Motorcar Parts of America(MPAA) - 2026 Q1 - Quarterly Report

General Information Filing Information The registrant, Motorcar Parts of America, Inc., an accelerated filer, has filed all required reports during the preceding 12 months - The registrant is Motorcar Parts of America, Inc., an accelerated filer, and has filed all required reports during the preceding 12 months[3][4] | Title of each class | Trading symbol(s) | Name of each exchange on which registered | | :------------------ | :---------------- | :---------------------------------------- | | Common Stock, par value $0.01 per share | MPAA | The Nasdaq Global Select Market | - There were 19,352,135 shares of Common Stock outstanding at August 4, 2025[4] Glossary This section defines key terms frequently used throughout the report, specifically 'Used Core' and 'Remanufactured Core,' which are central to the company's remanufacturing process and inventory management - A 'Used Core' is a previously used original equipment automobile part, obtained primarily through core exchange programs or from core brokers, and serves as raw material for remanufacturing[9] - A 'Remanufactured Core' is a Used Core that has undergone the remanufacturing process, involving breakdown, replacement of non-reusable components, and reassembly into a new part[10] PART I — FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for Motorcar Parts of America, Inc. and its subsidiaries, including the balance sheets, statements of operations, comprehensive income (loss), shareholders' equity, and cash flows, along with detailed notes explaining the accounting policies and specific line items Condensed Consolidated Balance Sheets | ASSETS (in thousands) | June 30, 2025 | March 31, 2025 | | :-------------------- | :------------ | :------------- | | Total current assets | $519,382 | $511,471 | | TOTAL ASSETS | $973,350 | $957,636 | | LIABILITIES AND SHAREHOLDERS' EQUITY (in thousands) | | | | Total current liabilities | $360,616 | $351,025 | | Total liabilities | $713,237 | $699,937 | | Total shareholders' equity | $260,113 | $257,699 | | TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $973,350 | $957,636 | - Total assets increased by $15.7 million from March 31, 2025, to June 30, 2025, primarily driven by increases in current assets and plant and equipment[14] - Total liabilities increased by $13.3 million, mainly due to an increase in contract liabilities, while total shareholders' equity saw a $2.4 million increase[14] Condensed Consolidated Statements of Operations | (in thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | | Net sales | $188,364 | $169,887 | | Cost of goods sold | $154,447 | $140,713 | | Gross profit | $33,917 | $29,174 | | Operating income (loss) | $20,069 | $(6,456) | | Net income (loss) | $3,042 | $(18,085) | | Basic net income (loss) per share | $0.16 | $(0.92) | | Diluted net income (loss) per share | $0.15 | $(0.92) | - Net sales increased by 10.9% year-over-year, from $169.9 million in Q1 2024 to $188.4 million in Q1 2025[16] - The company reported a net income of $3.042 million in Q1 2025, a significant improvement from a net loss of $18.085 million in Q1 2024[16] Condensed Consolidated Statements of Comprehensive Income (Loss) | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | | Net income (loss) | $3,042 | $(18,085) | | Foreign currency translation gain (loss) | $888 | $(675) | | Comprehensive income (loss) | $3,930 | $(18,760) | - Comprehensive income improved significantly from a loss of $18.76 million in Q1 2024 to a gain of $3.93 million in Q1 2025, primarily driven by the turnaround in net income and a foreign currency translation gain[19] Condensed Consolidated Statements of Shareholders' Equity | (in thousands) | Balance at March 31, 2025 | Balance at June 30, 2025 | | :------------- | :------------------------ | :----------------------- | | Total Shareholders' Equity | $257,699 | $260,113 | - Total shareholders' equity increased by $2.414 million from March 31, 2025, to June 30, 2025, primarily due to net income and share-based compensation expense, partially offset by share repurchases[21] - The company repurchased and cancelled 197,796 shares of common stock for $1.966 million during the quarter[21] Condensed Consolidated Statements of Cash Flows | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | | Net cash provided by (used in) operating activities | $10,028 | $(20,841) | | Net cash used in investing activities | $(806) | $(512) | | Net cash (used in) provided by financing activities | $(6,778) | $15,166 | | Net increase (decrease) in cash and cash equivalents | $3,050 | $(6,443) | | Cash and cash equivalents — End of period | $12,479 | $7,531 | - Operating activities generated $10.028 million in cash in Q1 2025, a significant improvement from a cash outflow of $20.841 million in Q1 2024[23] - Cash used in financing activities was $6.778 million in Q1 2025, compared to cash provided of $15.166 million in Q1 2024, primarily due to net repayments of revolving loan and share repurchases[23] Notes to