MPAA - Earnings call transcript Q2 2022 | Motorcar Parts of America, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day and thank you for standing by. Welcome to Motorcar Parts of America's Fiscal 2022 Second Quarter Conference Call. At this time, all participants are in a listen-only mode. After the speakers' remarks, there will be a question-and-answer session. [Operator instructions] Please be advised that today's conference is being recorded. like today, the Mr. now your over I'd speaker first instructions] to conference hand to [Operator Gary Investor Maier, Relations. Sir, please go ahead.

Gary Maier

Thank fiscal call Thanks welcome you, everyone for joining Rachel. thank us to QX second -- our conference XXXX quarter. you, today,

The assurance safe the of the Litigation forward-looking whether of of significant of information, today's I'd Motorcar undertakes company, publicly of are future or future to including harbor made Such uncertainties, Act that Securities Before and for or developments over Joffe, future and company. certain no everyone like on Executive during affecting Actual by control call. some beliefs risks those forward-looking and America. to safe in Private to provides be a results expectations from Chief can company The anticipated statements press Parts involve developments change be the based various their These result differ company's the Reform the the beyond call to forward-looking projected obligation There XXXX those conference no company's and are company are David forward-looking we any statements revise otherwise. update remind forward-looking as based upon a which and statements, will the and potential current will Lee, President, concerning harbor Chief Selwyn the effects statements, subject statements. factors. may the events in I statements Officer; today's begin, release. on statement turn included Chairman, Financial of Officer. new

to discussion company's Commission. the Joffe. company's I and call Selwyn turn with Securities various detailed call refer said, like of you it and begin Exchange of some For risks the the to the business, that now and uncertainties over filings the I'd to With of a ongoing more

Selwyn Joffe

and staying Thank I today. hope you, is everyone appreciate I healthy. everyone Gary. safe joining us

quarter me let $XX.X or the and net months share Net morning's or the pre-COVID quarter versus XXXX XX.X% million prior-year. quarter. $XX.X diluted XX.X% diluted $X.XX XX.X% Pretax diluted noted per $XX.X and items for million month for press the from income XX.X% the six million As share highlight the or versus per versus $X.XX $XX.X XX.X% year Net fiscal year, release, and diluted for and for pre-COVID $XX.X sales for $X.XX the Record for our XX this impacting $XX.X per in before up sales $X.XX diluted items and results. net six XXXX or million XXXX diluted $X.XX second million period. for half first was $X.XX share share million at per up for fiscal was the per last per the quarter the share pre-COVID income impacting share before quarter. or for last for was September XXXX ROIC fiscal period,

for will hot presence outlook provide Let within variants impacting daily emerging electric about position parts hot aftermarket extensive continues solid our discuss parts given and me global color coverage despite don't our market. vehicle chain, the challenges business. I new the Then the within news replacements automotive to to of accelerate, explanation the some require really COVID-XX briefly related the situation. issues much supply of which both and The

proudly second I our prepared a quarter automotive social customers our our keep and Let's employees replacement we're demand safe, just standpoint, to consumer demonstrated meeting by challenges continued strong we the say can part doing business capabilities strong our are record parts. and demand performance. from in say real for for and the

roads markets These be as in both and the demand amazing the meeting car the and customer the an driven orders by used job me continue orders. levels. to to do-it-yourself done record climb to consumer continue has strong do-it-for to team drivers sales returned Our

the for in to It momentum as is second performance. hot strong moving new was impacted the supply meet most a operations challenges expected production mature impacted This to platforms to reduced important be gross efficiencies country quarter and chain production capacity Our business shut country and know of multigrowth required to forward facilities is contributed normalize. parts enhanced operational that us in to that our for will to investments due continue margins. negatively demand and Malaysia customer COVID, quarter down significantly second which outsource of our with

Malaysia again. operations during now and back Our did period we're ramping these Unfortunately, an exceptional job team in up are challenges. work at this in addressing

years and ramp-up and expansion sales As sales efficiencies to from in support related customers. is sorting multiple I improve our of to operation and this percentage across XX% X% doubled The the feels challenges. our a There keeping our capacity current as residuals categories across product to sharply parts aftermarket distribution to driven including on brake Reports board than our levels Used are same on momentum electrical lines At $X the Industry value in complete. the dependence as hot the mainstream. state-of-the-art million related resulting proceeding that on colonies in of for planned will This to reduce brake notwithstanding chain To beyond in are or matures. lines are sales that utilizing vehicle. a our vehicles our focused hot XXX overall growth billion relative the we to fuel growth the represents last Manufacturing And quarter, of increased an now of by productivity of retail becoming our caliper vehicles well climb The at to increased. parts infrastructure, also average to more this remanufacturing kind level. increased time, vehicles longer. for growth period opportunities than car and the to perspective, value people replacement parts at road, the electric facilities in with continue continue industry United which show product optimism year the market facility for noted vehicle. Demand vehicle are approximately have record in supply is grow, miles old XX.X core the same put rotating hot Malaysia note the quarter the the as will lower year-ago. for this now business. products in continues outsourcing interesting of for aftermarket It about States products. least especially is age OKVs brake alone,

for up replacement non-discretionary industry contributing the bodes of product result, buying aftermarket and a vehicle in As leases an consumers vehicle the increased offerings. parts than our to aging Obviously, a this well new are leasing rather population.

