Motorcar Parts of America(MPAA) - 2020 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Net sales for Q3 2020 increased to $125.6 million from $124.1 million year-over-year, with adjusted net sales rising to $127.7 million from $119.6 million [25] - Gross profit for Q3 2020 was $27.7 million, up from $21.2 million a year earlier, with gross profit as a percentage of net sales increasing to 22% from 17% [26] - Adjusted net income for Q3 2020 was $5.5 million or $0.28 per diluted share, compared to $6.7 million or $0.35 per share a year ago [34] Business Line Data and Key Metrics Changes - The company is focusing on maintaining growth rates in hard parts categories and launching into the multi-billion dollar brake parts category [14] - The facility expansion in Malaysia is substantially complete, allowing for increased capacity and reduced dependence on outsourcing [11] Market Data and Key Metrics Changes - The market for internal combustion engine vehicles in the U.S. is projected to increase by 36 million from 2020 to 2030, which will drive growth in the aftermarket parts replacement industry [12] - The company expects to generate approximately $534 million in net sales for fiscal 2020, representing a 13% year-over-year growth [20] Company Strategy and Development Direction - The company is executing strategic investments to create a transformative platform for growth and profitability within the $125 billion aftermarket hard parts industry [8] - The strategy includes leveraging channel relationships for aftermarket parts and expanding into electric vehicle diagnostics and testing [16] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the outlook for current and expanding product lines, despite short-term softness in demand due to mild weather and deferred orders [21] - The company expects continued year-over-year sales increases and improved adjusted gross margins and operating income for fiscal 2020 [18] Other Important Information - The company has established itself as a leader in supplying internal combustion vehicle hard parts, with significant growth expected in the aftermarket parts replacement industry [12] - The company has a net bank debt of approximately $145.6 million and total cash availability of about $83.2 million as of December 31, 2019 [38] Q&A Session Summary Question: Can you provide more detail on specifics driving the revenue mix? - Management indicated that nearly all underperformance was due to the deferral of over $12 million in product orders, which are expected to hit in future quarters [46] Question: How do you see the impact of the coronavirus on supply chains? - Management stated there has been no effect from the coronavirus as of now, but there are risks associated with unique update orders and componentry sourced from China [58] Question: What are the expectations for the new brake caliper line? - Management expects revenue from calipers to be closer to $25 million to $30 million, depending on order timing [63] Question: How do you feel about capacity and CapEx needs for fiscal 2021? - Management indicated that CapEx will drop dramatically as facilities are completed, and they are well set up to handle expected growth [54] Question: What is the company's plan for debt repayment moving forward? - Management plans to minimize outstanding debt from the revolver and will consider capital allocation for shareholder value once stable positive cash flows are achieved [72]