Dorman Products (DORM) 2026 年第三季法說會：營收創新高，財測指引收窄

重點摘要

• Dorman Products (NASDAQ: DORM) 公布 2026 年第三季淨銷售額創下 5.62 億美元的歷史新高，年增約 3%，三大業務部門均實現成長。
• 調整後營業利潤率為 15.8%，而調整後稀釋每股盈餘 (EPS) 下降 21% 至 2.08 美元。管理層將此壓力主要歸因於關稅相關定價與成本的時間差。
• 輕型車輛淨銷售額成長約 3% 至 4.44 億美元。專業代工 (DIFM) 需求保持穩定，而 DIY (車主自行維修) 需求持續承壓。
• 營業現金流總計 6,500 萬美元，自由現金流為 5,700 萬美元。季末淨槓桿率為調整後 EBITDA 的 0.65 倍。
• Dorman 將 2026 全年調整後稀釋每股盈餘預測區間收窄至 8.50-8.70 美元，目前預計淨銷售額成長率為 2%-3%。
• 管理層預計第四季成長將由銷量驅動，並受到新產品和新獲得業務的支撐，但 DIY 需求持續疲軟以及與關稅相關的降價仍是逆風因素。

關鍵財務數據

Dorman 本季以約每股 127 美元的平均價格斥資 1,500 萬美元回購約 11.5 萬股。今年累計股票回購額達到公司創紀錄的 1.12 億美元，截至 2027 年授權額度中仍剩餘 3.48 億美元。

業務與營運表現

輕型車輛

在以 DIFM 為主品類與通路的推動下，輕型車輛淨銷售額成長約 3% 至 4.44 億美元。前三季累計銷售額成長約 2%。

本季 Dorman 主要客戶的 POS 銷售成長與該部門的銷售成長一致。管理層表示，DIFM 趨勢更加穩定，硬零件業務持續加強，而 DIY 需求依然承壓。

該部門營業利潤率下降 520 個基點至 18.5%。與去年同期相比，受去年關稅相關定價收益早於相關高成本出現的時間差影響。

管理層繼續看好輕型卡車和休旅車 (SUV) 保有量成長及其平均車齡提高所帶來的利多。Dorman 強調了一款全新的 OE FIX 四輪驅動鎖定輪轂致動器，涵蓋的車型包括 Ford F-150、Expedition、Bronco 以及 Lincoln Navigator。

重型車輛

在特定品類和通路銷量與價格提升的支撐下，重型車輛淨銷售額成長約 5% 至 6,600 萬美元。前三季累計銷售額成長約 8%。

該部門的營業利潤率處於損益兩平，反映出較高的關稅和運輸成本的時間差。管理層表示，卡車運輸市場壓力持續存在，儘管貨運噸位指標在近幾個月已趨於穩定。

Dorman 還報告了使用售後維修解決方案的原廠 (OE) 經銷商業務持續成長。管理層估計，原廠仍控制著重型車輛售後市場約 60% 的份額，而輕型車輛僅約 30%，這為價格較低的售後市場產品創造了潛在的市占率機會。

特種車輛

在產品組合擴展及選擇性定價策略的推動下，特種車輛淨銷售額成長約 3% 至 5,200 萬美元。前三季累計銷售額成長約 1%。

營業利潤率改善 30 個基點至 13.1%，但較高的貨運成本對獲利能力造成壓抑。新車銷售在作業用多功能車及高端駕駛室車輛方面表現最為強勁。

管理層表示，由於車主延長車輛使用壽命，維修與保養銷售正在加速成長。然而，較高的油價降低了騎乘頻率，削弱了對休閒產品和配件的需求。

管理層展望

Dorman 根據今年累計表現與第四季能見度更新了 2026 全年展望：

調整後每股盈餘範圍從先前預期的 8.50-8.80 美元收窄。管理層表示，銷售展望反映了 DIY 需求的持續疲軟以及預計在第四季進行的額外關稅相關降價。

公司預計 2026 年剩餘的成長將主要由新產品開發和先前取得品類訂單帶動的銷量推動。管理層亦預計降價效應將延續至 2027 年上半年，但未提供 2027 年的業績指引。

