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Motorcar Parts of America Reports Record Results for Fiscal Second Quarter and Six Months

– Record Gross Profit and Strong Cash Flow Generation –

Motorcar Parts of America, Inc. (Nasdaq: MPAA) today reported record sales for its fiscal 2024 second quarter and six-month period ended September 30, 2023, with record gross profit and strong cash flow from operating activities.

Net sales for the fiscal 2024 second quarter increased 14.0 percent to a record $196.6 million from $172.5 million in the prior year.

Net loss for the fiscal 2024 second quarter improved to $2.0 million, or $0.10 per share, from a net loss of $6.5 million, or $0.34 per share, a year ago. The company noted that the net loss for the fiscal 2024 second quarter was impacted by $8.7 million, or $0.44 per share, of non-cash items, as detailed in Exhibit 1.

Interest expense for the fiscal second quarter increased by $6.1 million, or $0.23 per share, to $15.4 million from $9.3 million a year ago, primarily due to higher market rates.

Gross profit for the fiscal 2024 second quarter increased 55.2 percent to a record $41.1 million from $26.5 million a year earlier. Gross margin for the fiscal 2024 second quarter was 20.9 percent compared with 15.4 percent a year earlier. Gross margin for the fiscal 2024 second quarter was impacted by $4.7 million, or 2.4 percent, of non-cash items, and $3.2 million, or 1.6 percent, of cash items, as detailed in Exhibit 3.

The company generated approximately $15 million of cash from operating activities during the quarter. During this period, the company intentionally deferred collecting approximately $15 million of receivables offered through its customer supply chain vendor finance programs, which resulted in lowering cash flow by that amount, and interest expense savings of approximately $1 million. This enabled the company to defer interest expenses until price increases for interest rates are fully recognized.

Additionally, the company used its liquidity to pay down the $11.25 million balance of its term loan. Interest rates on the term loan were approximately two percentage points higher than rates offered by the company’s customers’ supply chain vendor finance programs.

“Demand for critical non-discretionary automotive parts is strong and we remain focused on leveraging our leadership position. As sales volume increases, particularly within certain of our emerging brake-related product categories, we expect to realize even further improvement in operational efficiencies. We remain optimistic about achieving our year-over-year financial targets and look forward to a strong second half,” said Selwyn Joffe, chairman, president, and chief executive officer.

Six-Month Results

Net sales for the fiscal 2024 six-month period increased 5.9 percent to a record $356.3 million from $336.5 million.

Net loss for the fiscal 2024 six-month period improved to $3.4 million, or $0.17 per share, from a net loss of $6.7 million, or $0.35 per share, a year ago. The company noted that the net loss for the six months was impacted by $9.1 million, or $0.47 per share, of non-cash items, as detailed in Exhibit 2.

Interest expense increased by $10.9 million, or $0.42 per share, for the six months to $27.1 million from $16.2 million a year ago, primarily due to higher market rates.

Gross profit for the fiscal 2024 six-month period increased 19.2 percent to a record $67.7 million from $56.8 million a year earlier. Gross margin for the fiscal 2024 six-month period was 19.0 percent compared with 16.9 percent a year earlier. Gross margin for the fiscal 2024 six-month period was impacted by $8.1 million, or 2.3 percent, of non-cash items, and $5.2 million, or 1.5 percent, of cash items, as detailed in Exhibit 4.

Considerations for Fiscal 2024 Second Half

  • Sales volume is continuing to gain momentum.
    • Ordering activity strong.
    • Industry fundamentals continue to drive product demand.
  • Margin improvement.
    • Enhanced by multiple rounds of price increases.
    • Improving overhead absorption as brake-related business gains further momentum.
    • Improving operational efficiencies through volume increases.
  • Enhanced cash flow from working capital initiatives.

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 9, 2023 through 8:59 p.m. Pacific time on November 16, 2023 by calling (800) 770-2030 (domestic) or (647) 362-9199 (international) 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 2023 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,

 

 

2023

 

2022

 

2023

 

2022

 
Net sales

$

196,639,000

 

$

172,543,000

 

$

356,344,000

 

$

336,528,000

 

Cost of goods sold

 

155,491,000

 

 

146,027,000

 

 

288,629,000

 

 

279,710,000

 

Gross profit

 

41,148,000

 

 

26,516,000

 

 

67,715,000

 

 

56,818,000

 

Operating expenses:
General and administrative

 

14,325,000

 

 

14,846,000

 