Condensed Consolidated Financial Statements Note 1. Company Background and Organization This note outlines Motorcar Parts of America, Inc.'s business as a leading supplier of automotive aftermarket replacement parts and test solutions, serving North American retail chain stores, warehouse distributors, and major automobile manufacturers - MPA is a leading supplier of automotive aftermarket non-discretionary replacement parts and test solutions/diagnostic equipment[26] - Products include light and heavy-duty rotating electrical products, wheel hub assemblies, brake-related products, turbochargers, and test solutions for combustion and electric vehicles[26] Note 2. Basis of Presentation and New Accounting Pronouncements This note explains that the unaudited condensed consolidated financial statements are prepared in accordance with GAAP for interim financial information and Form 10-Q instructions - Financial statements are prepared in accordance with U.S. GAAP for interim information and Form 10-Q instructions[27] - The company is evaluating the impact of several new FASB ASUs, including ASU 2023-06 (Disclosure Improvements), ASU 2023-09 (Income Tax Disclosures), ASU 2024-03 (Disaggregation of Income Statement Expenses), and ASU 2024-04 (Debt with Conversion and Other Options), with effective dates ranging from fiscal years beginning after December 2024 to December 2026[29][30][31][32] Note 3. Accounts Receivable — Net This note provides a breakdown of the company's accounts receivable, net of allowances for credit losses, customer payment discrepancies, and customer returns | Accounts receivable - net (in thousands) | June 30, 2025 | March 31, 2025 | | :------------------------------------- | :------------ | :------------- | | Accounts receivable — trade | $109,041 | $113,807 | | Allowance for credit losses | $(264) | $(207) | | Customer payment discrepancies | $(2,015) | $(1,765) | | Customer returns RGA issued | $(21,230) | $(20,771) | | Total accounts receivable — net | $85,532 | $91,064 | - Total accounts receivable — net decreased by $5.532 million from $91.064 million at March 31, 2025, to $85.532 million at June 30, 2025[34] Note 4. Inventory — Net This note details the composition of the company's inventory, including raw materials, work-in-process, and finished goods, net of an allowance for excess and obsolete inventory | Inventory — net (in thousands) | June 30, 2025 | March 31, 2025 | | :----------------------------- | :------------ | :------------- | | Raw materials | $154,325 | $150,274 | | Work-in-process | $8,917 | $7,821 | | Finished goods | $204,604 | $202,078 | | Less allowance for excess and obsolete inventory | $(19,566) | $(18,964) | | Inventory unreturned | $18,492 | $18,460 | | Total inventory — net | $366,772 | $359,669 | - Total inventory — net increased by $7.103 million from $359.669 million at March 31, 2025, to $366.772 million at June 30, 2025[35] Note 5. Contract Assets This note provides a breakdown of the company's short-term and long-term contract assets, which primarily include cores expected to be returned by customers, core premiums, and remanufactured cores held at customer locations | Contract assets (in thousands) | June 30, 2025 | March 31, 2025 | | :----------------------------- | :------------ | :------------- | | Total short-term contract assets | $30,329 | $29,606 | | Total long-term contract assets | $340,529 | $336,268 | - The carrying value of Remanufactured Cores held at customers' locations was reduced by $1.026 million for the three months ended June 30, 2025, compared to $394 thousand for the same period in 2024[36] Note 6. Significant Customer and Other Information This note discloses significant customer concentrations for net sales and accounts receivable, as well as product line concentrations | Net sales concentration | June 30, 2025 | June 30, 2024 | | :-------------------- | :------------ | :------------ | | Customer A | 39% | 40% | | Customer B | 24% | 17% | | Customer C | 22% | 28% | | Accounts receivable - trade concentration | June 30, 2025 | March 31, 2025 | | :-------------------------------------- | :------------ | :------------- | | Customer A | 48% | 41% | | Customer B | 23% | 26% | | Customer C | 0% | 7% | | Product line concentration | June 30, 2025 | June 30, 2024 | | :------------------------- | :------------ | :------------ | | Rotating electrical products | 66% | 65% | | Brake-related products | 23% | 24% | | Wheel hub products | 6% | 7% | | Other products | 5% | 4% | Note 7. Debt This note details the company's debt structure, including its senior secured Credit Facility and Convertible Notes - The company has a $268.62 million senior secured Credit Facility, including a $238.62 million Revolving Facility and a $30 million Term Loan facility (repaid in FY2024), maturing on December 12, 2028[42] | Revolving Facility Outstanding (in thousands) | June 30, 2025 | March 31, 2025 | | :-------------------------------------------- | :------------ | :------------- | | Outstanding balance | $86,856 | $90,787 | | Available under Revolving Facility | $134,341 | N/A | | Interest rate | 7.40% | 7.46% | - Convertible Notes of $32 million principal amount, due 2029, bear 10.0% annual interest (compounded annually, payable in-kind or cash), with an effective interest rate of 18.3% as of June 30, 2025[45] - A Compound Net Derivative Liability related to the Convertible Notes resulted in a non-cash loss of $1.79 million in Q1 2025, compared to a gain of $2.58 million in Q1 2024[47] Note 8. Contract Liabilities This note details the company's short-term and long-term contract liabilities, which include customer allowances, core returns accruals, core bank liability, and customer deposits | Contract liabilities (in thousands) | June 30, 2025 | March 31, 2025 | | :-------------------------------- | :------------ | :------------- | | Total short-term contract liabilities | $49,396 | $38,158 | | Total long-term contract liabilities | $240,021 | $241,404 | - Short-term contract liabilities increased by $11.238 million, primarily due to a significant increase in core bank liability from $1.795 million to $11.399 million[50] Note 9. Leases This note provides detailed information on the company's operating and finance leases, including balance sheet classification, lease costs, and maturity schedules - The company recorded a non-cash gain of $4.002 million from the remeasurement of foreign currency-denominated lease liabilities in Q1 2025, compared to a loss of $5.709 million in Q1 2024[51] - Cessation of manufacturing at the Torrance, California facility required reassessment of the right-of-use asset, with no impairment identified at June 30, 2025[52] | Lease Costs (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------- | :------------------------------- | :------------------------------- | | Operating lease cost | $3,490 | $3,759 | | Finance lease cost | $429 | $409 | | Total lease cost | $4,268 | $4,644 | Note 10. Accounts Receivable Discount Programs This note describes the company's accounts receivable discount programs, which allow it to sell customer receivables to banks at a discount to accelerate cash collection - The company uses accounts receivable discount programs to accelerate cash receipt from customers[55] | Accounts Receivable Discount Programs | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | | Receivables discounted | $168,194,000 | $144,541,000 | | Weighted average days collection accelerated | 345 | 342 | | Annualized weighted average discount rate | 5.7% | 6.9% | | Amount of discount recognized as interest expense | $9,158,000 | $9,507,000 | Note 11. Supplier Finance Programs This note explains the company's supplier finance program, which enables suppliers to sell their receivables due from the company to participating financial institutions - The company utilizes a supplier finance program, allowing suppliers to sell receivables to financial institutions[57] - Outstanding supplier obligations confirmed under this program were $31.292 million at June 30, 2025, down from $33.661 million at March 31, 2025[57] Note 12. Net Income (Loss) per Share This note provides the reconciliation of basic and diluted net income (loss) per share, detailing the weighted average number of shares outstanding and the impact of potentially dilutive securities | Net Income (Loss) per Share | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | | Net income (loss) | $3,042,000 | $(18,085,000) | | Basic net income (loss) per share | $0.16 | $(0.92) | | Diluted net income (loss) per share | $0.15 | $(0.92) | - For Q1 2025, 1,049,341 potential common shares were anti-dilutive and excluded from diluted EPS calculation, compared to 2,285,834 in Q1 2024[59] Note 13. Income Taxes This note details the company's income tax expense and effective tax rate, highlighting the impact of valuation allowances on deferred tax assets and foreign income | Income Tax | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--------- | :------------------------------- | :------------------------------- | | Income tax expense (benefit) | $2,425,000 | $(178,000) | | Effective tax rate | 44.4% | 1% | - The effective tax rate for Q1 2025 was primarily impacted by changes in valuation allowance on deferred tax assets and foreign income taxed at different rates[61] - The company is evaluating the impact of the One Big Beautiful Bill Act (OBBBA), signed on July 4, 2025, on its future effective tax rate and deferred tax assets[64] Note 14. Financial Risk Management and Derivatives This note describes the company's strategy for managing financial risks, primarily foreign exchange rate fluctuations, through the use of forward foreign currency exchange contracts - The company uses forward foreign currency exchange contracts to mitigate market risk from fluctuations in the Mexican peso and Chinese yuan[66][67] | Forward Foreign Currency Exchange Contracts (in thousands) | June 30, 2025 | March 31, 2025 | | :------------------------------------------------------- | :------------ | :------------- | | U.S. dollar equivalent notional