Motorcar Parts of America Q1 Earnings Call Highlights

Key Points

• Fiscal 2027 guidance was reaffirmed despite first-quarter sales of $168 million being affected by customer order timing. The company continues to target $780 million–$800 million in net sales, $86 million–$91 million in operating income and $95 million–$100 million in EBITDA.
• The acquisition of Centric Parts brake brands is expected to support growth, with product relaunches planned by fiscal year-end. Management also expects new customer commitments and brake-category expansion to contribute during the second half of the year.
• First-quarter gross margin declined to 16.2% from 18% due to non-cash and one-time expenses, unfavorable foreign exchange and lower volume. The company is pursuing cost reductions, operational relocations and efficiency initiatives while managing $99.7 million in net bank debt and continuing share repurchases.

Motorcar Parts of America NASDAQ: MPAA reaffirmed its fiscal 2027 outlook after reporting first-quarter sales that were affected by the timing of customer orders, while management pointed to new business commitments, brake-category expansion and operating-efficiency efforts as drivers for the rest of the year.

For the fiscal first quarter ended June 30, 2026, the automotive aftermarket parts supplier reported net sales of $168 million. Chief Financial Officer David Lee said sales were impacted as expected by order timing, but the company expects higher sales volume, cost reductions and improved efficiency to support results as the year progresses.

The company maintained its fiscal 2027 guidance for net sales of $780 million to $800 million, representing year-over-year growth of 7.5% to 10.2%, excluding certain non-recurring items. It also reaffirmed expected operating income of $86 million to $91 million and EBITDA of $95 million to $100 million.

Centric Brake Brands Acquisition Targets Growth

Chairman, President and CEO Selwyn Joffe said the company remains on track to meet its fiscal-year expectations despite first-quarter industry headwinds. He cited new customer commitments and opportunities expected to phase in during fiscal 2027, including the company’s recently announced acquisition of Centric Parts brake brands.

Motorcar Parts expects to relaunch the Centric product lines by the end of the current fiscal year. Joffe said preliminary customer feedback has indicated demand for the brand, which he described as having a history of consumer satisfaction, catalog accuracy and established brake-pad formulations.

“We are excited to bring these customers the original magic sauce formulation they loved, reunited with their recognized brand,” Joffe said.

At its peak, Centric generated approximately $400 million in gross annualized sales, according to Joffe. He said the acquisition complements Motorcar Parts’ multi-year effort to expand in brake-related products, which have already become a second major category alongside its rotating electrical business.

Management also cited aging vehicles and the growing U.S. vehicle population as favorable aftermarket demand factors. Joffe said the average age of U.S. light vehicles has increased to about 13 years, from 12.6 years in 2024, while vehicles on the road rose to 289 million from 286 million a year earlier.

Margins Affected by Costs, Foreign Exchange and Sales Timing

First-quarter gross margin was 16.2%, compared with 18% a year earlier. Lee said the result included non-cash expenses equal to 2.4% of sales and one-time items equal to 1.6%. Excluding those items, gross margin was 20.2%.

Gross margin was also affected by approximately $3.5 million, or about 2%, in unfavorable foreign-exchange effects from a weaker U.S. dollar relative to the Mexican peso, as well as lower sales volume tied to order timing.

Lee said the company expects increased sales, greater overhead absorption, cost reductions and additional use of brake-related production capacity to support margins during fiscal 2027. Other initiatives include tariff mitigation, improved pricing for scrap sales, potential relocation of certain operations to lower-cost global facilities and additional strategic cost reductions.

The company is nearing completion of the relocation of its heavy-duty rotating electrical operations to Mexico from Canada, a process that began in the latter part of fiscal 2026. Joffe said the move is intended to improve operating efficiency and margins.

Cash Use, Debt and Repurchases

Motorcar Parts used $11.3 million in operating cash flow during the first quarter, primarily due to working-capital needs associated with inventory ramping for new business. The company repurchased $1.9 million of shares during the period.

• Revolver loan balance: $118.8 million as of June 30, 2026
• Cash balance: $19.1 million
• Net bank debt: $99.7 million
• Total cash and availability: approximately $112.4 million
• Shares repurchased: 129,523 for $1.9 million, or an average of $14.98 per share
• Remaining authorization for share repurchases: $20.1 million

Lee said EBITDA for the 12 months ended June 30 was $60 million, or $79.1 million before non-cash and one-time cash expenses. The company calculated its net bank debt-to-adjusted EBITDA ratio at 1.26.

The company also recently extended the maturity of its revolver credit facility, led by PNC Bank, to August 2031.

Additional Sales Opportunities and EV Emulator Review

Guidance includes customer commitments expected to ramp during the second half of fiscal 2027. Lee said the timing has been somewhat affected by customers purchasing liquidated inventory from a prior supplier.

Motorcar Parts expects to add more than $100 million in additional annualized net sales by the end of fiscal 2027, though those sales are not included in current guidance because of uncertainty surrounding timing. Management said annualized net sales are expected to exceed $900 million by the end of the fiscal year.

The company is also continuing to evaluate strategic alternatives for its non-core electric-vehicle emulator business, which includes a next-generation emulator. Lee said the business continues to secure new original-equipment customer commitments while the review proceeds.

In closing remarks, Joffe said management remains focused on expanding market share in non-discretionary aftermarket categories, improving efficiency across its global platform and supporting demand in passenger-vehicle, heavy-duty and diagnostic-testing markets.

About Motorcar Parts of America (NASDAQ:MPAA)

Motorcar Parts of America, Inc is a leading North American designer, manufacturer and distributor of aftermarket automotive replacement parts. The company's product portfolio spans collision and mechanical components, providing solutions for steering and suspension, brake systems, engine cooling, electrical and drivelines. Through a combination of proprietary brands and exclusive licensing agreements, Motorcar Parts of America offers an extensive selection of both new and remanufactured parts to meet the needs of automotive service professionals and retailers.

In addition to its core collision and under-hood product lines, the company markets specialty items such as performance accessories, tools and equipment.

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