 

26,927,000

 

 

28,480,000

 

Sales and marketing

 

5,688,000

 

 

6,066,000

 

 

11,107,000

 

 

11,608,000

 

Research and development

 

2,438,000

 

 

2,670,000

 

 

4,813,000

 

 

5,783,000

 

Foreign exchange impact of lease liabilities and forward contracts

 

4,760,000

 

 

1,082,000

 

 

490,000

 

 

1,760,000

 

Total operating expenses

 

27,211,000

 

 

24,664,000

 

 

43,337,000

 

 

47,631,000

 

Operating income

 

13,937,000

 

 

1,852,000

 

 

24,378,000

 

 

9,187,000

 

Other expenses:
Interest expense, net

 

15,383,000

 

 

9,283,000

 

 

27,103,000

 

 

16,204,000

 

Change in fair value of compound net derivative liability

 

390,000

 

 

-

 

 

530,000

 

 

-

 

Loss on extinguishment of debt

 

168,000

 

 

-

 

 

168,000

 

 

-

 

Total other expenses

 

15,941,000

 

 

9,283,000

 

 

27,801,000

 

 

16,204,000

 

Loss before income tax benefit

 

(2,004,000

)

 

(7,431,000

)

 

(3,423,000

)

 

(7,017,000

)

Income tax benefit

 

(46,000

)

 

(914,000

)

 

(55,000

)

 

(325,000

)

 
Net loss

$

(1,958,000

)

$

(6,517,000

)

$

(3,368,000

)

$

(6,692,000

)

Basic net loss per share

$

(0.10

)

$

(0.34

)

$

(0.17

)

$

(0.35

)

Diluted net loss per share

$

(0.10

)

$

(0.34

)

$

(0.17

)

$

(0.35

)

 
Weighted average number of shares outstanding:
Basic

 

19,599,162

 

 

19,272,557

 

 

19,554,142

 

 

19,197,181

 

Diluted

 

19,599,162

 

 

19,272,557

 

 

19,554,142

 

 

19,197,181

 

 

MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

 

 

 

 

 

 

 

September 30, 2023

 

March 31, 2023

ASSETS

(Unaudited)

Current assets:
Cash and cash equivalents

$

10,293,000

 

$

11,596,000

 

Short-term investments

 

2,036,000

 

 

2,011,000

 

Accounts receivable — net

 

161,120,000

 

 

119,868,000

 

Inventory

 

366,405,000

 

 

356,254,000

 

Contract assets

 

29,946,000

 

 

25,443,000

 

Prepaid expenses and other current assets

 

18,415,000

 

 

22,306,000

 

Total current assets

 

588,215,000

 

 

537,478,000

 

Plant and equipment — net

 

41,368,000

 

 

46,052,000

 

Operating lease assets

 

84,881,000

 

 

87,619,000

 

Long-term deferred income taxes

 

32,206,000

 

 

32,625,000

 

Long-term contract assets

 

313,613,000

 

 

318,381,000

 

Goodwill and intangible assets — net

 

4,721,000

 

 

5,348,000

 

Other assets

 

1,768,000

 

 

1,062,000

 

TOTAL ASSETS

$

1,066,772,000

 

$

1,028,565,000

 

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities

$

162,879,000

 

$

141,766,000

 

Customer finished goods returns accrual

 

29,956,000

 

 

37,984,000

 

Contract liabilities

 

53,368,000

 

 

40,340,000

 

Revolving loan

 

165,000,000

 

 

145,200,000

 

Other current liabilities

 

5,032,000

 

 

4,871,000

 

Operating lease liabilities

 

8,737,000

 

 

8,767,000

 

Current portion of term loan

 

-

 

 

3,664,000

 

Total current liabilities

 

424,972,000

 

 

382,592,000

 

Term loan, less current portion

 

-

 

 

9,279,000

 

Convertible notes, related party

 

31,819,000

 

 

30,994,000

 

Long-term contract liabilities

 

198,086,000

 

 

193,606,000

 

Long-term deferred income taxes

 

73,000

 

 

718,000

 

Long-term operating lease liabilities

 

75,698,000

 

 

79,318,000

 

Other liabilities

 

10,988,000

 

 

11,583,000

 

Total liabilities

 

741,636,000

 

 

708,090,000

 

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; 19,599,195 and 19,494,615 shares issued and outstanding at September 30, 2023 and March 31, 2023, respectively

 

196,000

 

 

195,000

 