value | $42,531 | $45,921 | - A non-cash loss of $5.369 million from forward foreign currency exchange contracts was recorded in Q1 2025, compared to a gain of $4.346 million in Q1 2024[69] Note 15. Fair Value Measurements This note summarizes financial assets and liabilities measured at fair value, categorized by the fair value hierarchy (Level 1, 2, and 3) | Fair Value Measurements (in thousands) | June 30, 2025 | March 31, 2025 | | :------------------------------------- | :------------ | :------------- | | Mutual funds (Level 1) | $2,011 | $1,881 | | Forward foreign currency exchange contracts (Level 2) | $2,683 | $0 | | Compound Net Derivative Liability (Level 3) | $9,260 | $7,470 | - The fair value of the Compound Net Derivative Liability, valued using Level 3 inputs and the Monte Carlo simulation model, increased from $7.47 million at March 31, 2025, to $9.26 million at June 30, 2025[73][75] - Key assumptions for the Compound Net Derivative Liability valuation include a risk-free interest rate of 3.70%, cost of equity of 21.40%, and expected volatility of common stock of 47.50% at June 30, 2025[74] Note 16. Share-based Payments This note provides a summary of the company's share-based payment awards, including stock options, Restricted Stock Units (RSUs), and Performance Stock Units (PSUs) | Share-based Payments | Outstanding at March 31, 2025 | Outstanding at June 30, 2025 | | :------------------- | :---------------------------- | :--------------------------- | | Stock Options | 1,053,561 | 1,049,341 | | Non-vested RSUs | 505,373 | 811,981 | | Non-vested PSUs | 764,387 | 998,147 | - The company granted 428,552 time-based vesting RSUs and 353,778 PSUs (at target performance levels) during Q1 2025[80][82] - Total unrecognized compensation expense for RSUs is $5.931 million (2.7 years remaining vesting period) and for PSUs is $5.256 million (2.2 years remaining vesting period) at June 30, 2025[81][86] Note 17. Commitments and Contingencies This note addresses the company's commitments and contingencies, specifically detailing the accrual for warranty returns and the status of various lawsuits, claims, and administrative proceedings | Warranty Returns (in thousands) | June 30, 2025 | June 30, 2024 | | :------------------------------ | :------------ | :------------ | | Balance at beginning of period | $19,677 | $19,326 | | Charged to expense | $38,453 | $33,352 | | Amounts processed | $(39,999) | $(37,632) | | Balance at end of period | $18,131 | $15,046 | - The total warranty return accrual was $18.131 million at June 30, 2025, a decrease from $19.677 million at March 31, 2025[88] - The company has an immaterial amount accrued for various lawsuits, claims, examinations, and administrative proceedings[89] Note 18. Segment Information This note identifies the company's three operating segments: Hard Parts, Test Solutions and Diagnostic Equipment, and Heavy Duty - The company operates in three segments: Hard Parts, Test Solutions and Diagnostic Equipment, and Heavy Duty[91][92] - Hard Parts is the only reportable segment, with Test Solutions and Diagnostic Equipment and Heavy Duty segments being immaterial[91] | Hard Parts Segment (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Net sales to external customers | $174,889 | $158,187 | | Total operating income (loss) | $18,432 | $(6,459) | | Depreciation and amortization | $2,232 | $2,525 | | Capital expenditures | $394 | $253 | Note 19. Share Repurchases This note details the company's share repurchase program, which was increased to $37 million in August 2018 - The board approved an increase in the share repurchase program to $37 million in August 2018[95] - During Q1 2025, the company repurchased 197,796 shares of common stock for $1.966 million[95] - As of June 30, 2025, $11.457 million remains available under the authorized share repurchase program[95] Note 20. Related Party Transactions This note discloses related party transactions, specifically an operating lease for a manufacturing facility in Canada with a company co-owned by a member of management - The company has an operating lease for a Canadian facility with a company co-owned by a member of management, with rent expense of $93 thousand in Q1 2025[96] - Douglas Trussler, a co-founder of Bison Capital, was appointed to the Board in connection with the Convertible Notes issuance[97] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations for the three months ended June 30, 2025, compared to the prior year Management Overview The management overview highlights the company's focus on growing its aftermarket hard parts business in North America and expanding its leadership in the test solutions and diagnostic equipment market through innovative solutions - The company focuses on growing its aftermarket hard parts business in North America and its leadership in test solutions and diagnostic equipment[101] - Significant investments include a 410,000 sq ft distribution center, two buildings totaling 372,000 sq ft for remanufacturing/core sorting, and production