風險與關注焦點

• 隨著消費者面臨更廣泛的通膨壓力，DIY 需求維持疲軟。
• 與關稅相關的降價預計將拖累第四季營收，而同期比較仍受到關稅定價與成本時間差的影響。
• 較高油價增加了運輸成本，並減少了特種車輛的休閒活動。
• 利率上升導致應收帳款承購成本增加，儘管 Dorman 的整體應收帳款承購策略並未改變。
• 由於關稅與運費成本上漲抵銷了銷量改善，重型車輛的獲利能力仍維持在損益兩平。
• 隨著關稅相關成本和先前過高庫存通過損益表消化完畢，未來幾個季度的庫存可能會增加。

分析師問答重點

管理層證實，輕型車輛的疲軟主要集中在 DIY，而 DIFM 相對穩定。管理層並強調，Dorman 的大部分產品組合包含非選擇性 (剛性需求) 硬零件，不過公司並未提供非選擇性與選擇性產品銷售的精確比例拆分。

在定價方面，管理層表示燃料、貨運和利息成本是定期對客戶進行定價決策時考量的因素之一。隨著特定關稅成本下降，公司降低了價格，但無法控制客戶是否將這些降價傳導給終端用戶。

Dorman 將其業務佈局描述為「無關傳動系統類型」(drivetrain-agnostic)。管理層表示，純電動車、油電混合車和燃油車都能帶來維修商機，而目前新車需求的變化需要數年時間才能進入 Dorman 主要的維修時間窗口 (車齡約為 7 到 14 年)。

資本配置優先順序仍為債務管理、新產品開發投資、戰略性併購 (M&A) 以及選擇性股票回購。管理層指出，若併購活動增加，回購活動可能會放緩。

法說會完整逐字稿

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完整財報電話會議逐字稿

管理層陳述

Operator

Good morning. My name is Nikki, and I will be your conference operator today. At this time, I would like to welcome everyone to the Dorman Products Third Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I will now turn the call over to Alex Whitelam, Vice President of Investor Relations. Please go ahead.

Alexander Whitelam

Thank you. Good morning, everyone. Welcome to Dorman's Third Quarter 2026 Earnings Conference Call. I'm joined by Kevin Olsen, Dorman's Chairman, President and Chief Executive Officer; and Charles Rayfield, Dorman's Chief Financial Officer. Kevin will begin with a high-level overview of the quarter, our segment level performance and market trends. Charles will walk through our third quarter financial results in more detail, discuss cash flow and capital allocation as well as our updated guidance before turning it back to Kevin for closing remarks. After that, we'll open the call for questions. By now, everyone should have access to our earnings release and earnings call presentation, which are available on our website at investors.dormanproducts.com.

Before we begin, I'd like to remind everyone that our prepared remarks, earnings release and investor presentation include forward-looking statements within the meaning of federal securities laws. We advise listeners to review the risk factors and cautionary statements in our most recent 10-Q, 10-K and earnings release for important material assumptions, expectations and factors that may cause actual results to differ materially from those anticipated and described in such forward-looking statements. We'll also reference certain non-GAAP measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are contained in the schedules attached to our earnings release and in the appendix to this earnings call presentation, both of which can be found on our website. Finally, during the Q&A portion of today's call, we ask that participants limit themselves to one question with one follow-up and to rejoin the queue if they have additional questions.

And with that, I'll turn the call over to Kevin.

Kevin Olsen

Thanks, Alex, and good morning, everyone. Thank you for joining us today. Let me start with our third quarter results and provide commentary on the performance and key trends we're seeing across the business. I'll then turn it over to Charles.

