– 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
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231109591632/en/
Gary S. Maier Vice President, Corporate Communications & IR
(310) 972-5124
Motorcar Parts and Assoc... (NASDAQ:MPAA)
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