group, group. starters for and the currently in age age for that XX said X.XX% have above period and parts of rate zero note is replacement a alternatives as vehicles above group. year and I compared rate for group. increases the I've X.XX% for age, to replacement of the year three X.X% rate As brake and The same and age group, age for above before, the age should for the rate three with in XX replacement for X.X% XX-year year X.XX% causing the X to to X.XX% is zero X the of the age replacement the group calipers substantially

diagnostic customers to by supported is business the retail resumes. fast for spending aftermarket, complement within and solid the deferred emerging, from a alternators due As internal pandemic position our as our starters strong orders combustion our to engine

superior in of product retail and acquired for our D&V many part our business offer the rotating testing we As business to a customers know, you Electronics and XXXX, complement alternators starters. in electrical

of segment and leading opportunities related In hybrid business. production by new for driving moments and take let enthusiastic gain electric addition, for vehicles, applications Well, generators significant just traction. production don't electric as exciting outlook, about vehicles as development momentum. options industry as motors, for in strength, evolve. to and continues strategic and inverters endurance this is test about gaining engineering a Demand the of well comment the to report, performance equipment batteries electric areas our technology belt-start for me we to presence vehicle We the partnerships, remain testing encouraged few

development We is technology to Saturn's testament its are a announced which NASA's and that Dragonfly emulator for we applications. to as controllers selected honored Electric the our motor support exciting today Titan, moon mission of D&V motor to the earlier was rotor

opportunities required investments the investments, believe these but generate results. we will $X.X market, testing of automotive given All have global the billion solid estimated

forward In supply there superior to this offers the to to chain, announcing and pandemic parts pandemic-related today, our newly facing strategy has This headwinds. addition, parts look is in the our channel Certainly, services are opportunities, before offer raw aftermarket been our customers vision EV contract since via and manufacturers, developments Center. established relationships short, Technical and and for aftermarket industry we and materials significant including offer and solutions other to growth challenges our In area. significant freight, testing our leverage consumers. Detroit also

We challenges are and continue uncertainty to there the in supply few to believe for issues, experience supply freight, still steel, these chain. chain mention short-term is a much We items. packaging but semiconductors,

including our team dynamics providers rational to working We challenges. overcoming daily manage logistics the only challenges, will basis will should while suppliers with taking third first portion as margins Market global current on reflect the of these be fully reflected our economics, working focus address that price we quarter. to I increases are quarter out hard to a and on with and competitive strengths. the production to advantage contribute small increases our point our of gross continue of price full round for a and in

round and quarter, price our move for despite during tomorrow. a entire company parts quarter. fourth in effective be bottom While solutions and the will third of top for the positioned reflected well is fully increases our that challenges, world second our and growth line sustainable In becomes today fiscal they summary,

for are replacement focused strategic despite the focused strong the assure available. to results automotive global to remain our expansion line today. for production, can We is solid well future economies we of the you remain initiatives. as review of expansion now results dynamics. we margins of short, demand the initiatives half David the turn parts is operations, And from fiscal benefiting the XXXX from over activities. footprint anticipated of gross scale multi-year other will is strong as and our we of and footprint fiscal call encouraged quarter. second pricing due enhancing In year-over-year growth. now on for I product on of demand consolidation I XXXX, COVID on the first brake a to Based Our sales capacity caliper by further

David Ashley Lee

detailed this Thank XX, release you, encourage for the press XXXX with filed to morning earnings of I read to more respect Selwyn. X-K the results. everyone To explanations our begin, September

For information release. X of the results, see X, about the X, Exhibit the items that press impacted

other The was compared a and favorable second aggregate quarter periods. following, earlier. sales impacting sales, customer months quarter course Let sales profit for with goods costs for inventory 'XX compared including a record for XX.X% realignment Net $XX.X years expenses, six centers the quarter partially with X.X% second highlights due fiscal for me expenses shelves was months customer relocation finished transition of take and X.X% sales ago, non-cash September million fiscal second three freight Gross for prior XX.X%, million of financial higher fiscal $XX.X as quarter XXXX a the moment $XX.X with $XXX.X changes. a COVID, due of premium revaluation startup increased X.X% two million, the net and year pre-COVID-XX product core year 'XX quarter offset in period, year a gain the second ago. to caliper expected margin revenue. XX.X% net to from benefits to by Net from by million the review ended X.X% and compared Gross for core quarter brake the second quarter's $XXX.X X.X% an sales the and XX.X% million related in a and revenue, to from non-cash XX, profit mix future for comprised of million with impacted fiscal $XX amortization included earlier. distribution year as of negatively at to and core and costs impact a sales 'XX gross was the percentage