Additional paid-in capital

 

234,399,000

 

 

231,836,000

 

Retained earnings

 

85,379,000

 

 

88,747,000

 

Accumulated other comprehensive income (loss)

 

5,162,000

 

 

(303,000

)

Total shareholders' equity

 

325,136,000

 

 

320,475,000

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

1,066,772,000

$

1,028,565,000

 

 

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, 2023 and 2022. 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, 2023 and 2022

Exhibit 1

 

Three Months Ended September 30,

2023

 

2022

$

 

Per Share

 

$

 

Per Share

GAAP net loss

$

(1,958,000

)

$

(0.10

)

$

(6,517,000

)

$

(0.34

)

 
Non-cash items impacting net loss
Core and finished goods premium amortization

$

2,707,000

 

$

0.14

 

$

3,064,000

 

$

0.16

 

Revaluation - cores on customers' shelves

 

1,995,000

 

 

0.10

 

 

1,269,000

 

 

0.07

 

Share-based compensation expenses

 

1,533,000

 

 

0.08

 

 

1,251,000

 

 

0.06

 

Foreign exchange impact of lease liabilities and forward contracts

 

4,760,000

 

 

0.24

 

 

1,082,000

 

 

0.06

 

Change in fair value of compound net derivative liability and loss on extinguishment of debt

 

558,000

 

 

0.03

 

 

-

 

 

-

 

Tax effect (a)

 

(2,888,000

)

 

(0.15

)

 

(1,667,000

)

 

(0.09

)

Total non-cash items impacting net loss

$

8,665,000

 

$

0.44

 

$

4,999,000

 

$

0.26

 

 
Cash items impacting net loss
Supply chain disruptions and related costs (b)

$

3,199,000

 

$

0.16

 

$

4,220,000

 

$

0.22

 

New product line start-up costs and transition expenses, and severance (c)

 

349,000

 

 

0.02

 

 

921,000

 

 

0.05

 

Tax effect (a)

 

(887,000

)

 

(0.05

)

 

(1,285,000

)

 

(0.07

)

Total cash items impacting net loss

$

2,661,000

 

$

0.14

 

$

3,856,000

 

$

0.20

 

(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.

For the three-months ended September 30, 2022, consists of $3,654,000 impacting gross profit and $566,000 included in operating expenses.

(c)

For the three-months ended September 30, 2023, consists of $349,000 included in operating expenses.

For the three-months ended September 30, 2022, consists of $921,000 included in operating expenses.

 

Items Impacting Net Income for the Six Months Ended September 30, 2023 and 2022

Exhibit 2

 

Six Months Ended September 30,

2023

 

2022

$

 

Per Share

 

$

 

Per Share

GAAP net loss

$

(3,368,000

)

$

(0.17

)

$

(6,692,000

)

$

(0.35

)

 
Non-cash items impacting net loss
Core and finished goods premium amortization

$

5,364,000

 

$

0.27

 

$

6,108,000

 

$

0.32

 

Revaluation - cores on customers' shelves

 

2,773,000

 

 

0.14

 

 

1,841,000

 

 

0.10

 

Share-based compensation expenses

 

2,843,000

 

 

0.15

 

 

2,500,000

 

 

0.13

 

Foreign exchange impact of lease liabilities and forward contracts

 

490,000

 

 

0.03

 

 

1,760,000

 

 

0.09

 

Change in fair value of compound net derivative liability and loss on extinguishment of debt

 

698,000

 

 

0.04

 

 

-

 

 

-

 

Tax effect (a)

 

(3,042,000

)

 

(0.16

)

 

(3,052,000

)

 

(0.16

)

Total non-cash items impacting net loss

$

9,126,000

 

$

0.47

 

$

9,157,000

 

$

0.48

 

 
Cash items impacting net loss
Supply chain disruptions and related costs (b)

$

5,183,000

 

$

0.27

 

$

7,314,000

 

$

0.38

 

New product line start-up costs and transition expenses, and severance (c)

 

684,000

 

 

0.03

 

 

1,539,000

 

 

0.08

 

Tax effect (a)

 

(1,467,000

)

 

(0.08

)

 

(2,213,000

)

 

(0.12

)

Total cash items impacting net loss

$

4,400,000

 

$

0.23

 

$

6,640,000

 

$

0.35

 

(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.

 

For the six-months ended September 30, 2022, consists of $6,202,000 impacting gross profit and $1,112,000 included in operating expenses.

