Motorcar Parts of America Reports Results for Fiscal Third Quarter and Nine Months
- Record sales and strong financial performance for the nine months.
- Significant increase in operating income and cash flow.
- Improvement in gross margin and profit margins.
- Reduction in net bank debt by $43.7 million during the nine-month period.
- Positive outlook on sales volume, ordering activity, and product demand.
- Focus on operational efficiencies and strategic plans.
- Non-GAAP measure EBITDA used to provide additional financial insights.
- Net loss of $47.2 million for the fiscal third quarter due to non-cash items.
- Increase in interest expense for the fiscal third quarter and nine months.
- Net loss of $50.6 million for the fiscal nine-month period.
- Valuation allowance under U.S. GAAP impacting net income figures.
- Limitations of non-GAAP measure EBITDA in reflecting all costs associated with business operations.
Insights
The reported increase in net sales by 13.2% to $171.9 million and the improvement in gross margin by 3.7 percentage points are significant indicators of Motorcar Parts of America's revenue growth and cost management efficiency. The substantial rise in operating income by 170.1% to $9.5 million suggests that the company has effectively controlled its operating expenses or has achieved economies of scale. However, the increase in interest expense by $6.8 million reflects the broader economic context of rising market interest rates, which could affect the company's debt servicing costs going forward.
From a cash flow perspective, generating approximately $53.6 million from operating activities is a strong sign of the company's operational health. The reduction of net bank debt by $43.7 million is another positive development, indicating a robust balance sheet and improved liquidity position. These financial metrics are crucial for stakeholders as they demonstrate the company's ability to generate cash and manage debt, which are key factors in assessing the company's financial stability and growth prospects.
The company's performance, despite industry softness in November and December, reflects resilience and potential market share gains, especially in the brake-related product categories. The mention of ongoing improvements in operational efficiencies as volume increases suggests that the company is scaling its operations effectively. For investors, the ability of a company to maintain and improve margins in the face of industry headwinds is a strong indicator of competitive advantage and strategic execution.
Additionally, the company's focus on strategic plans and leveraging its leadership position could signal future growth and expansion opportunities. The emphasis on enhancing cash flow from working capital initiatives is particularly noteworthy, as it suggests a sustainable approach to liquidity management which is critical in times of economic uncertainty.
The reported net loss for the fiscal 2024 third quarter of $47.2 million, largely due to a $37.5 million U.S. federal and state deferred tax asset valuation allowance, highlights the impact of accounting principles on reported earnings. While this non-cash item does not affect the company's operating metrics, it significantly impacts the reported net income under U.S. GAAP. The valuation allowance indicates that the company may not expect to realize some of its deferred tax assets, which could suggest a conservative approach to its future taxable income projections.
For investors, understanding the nature of non-cash items such as deferred tax asset valuation allowances is crucial as it provides insight into the company's tax position and potential future tax benefits or liabilities. It's important to note that while such allowances may not affect cash flow, they do affect the company's reported net income and, consequently, the perception of its profitability.
– Record Sales for Nine Months; Operating Income Up Sharply; Strong Cash Flow –
Key highlights for the fiscal third quarter.
-
Net sales increased 13.2 percent to
$171.9 million - Gross margin improved by 3.7 percentage points.
-
Gross profit increased 43.1 percent to
$30.0 million -
Operating income increased 170.1 percent to
$9.5 million -
The company generated cash of approximately
$53.6 million
Net sales for the fiscal 2024 third quarter increased 13.2 percent to
Gross profit for the fiscal 2024 third quarter increased 43.1 percent to
Operating income for the fiscal 2024 third quarter increased 170.1 percent to
Interest expense for the fiscal third quarter increased by
Due primarily to
The company generated approximately
“Our year-to-date results reflect significant progress in achieving three major initiatives: increasing cash flow from profits and neutralizing working capital, and increasing sales and profitability, despite some unexpected softness throughout the industry in November and December. Our brake-related product categories continue to gain momentum, and we expect to realize ongoing improvements in operational efficiencies as volume further increases. Finally, we remain focused on executing our strategic plans and leveraging our leadership position,” said Selwyn Joffe, chairman, president, and chief executive officer.
Nine-Month Results
Net sales for the fiscal 2024 nine-month period increased 8.2 percent to a record
Gross profit for the fiscal 2024 nine-month period increased 25.6 percent to
Operating income for the fiscal 2024 nine-month period increased 166.7 percent to
Interest expense increased by
Due primarily to
Further Considerations
-
Sales volume continuing to gain momentum.
- Ordering activity expected to benefit from current extreme weather conditions.