Turning to Slide 3. We delivered a solid third quarter with top line growth in each of our 3 business segments. Consolidated net sales were a record $562 million in the third quarter, up approximately 3% compared to the same period last year. Consistent with the expectations we outlined in our Q2 earnings call, our growth this quarter was primarily from volume increases in our light-duty and heavy-duty segments driven by new products and business wins, offset partially by pricing decreases in certain categories. Our largely nondiscretionary portfolio continues to perform well through various market cycles. Adjusted operating margin was 15.8% and adjusted EBITDA margin was 18.5% in the quarter. Keep in mind, we are lapping a tough comparison. Last year's third quarter benefited from the timing of tariff-related pricing without the higher tariff-related costs. As a reminder, we'll see this dynamic again in the fourth quarter as well.

Adjusted diluted EPS in Q3 was $2.08 compared to $2.62 in the same period last year. We are narrowing our full year 2026 guidance, given our performance year-to-date and the visibility we have for the remaining months of the year, we now expect full year net sales growth of 2% to 3% and adjusted diluted EPS for the year to be in the range of $8.50 to $8.70. Charles will walk you through this in more detail shortly.

Turning to Slide 4 in our light-duty segment. Net sales grew approximately 3% year-over-year to $444 million, driven by our DIFM-focused categories and channels. Year-to-date, light-duty net sales were up approximately 2%. During the quarter, POS across our top customers aligned with total net sales growth. We continue to see more pressure on the DIY side while our DIFM business, which represents the larger share of our portfolio, delivered solid growth. Looking at POS year-to-date, our performance was up mid-single digits. Operating margin was 18.5%, down 520 basis points year-over-year, again, due to the timing of tariff-related pricing and associated costs in the third quarter of last year. From an industry perspective, the fundamentals of the light-duty aftermarket remain positive. Vehicle miles traveled continued to increase year-over-year despite increased fuel prices, DIY consumers appeared to feel the effects of more widespread inflation during the quarter, but our DIFM focused business was more stable.

We also continue to benefit from the evolving mix of the vehicle population as light-duty trucks and SUVs represent a growing share of vehicles on the road. This is contributing to a higher average age of the VIO as drivers tend to hold on to these vehicles longer. They also present margin opportunity over the long term as parts for light-duty trucks and SUVs tend to have higher average selling prices. A great example of how we're expanding our portfolio for these vehicles is the recent launch of our new 4-wheel drive locking hub actuator. This OE FIX solution covers a wide range of vehicle models including the Ford F-150, Expedition and Bronco and the Lincoln Navigator. The original part often fails due to cracking in the internal diaphragm causing a vacuum leak. We've designed ours with an upgraded diaphragm material that is more resistant to wear, which provides our end users with a more durable. This is exactly the type of product that reinforces Dorman's leadership in the aftermarket innovation. Congratulations to the light-duty team on another excellent OE FIX launch.

Turning to Slide 5 in our heavy-duty segment. Net sales increased approximately 5% year-over-year to $66 million driven by higher volume and pricing in certain categories and channels. Year-to-date, heavy-duty net sales were up approximately 8%. Operating income margin was in line with our expectations at breakeven as the quarter was impacted by the timing of higher tariff and shipping costs. As we mentioned in prior calls, the heavier impact of tariffs will be absorbed later in 2026 to the HD segment, we remain focused on improving the margin profile of the business as volume continues to improve.

On the broader sector, pressures in the trucking market continued through the third quarter. While we saw increased freight rates as capacity further compressed, we didn't see a significant uptick in freight tonnage. That said, we have been cautiously encouraged to see tonnage indicators stabilize over recent months. Across our channels, we continue to see OE dealers drive growth using aftermarket repair solutions in their service centers. This presents a prime opportunity for us to capture share with our high-quality parts and aftermarket price points. On the product front, we continue to diversify our portfolio with innovative solutions. We recently launched a windshield wiper arm that was new to the aftermarket. This part is a component of a holistic offering of wiper related solutions that are applicable across multiple platforms. These launches further expand our above the frame offerings for OE dealers and other customers, which ultimately strengthens our relationship with fleets across North America. Congratulations to the heavy-duty team for continuing to drive innovation across the business.