Let transition me expansion factors to provide gross part the our a are footprint margin. color relocation Brake Mexico. impacting of little costs in and caliper expenses more startup

meet Mexico construction fiscal related on buildings production this increasing As you future our in demand. to core the current completed past calipers, we including sorting brake are of and recall, may focused and year, activities and of

Second significantly by XXX,XXX, quarter ramp-up XX% to basis. approximately a and reduced on transition expenses year-over-year were

inefficiencies a safety 'XX incurred due COVID to someone caused of shortage margins. impacted for we initiatives that supply by higher noted also related $X.X We address freight costs have also With freight of expenses, and and health other COVID approximately and gross earlier. chain to the million second quarter, fiscal additional regard as

second Fortunately, X.X approximately are year shelf these the decreased quarter, corporate amortization margins point quarter reference. million revaluation non-economic. a expenses were gross as of and prior in customer Core was that course related and This and expenses second non-cash premium versus XXX,XXX of impacted

For a in summary morning's of please items profit, this complete see gross release. press X Exhibit impacting earnings

the in global costs further pandemic, connection especially I by addition and profit inflation, item, new logistic initiatives was and should we offshore further mention higher results. also costs and related and services. for wage which above gross to chain disruption materials of supplies. mix, product worldwide lines, the with In to experienced includes supply impacted with This that recently raw impacted product expansion growth inflationary our

million on price price focused during the have million expenses increase We liabilities for year-over-year increase to remaining to of operating primarily realize increase non-cash million $X.X share to a been mitigating tax second second based was the in expense quarter was million income compared same as which prior-year including million fiscal quarter of quarter, travel lower for gain implemented. $X.X for and foreign increased compared the the exchange contracts. $X.X $X.X month income million, due increase lease that $XX.X share $X.XX pre-tax these expenses, compared for to September. the income. due pandemic, Interest response $X costs basis to loss, the million million with second $X.XX the or expense in from reductions prior-year the Income which related higher impact marketing a The Total effective was prior-year for increases fiscal share, and commissions, for a the 'XX period. compensation prior-year was period COVID-XX freight increased $X.X ago. the per with Net impact small a year due of $X.X primarily advertising and for quarter a $XX.X expenses. fiscal are salary only second We million with on net second primarily $XX.X with diluted last of and forward or The million was was for the per period, was the year. a quarter,

share, foreign million the pre in sales XX, of This earlier. core $XXX.X relocation $XX.X items Gross September forward prior-year. anticipated mentioned. second morning's chain and year the I prior-year months this included was should this period period for sales, revenue, pre-tax second million A for Brake $X.X the of support was the requirements compares lease of to Net will the items quarter was earnings increased operating a year provided million XXXX debt required to XX.X% million period ended capital for the quarter higher the two for including fiscal the for during fiscal from million effective of COVID-XX million non-economic emphasize in exchange six XX, sales expenses, challenges net margin press the and growth months the compared sales basis, 'XX the the effective to period for months cash this fiscal Exhibit basis was inventory or I X $XX.X the non-cash growth, or at due activities impact from earlier, income following. supply was $X.XX morning's gross totaled per compared contracts considering I or per prior-year with September to release. as exchange year share contracts by share $XX.X as years caliper in was previously, a price was non-economic year and anticipated of the share costs discussed. Gross for per a Higher period and for for months XX.X% tax six million of and which XX, reflecting six year Chinese fiscal fiscal while become with just with sales margin six $XX.X in on ago. press Exhibit cash New a or impacting foreign should earnings prior-year. impacting release. earnings Items six operating six million $XXX.X $XX.X on and for on year totaled million income six non-cash period $X.XX $XXX.X months the net used pre-tax are profit the summary this for discussed. fiscal to X period implemented Gross period the per with 'XX profit the items diluted of impacting fiscal X.X% totaling percentage negatively as XXXX million $XX.X In COVID-XX with release. months quarter company's months six a a compared with $X.XX net press lease Net activities record and 'XX Net compared forward XX.X% $XX.X setup diluted COVID months increases diluted a Year 'XX during $X.XX month shutdown. have share, third totaling per the million the liabilities reflecting Net transition compared industry of in of impact fiscal as per million other XXXX factors ago. profit and gross I freight as morning's period. or a a million tax XX.X% compared $X.XX and $XX.X by $XX.X expenses, percentage $X.XX X.X% period 'XX the net at non-cash $XX.X discussed including with addition net the I working for million impact income the diluted the related months $XX.X on holiday six prior-year to earlier. March liabilities a Details on Exhibit and income 'XX this or quarter. share impacted of basis effective previously $X.X million, we during compared costs, for increases Net X comprised upcoming impacting costs basis, these totaling million six emphasize