- 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 February 9, 2024 through 8:59 p.m. Pacific time on February 16, 2024 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 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 |
|
Nine Months Ended |
||||||
December 31, |
|
December 31, |
||||||
2023 |
|
2022 |
|
2023 |
|
2022 |
||
| Net sales |
|
|
|
|
||||
| Cost of goods sold | 141,819,000 |
130,826,000 |
430,448,000 |
410,536,000 |
||||
| Gross profit | 30,043,000 |
20,993,000 |
97,758,000 |
77,811,000 |
||||
| Operating expenses: | ||||||||
| General and administrative | 15,198,000 |
13,599,000 |
42,125,000 |
42,079,000 |
||||
| Sales and marketing | 5,931,000 |
5,634,000 |
17,038,000 |
17,242,000 |
||||
| Research and development | 2,539,000 |
2,547,000 |
7,352,000 |
8,330,000 |
||||
| Foreign exchange impact of lease liabilities and forward contracts | (3,149,000) |
(4,313,000) |
(2,659,000) |
(2,553,000) |
||||
| Total operating expenses | 20,519,000 |
17,467,000 |
63,856,000 |
65,098,000 |
||||
| Operating income | 9,524,000 |
3,526,000 |
33,902,000 |
12,713,000 |
||||
| Other expenses: | ||||||||
| Interest expense, net | 18,297,000 |
11,471,000 |
45,400,000 |
27,675,000 |
||||
| Change in fair value of compound net derivative liability | 1,160,000 |
- |
1,690,000 |
- |
||||
| Loss on extinguishment of debt | - |
- |
168,000 |
- |
||||
| Total other expenses | 19,457,000 |
11,471,000 |
47,258,000 |
27,675,000 |
||||
| Loss before income tax expense (benefit) | (9,933,000) |
(7,945,000) |
(13,356,000) |
(14,962,000) |
||||
| Income tax expense (benefit) | 37,281,000 |
(8,971,000) |
37,226,000 |
(9,296,000) |
||||
| Net (loss) income |
|
|
|
|
||||
| Basic net (loss) income per share |
|
|
|
|
||||
| Diluted net (loss) income per share |
|
|
|
|
||||
| Weighted average number of shares outstanding: | ||||||||
| Basic | 19,634,306 |
19,474,871 |
19,580,960 |
19,383,531 |
||||
| Diluted | 19,634,306 |
19,634,153 |
19,580,960 |
19,383,531 |
||||
MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES Consolidated Balance Sheets |
||||
| December 31, 2023 | March 31, 2023 | |||
| ASSETS | (Unaudited) | |||
| Current assets: | ||||
| Cash and cash equivalents |
|
|
||
| Short-term investments | 2,206,000 |
2,011,000 |
||
| Accounts receivable — net | 93,008,000 |
119,868,000 |
||
| Inventory | 393,777,000 |
356,254,000 |
||
| Contract assets | 25,236,000 |
25,443,000 |
||
| Prepaid expenses and other current assets | 17,978,000 |
22,306,000 |
||
| Total current assets | 544,360,000 |
537,478,000 |
||
| Plant and equipment — net | 39,644,000 |
46,052,000 |
||
| Operating lease assets | 85,187,000 |
87,619,000 |
||
| Long-term deferred income taxes | 2,447,000 |
32,625,000 |
||
| Long-term contract assets | 318,323,000 |
318,381,000 |
||
| Goodwill and intangible assets — net | 4,461,000 |
5,348,000 |
||
| Other assets | 1,511,000 |
1,062,000 |
||
| TOTAL ASSETS |
|
|
||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
| Current liabilities: | ||||
| Accounts payable and accrued liabilities |
|
|
||
| Customer finished goods returns accrual | 37,883,000 |
37,984,000 |
||
| Contract liabilities | 43,848,000 |
40,340,000 |
||
| Revolving loan | 115,000,000 |
145,200,000 |
||
| Other current liabilities | 5,369,000 |
4,871,000 |
||
| Operating lease liabilities | 8,564,000 |
8,767,000 |
||
| Current portion of term loan | - |
3,664,000 |
||
| Total current liabilities | 389,545,000 |
382,592,000 |
||
| Term loan, less current portion | - |
9,279,000 |
||
| Convertible notes, related party | 33,226,000 |
30,994,000 |
||
| Long-term contract liabilities | 206,590,000 |
193,606,000 |
||
| Long-term deferred income taxes | 74,000 |
718,000 |
||
| Long-term operating lease liabilities | 73,725,000 |
79,318,000 |
||
| Other liabilities | 11,021,000 |
11,583,000 |
||
| Total liabilities | 714,181,000 |
708,090,000 |
||
