UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2025 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO Commission File No. 001-33861 MOTORCAR PARTS OF AMERICA, INC. (Exact name of registrant as specified in its charter) New York 11-2153962 (State or other jurisdiction of i ...

Financial Data and Key Metrics Changes - Net sales increased by 10.9% to a record $188.4 million for Q1 2026 compared to $169.9 million in the prior year [17][18] - Gross profit rose by 16.3% to a record $33.9 million from $29.2 million a year earlier, with gross margin improving to 18% from 17.2% [19][20] - Operating income increased to $20.1 million from an operating loss of $6.5 million in the prior year, reflecting a 153.6% increase when excluding non-cash foreign exchange impacts [20][21] - Net income for Q1 2026 was $3 million or $0.15 per diluted share, compared to a net loss of $18.1 million or $0.92 per share in the prior year [22] Business Line Data and Key Metrics Changes - The hard parts business, particularly rotating electrical products, continues to perform well, contributing to overall sales growth [7][10] - Brake offerings, including brake calipers, are gaining market share and are expected to enhance operating efficiency and margins [9][10] - The diagnostic business, led by the JBT-one benchtop tester, is growing, with additional service-related revenue anticipated as more testers are deployed [12] Market Data and Key Metrics Changes - The average age of U.S. light vehicles has increased to 12.8 years, leading to more replacement opportunities for aftermarket parts [8] - The number of vehicles on the road rose to 293.5 million from 289 million a year ago, indicating a growing market for replacement parts [8] Company Strategy and Development Direction - The company is focused on continuous improvement and leveraging its North American operational and distribution footprint to drive growth [6][10] - There is a strategic emphasis on reducing dependence on the Chinese supply chain and enhancing operational efficiencies [12][13] - The company aims to grow sales of existing product lines while improving operational efficiencies to enhance margins and mitigate tariff impacts [41][42] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the outlook for fiscal 2026, citing strong sales growth and favorable industry dynamics for non-discretionary aftermarket parts [14][41] - The company anticipates continued organic growth supported by favorable industry tailwinds and increased demand for aftermarket parts in Mexico [14][23] - Management highlighted the importance of maintaining strong liquidity and low leverage to enhance shareholder value [42] Other Important Information - The company generated $10 million in cash from operating activities during Q1 2026, a significant improvement from a cash use of $20.8 million in the prior year [23] - Net bank debt decreased by $7 million to $74.4 million, reflecting ongoing efforts to reduce debt [23] Q&A Session Summary Question: Impact of tariffs this quarter compared to last quarter - Management noted a smaller impact from tariffs this quarter, with a $1.4 million impact compared to $4.6 million in the previous quarter [28][29] Question: Assumptions made for full year guidance regarding tariffs - Management indicated that while they raised sales guidance, they are not disclosing specific details on tariff pass-throughs due to confidentiality [30][31] Question: Major growth opportunities in rotating electric and braking businesses - Management highlighted significant growth potential in the professional installer market and emphasized opportunities for market share growth in brake-related products [34][36]

Core Viewpoint - The article emphasizes the importance of value investing and highlights Motorcar Parts of America (MPAA) as a strong value stock based on its financial metrics and Zacks Rank [1][2][6]. Company Summary - Motorcar Parts of America (MPAA) currently holds a Zacks Rank of 1 (Strong Buy) and an A grade for Value, indicating strong potential for investors [4]. - The stock is trading at a P/E ratio of 6.7, significantly lower than the industry average of 9.30, suggesting it may be undervalued [4]. - Over the past year, MPAA's Forward P/E has fluctuated between 5.81 and 21.89, with a median of 8.60, indicating volatility in its valuation [4]. - MPAA's P/B ratio stands at 0.85, compared to the industry average of 1.53, further supporting the notion that the stock is undervalued [5]. - The P/B ratio has ranged from a low of 0.39 to a high of 0.94 over the past year, with a median of 0.60, reflecting its valuation dynamics [5]. - Overall, the financial metrics suggest that MPAA is likely undervalued and has a strong earnings outlook, making it one of the market's strongest value stocks [6].

Exhibit 99.1 NEWS RELEASE CONTACT: Gary S. Maier Vice President, Corporate Communications & IR (310) 972-5124 MOTORCAR PARTS OF AMERICA REPORTS FISCAL FIRST QUARTER RESULTS - Record Sales and Gross Profit with Solid Cash Flow Generation - LOS ANGELES, CA – August 11, 2025 – Motorcar Parts of America, Inc. (Nasdaq: MPAA) today reported results for its fiscal 2026 first quarter -- reflecting record sales and gross profit for a fiscal first quarter with solid cash flow generation. Key highlights for the quarte ...

