Motorcar Parts of America Reports Fiscal Second Quarter Results

About this update from Motorcar Parts Of America, Inc.

- Record Sales and Gross Profit with Strong Cash Flow Generation - Full-Year Outlook Remains on Track LOS ANGELES --(BUSINESS WIRE)-- Motorcar Parts of America, Inc. ( Nasdaq: MPAA ) today reported results for its fiscal 2025 second quarter and six-month period ended September 30, 2024 , with a continued favorable full-year outlook supported by record sales and gross profit, and the ongoing benefits of strategic initiatives to further enhance profitability. Key highlights for the fiscal second quarter. Net sales increased 5.9 percent to a record $208.2 million . Gross profit increased to a record $41.3 million , impacted by certain one-time expenses of $2.7 million for onboarding new business, and $1.3 million of transition expenses related to the recent strategic relocation of certain operations with expected annualized savings of $7.1 million . Generated cash from operating activities of $22.9 million and reduced net bank debt by $22.0 million . Results were impacted by non-cash items totaling $10.6 million as detailed in the exhibits. Fiscal 2025 Second Quarter Results Net sales for the fiscal 2025 second quarter increased 5.9 percent to an all-time record $208.2 million from $196.6 million in the prior year. Gross profit for the fiscal 2025 second quarter increased to a record $41.3 million from $41.1 million a year earlier. Gross margin for the fiscal 2025 second quarter was 19.8 percent compared with 20.9 percent a year earlier. Gross margin for the fiscal 2025 second quarter was impacted by $3.8 million , or 1.8 percent, of non-cash expenses, and $1.3 million , or 0.6 percent, of one-time cash expenses, as detailed in Exhibit 3. In addition to the items detailed in Exhibit 3, gross profit for the current quarter was also impacted by $2.7 million , or 1.3 percent, of certain one-time expenses for onboarding new business. Interest expense for the fiscal second quarter decreased by $1.2 million to $14.2 million from $15.4 million a year ago, primarily due to lower average outstanding balances under the company’s credit facility and lower interest rates. Net loss for the fiscal 2025 second quarter was $3.0 million , or $0.15 per share, impacted by non-cash expenses of $8.0 million , or $0.40 per share, and one-time cash expenses of $1.1 million , or $0.06 per share, compared with a net loss of $2.0 million , or $0.10 per share, a year ago, impacted by various items detailed in Exhibit 1. In addition to the items detailed in Exhibit 1, as previously explained, results for the current quarter were also impacted by $2.7 million , or $0.10 per share, of certain one-time expenses for onboarding new business. “As we enter the second half of fiscal 2025, we remain optimistic about our year-over-year outlook. We anticipate continued improvements to gross margins, gross profit and cash flow in the quarters ahead, supported by opportunities to further leverage our leadership position within the non-discretionary aftermarket parts market. Our ongoing strategic actions throughout the entire organization are gaining traction as expected, enhanced by volume increases and improved operating efficiencies. “While there are a variety of factors related to financial performance beyond our control, such as non-cash items and interest rates, which are improving, the underlying fundamentals of our business continue to be strong. We remain focused on enhancing shareholder value and continued success in the second half,” said Selwyn Joffe , chairman, president, and chief executive officer. The company generated approximately $22.9 million of cash from operating activities during fiscal 2025 second quarter and reduced net bank debt by $22.0 million to $114.3 million from $136.3 million . Six-Month Results Net sales for the fiscal 2025 six-month period increased 6.1 percent to a record $378.1 million from $356.3 million a year ago. Gross profit for the fiscal 2025 six-month period increased to a record $70.5 million from $67.7 million a year earlier. Gross margin for the fiscal 2025 six-month period was 18.6 percent compared with 19.0 percent a year earlier. Gross margin for the fiscal 2025 six-month period was impacted by $6.9 million , or 1.8 percent, of non-cash expenses, and $1.3 million , or 0.3 percent, of one-time cash expenses, as detailed in Exhibit 4. In addition to the items detailed in Exhibit 4, gross profit for the