| Commitments and contingencies | ||||
| Shareholders' equity: | ||||
| Preferred stock; par value |
- |
- |
||
| Series A junior participating preferred stock; par value |
||||
| 20,000 shares authorized; none issued | - |
- |
||
| Common stock; par value |
||||
| 19,662,380 and 19,494,615 shares issued and outstanding at December 31, 2023 and | ||||
| March 31, 2023, respectively | 197,000 |
195,000 |
||
| Additional paid-in capital | 235,823,000 |
231,836,000 |
||
| Retained earnings | 38,165,000 |
88,747,000 |
||
| Accumulated other comprehensive income (loss) | 7,567,000 |
(303,000) |
||
| Total shareholders' equity | 281,752,000 |
320,475,000 |
||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
||
Additional Information and Non-GAAP Financial Measures
To supplement the consolidated financial statements presented in accordance with
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 December 31, 2023 and 2022 | Exhibit 1 |
||||||
Three Months Ended December 31, |
|||||||
2023 |
|
2022 |
|||||
$ |
|
Per Share |
|
$ |
|
Per Share |
|
| GAAP net (loss) income |
|
|
|
|
|||
| Non-cash items impacting net (loss) income | |||||||
| Core and finished goods premium amortization |
|
|
|
|
|||
| Revaluation - cores on customers' shelves | 1,607,000 |
0.08 |
863,000 |
0.04 |
|||
| Share-based compensation expenses | 1,425,000 |
0.07 |
1,021,000 |
0.05 |
|||
| Foreign exchange impact of lease liabilities and forward contracts | (3,149,000) |
(0.16) |
(4,313,000) |
(0.22) |
|||
| Change in fair value of compound net derivative liability | 1,160,000 |
0.06 |
- |
- |
|||
| Tax effect (a) | (970,000) |
(0.05) |
(162,000) |
(0.01) |
|||
| Tax valuation allowance | 37,461,000 |
1.91 |
- |
- |
|||
| Total non-cash items impacting net (loss) income |
|
|
|
|
|||
| Cash items impacting net (loss) income | |||||||
| Supply chain disruptions and related costs (b) |
|
|
|
|
|||
| New product line start-up costs and transition expenses, and severance (c) | 296,000 |
0.02 |
1,103,000 |
0.06 |
|||
| Tax effect (a) | (463,000) |
(0.02) |
(938,000) |
(0.05) |
|||
| Total cash items impacting net (loss) income |
|
|
|
|
|||
(a) |
Tax effect is calculated by applying an income tax rate of |
|
(b) |
For the three-months ended December 31, 2023, consists of |
|
|
For the three-months ended December 31, 2022, consists of |
|
(c) |
For the three-months ended December 31, 2023, consists of |
|
|
For the three-months ended December 31, 2022, consists of |
| Items Impacting Net Income for the Nine Months Ended December 31, 2023 and 2022 | Exhibit 2 |
||||||
| Nine Months Ended December 31, | |||||||
2023 |
|
2022 |
|||||
$ |
|
Per Share |
|
$ |
|
Per Share |
|
| GAAP net loss |
|
|
|
|
|||
| Non-cash items impacting net loss | |||||||
| Core and finished goods premium amortization |
|
|
|
|
|||
| Revaluation - cores on customers' shelves | 4,380,000 |
0.22 |
2,704,000 |
0.14 |
|||
| Share-based compensation expenses | 4,268,000 |
0.22 |
3,521,000 |
0.18 |
|||
| Foreign exchange impact of lease liabilities and forward contracts | (2,659,000) |
(0.14) |
(2,553,000) |
(0.13) |
|||
| Change in fair value of compound net derivative liability and loss on extinguishment of debt | 1,858,000 |
0.09 |
- |
- |
|||
| Tax effect (a) | (4,012,000) |
(0.20) |
(3,214,000) |
(0.17) |
|||
| Tax valuation allowance | 37,461,000 |
1.91 |
- |
- |
|||
| Total non-cash items impacting net loss |
|
|
|
|
|||
| Cash items impacting net loss | |||||||
| Supply chain disruptions and related costs (b) |
|
|
|
|
|||
| New product line start-up costs and transition expenses, and severance (c) | 980,000 |
0.05 |
2,642,000 |
0.14 |
|||
| Tax effect (a) | (1,930,000) |
(0.10) |
(3,151,000) |
(0.16) |
|||
| Total cash items impacting net loss |
|
|
|
|
|||
(a) |
Tax effect is calculated by applying an income tax rate of |
|
(b) |
For the nine-months ended December 31, 2023, consists of |
|
|