Turning to Slide 6 in our Specialty Vehicles segment. Net sales were up approximately 3% year-over-year at $52 million, driven by portfolio expansion and pricing initiatives in certain categories. Year-to-date, specialty vehicle net sales were up approximately 1%. Operating income margin was 13.1%, up 30 basis points year-over-year, largely driven by the growth I just mentioned. Higher freight costs in the quarter weighed on our overall margin profile. On the broader market, we saw significant growth in new vehicle sales during the quarter, particularly with work-related utility machines and higher-end cab vehicles marketed to affluent riders. These tend to come with lower attachment rates at the dealer, but our team is doing a nice job expanding our parts portfolio to meet our riders at various stages of the vehicle life cycle.

On this front, we're seeing sales of repair and maintenance solutions accelerating as riders hold on to their vehicles longer. Currently, however, we're seeing some riders pull back on the frequency of their riding activities as higher fuel prices are driving up the cost to trailer and ride their vehicles. From an innovation perspective, our team has done an excellent job developing products that meet our riders' evolving needs. As demand for cab units has increased, our team has responded with high-quality alternatives for machines without these features pre-installed. A great example is the recent launch of the hard cabin closure for the CFMOTO ZForce 800. This solution offers riders, protection from dust, debris and harsh elements, while also providing comfort with our BreezeRite ventilation. Our upper doors, along with our front and rear windshields, are built with highly durable abrasion-resistant polycarbonate material, which is significantly stronger than glass. This is exactly the ruggedness that our brands are known for. Congratulations to the specialty vehicle team for the speed to market with this great solution.

With that, I'll turn it over to Charles to cover our results in more detail. Charles?

Charles Rayfield

Thanks, Kevin. Turning to Slide 7. I'll walk through our consolidated financial performance for the third quarter. Total net sales for Q3 were a record $562 million, up approximately 3% compared to the prior year period. As Kevin noted, top line growth was driven by solid performance across each of our business segments with our nondiscretionary portfolio enabling growth despite headwinds persisting across our respective markets. Year-to-date, net sales were $1.64 billion, up approximately 3% compared to the same period in 2025. Adjusted gross margin in the quarter was 39.4%, down 500 basis points year-over-year. As Kevin mentioned, last year's third quarter benefited from higher pricing without higher tariff-related costs impacting our margins. Our team did a nice job managing expenses in the quarter as adjusted SG&A as a percentage of net sales was 23.6%, down 30 basis points year-over-year. Adjusted operating income in the quarter was $89 million and adjusted operating income margin was 15.8%. Year-to-date, adjusted operating income was $275 million, down 4% compared to the same period last year.

Looking forward, we remain focused on realizing cost savings through our supplier diversification, productivity and automation initiatives across each of our segments. Adjusted diluted EPS in the third quarter was $2.08, down 21% year-over-year, in line with our operating performance, a lower share count offset lower other income and a higher tax rate in the quarter. Year-to-date adjusted diluted EPS was $6.73, flat compared to the same period last year.

Turning now to Slide 8. Operating cash flow for the quarter was $65 million, and free cash flow was $57 million. highlighting the nice job our team did on the working capital front. I'd also note that with additional cash on hand, we reduced our factoring volume. This lowered free cash flow sequentially from last quarter, but it also reduced our factoring expense. In regards to capital allocation, we deployed $15 million in opportunistic share repurchases that retired approximately 115,000 shares at an average price of approximately $127 a share. Through the first 9 months of the year, we've deployed a company record of $112 million on share repurchases. Going forward, we have $348 million remaining on our share repurchase authorization that extends through 2027.

