Earnings call transcript Q1 2024

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Operator

Thank you for standing by. My name is Brian, and I will be your conference operator today. At this time, I would like to welcome everyone to the Motorcar Parts of America – I would like to welcome everyone to the Motorcar Parts of America Fiscal 2024 First Quarter Conference Call and Webcast. [Operator Instructions] Thank you.

Gary Maier, Vice President, Corporate Communications and Investor Relations, you may begin your conference.

Gary Maier

Brian. you, Thank joining for Thanks, us. everyone,

to Before I today’s Chairman, Chief press to the like Joffe, release. call and the Financial statement Chief in I’d our over President Lee, Executive Selwyn David of turn Officer; included everyone remind Officer, Safe-Harbor and

statements future for today’s on Securities Act concerning conference developments company. effects of significant and some uncertainties, forward-looking which are be based Harbor America. call. company’s potential upon will Private statements, those current subject including beliefs risks provides those are a parts may of of no control of Such based change beyond and results The forward-looking XXXX are other various forward-looking differ statements and from the on expectations can car factors. Litigation There forward-looking affecting Safe assurance Reform their certain the involve the developments Actual to the company projected and made during statements anticipated future that company in the the by These be statements.

customers expectations with growth forward-looking publicly or whether information, new any about future result be future undertakes a not obligation of and as anticipated update revise The opportunities or events to otherwise. statements, particular, no achieved. In company may

of For with filings the of some more I a detailed and to discussion Commission. our various Securities the uncertainties refer risks ongoing of the Exchange you company’s business, and

turn call over our With Selwyn. like and it begin that, to I’d to

Selwyn Joffe

Thank you, appreciate us Gary. I joining everyone today.

seeing reported June robust. off I strong the and achieve second may April Also, to sales as by is start improved efficiency for July to a improvements, timing continue orders in higher and of by across recovery production months our materialize, to track Equally March, margin operational sales weather We emerging quarter volume, are enhanced well due retailers. on a the particularly on in trends increased efficiencies from our and the and excellent increasing from with note to and rainy all sales and fiscal along optimism. record lines. These the an important, very price month. still based bode our increases expansion. overhead to May, saw support country operating we starting be absorption year-over-year brick-related the are for notwithstanding targets, Industry product extreme We hard a softness cooler sales

benefits add It relationships, expect we mix organization. quality, leveraging focused of affects will completion implement might our initiatives improvement a increases remain not fiscal of as gross on from range to current second product marketing run-rate margin, order cost We categories volume We to from that continue XXXX as and that efficiencies our that be important including dollars increase to respect our the is result that reduction should following applications highly the our all evolves. we regarded gross quarter, operating and initiatives. gross profit entire the across With mention of understand on improvement, anticipate but product support. a all basis, merchandising recognized. customer solid performance, margins, strengths, I our and price value-added to

with noteworthy, products the we until margins be Also newly tend lines into our launched capacity that on and to lower than grow efficiencies our product come mature develop time.

impact interest ways cash quarter. In fully long-established continue be by on related rates for interest discussed, from supply implemented have offset price received we addition, expense we – have we will primarily customers, for to expenses, are which chain exploring this To have the increases programs. previously enhancing operation. increases as we we Besides to are flow. rates High-interest price reduce to have looking partnerships vehicle strategic these to electric customer due our potential finance profitability, significant a

as capital working neutralizing on focused are as We much possible.

income, operating our and sales increasing managing on Our payable. implementing outstanding as to profit a inventory accounts days and extend of percentage initiatives programs include gross

cost-cutting million to representing related between the We accretion XXXX be to further $XXX and from Also, fiscal million, expect see we for between to still margin year-over-year higher X.X% sales efficiencies expect $XXX remarks. growth, and respectively. X.X% I as noted volume to earlier few to initiatives, will continue is our With and expectation flow, to this make in respect my a in minutes. progress cash. David generate to upon cash expand

operating between cash we non-cash depreciation items year-end impact expect Regarding before the be and and and million. amortization $XX and $XX the guidance, before of million income to