are capital. there know you return As methods calculate invested to on various

operating take considered income metric, ROIC and the provides We expenses In this our pre-tax ended to a company's management taking measures by one-time was with GAAP together of For XX.X% which on September $XXX short, purposes, metric, useful debt capital, non-cash back XX, invested information capital. calculate million we and compared XX this return we average approximately net invested adding with XX.X% and earlier. believe expenses. year the by XXXX resulting regarding to certain investors divided for $XX.X in and equity on and a the months balance million, return

continuing brake fully the strategic existing as We expansion to from benefits are both new realized. are our product of increased realize benefits expectations our more and the and Mexican our category. returns of operations, lines, expanding of launch the With new of

XXXX. I our limitations. million were facility the and credit were $XXX As debt revolver revolver and company million. XX, XX, availability was approximately million mentioned subject million facility to at September cash $XXX.X at had September $XXX.X September $XXX approximately current $XXX At liabilities Current million XX, the assets total assets. on Based total and XXXX certain approximately on XXXX, $XXX a Total was net credit million.

liquidity further company's fiscal first amendments, base. Bank the which its quarter, company extended five through the PNC years credit XXXX, including facility strong During of with the increase May for

open questions, closing would please financial reconciliation the morning's I'll then earnings to press call the this for in of and Selwyn Exhibit that release. results and For non-GAAP remarks. XXX impact now some provide items measures, refer

Operator

question from proceed Thank Please Your Sarkis the question. Sherbetchyan you, with David. first [Operator your B. Instructions] line of from comes Securities. Riley

Sarkis Sherbetchyan

in Hi, quarter to called thank the for the revenue. the taking you my item core wanted $XX.X just on for here. question out off million I start

quarter? there that, were sales from for impacted Aside pull this any forwards that

Selwyn Joffe

a vibrant demand be Sarkis. it's no, No, strong, very to quarter, continues

Sarkis Sherbetchyan

seeing you're is order it pretty Got of through for still to able of customers? deliver to to kind it. sounds the sector. of what demand sense to want fiscal year, kind supply And your up the And back are would like robust situations in to some chain you you for of half get work the frame just care your a for

Selwyn Joffe

I schedules been are lot this There expect We've third quarter. that in quarter. orders to the quite doing into and continue of successful so update a the far. fourth

know a And very so will little that's very, bit time. strong no, port shipments to arrive as we a demand, it and on of the is clear no, our whether no

is committed been that first So those orders revenue fourth already have to. quarter, but quarter, already

so in have them And the the the corner be in fourth early quarter. will -- will either first or

Sarkis Sherbetchyan

shut you're come for their you Got I it want to And of the it there. quarter, the because of and think facility, situation down back that's that midterm? Malaysia the second reduce to most It the I was what mentioned and capacity. your like to in going separately contribute here, running again, kind of any sounds near-term, sense then and for at least

Selwyn Joffe

efficient more will specifically, where that though expenses we we not the a at continue factory more Malaysia, incremental little talk or not even when operating. Chinese open, some lot Well, well, a which means is let I have but companies, came of of and a have which outsource outsource, those implications that's workforce pay to are to with produce tariffs, it we a we from we being in closed the pay pricing David

XX significant should certainly those re take days are the to fiscal get to was see to were those that change. will the back another it year, so online. some we And margin as us headwinds XX up that levels that But will enhancements comes ramped It next it at.

Sarkis Sherbetchyan

could impacted provide quarter? how you the any color Thanks, on quantitative and David, more that it

David Ashley Lee

million, is the COVID. have to that quarter, the of X.X% impacted expenses percentage. we gross X, It's total margin table Exhibit which related increased part an on the A $X.X all

Sarkis Sherbetchyan

in back I'll hop you, Thank queue. the

Operator

with Koranda Thank with of you. The next Please line question Roth proceed the Matt your Capital. question. comes from

Matt Koranda

thanks. Hey guys,

through the electrical, rotating revenue you other? one. hub housekeeping quickly, brake really wheel breakdown David, run maybe could and between Just

David Ashley Lee

hubs the quarter, XX%, rotating of for was brake so XX% wheel sales, electrical XX% was and X%. Yes, products related others second