realignment at a 312,000 sq ft facility in Mexico[101] Segment Reporting This section reiterates the company's three operating segments: Hard Parts, Test Solutions and Diagnostic Equipment, and Heavy Duty - The company's three operating segments are Hard Parts, Test Solutions and Diagnostic Equipment, and Heavy Duty[102][103] - Hard Parts is the only reportable segment, as the other two do not meet materiality thresholds[102] Results of Operations for the Three Months Ended June 30, 2025 and 2024 This section provides a detailed analysis of the company's operating results, highlighting significant improvements in net sales, gross profit, and operating income | Key Operating Data (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Cash flow provided by (used in) operations | $10,028 | $(20,841) | | Finished goods turnover (annualized) | 4.2 | 3.3 | Net Sales and Gross Profit Net sales increased by 10.9% year-over-year, driven by strong demand for rotating electrical and brake-related products | Net Sales and Gross Profit (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :---------------------------------------- | :------------------------------- | :------------------------------- | | Net sales | $188,364 | $169,887 | | Gross profit | $33,917 | $29,174 | | Gross margin | 18.0% | 17.2% | - Net sales increased by $18.477 million, or 10.9%, year-over-year, reflecting strong demand for rotating electrical and brake-related products[106] - Gross margin increased due to increased facility utilization, operating efficiencies, cost-saving initiatives, and changes in product mix, partially offset by $1.426 million in net tariff costs[107] Operating Expenses Operating expenses decreased significantly year-over-year, primarily due to a non-cash foreign exchange gain on lease liabilities and forward contracts, and reduced general and administrative expenses from prior year headcount reductions | Operating Expenses (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | General and administrative | $12,680 | $16,670 | | Sales and marketing | $6,210 | $5,449 | | Research and development | $3,306 | $2,433 | | Foreign exchange impact of lease liabilities and forward contracts | $(8,348) | $11,078 | - General and administrative expenses decreased by $3.99 million (23.9%) due to prior year headcount reduction and favorable foreign currency fluctuations[109] - Foreign exchange impact shifted from a non-cash loss of $11.078 million in Q1 2024 to a non-cash gain of $8.348 million in Q1 2025[112] Operating Income (Loss) The company achieved a consolidated operating income of $20.069 million in Q1 2025, a substantial improvement from an operating loss of $6.456 million in Q1 2024 | Operating Income (Loss) (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------------------- | :------------------------------- | :------------------------------- | | Consolidated operating income (loss) | $20,069 | $(6,456) | - The increase in operating income was primarily due to a non-cash foreign exchange gain of $8.348 million (vs. $11.078 million loss in prior year), increased gross profit, and decreased general and administrative expenses[113] Interest Expense Net interest expense decreased by 10.9% year-over-year, primarily due to lower average outstanding balances under the credit facility and reduced interest rates on both the credit facility and accounts receivable discount programs | Interest Expense, net (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | | Interest expense, net | $12,812 | $14,387 | - Interest expense decreased by $1.575 million (10.9%) due to lower average outstanding balances under the credit facility and lower interest rates[114] Change in Fair Value of Compound Net Derivative Liability The change in fair value of the compound net derivative liability associated with convertible notes resulted in a non-cash loss of $1.790 million in Q1 2025, contrasting with a non-cash gain of $2.580 million in Q1 2024 | Change in Fair Value of Compound Net Derivative Liability (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--------------------------------------------------------------------- | :------------------------------- | :------------------------------- | | Change in fair value | $1,790 | $(2,580) | Provision for Income Taxes The company recorded an income tax expense of $2.425 million, resulting in an effective tax rate of 44.4% for Q1 2025, a significant change from an income tax benefit of $178,000 (1.0% effective rate) in Q1 2024 | Income Tax (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------ | :------------------------------- | :------------------------------- | | Income tax expense (benefit) | $2,425 | $(178) | | Effective tax rate | 44.4% | 1.0% | - The effective tax rate for Q1 2025 was primarily impacted by changes in valuation allowance on deferred tax assets and foreign income taxed at different rates[116] Liquidity and Capital Resources This section discusses the company's financial flexibility, including working capital, cash flow generation, and available credit