are details, To lease supply XXXX to pools million. of income customer liabilities and In provide $XX to finished million. estimate revaluation cash to EV-related be share-based Depreciation non-cash We specialty and chain core fiscal flow. for fiscal million, million board XXXX and gross estimated approximately and and approximately other be of and non-cash goods premium And the evolves, contracts, and our compensation. shells amortization research disruptions, non-cash expenses operating expenses, approximately expected enhance items are include impact cash before short, between exchange amortization which more and million for $XX we $X across impact will expected be increase foreign which $XX forward the the $XX impact to income. be operating expect as and is margins development

and hard industry in testing well solutions. as business favorable bottom and our for Our extremely for multiyear parts well strategic top are well as bode positioned company, initiatives we dynamics sustained growth line and the

provide business Now our targets. updates let ability a to achieve financial other our me bit to expand to drivers support long-term our the of further some and

with volume absorption. customers experience continuing to the increases lines, consumers of product traction and continue efficiency improvements We meaningful cost and operating fixed break-related our with with the launch as with

product sales as to increased Mexico for lines part customers experience demand multiple continuing aftermarket parts. hard expand with our in are We

customer continue distributors in testing from We center services. our Major to are testers retailers automotive, institutions interest design, and and global electric research equipment major aerospace for diagnostic starters and/or orders Detroit new installers. test were solutions our increasing the receiving equipment, automotive product purchase tech desktop for development professional and our to for alternated and and and particular, utilize

strong In product across applications short, market our to continue vehicle both be data well to markets. the positioned a Industry non-discretionary which for demand the aftermarket of and here percentage and support and market decades. electric vehicle internal be growth, functionality small represents car view address for our still applications parts will emerging engine continues combustion combustion to broad both we of internal electric engine that park. with Notwithstanding overall line the

to review I’ll turn the greater results call our to now over detail. in David

David Lee

everyone. release later as the well today. morning, be Thank will filed encourage you, everyone XX-Q this the good Selwyn, earnings morning issued that and to I read press as

compared financial first $XX.X quarter items. was were Gross of provide orders. for for the Gross year earlier. million the timing ‘XX ‘XX as review results. in Let our with impacted me first compared well of fiscal sales a million for a year, $XX.X first now Net as $XXX prior items fiscal million profit $XXX.X reflecting with primarily fiscal quarter non-cash the quarter profit cash quarter million by was the

I periods Let enhance me provide on to can each for on so each, further and impact will then profitability. underlying you item additional provide details the further and line the fundamentals between opportunities the details understand

total and these our finished The with shelves, non-cash on items core are which The for certain topic the is and would products on million. noncash and by explanation encourage cores of GAAP. our quarter customer items good to review anyone revaluation about approximately premium was amortization of video. to required unique and I questions $X.X in A detailed website, more of the this available core accounting reflects

in the well items was First XX.X% as and margin the non-cash the from X.X% increases, less due by XX.X% per margin mentioned first not summary, yet to absorption quarter costs non-cash costs production higher explained to product mix. margin of and gross compared resulting sales previously as quarter year for inflationary fiscal items by Gross cash a of were earlier. overhead ‘XX In by from previously, unit a lower as from with volume, items. covered price percentage impacted addition cash was in returns higher gross X% impacted costs changes

from prior expense of will $X.X experiencing, the million This returns be were for lease with with volume, exchange prior higher emphasize a a increase the million further absorption, the impact Furthermore, non-cash gain will remaining a contracts enhanced $XXX,XXX. cost foreign decreases margins. period. $XX.X $X.X year that we enhanced the year margins non-cash will quarter over of Operating reduction million enhance of gross price sales included increases me and as efficiencies. of expenses Let of loss lower and the to are in operating by gross operating The million percentage compared sales million down which liabilities initiatives. that $XX and Florida $X.X included

items impacted share. Exhibit a detailed of reported X We loss as share or items $X.XX per results share. $X.XX reflect per or impact Cash press a $XXX,XXX million of $X.XX release, or per $X.X in this $X.X million by morning’s earnings net non-cash

cash impacted items and quarter In to ‘XX. as sales results fiscal addition by volumes non-cash to gross be of are Results that and impacted items, certain throughout benefit expected margins. the for the price forward the enhanced the moving realized increases full with mentioned higher above previously were