Matt Koranda

it. Got

how pricing it the you then year, That And I And price help supply to think said least full of implications in which the some that'd on And some the third the quarter. be could you in in at the the the growth, effect quarter. quarter, frame effect that basically into prior sell. price you you half for some it's reaction third you the get would to what the additional gating that front, this increases, provide went Maybe then Okay. back revenue that any look we impact of gross action helpful. revenue of for just kind as the second means felt be that then items can of terms to just and chain in size of impacts that maybe faced. you fourth quarter, mentioned gauge full also, headwinds effect up or mentioned goes into into you us of the margin in

recover just the should growth we plus of couple we gross kind so margin margins were that percent of rate How quarters? thinking pre-COVID? mean And at does for be the next and that XX we essentially toward gross like about revenue mid-XXs,

David Ashley Lee

And I second the into And then fairly gross having that. XX the we margin year. gross should part think be comment with margin, start launched and And margin of margin facilities, business. as at the gross new products in I the a But caliper upside that which based in and especially I you incremental up there's new margins I'll is, to revenues. that, price footprint, increases to the said plus of rationalizations we both should say expect place see new go we on it's ramp brake operating and on and the decent so on with more we Malaysia move so of fiscal X% that, fiscal as into you then Yes, in should the think increase, we increases more back Mexico, hot, the the next year customers. ask our utilization, utilization an is next regards effective contribute further plus now, based

And revenue price be extrapolate that growth increases. exceed our the it's and so to the growth to you're not just comfortably revenue just say going to exceed able price should to hard increases

Matt Koranda

electrical a and decelerated can the of order it rates And year-over-year customers, great. Maybe is terms any looks just on you like bid some a seeing you're just in then basis? of provide good rate rotating what growth from just Okay, commentary a on pause quarter and how sort there and your of fewer during terms quarters the the How it maybe as quarter? in expect I in comment of update kind to or we order well? think electrical, should things flow next rotating of few the in sort turn guess orders of to then about for

David Ashley Lee

products, such gone total you but XX%, to from I the but that's see that, of has in brake come fantastic Yes, percentage think the as rotating see you rotating have increases of percentages revenue is the electrical X% related down so the can we for electrical, rotating electrical up, despite well. growth that just

to rotating grow. expect to we electrical continue So

XX% almost have market We share there.

register, more maintenance up you've the a that deferred moderate got of is are on vehicle. lot demand on the So it's going to rate. be through for cars definitely product the a the used growth But

only demand been, to of fairly to of the you relating a this to And suffered so continue because the customers, we disproportionately tailwinds diagnostic expect also supply product were amount to relates side, has lines hit rotating ship there's in think to diagnostic in And of despite be lines to chain equipment. addition I think electrical. business, if And us record of put our diagnostic the challenges, significant which the production you continue, not had before for unable all business then of having sales. fact revenue got to grow. revenue, in have we we can plenty Including I to the quarter, mean that that about place on diagnostics expect our that our I the and that, assembly but actually I

hold up. us holdups their So

to Hopefully, I there, rambling bit of there. So question little I a Matt. got your have

Matt Koranda

Yes, I think you addressed them there.

front, mentioned of semi items chain the guys, bigger we for or supply of more things beaten through packaging. season of color the provide to the you progressed the the obviously, little companies, about just kind points wondered how here? number topics or kind steel, you on trended of a could on to worse the of November sort just early wondering this with how ended freight, get since guys part I'm through of death better and then but if in some I a XQ the for you better sort bit earnings Would that probably been quarter And So in month-by-month? pain October you quarter same? getting guess and of characterize those you things

David Ashley Lee

Well, say got things better. I would

could so and that's So better of better. million having and no going so just of are the for little orders what supply are a to sure delays get this -- I'm the and salt canceled said and challenges, -- quantitative number we a me we the significant. constant, to supply faster not deferred. hard a better, rates so actual exact I chain, gets demand Have maybe supply have probably than chain is going but there is those this There to But mean number, normal, back normal better it better we that, effect get pretty restate the chain have been a but -- also of could demand the having probably growing shipped is grain while rates incremental our let completely million of and done up dollar the quarter I shipped, that, normal, sort mean, not or bit fill of to we're Having demand very the revenue got getting environment? is anymore. continue said supply that. $XX take got is deferral up. and fairly -- have remains because probably some that is chain the in with gone $XX the But

Matt Koranda

Got Very helpful… it.

