Motorcar Parts of America (MPAA) FY Conference June 11, 2025 10:30 AM ET Speaker0 Well, good morning. Thank you all for joining us. So my name is Brian Nagel. I'm the senior equity research analyst here at Oppenheimer, coming consumer growth and ecommerce. This is day three of our twenty fifth annual Oppenheimer consumer growth and ecommerce conference. So, again, thank you all for joining us today. I'm very pleased to have with us our next presenting company, Motorcar Parts of America, and the company's ch ...

Financial Performance - Sales increased by 5.5% to a record $757.4 million in fiscal 2025, despite industry softness [148] - Gross profit rose 16.1% to a record $153.8 million, with gross margin increasing by 1.8 percentage points to 20.3% [148] - Consolidated net sales for fiscal 2025 were $757,354,000, an increase of $39,670,000, or 5.5%, from fiscal 2024's $717,684,000 due to strong demand for rotating electric and brake-related product lines [204] - Gross profit for fiscal 2025 increased by $21,277,000, or 16.1%, to $153,828,000, with a gross profit margin improvement to 20.3% from 18.5% in fiscal 2024 [206] - Operating income for fiscal 2025 was $39,923,000, a decrease from $46,120,000 in fiscal 2024, primarily due to a non-cash loss of $15,892,000 from foreign exchange impacts [212] Cash Flow and Debt Management - Cash generated from operating activities was approximately $45.5 million, and net bank debt was reduced by $32.7 million to $81.4 million [148] - Cash provided by operating activities was $45,477,000 for fiscal 2025, up from $39,172,000 in fiscal 2024, reflecting improved operating results [222] - Net cash used in investing activities increased to $4,469,000 in fiscal 2025 from $479,000 in fiscal 2024, primarily due to higher capital expenditures [223] - Net cash used in financing activities was $44,655,000 in fiscal 2025, compared to $36,439,000 in fiscal 2024, mainly due to net repayments under the revolving facility and stock repurchases [224] - The company has a $268,620,000 senior secured Credit Facility, which includes a $238,620,000 revolving loan facility and a $30,000,000 term loan facility, maturing on December 12, 2028 [226] Inventory and Allowances - The reserve for excess and obsolete inventory increased to $18,964,000 as of March 31, 2025, compared to $17,372,000 in 2024, primarily due to excess finished goods inventory [171] - The customer finished goods returns accrual was $34,411,000 at March 31, 2025, down from $38,312,000 in 2024, reflecting changes in the timing of returned goods authorizations [196] - The company recorded an allowance for warranty returns based on historical return levels as a percentage of total unit sales, with stock adjustment returns typically less than 5% of units sold [185] - The allowance for potentially excess and obsolete inventory is based on recent sales history and forecasted inventory use, with reserves established at management's discretion [171] Shareholder Activities - The company repurchased 542,134 shares for $4.8 million during the full year under a current authorization program [154] - The company repurchased 542,134 shares of common stock for $4,832,000 during fiscal 2025, with $13,423,000 remaining available under the share repurchase program [247] Interest and Financing Costs - The weighted average discount rate for accounts receivable discount programs was 6.2% for fiscal 2025, down from 6.8% in fiscal 2024 [155] - The weighted average interest on borrowings under the credit facility was 7.46% at March 31, 2025, compared to 8.43% at March 31, 2024 [155] - Interest expense for fiscal 2025 decreased by $4,490,000, or 7.5%, to $55,550,000, attributed to lower outstanding balances and interest rates [213] - The effective interest rate on the convertible notes was 18.3% as of March 31, 2025 [239] Operational Developments - The company expanded its product coverage with over 629 new part numbers, covering approximately 130 million vehicles in operation in North America [148] - The roll-out of JBT-1 bench-top testers gained momentum, with most retail stores in North America deploying or planning to install the diagnostic units [148] - The company added a new warehousing and distribution facility in Malaysia to support future direct shipment programs [148] Future Outlook and Commitments - Total capital expenditures for fiscal 2025 were $6,066,000, an increase from $1,755,000 in fiscal 2024, with expectations of approximately $9,500,000 for fiscal 2026 to support global growth initiatives [249] - The company has long-term agreements with major customers, which may require increased inventories and personnel to meet demand [245][246] - Contractual obligations total $310,552,000, with $35,770,000 due within one year and $179,892,000 due in 3 to 5 years [250] Risk Management - Foreign currency exchange risk is significant, with a potential increase of $4,023,000 in operating expenses if exchange rates rise by 10% [255] - Losses of $4,179,000 and $1,373,000 were recorded in fiscal 2025 and 2024, respectively, due to changes in the value of forward foreign currency exchange contracts [255] - The company maintains an allowance for credit losses to cover potential losses from customer defaults, which could materially affect financial position [257]

Core Viewpoint - Motorcar Parts of America, Inc. is conducting its Q4 2025 earnings conference call, indicating a focus on financial performance and future outlook for the company [1]. Company Participants - The conference call features key company executives including Selwyn H. Joffe (Chairman, President & CEO), David Lee (Chief Financial Officer), and Gary S. Maier (Vice President of Corporate Communications and Investor Relations) [1][2]. Conference Call Structure - The call is structured to provide insights into the company's financial results and future expectations, with a reminder of the safe harbor statement regarding forward-looking statements [2][3].