Turning to Slide 9. Our balance sheet remains strong. We ended the quarter with net debt of approximately $283 million and total liquidity of $966 million. Our total net leverage ratio at the end of Q3 was 0.65x our adjusted EBITDA, which positions us extremely well to invest in the business, pursue strategic M&A opportunities and return capital to shareholders through opportunistic share repurchases.

Turning now to Slide 10. We are updating our full year 2026 guidance, given our performance through the first 9 months of the year and the visibility we currently have for Q4. On the top line, we now expect full year net sales growth of 2% to 3%. This update reflects continued soft DIY demand and the timing of additional tariff-related price reductions that are expected in the fourth quarter. That said, the growth for the remainder of the year is expected to be volume driven, given the success we're seeing with new product development and the category wins we previously discussed. Consistent with our comments last quarter, we continue to expect gross margin in the fourth quarter at approximately 40% exiting the year with a structural base for 2027. For adjusted operating income margin, we've narrowed our guidance to the top end of our prior range and now expect 16% to 16.5% for the full year. In addition, we now expect the full year effective tax rate of 23.5% to 24%.

On the bottom line, we now anticipate that adjusted diluted EPS for the year will be in the range of $8.50 to $8.70 narrowed from our prior range of $8.50 to $8.80. While we continue to experience short-term noise in our overall markets and performance, our long-term approach remains the same. We are focused on our innovation strategy and expanding on our nondiscretionary portfolio, driving efficiencies and cost savings across the business and delivering for our customers. Additionally, our strong balance sheet gives us meaningful levers to drive growth going forward.

With that, I'll now turn the call back over to Kevin to conclude. Kevin?

Kevin Olsen

Thanks, Charles. Let me close by reinforcing a few points. First, we delivered solid performance in the quarter with top line growth across each of our business segments. Second, and as Charles mentioned, our strong balance sheet positions us well to make strategic investments in the business as we demonstrated this quarter with continued share repurchases and finally, we remain focused on our long-term strategy to drive shareholder value. The structural drivers of the aftermarket demand remain in place and our innovation engine, diversified supplier network and financial flexibility position us well for the future. We appreciate your continued interest and support. And with that, we'll open the call up for questions. Operator?

Operator

[Operator Instructions] We will take our first question from Scott Stember with Roth Capital.

分析師問答

Scott Stember

Just a question on POS. So I just want to clarify that all of the softness or net, I guess, softness compared to what we've seen in the last couple of quarters, that was just strictly due to DIY. And I just wanted to confirm that DIFM -- that the trends have really not changed, positive trajectory.

Kevin Olsen

Scott, it's Kevin. I'll handle that question. Just POS in general, as we talked about in our prepared remarks, we're essentially aligned with our net sales growth in the quarter. I'll just note that, that's down a bit from where we were in previous quarters at mid-single-digit growth. And that's because we lapped the price increases that went in place last year in the third quarter on top of the fact that we started reducing pricing in the second quarter of this year. In terms of your question around the segments, you are correct. DIY remained pressured from a POS standpoint, and DIFM was certainly more stable. On the hard part business, DIFM, we've continued to see that strengthening as we move through the year. But DIY does remain pressured. And I'll just also note when you step back and look at the entire industry dynamics, they continue to remain positive. Vehicle miles traveled continue to increase year-over-year despite the higher fuel prices, but it's clearly something that we're keeping a close eye on. And as I also mentioned in the prepared remarks that light-duty trucks and SUVs continue to become a bigger part of the prime VIO. And for us, that's a really good dynamic as we have -- it's a higher average age and a higher average selling price opportunity.

Scott Stember

Got it. And then last question. In light duty, last quarter you just talked about how you been adjusting pricing with customers due to tariffs. But how is that changing now that we have diesel going up 40% since the last quarter? And now with short-term rates going up, potentially affecting your factoring expenses?