current six-month period was also impacted by $2.7 million , or 0.7 percent, of certain one-time expenses for onboarding new business. Interest expense increased by $1.5 million for the six months to $28.6 million from $27.1 million a year ago, primarily due to increased collection of receivables utilizing accounts receivable discount programs resulting from higher sales, partially offset by lower average outstanding balances under the company’s credit facility and lower interest rates. Net loss for the fiscal 2025 six-month period was $21.0 million , or $1.07 per share, impacted by non-cash expenses of $17.4 million , or $0.88 per share, and one-time cash expenses of $3.3 million , or $0.17 per share, compared with a net loss of $3.4 million , or $0.17 per share, a year ago, impacted by various items detailed in Exhibit 2. In addition to the items detailed in Exhibit 2, as previously explained, results for the current six-month period were also impacted by $2.7 million , or $0.10 per share, of certain one-time expenses for onboarding new business. Further Considerations Continued sales volume increases: Ordering activity has gained momentum. The company’s fundamentals are improving. Margin improvement: Enhanced by multiple rounds of price increases. Improving overhead absorption as brake-related business gains further momentum. Improving operational efficiencies. Positive cash flow outlook. Fiscal 2025 Guidance As noted in the company’s prior fiscal year 2024 earnings press release, net sales for the fiscal year ending March 31, 2025 are estimated to be between $746 million to $766 million , representing between 3.9 percent and 6.7 percent year-over-year growth. The company expects gross margin accretion from operating efficiencies, increased volume and cost absorption. Operating income is expected to be between $79 million and $84 million , before certain non-cash items and one-time expenses. The company estimates depreciation and amortization will be approximately $11 million . Use of Non-GAAP Measure This press release includes the following non-GAAP measure – EBITDA, which is not a measure of financial performance under GAAP and should not be considered as an alternative to net income as a measure of financial performance. The company believes this non-GAAP measure, when considered together with the corresponding GAAP measures, provides useful information to investors and management regarding financial and business trends relating to the company’s results of operations. However, this non-GAAP measure has significant limitations in that it does not reflect all the costs and other items associated with the operation of the company’s business as determined in accordance with GAAP. In addition, the company’s non-GAAP measures may be calculated differently and are therefore not comparable to similar measures by other companies. Therefore, investors should consider non-GAAP measures in addition to, and not as a substitute for, or superior to, measures of financial performance in accordance with GAAP. For a definition and reconciliation of EBITDA to net income, its corresponding GAAP measure, see the financial tables included in this press release. Also, refer to our Form 8-K to which this release is attached, and other filings we make with the SEC , for further information regarding this measure. Earnings Conference Call and Webcast Selwyn Joffe , chairman, president and chief executive officer, and David Lee , chief financial officer, will host an investor conference call today at 10:00 a.m. Pacific time to discuss the company’s financial results and operations. The call will be open to all interested investors either through a live audio webcast at www.motorcarparts.com or live by calling (888) 440-5584 (domestic) or (646) 960-0457 (international). For those who are not available to listen to the live broadcast, the call will be archived on Motorcar Parts of America’s website www.motorcarparts.com . A telephone playback of the conference call will also be available from approximately 1:00 p.m. Pacific time on November 12, 2024 through 8:59 p.m. Pacific time on November 19, 2024 by calling (800) 770-2030 (domestic) or (609) 800-9909 (toll) and using access code: 1545314. About Motorcar Parts of America, Inc. Motorcar Parts of America, Inc. is a remanufacturer, manufacturer, and distributor of automotive aftermarket parts -- including alternators, starters, wheel bearings and hub assemblies, brake calipers, brake pads, brake rotors, brake