Spruce Point Capital Releases a Strong Sell Forensic Research Opinion "Out of Stock, Time To Part with Dorman" on Dorman Products, Inc. (DORM)

NEW YORK, Aug. 16, 2017

• Revenue Growth Slowing and Overstated: Dorman's Revenue growth has slowed from a 13% CAGR (2009 to 2015) to less than 6% in 2016 (adjusted for extra week). Analysts expect DORM to continue growing top-line sales at 7% which Spruce Point believes to be difficult given its largest customers are growing at low single digits and showing signs of decline.
• Product Innovation Slowing, Prices Deflating: Unique products introduced declined 13% in 2016, the first contraction in years. Piecing together clues from DORM's various disclosures, Spruce Point estimates average revenue from new part introductions has been in a multiyear decline, while its annual R&D spend increases.
• Hidden Margin Benefits From Aggressive Capitalization and FX Tailwinds Coming To An End: Spruce Point believes DORM's earnings leverage is waning as revenue and gross profit from active accounts slowed to low single digits in 2016. The weakening of the Chinese Yuan has been a hidden tailwind to gross margins in the last three years since DORM sources heavily from China/Taiwan. Spruce Point estimates that DORM's gross margins benefited by ~350bps cumulatively from 2014-2016 due to the Yuan weakening.
• Risk/Reward Unattractive at Current Price Levels: DORM is at or approaching peak valuation levels for the cycle across multiple metrics. Street analysts see just 16% upside and fundamental investors and management have been selling into the company's buyback.

The research report can be found on our website at www.sprucepointcap.com/dorman-products-inc and updates will be posted on twitter @sprucepointcap.

Spruce Point Capital has a short position in Dorman Products, Inc. and stands to benefit if its share price falls.

About Spruce Point Capital
Spruce Point Capital Management, LLC, is a forensic fundamentally-oriented investment manager that focuses on short-selling, value and special situation investment opportunities.

Contact 
Sean Donohue  
Spruce Point Capital Management 
sean.donohue@sprucepointcap.com 
212-519-9813

Spruce Point Capital Management, LLC is a member of the Financial Industry Regulatory Authority, CRD number 288248.

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