For the nine-months ended December 31, 2022, consists of |
|
(c) |
For the nine-months ended December 31, 2023, consists of |
|
|
For the nine-months ended December 31, 2022, consists of |
| Items Impacting Gross Profit for the Three Months Ended December 31, 2023 and 2022 | Exhibit 3 |
||||||
| Three Months Ended December 31, | |||||||
2023 |
|
2022 |
|||||
$ |
|
Gross Margin |
|
$ |
|
Gross Margin |
|
| GAAP gross profit |
|
|
|
|
|||
| Non-cash items impacting gross profit | |||||||
| Core and finished goods premium amortization |
|
|
|
|
|||
| Revaluation - cores on customers' shelves | 1,607,000 |
|
863,000 |
|
|||
| Total non-cash items impacting gross profit |
|
|
|
|
|||
| Cash items impacting gross profit | |||||||
| Supply chain disruptions and related costs |
|
|
|
|
|||
| Total cash items impacting gross profit |
|
|
|
|
|||
| Items Impacting Gross Profit for the Nine Months Ended December 31, 2023 and 2022 | Exhibit 4 |
||||||
Nine Months Ended December 31, |
|||||||
2023 |
|
2022 |
|||||
$ |
|
Gross Margin |
|
$ |
|
Gross Margin |
|
| GAAP gross profit |
|
|
|
|
|||
| Non-cash items impacting gross profit | |||||||
| Core and finished goods premium amortization |
|
|
|
|
|||
| Revaluation - cores on customers' shelves | 4,380,000 |
|
2,704,000 |
|
|||
| Total non-cash items impacting gross profit |
|
|
|
|
|||
| Cash items impacting gross profit | |||||||
| Supply chain disruptions and related costs |
|
|
|
|
|||
Total cash items impacting gross profit |
|
|
|
|
|||
| Items Impacting EBITDA for the Three and Nine Months Ended December 31, 2023 and 2022 | Exhibit 5 |
||||||
Three Months Ended December 31, |
|
Nine Months Ended December 31, |
|||||
2023 |
|
2022 |
|
2023 |
|
2022 |
|
| GAAP net (loss) income |
|
|
|
|
|||
| Interest expense, net | 18,297,000 |
11,471,000 |
45,400,000 |
27,675,000 |
|||
| Income tax expense (benefit) | 37,281,000 |
(8,971,000) |
37,226,000 |
(9,296,000) |
|||
| Depreciation and amortization | 2,878,000 |
3,108,000 |
8,844,000 |
9,322,000 |
|||
| EBITDA |
|
|
|
|
|||
| Non-cash items impacting EBITDA | |||||||
| Core and finished goods premium amortization |
|
|
|
|
|||
| Revaluation - cores on customers' shelves | 1,607,000 |
863,000 |
4,380,000 |
2,704,000 |
|||
| Share-based compensation expenses | 1,425,000 |
1,021,000 |
4,268,000 |
3,521,000 |
|||
| Foreign exchange impact of lease liabilities and forward contracts | (3,149,000) |
(4,313,000) |
(2,659,000) |
(2,553,000) |
|||
| Change in fair value of compound net derivative liability and loss on extinguishment of debt | 1,160,000 |
- |
1,858,000 |
- |
|||
| Total non-cash items impacting EBITDA |
|
|
|
|
|||
| Cash items impacting EBITDA | |||||||
| Supply chain disruptions and related costs |
|
|
|
|
|||
| New product line start-up costs and transition expenses, and severance | 296,000 |
1,103,000 |
980,000 |
2,642,000 |
|||
| Total cash items impacting EBITDA |
|
|
|
|
|||
View source version on businesswire.com: https://www.businesswire.com/news/home/20240209672412/en/
Gary S. Maier
Vice President, Corporate Communications & IR
(310) 972-5124
Source: Motorcar Parts of America, Inc.
FAQ
What was the percentage increase in net sales for the fiscal 2024 third quarter?
How much did the operating income increase by for the fiscal 2024 third quarter?
What caused the net loss of $47.2 million for the fiscal 2024 third quarter?
What was the gross margin for the fiscal 2024 third quarter?
How much cash did the company generate from operating activities during the fiscal 2024 third quarter?
What was the percentage increase in net sales for the fiscal 2024 nine-month period?
How much did the gross profit increase by for the fiscal 2024 nine-month period?
What was the operating income for the fiscal 2024 nine-month period?
What was the net loss for the fiscal 2024 nine-month period?
How much did the company reduce net bank debt by during the nine-month period?