We throughout further all profitability. including services, continue expected to implement opportunities, travel, costs initiatives overall to company, are and which outside cost of initiatives enhance reduction the labor cost-saving and

first Interest million due year. million of share with quarter interest $X.X were expense $X.X higher rates. higher $XX.X Results the fiscal market was by last primarily for per interest or impacted $X.XX expenses, to compared million for

Income inability price expense tax will a tax contribute was annualized We have increases, $XXX,XXX enhancement. benefit meaningful year $X,XXX compared the received of income tax at mention income to affected losses for should net same period to the in rate benefit with which for quarter to part foreign jurisdictions. the first fiscal effective recognize the due I was of ago. specific that the

future expect benefit utilized rates. against will tax these will losses we which be However, future profits,

first and before short, $XX.X in impact effect. items for for cash the quarter. was impacted non-cash cash million, items. by mentioned by first above, there impacting the the of $XX.X impacted non-cash quarter EBITDA various million EBITDA $XXX,XXX was of and tax items factors the was EBITDA $X.X are In million

by to impacting increases improvement addition cost full the impacted for expected above initiatives. summary, certain in the cash ‘XX gross sales benefit quarter and EBITDA explained. addition the In In first further higher was items, realized volume price previously is reduction as fiscal and is of margin to items non-cash the with for EBITDA

a support flow will second and positive the expects key the Now to items. of of quarter. activities, the use the reversal quarter fiscal on move for cash to in Notwithstanding corporate cash company $XX.X million operating we

As receivables approximately we lower $XX offer customer we through release in during morning, paid programs finance chain the supply this first our strategically quarter. elected and million collections to noted our press by of fiscal

second company reversal a The the in expects quarter. fiscal positive

noted collections programs finance chain resulted approximately during we press lower paid expenses interest that defer release in our This we in price of interest million strong savings to I fiscal offered to until strategically the interest approximately elected enabled to $XX $X.X receivables liquidity quarter. supply should customer by through million and recognized. the emphasize this As strategy. are morning, increases our execute of this first company’s us for us rates allowed

reduce And based end, offered to rates term The of by and the opportunities additionally, company’s down are subsequent the to we through finance In company’s can rate. pay we X% to programs. monetizing approximately customers the paid throughout vendor continue loan. quarter million offered, $XX.XX Interest and interest than programs terms discount term level the chain vendor short, the loan rates finance will supply were supply year on higher customer to chain to payments. elect the the customer XXX timing interest when and proportional customer the on be we paid monitor days expense

operating We efficiencies flows for generate expect from a fiscal by customer on and basis a profit increase from expansion in an now positive ‘XX. and supported demand fiscal completed year-over-year growth ‘XX, cash generate operating for to organic footprint

inventory on operating capital In vendor are working our improving product payment generating diligently of including neutralize management addition customer goal planning, to demand enhanced growth, opportunities terms. focused to increased and profits, we

product with our investments further operations and brake we growth performance our along are increasing gratified bear of momentum lines. fruit, ongoing will are in from of both expectations categories, existing Our emerging by and expanded of success new financial Mexico the and the and

end approximately the our adjustments. $XXX and facility while million, of was net total certain the $XX on contractual at debt quarter, approximately credit Our was million availability revolving convertible cash note, the after excluding

and of Lastly, as the term of seventh entered to a covenant credit ratio balance loan facility, leverage we paying XXXX. down XX, outstanding amendment our into the our June recently eliminating senior including

million. $XX Our loan after the paying strong of liquidity term remains down north and

financial further in items impacted For reconciliation please that non-GAAP X explanation on of through measures, refer this and earnings the to press Exhibit morning’s release. X results

the would I line like now for to questions. open

Operator

from from the ROTH Matthew comes first question MKM. line Your Koranda Instructions] [Operator of

open. is line Your

Matthew Koranda

morning. good guys Hi,

I the just quarter So, and hubs breakdown will within David. which wheel give between rotating products? brake – What with can product question, is start electrical, the for – the traditional you

David Lee

- for of products were Yes, X%. related first was and hubs the quarter, Brakes electrical XX% was XX% Matt, sales. wheel brake were others rotating XX% XX%,

Matthew Koranda

Okay.