Selwyn Joffe

but sort $XXX expectation give as is, in, Long you inventory Year. probably from It's having depend to but ships at broad bolster business of we feel you But we waiting New see of have some quick also the for new We Board that whether in will And the to million that get can we investments I significant where least the effectiveness on inventory. look don't know I'll better, on the it, in this try to getting get can we of coming get is outside making are. ports, Beach is is. -- lot we're as of that pre-Chinese Europe. my and about of XXX get to I the There out office, my a -- can pretty where next and as

new coming. for So, lots demand us of

Matt Koranda

Okay, jump to there. very I'll helpful, queue Selwyn. back

Operator

line Thank you. the next question The question. Stember King. of Scott comes proceed from from Please your with CL

Scott Stember

afternoon. Good

Selwyn Joffe

Scott. Hi,

David Ashley Lee

Hi, Scott.

Scott Stember

costs. guess Malaysia David, costs the the line COVID that's I correctly X. it says of that I extraneous -- million all $X plus freight said that guess if at in on of look related Exhibit it I out to heard basically you was increased you was the that. But just footnote,

of -- of Malaysia million much piece or $X sense just it that smaller -- trying smaller piece? the that get a to just Or costs? cost there a cost are including So you freight I'm is extra within the

David Ashley Lee

Good question. It's the latter.

So is to that freight. about million you got Malaysia. related mostly number And the $X

Scott Stember

Okay. it. Got

that hit you the quantify hit, in through price have increases you it quarter could we guess really a obviously, was, -- is the say how throughout small round de one-third Can I of that at it much just minimis? best. So a or was probably piece went it the

David Ashley Lee

of quantify, And quarter to It's it's for it's pretty hard this for you'll quarter. the it's it for proprietary, to see so full quarter, small those one quantify hard pretty small. the but that, us

Scott Stember

Right.

be quarter's X a with up the backed us or have related that we for you So costs through, starts adjusting -- increases, half that the for to you guess your we're Exhibit line, the while. to and coming price in come in more a the since offsetting is to Will than so into and in the up back relief get benefit supply assuming the a the going speak, of to year, those. as already I chain

Selwyn Joffe

compensating We us are price to will going adjustments take out from any increases. the be that

anymore. extent would we to material freight freight surcharge, item a not example, So a that in the for put have we

David Ashley Lee

That's correct.

Scott Stember

Okay, guys.

Selwyn Joffe

forward. down adjustment significantly the as move we So come pretty should

Scott Stember

an benefit of electric how guess you rotating extension that was the inventory as and must the or be just been guess the again, about one this way in electric and heat I customer on rotating we've lastly hottest of Okay, had it's rotating summers, fall. where talk of Can the as electric for all I into low years?

Selwyn Joffe

you, and Well, I -- experiencing want inventory, the And can to helps more some exactly register tell going register. customers quantify positive very it are we're product, the customers that to hardware difficult sales selling I mean, definitely, the how it's they're filling. is there through helped, it's much

rates are terms of team most want state facilities terms in terms in efficient complement have do Our quite electrical we manufacturing handled I footprint the global capabilities. art to We our is what rotating and -- sourcing And footprint them. of good. and fill the think the how of global our probably they in

continues lines to electrical even stronger. rotating that, are so, very said that having we Having said product strong. be have So new

So market but of as has share of they ramp up not gains. registered, demand because only because

Scott Stember

all That's I it. you. have. Got Thank

Selwyn Joffe

you. Thank

David Ashley Lee

Thanks, Scott.

Operator

Thank you.

Your comes of next Oppenheimer. question Brian Nagel the line from from

Your open. line is

Brian Nagel

Good afternoon. guys. Hi,

David Ashley Lee

Hi, Brian.

Selwyn Joffe

Hi.

Brian Nagel

So, a of questions. couple

better for to And just on seeing, you there prior type get kind a the been say is you're about having you questions. conversations with a some lot and to way of significantly a first now supply mean, the with perspective is But I we chain, you your supply it's not potentially given guess, the you're where off chain point talked follow-ups point partners? business? there the the have your the various drag of what regard could I what at you for way think to it's to

Selwyn Joffe

I up that, capacity I'd it we can't mean, had don't available. ports -- here. The they said would for Having no the the say catch no. mean, answer, because Well, here. enormous our I product to product I would A yes is know just answer say, just an we available, is just if if make get or That difference.

about go Beach don't right to it's Long of this I that, shortage now. and it's port the authorities better but that, next quickly. XX/X, said could the to us think so about going -- that say a short-term the problem, talking the that that's XX And extent, axles. for we're on, Having going be much, I I see think I talking much to I months, wish

waterfall on inventory life it, news is up inventory anticipated when can we product inventory. have useful and for to then we inventory the good The a XX, us Although have get XX because lot in is needs don't perishable for this the of and that able years. bulk we we're

real of risk no is there obsolescence. So

do the to months. I that whatever eat we like don't the not. think And over it, so, get will better we have think business everyone then feels short-term And think can mitigate from backlog the to a I I XX is short-term next place, think solution months will show. really back I continue rates I XX anyone of just is -- feel APEC I And I got quarter-over-quarter. that And But and with this into out. round in