Financial Data and Key Metrics Changes - Net sales increased by 5.5% to a record $757 million for fiscal year 2025, with gross profit rising by 16.1% to a record $154 million [7][20] - Cash flow from operating activities was $45.5 million, and net bank debt was reduced by $32.6 million to $81.4 million [7][27] - For the fourth quarter, net sales increased by 1.9% to $193.1 million, and gross profit increased by 10.6% to $38.5 million [20][21] Business Line Data and Key Metrics Changes - The hard parts business, particularly in rotating electrical products, continues to perform well, driven by the non-discretionary nature of the products [9][10] - Brake-related applications are the second largest product category, showing strong performance supported by quality and customer service [10][12] - The diagnostic business is experiencing growth, particularly with the JBT-one benchtop tester, which is expected to contribute additional service-related revenue [14][15] Market Data and Key Metrics Changes - The average age of U.S. light vehicles has risen to 12.8 years, leading to increased replacement opportunities [10] - Vehicle registrations in 2024 surpassed 16 million for the first time since 2019, indicating a favorable market environment [10] - The company is well-positioned in the Mexican market, with increased demand for aftermarket parts and strong relationships with U.S.-based retailers [14] Company Strategy and Development Direction - The company is focused on mitigating tariff impacts through price increases and supply chain initiatives, aiming for strategic competitive advantages [6][8] - There is a strong emphasis on reducing dependency on Chinese suppliers, with less than 25% of products sourced from China [8][32] - The company aims to enhance shareholder value through cash generation, debt reduction, and share repurchases [7][19] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the outlook for non-discretionary aftermarket parts, expecting continued organic growth supported by favorable industry dynamics [16][17] - Tariffs are seen as a challenge, but management believes they can maintain rational pricing and continue to offer quality products [17][18] - The company anticipates net sales for fiscal year 2026 to be between $780 million and $800 million, representing year-over-year growth of 35.6% [27] Other Important Information - The company repurchased 542,134 shares for $4.8 million at an average price of $8.91 during fiscal year 2025 [7] - Non-cash expenses related to foreign exchange and tariffs have impacted financial results, but management is focused on minimizing these expenses [11][21] Q&A Session Summary Question: How do tariffs potentially help market share? - Management indicated that they have adjusted their supply chain to be less dependent on China, which positions them favorably compared to competitors who rely on U.S. inventory [32][33] Question: Impact of customer price increases on gross margin? - Management acknowledged that while tariffs may slightly negatively impact gross margin, other initiatives are expected to offset this effect [35] Question: Clarification on tariff impacts and price increases? - Management noted that the timing of tariff impacts is unpredictable but expects to see improvements as price increases take effect [41][42] - Almost 100% of the price increases have been accepted by customers [43] Question: Expected margin expansion catalysts? - Management highlighted initiatives focused on reducing costs per unit and increasing sales per unit as key drivers for margin expansion [44][45]

Motorcar Parts of America (MPAA) Q4 2025 Earnings Call June 09, 2025 01:00 PM ET Speaker0 Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Motorcar Parts of America Inc. Fiscal twenty twenty five Fourth Quarter and Year End Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. I would now like to t ...