– So, do this the hubs? I wheel sorry, am XX% to what on fly trying XX%, here,

David Lee

XX%.

Matthew Koranda

hub break or – then sorry, related And break products?

David Lee

XX%.

Matthew Koranda

it. Got XX%.

that, X%, and on so it it and bulk at hub comes little Maybe you sort the wheel and hub look shortfall just weak. quarter sequentially like a in year-over-year we the like to least rotating saw electrical basis, from the why Other Okay. the is then decline the of if of bit looks speak there? wheel a seems during trends quarter at the

Selwyn Joffe

Yes.

down the in again. the just slows on When have will cooler rainy month. items following you March, I reported at So, weather in those and weather retailers the replenishment start

down items. significant see with is we in But we Matt, I April resurgence will products. And in our along a have got so those say that. that, slowed break-related of momentum

quarter. continue We to will expect the a going bit rotating that of to electrical first into softness continue grow. do little grow have well, we So, that a as to

just should should is operating because – I be those see lines more products. hot the so our hot say coming efficiencies see on lines and driver of going forward. is sales on And are emerging perspective that just in more and you Now, I in weather, product electrical extreme for not legacy are And those that the getting starting as is we in margin pressure and pressure margin lines. margin that the product the to new volumes product I get momentum. improvement mean rotating weather, already And those better, are mean will up.

a expect have. I that months. we nine guidance reiterated very the So, strong we And back I think

just little the expected. timing a of is a of the bit sales numbers for we lower of that ahead what your think than I a expect be this lot are you But little to year.

Matthew Koranda

vein of Okay. just and the sell-in trends front you here top should we to that in order the that quarter thinking Maybe hotter visibility into in weather growth how the Could line speak recently. you mentioned terms be you XQ and more gives and about July growth?

Selwyn Joffe

cash of the But July the are all-time July our higher really pay-down the I is side rest probably off we quarter, along with so – months metrics. to we were an Yes. I to I mean able a very off mean us strong flow good July record ever. of mean for mean is – – I availability. our and the visibility good with for to debt maintain and one

So, a – and the off eliminates and lot just of covenant. so that collections was with one paid

positive So, and months. we the nine next I outlook the about are overall, feeling very think certainly, for

Matthew Koranda

seasonality to that Any pickup so on expected during on does You pretty reiterated folks Okay. year. just guide, full a thoughts so require the the in seasonality? year growth, speak level maybe set and

Selwyn Joffe

Yes.

quarter third and real strong. is expecting certainly mean think is everyone I second expecting, the as that. a the quarter think third we think us. that’s your than quarter little to quarter always be question. are the is We now, going probably I We mean think I expected numbers. for great what’s I fourth I again, good a expect and higher right be will

think months nine very the we strong. should back So, be

the remaining us. there, done and nine that the are be strong indications very, Now, to be should lots lots out of for but of very variables work months

Matthew Koranda

on then Okay. environment. And more the just maybe one pricing

factor round got talked put You increases expense that what the all effect interest you you that of into expense on did of price that the the for was have unintended factoring the Has line? pricing about of to in as expense. now, last been

Selwyn Joffe

Yes.

put into has been it of effect. most So,

be soon Now, million is to $X another effect soon, that of weeks. million price of the $X will increases still in couple there very in next

Matthew Koranda

it there margin gross it. related margin And then electrical most of differential to a or brake here? is year, you more lines you this you ramp the we Got Okay. being we when in products mentioned the next? do up. get product is that products the on gross normalized like drag hub the brake likely versus have? likely think is do And between core rotating sort data What Can do it wheel to and

Selwyn Joffe

granular can’t sort and increase thing I they would on of give to data the actual continue is you unfortunately, margins. only We you, the margins Yes. that positive. But are all tell those

so And combined, some are freight where each overall. improvement overall of seeing we now have is absorption there it operations. consolidated quarter, sequential a we of consolidated are And lot things is

so And difficult the are core report give understand intact don’t that is people intact. to the core very But line. I think it’s business thing product you by and is important that to the for We margins number.