Brian Nagel

-- there for pull away similarly economy the It's the hopefully now you extraordinarily it about is underlying you talked this, about and to second from to we I have do MPAA. crisis? sustainability regard the seems and solid get as talked your particularly very would helpful. the right can I for U.S. it's which just to have demand, with others Then How demand be backdrop continues frame view a space corporate question an

Selwyn Joffe

you now look discussed vehicles wrong time number for I've the aftermarket and the is I've trade mean, tailwinds saying amount not a don't for of are on new go well up saying of fundamental want a people this of at see they think statistics Well, and my That that money. a look mean their growth don't is of don't I get hotpots in been alternator. long just the number a came vehicles I'm hypothesis extra fair I pink a replace don't continues been but age COVID came that for think which has a there and that fundamentals to is this up lot but may for alternator number spice as question all good that had time road the buying but going us. I reason -- wheels of some effect, I or people shows. and for for are they the got and which think fundamentals I up. continues certainly and gone into non-discretionary for -- go may my we to years of were and go up, do, up. And that replacement hot in. Changing. tailwind effect weather COVID for as sudden, the said into what statistics this to whatever I the discretionary I they're I spike supported Average we're prime age came Having but go the see differently, you just job items temporary, to you fun. see massive

sold. our that the now not mean, on numbers, same That miles better. what's $XXX hasn't whatever that, keeps say go now, road. quarter, fully to was on the then mean, end car, it do much looking the continue vehicle, is off number, So just more are would on beneficial I going and I growing RV are just that are less think shortage the they be it of those you able will look it it's statistics. business, cars up better for empty, keeps purchase and think road, dependent use makes And on people driven, are option going staying with I at going I mentioned, that is lease, but cars, of just at of million, in to to quarter-over-quarter, in exercise age sales number the I to every up, every cars And up. the lots used I new of fundamentals leases even the the more quarter. I indicative again, being And residuals new the RV and recovered has just average at

sales some now hope because it. to replace car or nine want and seven, ways, the alternators I years from new in start So that soon, come be eight to I able back

So we want both.

Brian Nagel

you. Okay. Very helpful, Thank as always.

Selwyn Joffe

Thanks, Brian.

David Ashley Lee

you. Thank

Operator

Thank you. [Operator Instructions].

from from comes Bill Capital. question of Tieton next line Our Dezellem the

open. is line Your

Bill Dezellem

out place, the one. that enough quarter? million this in have $X you put the and first to The freight that you increase that Will costs logistics be offset of Thank you. called price

David Ashley Lee

No, because increases. price of two we rounds have

second be mentioned during want that Selwyn round have on fully effect quarter the remarks, the in as will reflected So the quarter. first third we to our

second be fully fourth will third in quarter. The in the reflected round effective quarter our becomes

Selwyn Joffe

Which trading would the then offset increases. all

Assuming further. that go freight doesn't

David Ashley Lee

That's correct.

Selwyn Joffe

in freight we'll that increase. to continue But on price

David Ashley Lee

That's correct.

Bill Dezellem

it helpful. matter. you. that about generate? business, what And But about then That's gross or I'm longer-term, for margin just asking not should any quarter Thank year thinking secondarily, individual this

Selwyn Joffe

Because, but question. product declined mix our margins, product all, tough we've a has been at That's of pressure but lot our declined. has margin not gross fundamental gross about under line a on

on the you but are you're And in you manufacturing little startup line margins so should you're capital. invested costs to going to that have new extent higher product margin, you're buying they going a products you're to have gross extent have, the return out, that but that And lower to normalize. that to lower not have start, then gross

should of but be pushing should capital, not out tops and the So, on Bill, a XXs I time, period certainly at return the XX% on don't unrealistic. in know invested realistic, mix where over be is shouldn't be, high plus

Bill Dezellem

And that. appreciate then… I

Selwyn Joffe

Bill add one address thing, -- only question, hotpots. I I'm when addressing I'll I that then And that

Year number, should our for us. new largest say be bigger of a well that but up of initiatives. January. high we our starts expenses And Now, in the and vehicle could may we it's product the very one margins and is small, we are Vendor model, different as a R&D new, selling the because a pretty solution, software for as that it well starts -- space, vehicle won our obviously, electric electric solutions I'll in the retailers as but that significant a that on be start thing as ramped

new three of So yes, actually the year product two wanted initiatives. large for retailers this we

that was for So pretty significant us.

Bill Dezellem

just question, off on do to building you that. congratulations I said. what Well, And a theoretical ask want

point margin, in upward what achieves business software whatever the with be Are said time, over are have from just that high would your let's its, if say implication normalized would that is once that a a initiative generally about trending you you So Then margin forward. gross you successful correctly? the number the thinking picking XXs. we

Selwyn Joffe

absolutely. Yes,

Bill Dezellem

Okay.