(c)

For the six-months ended September 30, 2023, consists of $684,000 included in operating expenses.

For the six-months ended September 30, 2022, consists of $1,539,000 included in operating expenses.

 

Items Impacting Gross Profit for the Three Months Ended September 30, 2023 and 2022

Exhibit 3

 

Three Months Ended September 30,

2023

 

2022

$

 

Gross

Margin

 

$

 

Gross

Margin

GAAP gross profit

$

41,148,000

 

20.9

%

$

26,516,000

 

15.4

%

 
Non-cash items impacting gross profit
Core and finished goods premium amortization

$

2,707,000

 

1.4

%

$

3,064,000

 

1.8

%

Revaluation - cores on customers' shelves

 

1,995,000

 

1.0

%

 

1,269,000

 

0.7

%

Total non-cash items impacting gross profit

$

4,702,000

 

2.4

%

$

4,333,000

 

2.5

%

 
Cash items impacting gross profit
Supply chain disruptions and related costs

$

3,199,000

 

1.6

%

$

3,654,000

 

2.1

%

Total cash items impacting gross profit

$

3,199,000

 

1.6

%

$

3,654,000

 

2.1

%

 

Items Impacting Gross Profit for the Six Months Ended September 30, 2023 and 2022

Exhibit 4

 

Six Months Ended September 30,

2023

 

2022

$

 

Gross

Margin

 

$

 

Gross

Margin

GAAP gross profit

$

67,715,000

 

19.0

%

$

56,818,000

 

16.9

%

 
Non-cash items impacting gross profit
Core and finished goods premium amortization

$

5,364,000

 

1.5

%

$

6,108,000

 

1.8

%

Revaluation - cores on customers' shelves

 

2,773,000

 

0.8

%

 

1,841,000

 

0.5

%

Total non-cash items impacting gross profit

$

8,137,000

 

2.3

%

$

7,949,000

 

2.4

%

 
Cash items impacting gross profit
Supply chain disruptions and related costs

$

5,183,000

 

1.5

%

$

6,202,000

 

1.8

%

Total cash items impacting gross profit

$

5,183,000

 

1.5

%

$

6,202,000

 

1.8

%

 

Items Impacting EBITDA for the Three and Six Months Ended September 30, 2023 and 2022

Exhibit 5

 

Three Months Ended

September 30,

 

Six Months Ended

September 30,

2023

 

2022

 

2023

 

2022

GAAP net loss

$

(1,958,000

)

$

(6,517,000

)

$

(3,368,000

)

$

(6,692,000

)

Interest expense, net

 

15,383,000

 

 

9,283,000

 

 

27,103,000

 

 

16,204,000

 

Income tax benefit

 

(46,000

)

 

(914,000

)

 

(55,000

)

 

(325,000

)

Depreciation and amortization

 

2,933,000

 

 

3,090,000

 

 

5,966,000

 

 

6,214,000

 

EBITDA

$

16,312,000

 

$

4,942,000

 

$

29,646,000

 

$

15,401,000

 

 
Non-cash items impacting EBITDA
Core and finished goods premium amortization

$

2,707,000

 

$

3,064,000

 

$

5,364,000

 

$

6,108,000

 

Revaluation - cores on customers' shelves

 

1,995,000

 

 

1,269,000

 

 

2,773,000

 

 

1,841,000

 

Share-based compensation expenses

 

1,533,000

 

 

1,251,000

 

 

2,843,000

 

 

2,500,000

 

Foreign exchange impact of lease liabilities and forward contracts

 

4,760,000

 

 

1,082,000

 

 

490,000

 

 

1,760,000

 

Change in fair value of compound net derivative liability and loss on extinguishment of debt

 

558,000

 

 

-

 

 

698,000

 

 

-

 

Total non-cash items impacting EBITDA

$

11,553,000

 

$

6,666,000

 

$

12,168,000

 

$

12,209,000

 

 
Cash items impacting EBITDA
Supply chain disruptions and related costs

$

3,199,000

 

$

4,220,000

 

$

5,183,000

 

$

7,314,000

 

New product line start-up costs and transition expenses, and severance

 

349,000

 

 

921,000

 

 

684,000

 

 

1,539,000

 

Total cash items impacting EBITDA

$

3,548,000

 

$

5,141,000

 

$

5,867,000

 

$

8,853,000

 

 

Contacts

Gary S. Maier

Vice President, Corporate Communications & IR

(310) 972-5124

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