master cylinders, brake power boosters, turbochargers, and diagnostic testing equipment utilized in imported and domestic passenger vehicles, light trucks, and heavy-duty applications. Its products are sold to automotive retail outlets and the professional repair market throughout the United States , Canada , and Mexico , with facilities located in California , New York , Mexico , Malaysia , China and India , and administrative offices located in California , Tennessee , Mexico , Singapore , Malaysia , and Canada . In addition, the company’s electrical vehicle subsidiary designs and manufactures testing solutions for performance, endurance, and production of multiple components in the electric power train – providing simulation, emulation, and production applications for the electrification of both automotive and aerospace industries, including electric vehicle charging systems. Additional information is available at www.motorcarparts.com . The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for certain forward-looking statements. The statements contained in this press release that are not historical facts are forward-looking statements based on the company’s current expectations and beliefs concerning future developments and their potential effects on the company. These forward-looking statements involve significant risks and uncertainties (some of which are beyond the control of the company) and are subject to change based upon various factors. Reference is also made to the Risk Factors set forth in the company’s Form 10-K Annual Report filed with the Securities and Exchange Commission (SEC) in June 2024 and in its Forms 10-Q filed with the SEC for additional risks and uncertainties facing the company. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise. (Financial tables follow) MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES Consolidated Statements of Operations (Unaudited) Three Months Ended Six Months Ended September 30 , September 30 , 2024 2023 2024 2023 Net sales $ 208,186,000 $ 196,639,000 $ 378,073,000 $ 356,344,000 Cost of goods sold 166,909,000 155,491,000 307,622,000 288,629,000 Gross profit 41,277,000 41,148,000 70,451,000 67,715,000 Operating expenses: General and administrative 15,052,000 14,325,000 31,722,000 26,927,000 Sales and marketing 5,834,000 5,688,000 11,283,000 11,107,000 Research and development 2,443,000 2,438,000 4,876,000 4,813,000 Foreign exchange impact of lease liabilities and forward contracts 5,428,000 4,760,000 16,506,000 490,000 Total operating expenses 28,757,000 27,211,000 64,387,000 43,337,000 Operating income 12,520,000 13,937,000 6,064,000 24,378,000 Other expenses: Interest expense, net 14,182,000 15,383,000 28,569,000 27,103,000 Change in fair value of compound net derivative liability 380,000 390,000 (2,200,000 ) 530,000 Loss on extinguishment of debt - 168,000 - 168,000 Total other expenses 14,562,000 15,941,000 26,369,000 27,801,000 Loss before income tax expense (benefit) (2,042,000 ) (2,004,000 ) (20,305,000 ) (3,423,000 ) Income tax expense (benefit) 912,000 (46,000 ) 734,000 (55,000 ) Net loss $ (2,954,000 ) $ (1,958,000 ) $ (21,039,000 ) $ (3,368,000 ) Basic net loss per share $ (0.15 ) $ (0.10 ) $ (1.07 ) $ (0.17 ) Diluted net loss per share $ (0.15 ) $ (0.10 ) $ (1.07 ) $ (0.17 ) Weighted average number of shares outstanding: Basic 19,760,028 19,599,162 19,717,517 19,554,142 Diluted 19,760,028 19,599,162 19,717,517 19,554,142 MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES Consolidated Balance Sheets September 30, 2024 March 31, 2024 ASSETS (Unaudited) Current assets: Cash and cash equivalents $ 10,413,000 $ 13,974,000 Short-term investments 1,901,000 1,837,000 Accounts receivable — net 112,699,000 96,296,000 Inventory — net 378,776,000 397,328,000 Contract assets 24,956,000 27,139,000 Prepaid expenses and other current assets 19,457,000 23,885,000 Total current assets 548,202,000 560,459,000 Plant and equipment — net 32,561,000 38,338,000 Operating lease assets 71,792,000 83,973,000 Long-term deferred income taxes 5,637,000 2,976,000 Long-term contract assets 321,303,000 320,282,000 Goodwill and intangible assets — net 3,984,000 4,274,000 Other assets 2,763,000 1,700,000 TOTAL ASSETS $ 986,242,000 $ 1,012,002,000 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 168,548,000 $ 185,182,000 Customer finished goods returns accrual 37,495,000 38,312,000 Contract liabilities 45,517,000 37,591,000 Revolving loan 124,691,000 128,000,000 Other