Summary of Motorcar Parts of America (MPAA) FY Conference Call Company Overview - **Company**: Motorcar Parts of America (MPAA) - **Industry**: Automotive aftermarket, specializing in nondiscretionary replacement parts, particularly in rotating electrical and brake components [7][8] Key Financial Highlights - **Cash Generation**: Generated $45 million in cash during the last fiscal year [9] - **Debt Reduction**: Paid down over $30 million of debt, resulting in net debt of approximately $80 million [9] - **EBITDA**: Significant EBITDA reported, with a low debt-to-EBITDA ratio indicating strong liquidity [9] - **Share Buybacks**: Engaged in share buybacks, reflecting confidence in the company's financial health [9] Tariff Impact and Mitigation Strategies - **Tariff Headwinds**: Facing short-term tariff headwinds due to transitional tariffs, but expects to mitigate 100% of the tariff impact over time [10][13] - **Operational Adjustments**: Implementing operational adjustments and supply chain efficiencies to manage tariff costs [13][14] - **Competitive Advantage**: Less than 25% of products are subject to tariffs, providing a competitive edge over competitors who may face higher costs [15][18] Market Demand Dynamics - **Nondiscretionary Demand**: The demand for replacement parts remains stable and is driven by the increasing number of older vehicles on the road, with the average vehicle age at 12.8 years [23][24] - **Consumer Behavior**: Consumers are likely to replace parts rather than vehicles, maintaining demand for MPAA's products [25][28] - **Inflation Effects**: Some inflation in the market is viewed positively as it supports a viable supply chain [29] Product Diversification and Growth Strategy - **Expansion Beyond Core Products**: Transitioning from a focus solely on rotating electrical parts to include a broader range of brake components, with significant market share growth in brake calipers and pads [34][35] - **Focus on Existing Categories**: The company is concentrating on growing existing product lines rather than seeking new categories at this time [37][39] Competitive Positioning - **Service and Quality**: Emphasizes a comprehensive service model and high-quality products, with tier certification in all facilities [42][45] - **Manufacturing Efficiency**: Over 75% of production is based in Mexico, which is USMCA certified and tariff-free, enhancing operational flexibility [47][48] Currency Management - **Noncash Items**: Addressed the impact of noncash items related to currency fluctuations, particularly the mark-to-market on Mexican leases, which does not affect cash flow [53][55] - **Forward Contracts**: Engaging in forward contracts for currency to manage cash requirements effectively [56][58] M&A Considerations - **Open to Opportunities**: While not actively seeking M&A, the company remains open to opportunities in a consolidating supply chain environment [61][62] Long-term Financial Outlook - **Growth Projections**: Anticipates mid to high single-digit growth with potential for margin accretion in the mid to high twenties [63][64] - **Positive Cash Flow Focus**: Committed to maintaining positive cash flow and enhancing shareholder value through strategic capital deployment [38][62] Conclusion - **Overall Sentiment**: The company expresses optimism about overcoming short-term challenges, with a strong focus on growth, market share expansion, and operational efficiency [65]

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]

Financial Data and Key Metrics Changes - Net sales increased by 5.5% to a record $757 million for fiscal year 2025, with fourth-quarter net sales rising by 1.9% to $193.1 million [20][21] - Gross profit for fiscal year 2025 increased by 16.1% to a record $153.8 million, with fourth-quarter gross profit rising by 10.6% to $38.5 million [20][21] - Cash flow from operating activities was $45.5 million, and net bank debt was reduced by $32.6 million to $81.4 million [20][28] - The company repurchased 542,134 shares for $4.8 million at an average price of $8.91 [7][20] Business Line Data and Key Metrics Changes - The hard parts business, particularly in rotating electrical components, continues to perform well, driven by the non-discretionary nature of products [9][10] - Brake-related applications are the second-largest product category, showing strong performance supported by quality and customer service [10][18] - The diagnostic business is experiencing growth, particularly with the JBT-one benchtop tester, which is expected to generate 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, exceeding scrappage rates [10] - The company is gaining momentum in the Mexican market, with increased demand for aftermarket parts [14] Company Strategy and Development Direction - The company is focused on reducing dependency on Chinese supply chains, with less than 25% of products sourced from China [8][32] - Strategies are in place to enhance competitive edge, including direct shipping from factories to mitigate tariff impacts [33] - The company aims to leverage its strong market position and operational efficiencies to drive sales growth and margin improvement [12][18] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about future growth, citing favorable long-term industry dynamics for non-discretionary aftermarket parts [15][49] - The company expects continued organic growth supported by favorable market conditions and operational efficiencies [17][28] - Tariffs are seen as a challenge, but management believes they can be offset through pricing strategies and operational adjustments [16][42] Other Important Information - The company experienced a net loss of $19.5 million for fiscal year 2025, primarily due to non-cash expenses and one-time cash expenses [26][27] - EBITDA for fiscal year 2025 was $50.3 million, impacted by non-cash and one-time cash expenses [27] - The company expects net sales for fiscal year 2026 to be between $780 million and $800 million, representing year-over-year growth of 3.5% to 5.6% [28] 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 may face higher cash requirements due to tariffs [32][33] Question: Impact of customer price increases on gross margin? - Management acknowledged that while tariffs may slightly negatively impact gross margin, other initiatives to expand gross margin should offset this effect [35][36] Question: Clarification on tariff impacts and price increases? - Management noted that the timing of tariff impacts is unpredictable but expects that most price increases have been accepted [42][44] Question: Expected margin expansion catalysts? - Management highlighted initiatives focused on lowering costs per unit and increasing sales per unit as key drivers for margin expansion [45][46]

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]