# To Our Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/consumer-cyclical-auto-parts/NASDAQ_DORM_2020/NASDAQ_DORM_2020.mmd` · pages 1-7_

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To Our Shareholders,

Fiscal 2020 marks a significant milestone in Dorman's history, as the Company's record-breaking performance in the second half of the year enabled us to deliver more than $1 billion in annual net sales for the first time, underscoring the success of our strategy to bring innovative solutions to the automotive aftermarket. Reflecting on this past year, we faced the unprecedented COVID-19 pandemic, which created significant challenges for the entire global community. In response, we acted swiftly to implement measures to protect the health and safety of our valued contributors, customers, and channel partners, and still managed to continue to drive operational efficiencies across our business. Our results are a testament to the hard work of our contributors, whose dedication was critical to our success.

While the macroeconomic environment was incredibly fluid over the year, we remained focused on the aspects of the business under our control, executing on our initiatives and making significant progress on our strategic priorities. Some highlights from the year include:

• Increased full-year net sales growth by 10% driven by robust customer demand for our products across all channels.

• Significantly expanded the size of our heavy-duty product offering, contributing to heavy-duty annual net sales growth of 15% year-over-year.

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• Executed our strategic initiatives to improve productivity in our operations, which resulted in our second half gross margins returning to historical levels, excluding the impact of tariff pricing.

• Implemented actions to protect our financial position in the early stages of the COVID-19 pandemic, which combined with our strong operating cash flow generation throughout the year, resulted in us ending fiscal 2020 with $155 million in cash and essentially no debt, demonstrating why we believe we have the flexibility to operate in a variety of macroeconomic environments.

A critical growth lever at Dorman is bringing innovative solutions to the aftermarket, and despite the pandemic, we were able to continue investing in new product development and R&D capabilities during fiscal 2020 to help ensure that we remain at the forefront of innovation within the automotive aftermarket. This innovation focus is critical, as vehicles are becoming increasingly more complex due to the rapid adoption of, and reliance upon, electronics and technology. We continue to make the necessary investments in technology and people to benefit from this shift, including hiring engineers with deep expertise in complex electronics and computer programming. These investments are a cornerstone of our growth strategy as we look to drive further innovation in the years to come.

Turning to capital allocation, our strategy remains balanced, with organic investment being our top priority. Executing on strategic acquisitions is our second priority, and we continue to build a pipeline of potential opportunities. We started 2020 off strong completing the acquisition of Power Train Industries, Inc. early in the year, but M&A activity slowed during 2020 due to the pandemic. However, we are optimistic about 2021 as we are beginning to see an uptick in activity. Our M&A strategy is focused on light- and heavy-duty targets, as well as opportunities in new adjacencies and geographies, with the goal of expanding our business while maintaining our leadership position. Lastly, we are committed to returning excess cash to shareholders through our share buyback program, as evidenced by the 439,235 shares we repurchased in fiscal 2020 for a total of $36.8 million.

Our business outlook remains favorable as we continue to expand our market share and provide new and innovative solutions for our customers. Our "sweet-spot" is vehicles aged 8-13 years. We believe that during this time in a vehicle's life cycle, normal wear and tear can cause part failures and vehicle owners are less likely to go to the original equipment manufacturer ("OEM") for repairs. We believe this segment of the automotive aftermarket will continue to grow over the next several years. This creates a significant opportunity for us to leverage our vast network of industry sources to identify failure-prone OEM parts, allowing our 400+ product, engineering and quality contributors to design new, better products and provide innovative solutions to our customers. We expect this dynamic to provide a tailwind for Dorman for the foreseeable future.

Overall, while fiscal 2021 remains hard to predict given macroeconomic environment uncertainties, we remain confident that our Culture of Contribution, commitment to operational excellence and relentless focus on innovation position us well for continued success and achievement of our strategic initiatives.

We are as committed as ever to meeting customer needs and maximizing shareholder value, and we look forward to building on the success we achieved in fiscal 2020 as we move into the future. Thank you to our contributors, customers, suppliers, shareholders and other stakeholders for your continued confidence and support.

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Kevin M. Olsen
President & CEO

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