Charles Rayfield

Yes. Thanks, Scott. This is Charles. I'll start with that one. So I'll get questions. Ultimately, those are input components that are things that we factor into our pricing decisions periodically. So as we go forward through the next couple of quarters, those are things we'll look to you to consider in those pricing decisions. But ultimately, yes, to your point, fuel costs have gone up, we're starting to see that. We've also seen some increases in interest rates with the Fed raising the borrowing rate. But ultimately, their input costs, we consider them as we make those pricing decisions.

Kevin Olsen

Yes. Scott, I'll just add -- it's Kevin. We have a long track record of handling inflationary and deflationary situations through our history. We have a long track record of being able to handle that, particularly in the last 6 years where we've had some pretty wild swings in inflation and deflation.

Operator

We will move next with Jeff Lick with Stephens, Inc.

Jeffrey Lick

Congrats on nice results. Eight months in now to the elevated gas prices and throughout kind of the auto ecosystem, we're seeing a transition to vehicles that are kind of less light-duty trucks and SUVs and maybe a marginal preference for even EVs and sedans. I'm just curious -- maybe a 2-part question. One is, how do -- how does that dynamic affect your kind of ideation process and are you guys already identifying things that might be too early in breakage? And then also are there parts you can come up with or that you have that the light-duty trucks and the SUVs they're already in the population, right? So if you have one, you got one, are there parts that can actually help with fuel efficiency? Or does thr quest for fuel efficiency help you guys?

Kevin Olsen

Jeff, it's Kevin. Good question. I'd say, number one, the current VIO is -- continues to be favorable for us. Keep in mind that our prime repair cycle is that vehicle in that 7-, 8-year-old range, and then we kind of carry that through to about 13 to 14 years old. So any kind of change dynamic on the front end via new car sales takes a long time for us to impact in the aftermarket. That being said -- so we have a very long tail. That being said, all new vehicles continue to present a lot of repair opportunities, whether it's a pure BEV, a hybrid or a pure ICE vehicle. So we're drivetrain agnostic as we've talked a lot about before. We see a lot of repair opportunities and BEVs as a matter of fact. We see higher average selling prices for repair opportunities in BEV. So whatever the repair opportunity that presents itself to us, we'll have a solution for it.

Jeffrey Lick

And just a quick follow-up, just building on Scott's question. Obviously, 90 days ago, that was a very fluid situation with tariff refunds and the dynamics with the large retailers. I'm just curious, as you -- you mentioned 2 factors, one, maybe a softening DIY environment and then obviously, the pricing dynamics that were probably tariff related and then last year's compares. Maybe could you just handicap or proportion, what part of the revenue guide down was related to the pricing versus the softening environment? Was it 80-20, 20-80? Any help there, much appreciated.

Charles Rayfield

Yes. Thanks, Jeff. This is Charles. Yes. So we are going to split that out for a variety of reasons. But to your point, just going back to the drivers of that guide, the 2% to 3%. We saw some DIY continued softness in that area. And to the point you just made. We did -- we continue to go through those negotiations with customers and seeing the IEEPA tariffs down in kind, like we talked about last quarter, the anticipation was and our high preference was to bring price is down commensurate with how we went up. So on the way down, we took prices down as well. But we're not going to break out the negotiations we've had with those customers or the breakout but preference was to lower overall pricing because we think this is ultimately going to benefit end customers. But with that said, we feel pretty good with where we're at currently. But we feel good with where we sit here and the 2% to 3% is reflective of where we see the fourth quarter going as well.

Operator

We will move next with Bret Jordan with Jefferies.

Bret Jordan

To that point, to the extent I guess you're going to return the IEEPA refunds via lower prices to your customers, but you said you expect that to benefit the end customers? Do you actually see your customer base lowering retail prices?

Kevin Olsen

Yes. Brett, look, I think we mentioned this. This is Kevin. We mentioned this last quarter. We obviously would hope that a lower end price to customers becomes a reality. But frankly, we can't control that. And we're certainly not making any predictions whether that's going to happen or not. But again, we'd love to see lower prices for our ultimate end customer. The guys hanging the parts on the vehicles and being able to help the folks that need to repair their vehicles to get to -- we can't control that. We're not going to make any predictions on what happens in the ultimate end market.