Financial Performance - Net sales for fiscal 2025 increased 5.5% to a record $757.4 million from $717.7 million in the prior year[12] - Gross profit for fiscal 2025 increased 16.1% to a record $153.8 million from $132.6 million a year earlier, with a gross margin of 20.3% compared to 18.5%[13] - Net loss for fiscal 2025 was $19.5 million, or $0.99 per share, an improvement from a net loss of $49.2 million, or $2.51 per share, in the prior year[15] - Operating income for fiscal 2026 is expected to be between $86 million and $91 million, representing 4.3% to 10.4% year-over-year growth[18] - The company expects fiscal 2026 net sales to be between $780 million and $800 million, representing 3.0% to 5.6% year-over-year growth[18] Cash Flow and Debt Management - Generated cash from operating activities of $45.5 million and reduced net bank debt by $32.6 million to $81.4 million[11] - Interest expense decreased by $4.5 million for fiscal 2025 to $55.6 million from $60.0 million a year ago[14] - The company repurchased 542,134 shares for $4.8 million during fiscal 2025, supported by strong cash generation[17] Assets and Liabilities - Total assets decreased from $1,012,002,000 in 2024 to $957,636,000 in 2025, a decline of approximately 5.4%[28] - Total current liabilities decreased from $404,425,000 in 2024 to $351,025,000 in 2025, a reduction of approximately 13.2%[28] - Total liabilities decreased from $726,892,000 in 2024 to $699,937,000 in 2025, a reduction of approximately 3.7%[28] - The company’s retained earnings fell from $39,503,000 in 2024 to $20,033,000 in 2025, a decrease of approximately 49.3%[28] Operational Costs and Expenses - Cash items impacting net income for the three months ended March 31, 2025 totaled $3,575,000, compared to $1,180,000 in 2024, indicating increased operational costs[32] - Share-based compensation expenses increased to $868,000 in Q1 2025 from $432,000 in Q1 2024[38] - The company incurred new product line start-up costs of $160,000 in Q1 2025, compared to $840,000 in Q1 2024[38] Supply Chain and Geopolitical Challenges - The company has reduced its reliance on Chinese suppliers to less than 25% and is leveraging its North American footprint for further reductions[10] - The company is addressing current geopolitical challenges, specifically tariffs and pricing, to support its competitive position and anticipated future growth[9] - Tariff costs paid for products sold before price increases were effective totaled $4,607,000 in Q1 2025, with no costs reported in Q1 2024[38] - Supply chain disruptions and related costs were recorded as $734,000 in Q1 2024, with no such costs reported in Q1 2025[38] Earnings and EBITDA - GAAP net loss for the three months ended March 31, 2025 was $722,000, compared to a net income of $1,338,000 in 2024, representing a significant turnaround[32] - EBITDA for the twelve months ended March 31, 2025 was impacted by non-cash items totaling $25,029,000, contributing to a net loss of $19,470,000[34] - EBITDA for Q1 2025 was $16,296,000, a decrease from $17,703,000 in Q1 2024, while the twelve-month EBITDA decreased from $58,591,000 to $50,263,000[38] - Non-cash items impacting EBITDA totaled $3,528,000 in Q1 2025, significantly higher than $301,000 in Q1 2024[38]

Financial Performance - Consolidated net sales for the three months ended December 31, 2024, were $186,176,000, an increase of $14,314,000, or 8.3%, from $171,862,000 in the same period of 2023[112] - Gross profit for the three months ended December 31, 2024, was $44,882,000, representing a gross margin of 24.1%, compared to $30,043,000 and 17.5% in the same period of 2023[113] - Operating income for the three months ended December 31, 2024, was $17,581,000, an increase from $9,524,000 in the same period of 2023[120] - Consolidated net sales for the nine months ended December 31, 2024, were $564,249,000, an increase of $36,043,000, or 6.8%, from $528,206,000 in the same period of 2023[126] - Gross profit for the nine months ended December 31, 2024, was $115,333,000, with a gross margin of 20.4%, compared to $97,758,000 and 18.5% in the same period of 2023[128] Expenses and Costs - Interest expense for the three months ended December 31, 2024, decreased by $3,862,000, or 21.1%, to $14,435,000 from $18,297,000 in the same period of 2023[121] - Cash flow provided by operations for the three months ended December 31, 2024, was $34,357,000, down from $53,615,000 in the same period of 2023[111] - Cash flow provided by operations for the nine months ended December 31, 2024, was $36,368,000, compared to $48,445,000 in the same period of 2023[125] - Research and development expenses for the three months ended December 31, 2024, increased by $469,000, or 18.5%, to $3,008,000 from $2,539,000 in the same period of 2023[118] - General and administrative expenses increased by $5,809,000, or 13.8%, to $47,934,000 for the nine months ended December 31, 2024, primarily due to foreign currency losses and increased severance costs[130] - Research and development expenses rose by $532,000, or 7.2%, to $7,884,000 for the nine months ended December 31, 2024, driven by increased headcount[132] Financial Position and Cash Flow - Consolidated operating income decreased to $23,645,000 for the nine months ended December 31, 2024, down from $33,902,000 in the prior year, largely due to a non-cash loss of $18,966,000 from foreign exchange impacts[134] - Interest expense decreased by $2,396,000, or 5.3%, to $43,004,000 for the nine months ended December 31, 2024, attributed to lower average outstanding balances and interest rates[135] - Net cash provided by operating activities was $36,368,000 for the nine months ended December 31, 2024, down from $48,445,000 in the previous year, influenced by changes in accounts payable and receivable[144] Financing and Capital Expenditures - The company had $268,620,000 in senior secured financing, including a $238,620,000 revolving loan facility and a $30,000,000 term loan facility, with the credit facility maturing on December 12, 2028[147] - As of December 31, 2024, $94,802,000 was outstanding under the revolving facility, with an interest rate of 7.66%[148] - Total capital expenditures rose significantly to $2,531,000 for the nine months ended December 31, 2024, compared to $559,000 in 2023, marking an increase of approximately 352%[158] - The company expects to incur approximately $5,000,000 in capital expenditures during fiscal 2025 to support global growth initiatives and current operations[158] Supplier Finance and Obligations - Commitments from participating financial institutions in the supplier finance program increased to $27,000,000 from $15,000,000 during the three months ended December 31, 2024[157] - Outstanding supplier obligations confirmed as valid under the supplier finance program amounted to $31,809,000 as of December 31, 2024[157] Other Financial Information - The change in fair value of the compound net derivative liability associated with convertible notes resulted in a non-cash gain of $2,460,000 for the nine months ended December 31, 2024[136] - The company repurchased 268,130 shares of common stock for $2,096,000 during the nine months ended December 31, 2024, with $20,841,000 utilized and $16,159,000 remaining under the share repurchase program[143] - Accounts receivable discounted increased to $488,505,000 for the nine months ended December 31, 2024, compared to $465,073,000 in 2023, reflecting a growth of approximately 5.5%[156] - The annualized weighted average discount rate decreased to 6.3% in 2024 from 6.8% in 2023, indicating improved financing conditions[156] Legal and Regulatory Matters - Rent expense for a related party lease was $81,000 and $243,000 for the three and nine months ended December 31, 2024, respectively[159] - The company has no material changes in market risk from the previous disclosures as of March 31, 2024[170] - The company is currently evaluating the impact of new accounting standards issued by the FASB on its financial statement disclosures[164][167][169] - There is an immaterial amount accrued related to various lawsuits and claims against the company[162]