current liabilities 8,419,000 7,021,000 Operating lease liabilities 9,272,000 8,319,000 Total current liabilities 393,942,000 404,425,000 Convertible notes, related party 32,340,000 30,776,000 Long-term contract liabilities 219,891,000 212,068,000 Long-term deferred income taxes 573,000 511,000 Long-term operating lease liabilities 69,419,000 72,240,000 Other liabilities 6,114,000 6,872,000 Total liabilities 722,279,000 726,892,000 Commitments and contingencies Shareholders' equity: Preferred stock; par value $.01 per share, 5,000,000 shares authorized; none issued - - Series A junior participating preferred stock; par value $.01 per share, 20,000 shares authorized; none issued - - Common stock; par value $.01 per share, 50,000,000 shares authorized; 19,776,373 and 19,662,380 shares issued and outstanding at September 30, 2024 and March 31, 2024 , respectively 198,000 197,000 Additional paid-in capital 238,089,000 236,255,000 Retained earnings 18,464,000 39,503,000 Accumulated other comprehensive income 7,212,000 9,155,000 Total shareholders' equity 263,963,000 285,110,000 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 986,242,000 $ 1,012,002,000 Additional Information and Non-GAAP Financial Measures To supplement the consolidated financial statements presented in accordance with U.S. generally accepted accounting principles ("GAAP"), the company has included the following additional information and non-GAAP financial measures for the three and six months ended September 30, 2024 and 2023. Among other things, the company uses such additional information and non-GAAP adjusted financial measures in addition to and together with corresponding GAAP measures to help analyze the performance of its business. The company believes this information helps provide a more complete understanding of the company's results of operations and the factors and trends affecting the company's business. However, this information should be considered as a supplement to, and not as a substitute for, or superior to, information contained in the company’s financial statements prepared in accordance with GAAP. In addition, the company’s non-GAAP measures may be calculated differently and are therefore not comparable to similar measures by other companies. The company defines EBITDA as earnings before interest, taxes, depreciation, and amortization. A reconciliation of EBITDA to net income is provided below along with information regarding such items. Items Impacting Net Income for the Three Months Ended September 30, 2024 and 2023 Exhibit 1 Three Months Ended September 30 , 2024 2023 $ Per Share $ Per Share GAAP net loss $ (2,954,000 ) $ (0.15 ) $ (1,958,000 ) $ (0.10 ) Non-cash items impacting net income Core and finished goods premium amortization $ 2,621,000 $ 0.13 $ 2,707,000 $ 0.14 Revaluation - cores on customers' shelves 1,164,000 0.06 1,995,000 0.10 Share-based compensation expenses 1,016,000 0.05 1,533,000 0.08 Foreign exchange impact of lease liabilities and forward contracts 5,428,000 0.27 4,760,000 0.24 Change in fair value of compound net derivative liability and loss on extinguishment of debt 380,000 0.02 558,000 0.03 Tax effect (a) (2,652,000 ) (0.13 ) (2,888,000 ) (0.15 ) Total non-cash items impacting net income $ 7,957,000 $ 0.40 $ 8,665,000 $ 0.44 Cash items impacting net income Supply chain disruptions and related costs (b) $ - $ - $ 3,199,000 $ 0.16 New product line start-up costs and transition expenses, and severance and other (c) 1,498,000 0.08 349,000 0.02 Tax effect (a) (375,000 ) (0.02 ) (887,000 ) (0.05 ) Total cash items impacting net income $ 1,123,000 $ 0.06 $ 2,661,000 $ 0.14 (a) Tax effect is calculated by applying an income tax rate of 25.0% to items listed above; this rate may differ from the period's actual income tax rate. (b) For the three months ended September 30, 2023 , consists of $3,199,000 impacting gross profit. (c) For the three months ended September 30, 2024 , consists of $1,298,000 impacting gross profit and $200,000 included in operating expenses. For the three months ended September 30, 2023 , consists of $349,000 included in operating expenses. Items Impacting Net Income for the Six Months Ended September 30, 2024 and 2023 Exhibit 2 Six Months Ended September 30 , 2024 2023 $ Per Share $ Per Share GAAP net loss $ (21,039,000 ) $ (1.07 ) $ (3,368,000 ) $ (0.17 ) Non-cash items impacting net income Core and finished goods premium amortization $ 5,349,000 $ 0.27 $ 5,364,000 $ 0.27 Revaluation - cores on