Bret Jordan

Okay. And then the decision on factoring volume, is that because you had incremental liquidity from IEEPA refunds? Or was there -- is there a change around the factoring strategy? And has the price of factoring changed materially?

Charles Rayfield

Yes. So good question, Brett. This is Charles. As you know, the Fed raise rates, so the factoring costs are software plus in most instances. So obviously, we've seen some increases in some of those factoring costs. Our overall strategy hasn't changed. We continue to look at our cash flow needs relative to the factoring costs. So the overall strategy hasn't changed. Something that we monitor on an ongoing basis. We'll continue to do so, but no major change in how we look at it.

Operator

Our next question comes from Gary Prestopino with Barrington Research.

Gary Prestopino

Kevin, could you just remind us how much of your portfolio now is discretionary versus nondiscretionary?

Kevin Olsen

Yes, Gary, we haven't really broken that out because, frankly, that's a difficult one to really pin down an exact number on. But I will tell you that in general, the vast majority of our portfolio is nondiscretionary. Your car is either not running safely or it's not running for the most part. But we certainly do have some more discretionary DIY type items. Those tend to be more in the front rooms of a lot of our customers, but the vast majority is in the back room, nondiscretionary hard part.

Gary Prestopino

Okay. And then just a follow-up. You mentioned that you're seeing more dealers, OE dealers using aftermarket parts on the heavy-duty side. Can you give us some idea of how much aftermarket parts have proliferated in the repair process for heavy duty and where you might see that go? I'm not talking about just for your company, but just in the market itself.

Kevin Olsen

Yes. The market overall, Gary, and this is one of the reasons why we entered the heavy-duty market because the OEs still control a very large portion of the aftermarket, right? They're up in the 60% range, whereas on the light duty side, it's down in the 30% range, and that's really tied to warranty repair. So it's one of the reasons why we like this space so much. We see an opportunity to continue to take share from the OE with high-quality aftermarket solutions at a lower price point. So you're going to hear us continually talk about that, expanding our above the frame portfolio that will allow us to continue to take share from the OE dealer.

Gary Prestopino

So you always are right now about 60% of the market?

Kevin Olsen

Yes.

Operator

Our next question comes from David Lantz with Wells Fargo.

David Lantz

Curious if you could talk about the implied Q4 net sales guide. I think it's flattish to slightly down to up 4% plus. And what the drivers could be to get to you to the low end versus the high end?

Charles Rayfield

Yes. Thanks, David. I appreciate the question. This is Charles. I'll start. So we talked a lot about in the last call, the fact that we thought there'd be a lot more volume coming through in the back half of the year, and we've certainly seen that in the third quarter. We would expect that to continue in the fourth. So the guide is reflective of the fact that we continue to see a softened DIY market. Given what we see with some of the pricing actions that we've taken related to the tariff downs, we think we'll continue to see good volume come through with new product launches and some of the new business that we brought on board. But a lot of it will be based on how that volume comes through, but we feel pretty confident with the 2% to 3% range, but largely volume driven in the back part of the year and Q4.

David Lantz

Got it. That's helpful. And then inventories declined, I think it was a double-digit year-over-year in Q3. So curious if you could talk about the drivers of that and how you're thinking about trends over the next couple of quarters on an inventory basis.

Charles Rayfield

Yes, great question. So when we saw the inventory increases a large portion of that was due to some of the heightened IEEPA tariff costs that got capitalized into our inventory. So a lot of the flow-through we simply got inventory bleeding out to the P&L. We also strategically took up inventory last year and bled through some of that. That said, we think we'll start to see inventory start to come up a little bit as we go through the next couple of quarters. But expect free cash flow still to be pretty solid in kind of in the range that we had talked about previously, which typical run rates, high $100 million, sort of low $200 million-ish range, ex IEEPA cash impacts.