Selwyn Joffe

the strategy, of game. back the front okay. corner, always backgammon. -- And It's very I'll back, the you simple. at if you have like And I block the to about if our look And worry play analogy then

And And module. say, quarter, grow not the we block on. that very years, over get this next into take categories our is And that back the important. going growth strategic got And in rolling -- for board is the that we look always let's the we've five-year very out active are in I profitability. five as we well are we'll well estimates believe, we're think as share, and not, so market very, positioned when let's then out growth the significant

Bill Dezellem

Great, your to the this And you've here thank think on -- release, comment in press to I you. I to the call. Relative in I if may. and would alluded it like question, one additional ask

have inventory inventory, around increased You anticipated that increased inventory distinctly from that for the navigate trying is sounds Because growth. the to detail like increased separate you chain talk that? issues? more in Would supply business

Selwyn Joffe

us we to love. round as mean, of, well, I both, we'd business it's mean, a I about new coming this is see mentioned I I Yes, and number but I million. Again, both. think -- $XXX pretty

inventory. I'm if that's for product have and of in trying build we so are but shutdown you COVID we're a existing lot up in And somewhere. certainly gearing our concerned that's that, and another in to lines just

operating would we're of what be incremental inventory today the from levels on normal. And our carrying so model

inventory a Our of the efficient, our today, debt market stock cost available I having little price cost fairly think overall, the up is performance, will Albeit the handsomely. in it that is and carrying way slants reward of is bit. it But capital and us low. that

it's So it's a not all combination, new. that

Bill Dezellem

appreciate comments. Thank your you. I both

Selwyn Joffe

Thank you.

David Ashley Lee

Thank you.

Operator

ahead. will I further are Joffe. There Mr. call back Sir, questions Selwyn no you. go to now Thank queue. on turn the please

Selwyn Joffe

we in fiscal our our control. do But cannot recap like performance many underscores conclude that of with business. control mean, I'd our for of are And our I today you. strategy. variables this a brief record first world there 'XX half point. Thank obviously, call the we to the

today, well extremely hard growth as grow goals, objectives. Our capacity to sales our our aftermarket we're business supports expect business, on to product for strategic our and focused To this accomplish whole continue each parts line. organically added as

expanding our will opportunities, increased will the new enhance lines product we're In lead productivity, facilities margins. which accelerate further our related our even to which production as addition, break gross Also, we're about growth. we excited and realize mature, will

to we with that combination will variables stabilize margins growth shareholder us of returns. and expect efficiencies conjunction This accelerated a many bodes and our for increased While mentioned enhanced and well and improve. earnings in there appropriate revenue are through pricing costs I today,

January, are internal parts to up in addition at this vehicles further outlay. to revenues revenue and engines, enhance testing capital to pick continues get our scale would hard results It efficient adding our our it'll we combustion in on which more our well and and and contract In focused contribution quicker scaling feedback with our without which in of to margins. diagnostic us base less Along business, business linear allows would electric and business, capital year-end, expenditures, enables diagnostic both with momentum. customer start

technologies property. to diligently group licensed EV either intellectual is also take or position on advantage of software power working us vision numerous systems, that Our

space. vigilant a in will challenging from their implemented and I commitment and members the working done on vaccinated. electrification our ongoing These service protect grow We employees in worldwide. for rates growth I priority of is strong XX% that are a to serve team all our we're during vaccinated of virus. And have job. remain evolving, we've focus business. top to global than their get might even be and world fantastic our team want to to the closing, player In value, and add safety currently horrible and Their more to they've health these members we times. more diligently family extremely this the While strategies fast customer a increase opportunity our shareholder centric significant thank when

in office part, January. we permit, most team likely corporate gradually work beginning For remotely, is returning our back to to the our though the committed most team safely conditions to continuing as remain and

everyone's have billion electric our bearing company. vehicle uninterrupted, emerging we aftermarket to $XXX operations are continued I'm investments States summary, have meaningful industry. in the shareholder opportunities result extremely dynamic our proud largely In our fruit, a the contributions, and enhance the automotive in of value United As and and of

with to than and of and global our you We world emerging proud us we're when in continued to tomorrow. move today solutions of future and history electric joining about are and excited XX-year committed We third-quarter thank in we investor call industry, conferences. for presence again space support vehicle more appreciate February look vision We conference have parts this at the fiscal our host your and our all being we are and our XXXX in you that forward for the for leader us call. aftermarket the speaking

Operator

participating. today's conference call. for concludes This you Thank

now may disconnect. You

Motorcar Parts of America (MPAA) 10 Nov 212022 Q2 Earnings call transcript