expect continue even the in continue electrical, to grow. fluctuations you softness will We businesses are grow and And other though growing. that see to it some to but sometimes rotating

new. Now, growing the business is brake-related brand disproportionately, it’s

So, when you see that growth.

continue but affects margins, And gross that those. overall contribution so profit to up from of incremental all go should

people And think it’s important so, understand that. that I

Matthew Koranda

more I lied, inventory that it QX – to AR, continue and a just point I should or tick this Is mean that the on on for rest at peaked higher on of capital. speak Is and on drops, some balance then receivables sort days we then button up. expect for remainder the Okay. the the the DSOs collection of guess year? of we Fair of down to we it year? know to expect Maybe one cash which came just kind management tick hit the And on balance. continues there sort just should of the be and enough. inventory the slowly of year, same hand I where seasonality balance of in on or the year? should last I kind to working

Selwyn Joffe

Yes. No.

which of address option The the days the of hard will inventory. receivables, will because give, outstanding we David one, XX generally receivables, I I have retail factoring. the of days is So,

on tick is mean are sales And sales got our were – $XX-plus could through because two XX directly we and expense. going collect so quarter, so reporting interest one I quarter, this we there not only growing elected the to of that the receivables the of got the up cash million see to we strong we for of things. sales – of as first very the timing you save one and related timing receivables up

in, we – go at mean as we year not – receivable always last interest. to all I expected because to do. want not quarters are I what we expect expect are this We that’s prices of collections receivable mean to the these defer But very minimizing again, strong. be looking to three

program, I think think you as now start market days sell quarter. there. don’t will I so that’s the balance that I while we mention normalized end we we receivable – will have continue the seeing also that through again, of significantly grow pretty get receivables and professional this a And to And doesn’t installer to outstanding,

is days those rate, longer, outstanding a bit external interest are little interest So, receivables but rate. no there

am that on and rotors success of parts – really is our had pretty outstanding effects in days receivables. both also that. business the I we number significant that pads say business, the of the to both significantly. grow And all – as But have success to some business well that So, happy growing, continues as

end say strong, thinking I so should of stabilize all the be going would of quarter overall, I strong. remaining because a I three Overall, but we the And a through get I that receivables be to mumbo am this here, with as jumbo should think will quarters lot lot. am

Matthew Koranda

maybe, David, then on… And Okay.

Selwyn Joffe

Yes.

David Lee

question. that for Thanks Yes.

reasons. address new To chain and brake-related our products. of inventory recall, business, will three support we increased disruptions expansion You in supply demand support the for

of increased our We lines. product all seeing are demand for

as percentage going So, going inventory that see down. coming you a are of forward, sales to

as percentage momentum sales will our of be as that keeps So, inventory down. growing, that growth coming a

Matthew Koranda

Okay. Fair enough. Thanks.

Operator

questions over [Operator at further Selwyn Instructions] will There time. Joffe, I the you. are call back no this turn to

Selwyn Joffe

are summary, ahead. we the In quarters about Okay. excited

of the aging was expect down demand cost replacements as park of X.X%. well and as X.X%, growth that focused platform equally replacement of strong of I mentioned, who for In have we reached car recognize providing Industry months road must in miles-driven and parts and built-in solid for we of relevant consumers. aftermarket the critical service. growth, As is I for are non-discretionary rate six surpass the for XXXX-XXXX, all longer, and a observers have our pre-pandemic our first customers for day need the members opportunities a rate the the which will by growth products every XXXX, short, the have team closing, And X-year on supported highest multiple in period. level contributions

We joining we continued the for world today We and committed that and for being thank support to parts leader for your solutions all again this the industry move future. and you our are appreciate in call. us

fiscal host second forward November you future to conferences. you. and Thank look investor call We we speaking our with in when at XXXX quarter

Operator

concludes call. conference This today’s

You may now disconnect.

Motorcar Parts of America (MPAA) 9 Aug 232024 Q1 Earnings call transcript