customers' shelves 1,558,000 0.08 2,773,000 0.14 Share-based compensation expenses 2,016,000 0.10 2,843,000 0.15 Foreign exchange impact of lease liabilities and forward contracts 16,506,000 0.84 490,000 0.03 Change in fair value of compound net derivative liability and loss on extinguishment of debt (2,200,000 ) (0.11 ) 698,000 0.04 Tax effect (a) (5,807,000 ) (0.29 ) (3,042,000 ) (0.16 ) Total non-cash items impacting net income $ 17,422,000 $ 0.88 $ 9,126,000 $ 0.47 Cash items impacting net income Supply chain disruptions and related costs (b) $ - $ - $ 5,183,000 $ 0.27 New product line start-up costs and transition expenses, and severance and other (c) 4,438,000 0.23 684,000 0.03 Tax effect (a) (1,110,000 ) (0.06 ) (1,467,000 ) (0.08 ) Total cash items impacting net income $ 3,328,000 $ 0.17 $ 4,400,000 $ 0.23 (a) Tax effect is calculated by applying an income tax rate of 25.0% to items listed above; this rate may differ from the period's actual income tax rate. (b) For the six months ended September 30, 2023 , consists of $5,183,000 impacting gross profit. (c) For the six months ended September 30, 2024 , consists of $1,298,000 impacting gross profit and $3,140,000 included in operating expenses. For the six months ended September 30, 2023 , consists of $684,000 included in operating expenses. Items Impacting Gross Profit for the Three Months Ended September 30, 2024 and 2023 Exhibit 3 Three Months Ended September 30 , 2024 2023 $ Gross Margin $ Gross Margin GAAP gross profit $ 41,277,000 19.8 % $ 41,148,000 20.9 % Non-cash items impacting gross profit Core and finished goods premium amortization $ 2,621,000 1.3 % $ 2,707,000 1.4 % Revaluation - cores on customers' shelves 1,164,000 0.6 % 1,995,000 1.0 % Total non-cash items impacting gross profit $ 3,785,000 1.8 % $ 4,702,000 2.4 % Cash items impacting gross profit Supply chain disruptions and related costs $ - - $ 3,199,000 1.6 % New product line start-up costs and transition expenses 1,298,000 0.6 % - - Total cash items impacting gross profit $ 1,298,000 0.6 % $ 3,199,000 1.6 % Items Impacting Gross Profit for the Six Months Ended September 30, 2024 and 2023 Exhibit 4 Six Months Ended September 30 , 2024 2023 $ GrossMargin $ GrossMargin GAAP gross profit $ 70,451,000 18.6 % $ 67,715,000 19.0 % Non-cash items impacting gross profit Core and finished goods premium amortization $ 5,349,000 1.4 % $ 5,364,000 1.5 % Revaluation - cores on customers' shelves 1,558,000 0.4 % 2,773,000 0.8 % Total non-cash items impacting gross profit $ 6,907,000 1.8 % $ 8,137,000 2.3 % Cash items impacting gross profit Supply chain disruptions and related costs $ - - $ 5,183,000 1.5 % New product line start-up costs and transition expenses 1,298,000 0.3 % - - Total cash items impacting gross profit $ 1,298,000 0.3 % $ 5,183,000 1.5 % Items Impacting EBITDA for the Three and Six Months Ended September 30, 2024 and 2023 Exhibit 5 Three Months Ended September 30 , Six Months Ended September 30 , 2024 2023 2024 2023 GAAP net loss $ (2,954,000 ) $ (1,958,000 ) $ (21,039,000 ) $ (3,368,000 ) Interest expense, net 14,182,000 15,383,000 28,569,000 27,103,000 Income tax expense (benefit) 912,000 (46,000 ) 734,000 (55,000 ) Depreciation and amortization 2,601,000 2,933,000 5,330,000 5,966,000 EBITDA $ 14,741,000 $ 16,312,000 $ 13,594,000 $ 29,646,000 Non-cash items impacting EBITDA Core and finished goods premium amortization $ 2,621,000 $ 2,707,000 $ 5,349,000 $ 5,364,000 Revaluation - cores on customers' shelves 1,164,000 1,995,000 1,558,000 2,773,000 Share-based compensation expenses 1,016,000 1,533,000 2,016,000 2,843,000 Foreign exchange impact of lease liabilities and forward contracts 5,428,000 4,760,000 16,506,000 490,000 Change in fair value of compound net derivative liability and loss on extinguishment of debt 380,000 558,000 (2,200,000 ) 698,000 Total non-cash items impacting EBITDA $ 10,609,000 $ 11,553,000 $ 23,229,000 $ 12,168,000 Cash items impacting EBITDA Supply chain disruptions and related costs $ - $ 3,199,000 $ - $ 5,183,000 New product line start-up costs and transition expenses, and severance and other 1,498,000 349,000 4,438,000 684,000 Total cash items impacting EBITDA $ 1,498,000 $ 3,548,000 $ 4,438,000 $ 5,867,000 View source version on businesswire.com : https://www.businesswire.com/news/home/20241112790410/en/ Gary S. Maier Vice President, Corporate Communications & IR (310) 972-5124 Source: Motorcar Parts of America, Inc.

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