Motorcar Parts of America -- February 2025 "The Global Leader for Parts and Solutions That Move Our World Today and Tomorrow" Safe Harbor Statement 1 This presentation and any question-and-answer period or other communications afterwards may contain forward-looking statements with respect to the financial condition, results of operation and business of the company made pursuant to the safe harbor provisions of the Private Securities Litigation Act of 1995. These forward-looking statements involve significan ...

Financial Data and Key Metrics Changes - Net sales increased by 8.3% to a record $186.2 million for the fiscal 2025 third quarter, up from $171.9 million in the prior year [26][28] - Gross profit rose by 49.4% to a record $44.9 million, compared to $30 million a year earlier [26][28] - Net income for the quarter was $2.3 million, a significant improvement from a net loss of $47.2 million in the prior year [35] - EBITDA for the fiscal third quarter was $20.4 million, reflecting a $6.6 million impact of non-cash expenses [35] Business Line Data and Key Metrics Changes - The rotating electrical category continues to perform solidly, with expectations for further opportunities to add retail and traditional customers [10] - Brake-related products, the second-largest category, are expected to see strong demand, particularly as the spring repair season approaches [12][23] - The diagnostic business is experiencing success with the JBT one bench top test, aiming for a $100 million milestone in diagnostic equipment [17] Market Data and Key Metrics Changes - The company is seeing increased demand for aftermarket parts in Mexico, with strong growth in hard parts sales [20][21] - The average age of vehicles in the U.S. is now 12.8 years, indicating a favorable market for nondiscretionary aftermarket parts [24] Company Strategy and Development Direction - The company is focused on enhancing profitability through gross margin expansion and neutralizing working capital [9][40] - Strategic initiatives include improving operational efficiencies and leveraging a low-cost global footprint [16][20] - The company aims to increase market share in emerging markets and enhance shareholder value through cash generation and share repurchases [10][41] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the outlook, emphasizing the importance of operational efficiencies and a strong liquidity position [82][84] - The company is managing through tariff impacts and has implemented surcharges to offset costs associated with tariffs on goods from China [46][83] - Interest rates have decreased, which is expected to benefit profitability if the trend continues [15] Other Important Information - Non-cash items reduced net income by $5 million and gross profit by $3.4 million for the quarter [27] - The company repurchased 268,130 shares for $2.1 million at an average price of $7.82 under its repurchase authorization program [9][41] Q&A Session Summary Question: Impact of Tariffs on Business - Management noted that they have implemented tariff surcharges and have become less dependent on China, expecting minimal material impact from tariffs [46][47] Question: Gross Margin Expansion - Management indicated that gross margin expansion is driven by operational efficiencies and increased revenue absorption, with ongoing initiatives to enhance production efficiency [48][50] Question: Future Cash Utilization - The company plans to continue generating cash flow, pay down debt, and be opportunistic with share repurchases to enhance shareholder value [54][55] Question: Seasonal Sales and Gross Profit - Management explained that despite lower sales in December, gross profit dollars increased due to improved operational efficiency and production initiatives [59][61]