facilities Overview The company's working capital was $158.766 million at June 30, 2025, with a current asset to current liability ratio of 1.4:1.0 | Working Capital (in thousands) | June 30, 2025 | March 31, 2025 | | :----------------------------- | :------------ | :------------- | | Working capital | $158,766 | $160,446 | | Current assets to current liabilities ratio | 1.4:1.0 | 1.5:1.0 | - Primary liquidity sources are cash from operations, receivable discount programs, and the credit facility[118] Share Repurchase Program The company's board approved an increase in its share repurchase program to $37 million in August 2018 - Share repurchase program increased to $37 million in August 2018[119] - 197,796 shares were repurchased for $1.996 million during Q1 2025[119] - $11.457 million remains available for repurchases as of June 30, 2025[119] Cash Flows Net cash provided by operating activities significantly improved to $10.028 million in Q1 2025 from a net cash outflow in Q1 2024, driven by increased accounts payable and improved operating results | Cash Flows (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------ | :------------------------------- | :------------------------------- | | Operating activities | $10,028 | $(20,841) | | Investing activities | $(806) | $(512) | | Financing activities | $(6,778) | $15,166 | - Net cash provided by operating activities improved by $30.869 million year-over-year, primarily due to increased accounts payable and improved operating results[120] - Net cash used in financing activities was $6.778 million, a change from $15.166 million provided in the prior year, mainly due to net repayments of the revolving loan and common stock repurchases[122] Capital Resources The company's capital resources include a $268.62 million senior secured Credit Facility, with $86.856 million outstanding under the Revolving Facility and $134.341 million available at June 30, 2025 - The Credit Facility consists of a $238.62 million revolving loan facility and a $30 million term loan facility (repaid), maturing December 12, 2028[123] | Revolving Facility (in thousands) | June 30, 2025 | March 31, 2025 | | :-------------------------------- | :------------ | :------------- | | Outstanding balance | $86,856 | $90,787 | | Available credit | $134,341 | N/A | | Interest rate | 7.40% | 7.46% | - Convertible Notes of $32 million principal amount, due 2029, bear 10.0% interest and had an effective interest rate of 18.3% at June 30, 2025[126] Accounts Receivable Discount Programs The company utilizes accounts receivable discount programs to accelerate cash collection, selling customer receivables to banks at a discount - Accounts receivable discount programs accelerate cash receipt by selling receivables to banks[130] | Accounts Receivable Discount Programs | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | | Receivables discounted | $168,194,000 | $144,541,000 | | Weighted average days collection accelerated | 345 | 342 | | Annualized weighted average discount rate | 5.7% | 6.9% | | Amount of discount recognized as interest expense | $9,158,000 | $9,507,000 | Supplier Finance Programs The company uses a supplier finance program that allows its suppliers to sell their receivables to financial institutions - Supplier finance program allows suppliers to sell receivables to financial institutions; the company has no economic interest[133] - Outstanding supplier obligations confirmed under this program were $31.292 million at June 30, 2025, a decrease from $33.661 million at March 31, 2025[133] Capital Expenditures and Commitments Total capital expenditures for Q1 2025 were $2.708 million, significantly higher than the prior year, primarily for equipment supporting current operations and global growth initiatives | Capital Expenditures (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | | Total capital expenditures | $2,708 | $493 | - Capital expenditures for Q1 2025 primarily supported current operations and global growth initiatives[134] - The company expects approximately $8 million in capital expenditures for fiscal 2026[134] Related Party Transactions This section reiterates the related party operating lease for a Canadian facility, with rent expense of $93,000 for Q1 2025, and the appointment of Douglas Trussler to the Board in connection with the Convertible Notes issuance - Operating lease for a Canadian facility with a company co-owned by management resulted in $93 thousand rent expense in Q1 2025[135] - Douglas Trussler was appointed to the Board in connection with the Convertible Notes issuance[136] Litigation The company is subject to various lawsuits, claims, examinations, and administrative proceedings, but has accrued an immaterial amount related to these exposures - The company is subject to various lawsuits, claims, and administrative proceedings[137] - An immaterial amount is accrued for these exposures[137] Critical Accounting Policies This section states that there have been no material changes to the company's critical accounting policies and