Operator

[Operator Instructions] We will move next with Tristan Thomas-Martin with BMO Capital Markets.

Tristan Thomas-Martin

Just a question on pricing, right? You began price reductions in the second quarter of this year. Does that mean it remains a headwind in the first quarter of 27% and then kind of normalize thereafter?

Charles Rayfield

Yes. Tristan, this is Charles. Yes. So as Kevin talked about previously, we started to see some prices come down in the third quarter. We'll expect to see some more of that happening in the fourth quarter. That said, we'll have to lap that as we go through at least the earlier part of next year, we're obviously not giving guidance on 2027 at this point. But yes, they have to have some impact next year. But all -- taken as a whole, we consider a lot of the other cost inputs when we look at pricing. But yes, overall, we'd expect to see some impact on the price down through next year. That has to be taken into account from some of the volume impacts that we think we'll see as well as other pricing impacts we'll have to consider as we go through the first part of the year.

Tristan Thomas-Martin

Okay. And then just on specialty vehicles. I think you're the first company I've heard call out headwinds on enthusiast activity. What are you kind of seeing? Like what's kind of underlying that claim in terms of what you're seeing?

Kevin Olsen

Tristan, can you repeat that? We didn't catch the first part of that.

Tristan Thomas-Martin

Just higher fuel prices impacting enthusiast activity. what do you kind of like what are you seeing specifically to kind of lead you to make that?

Kevin Olsen

Yes. Good question. I would say that we're clearly seeing a stronger performance in the more utility work-related type vehicles. And when you look at our more recreational focused parts and accessories, we're seeing softened demand. So it's probably pretty clear that we are seeing that fuel prices are impacting that end market segment. mean fuel prices were up 30% year-over-year in the month of September alone.

Tristan Thomas-Martin

Okay. Just maybe I forgot, does the super ATV sell like consumables on the off-road vehicle side?

Kevin Olsen

I'm sorry, Tristan, I didn't catch the first half of that again.

Tristan Thomas-Martin

No, that's probably my fault. But does super ATV sell things like oil, is there any like kind of specific metrics or products you can point to? [indiscernible] a decline in actual activity?

Kevin Olsen

No. We don't -- not that we talk about publicly, but I would tell you, Tristan, just in general, roughly half of our portfolio is tied to what we would consider break/fix or kind of nondiscretionary repair. And then roughly 40% to 50% of our business is tied more to the utility work type vehicle if that helps you.

Operator

We will move next with Justin Ages with CJS Securities.

Justin Ages

The last few quarters, you guys have had low leverage, and you've been active repurchasing share about capital allocation priorities and where you see the most focus right now?

Kevin Olsen

Yes. Sure. I'll take that one, Justin. So overall, the capital allocation strategy has not changed. So we're looking at debt levels, as you've noted, the leverage level is below 0.7 currently. So not so concerned about that. We next year looking to put money back and see a new product development, we think we get our best returns there. And then third, we're looking at M&A, Kevin has talked about some of the M&A strategy on recent calls. And then fourth, we're looking opportunistically at share buybacks. So thus far this year, we've had a record number of buybacks. We continue to do about $15 million in the quarter. And we'll continue to look at that opportunistically. So not putting out any targets for share buybacks at this point. We tend to do a little bit less M&A, we tend to look a little bit more at share buybacks as we get a little more active going forward, we may look to pull back on that a little bit, but that's the summary of the capital deployment strategy.

Justin Ages

All right. And then you made some comments about the interplay between DIY and DFIM. Can you give us a general idea of the size of each of those channels as it relates to your business?

Kevin Olsen

Yes, Justin, yes, I think we talked a little bit about this earlier that we don't break out a specific target. Our DIY focused portfolio typically tends to be in the front rooms of our customers, but the vast majority of our portfolio would be more DIFM/professional focus, and those are in the back rooms. I hope that helps you.

Operator

Thank you. This concludes our Q&A session and today's conference call. Thank you for your participation. You may now disconnect.