Financial Performance - Net sales for fiscal 2025 third quarter increased 8.3% to a record $186.2 million from $171.9 million in the prior year[4] - Gross profit for fiscal 2025 third quarter increased 49.4% to a record $44.9 million from $30.0 million a year earlier, with a gross margin of 24.1% compared to 17.5%[5] - Net income for the fiscal 2025 third quarter was $2.3 million, or $0.11 per diluted share, a significant improvement from a net loss of $47.2 million in the prior year[8] - For the nine-month period, net sales increased 6.8% to a record $564.2 million from $528.2 million a year ago[11] - Gross profit for the nine-month period increased 18.0% to a record $115.3 million, with a gross margin of 20.4% compared to 18.5% a year earlier[12] - GAAP net income for the three months ended December 31, 2024, was $2,291,000, compared to a net loss of $47,214,000 for the same period in 2023[29] - GAAP gross profit for the three months ended December 31, 2024, was $44,882,000, with a gross margin of 24.1%, up from $30,043,000 and a margin of 17.5% in 2023[34] - For the nine months ended December 31, 2024, GAAP net loss was $18,748,000, an improvement from a loss of $50,582,000 in the same period of 2023[31] - The company reported a gross profit of $115,333,000 for the nine months ended December 31, 2024, with a gross margin of 20.4%, compared to $97,758,000 and 18.5% in 2023[36] Cash Flow and Debt Management - Cash generated from operating activities during fiscal 2025 third quarter was approximately $34.4 million, and net bank debt was reduced by $30.3 million to $84.0 million[10] - Total current liabilities decreased from $404,425,000 on March 31, 2024, to $348,611,000 on December 31, 2024, a reduction of approximately 13.8%[25] - Cash and cash equivalents decreased from $13,974,000 on March 31, 2024, to $10,810,000 on December 31, 2024, a decline of approximately 22.9%[25] Shareholder Value and Strategic Initiatives - The company remains focused on enhancing shareholder value and achieving continued success through strategic initiatives[9] - The company repurchased 268,130 shares for $2.1 million at an average share price of $7.82 during the fiscal third quarter[15] Expenses and Non-Cash Items - Interest expense for the fiscal third quarter decreased by $3.9 million to $14.4 million from $18.3 million a year ago[7] - Non-cash expenses impacted net income by $5.0 million and gross profit by $3.4 million for the fiscal 2025 third quarter[6] - Non-cash items impacting net income for the three months ended December 31, 2024, totaled $4,961,000, compared to $40,372,000 in 2023[29] - Total non-cash items impacting EBITDA rose to $6.615 million in Q3 2024, up from $3.881 million in Q3 2023, indicating increased non-cash expenses[37] Supply Chain and Operational Challenges - The company experienced supply chain disruptions impacting gross profit, with costs of $1,555,000 for the three months ended December 31, 2023[30] - Supply chain disruptions and related costs were eliminated in Q3 2024, compared to $1.555 million in Q3 2023[37] Tax and Depreciation - Income tax expense for Q3 2024 was $1.115 million, a decrease from $37.281 million in Q3 2023, reflecting a reduction of 97%[37] - Depreciation and amortization expenses decreased to $2.532 million in Q3 2024 from $2.878 million in Q3 2023, a decline of 12%[37] EBITDA Performance - EBITDA for Q3 2024 increased to $20.373 million, compared to $11.242 million in Q3 2023, reflecting a growth of 81.7%[37] - The company reported a total of $33.967 million in EBITDA for the nine months ended December 31, 2024, down from $40.888 million in the same period of 2023[37] - Foreign exchange impact of lease liabilities and forward contracts contributed $2.460 million to EBITDA in Q3 2024, compared to a negative impact of $3.149 million in Q3 2023[37] Asset Management - Total assets decreased from $1,012,002,000 on March 31, 2024, to $949,508,000 on December 31, 2024, representing a decline of approximately 6.2%[25] - Long-term contract assets increased from $320,282,000 on March 31, 2024, to $334,424,000 on December 31, 2024, an increase of approximately 4.3%[25]