estimates since its Annual Report on Form 10-K for the fiscal year ended March 31, 2025 - No material changes to critical accounting policies and estimates since the March 31, 2025, Annual Report on Form 10-K[138] Accounting Pronouncements Not Yet Adopted This section discusses several new FASB Accounting Standards Updates (ASUs) that are not yet adopted, including those related to disclosure improvements, income tax disclosures, disaggregation of income statement expenses, and debt with conversion options - The company is evaluating the impact of ASU 2023-06 (Disclosure Improvements), ASU 2023-09 (Income Tax Disclosures), ASU 2024-03 (Disaggregation of Income Statement Expenses), and ASU 2024-04 (Debt with Conversion and Other Options)[139][140][141][142] - These ASUs have various effective dates, with the earliest for fiscal years beginning after December 15, 2024, and the latest for annual reporting periods beginning after December 15, 2026[140][141][142] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that there have been no material changes in market risk from the information previously provided in the company's Annual Report on Form 10-K as of March 31, 2025 - No material changes in market risk from the information provided in the Annual Report on Form 10-K as of March 31, 2025[143] Item 4. Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures as of June 30, 2025, based on an evaluation by management - The company's disclosure controls and procedures were effective as of June 30, 2025[145] - No material changes in internal control over financial reporting occurred during the three months ended June 30, 2025[150] - Internal control over financial reporting is designed to provide reasonable assurance regarding financial reporting reliability, but has inherent limitations[147][149] PART II — OTHER INFORMATION Item 1. Legal Proceedings This section states that the company is subject to various lawsuits, claims, examinations, and administrative proceedings, but has accrued an immaterial amount related to these exposures - The company is subject to various lawsuits, claims, and administrative proceedings[152] - An immaterial amount is accrued for these exposures[152] Item 1A. Risk Factors This section indicates that there have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended March 31, 2025 - No material changes in risk factors from the Annual Report on Form 10-K for the fiscal year ended March 31, 2025[153] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's share repurchase activities during the quarter, including the number of shares purchased, average price paid, and the remaining amount available under the authorized program - The Credit Facility permits up to $27.584 million of dividends and share repurchases for fiscal year 2026[154] | Purchases of Equity Securities by the Issuer | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1) | | :----------------------------------------- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------------------- | :--------------------------------------------------------------------------------------- | | April 1 - April 30, 2025 | - | - | - | $13,423,000 | | May 1 - May 31, 2025 | 98,671 | $9.73 | 960,000 | $12,463,000 | | June 1 - June 30, 2025 | 99,125 | $10.15 | 1,006,000 | $11,457,000 | | Total | 197,796 | $1,966,000 | N/A | $11,457,000 | - As of June 30, 2025, $11.457 million remains available under the authorized share repurchase program[156] Item 3. Defaults Upon Senior Securities This section explicitly states that there were no defaults upon senior securities during the reported period - No defaults upon senior securities were reported[155] Item 5. Other Information This section discloses that the company purchased 197,796 shares under a Rule 10b5-1 trading arrangement during the quarter, which allows for share repurchases during blackout periods or when in possession of material non-public information - The company purchased 197,796 shares under a Rule 10b5-1 trading arrangement during Q1 2025[158] - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter[160] Item 6. Exhibits This section provides a comprehensive list of exhibits filed with the Form 10-Q, including various corporate documents, incentive award plans, convertible promissory notes, common stock warrants, and certifications required by the Sarbanes-Oxley Act - The exhibits include corporate documents like the Certificate of Incorporation and By-Laws, various Incentive Award Plans (2010 and 2022), and forms related to Convertible Promissory Notes and Common Stock Warrants[161][162] - Certifications from the Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are filed herewith[162] SIGNATURES Signatures This section contains the duly authorized signatures of the registrant's Chief Financial Officer and Chief Accounting Officer, affirming the submission of the report pursuant to the Securities Exchange Act of 1934 - The report is signed by David Lee, Chief Financial Officer, and Kamlesh Shah, Chief Accounting Officer, on August 11, 2025[167]