管理層發言
Hello, and thank you for being here. My name is Lacey, and I will be your conference operator today. I want to welcome everyone to the Motorcar Parts of America Inc. Fiscal 2026 First Quarter Conference Call and webcast. Thank you. I would now like to turn the conference over to Gary Maier. You may begin.
Thank you, Lacey, and thanks, everyone, for joining us for our call today. Before I turn the call over to Selwyn Joffe, Chairman, President and Chief Executive Officer; and David Lee, the company's Chief Financial Officer, I'd like to remind everyone of the safe harbor statement included in today's press release. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for certain forward-looking statements, including statements made during today's conference call. Such forward-looking statements are based on the company's current expectations and beliefs concerning future developments and their potential effects on the company. There can be no assurance that future developments affecting the company will be those anticipated by the company. Actual results may differ from those projected in these forward-looking statements. Forward-looking statements involve significant risks and uncertainties, some of which are beyond the control of the company and subject to change based on various factors, in particular, expectations about anticipated future growth and opportunities with customers that may not be achieved.
The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. For a more detailed discussion of some of the ongoing risks and uncertainties of the company's business, I refer you to the various filings with the SEC. I would now like to begin the call and turn it over to Selwyn to begin.
Thank you, Gary. I appreciate everyone joining us today. We're off to a solid start for fiscal 2026. We are encouraged by our first quarter performance, reflecting record net sales and gross profits for our fiscal first quarter. Equally important, we generated solid cash flow from operating activities, reduced net bank debt and continued to repurchase shares. All of this underscores our commitment to success as a leading supplier of nondiscretionary automotive aftermarket parts. Our team is focused on continuous improvement and success. We are excited by the opportunities for growth. We offer a well-respected portfolio of products and services and have the capacity and ability to further leverage our state-of-the-art North American operational and distribution footprint. Our hard parts business, led by our rotating electrical 50-plus year flagship category continues to generate solid performance.
Nondiscretionary parts cannot be deferred. If parts fail, your car cannot be driven. According to industry reports, the average age of U.S. light vehicles has risen to 12.8 years from 12.6 years in 2024. In addition, the number of vehicles on the road climbed to 293.5 million from 289 million just a year ago. We expect increased replacement opportunities for the life of the vehicle, particularly with consumers holding on to their cars for longer. We are encouraged by the continued success of our second largest product category, brake offerings, which includes brake calipers manufactured at our state-of-the-art production operation in Mexico. Our team is doing an exceptional job to further enhance market share for the entire brake product line as well as all of our other nondiscretionary product offerings. We continue to leverage our strengths, offering our customers great products, industry-leading SKU coverage and order fill rates, supported by value-added merchandising and marketing support.
In short, we are all committed and focused on our customers, offering quality products and services with rational pricing. All of our products are offered to the professional installer market under our Quality-Built brand, and we are gaining market share. As production volume increases for certain newer hard part products such as brake-related offerings, we expect enhanced operating efficiency and margin improvement. With regard to our heavy-duty business, we continue to leverage our reputation and industry position in this market, particularly with regard to supplying alternators and starters to our channel partners who are leaders in the heavy-duty aftermarket segment. Our growth opportunities continue to gain momentum. We are becoming an increasingly important supplier to the heavy-duty rotating electrical market with multiple opportunities to expand our Quality-Built brand name to this market.
We continue to experience increased demand for our aftermarket parts in Mexico, which complements our existing strategic and operational and distribution footprint there. As our U.S.-based retailers and warehouse distributors, customers expand through Latin and South America, we are well positioned to support their growth and benefit. With regard to our diagnostic business, our JBT-1 Bench Top tester leads the industry and the installed base is continuing to grow. Additional service-related revenue is expected as more testers are deployed, which includes repairs, software and database updates. We also expect more opportunities outside North America as the business evolves. We continue to work on mitigating tariffs with customer price increases and important cost reduction initiatives, including strategic supply chain sourcing changes. From a positive perspective, we believe tariffs present some strategic competitive advantages given the strength of our North American footprint and being USMCA compliant.
I should emphasize that we have been focused on executing strategies designed to be less dependent on the Chinese supply chain for a number of years, whether it be components or parts. In short, favorable long-term industry dynamics continue to bode well for the company, and we are extremely well positioned for sustainable top and bottom line growth. As I've mentioned, the outlook is bright for nondiscretionary aftermarket parts for the internal combustion engine in particular. We are focused on leveraging our capability and capacity to offer a broad range of applications for all makes and models whether newer or older vehicles. Before I turn the call over to David to review our results in greater detail, let me summarize. From a sales perspective, we expect continued organic growth for our business, supported by the favorable industry tailwinds I previously mentioned. Our commercial heavy-duty market continues to grow.
Our brake-related business is gaining further traction, particularly with brake calipers. In addition, our sales in the Mexican market are growing nicely, and we expect this momentum will continue and expand throughout the region. And finally, our diagnostic business is growing nicely, and we look forward to ongoing success. From a gross margin perspective, we are encouraged by the increase in the year-over-year gross margin despite the headwinds related to tariffs; increasing market share gains, particularly for brake-related products should continue to enhance our gross margin. With continued operating efficiencies and supply chain cost reduction initiatives, we expect further margin growth. Finally, sales growth, gross margin improvement and an ongoing focus on neutralization of working capital support our ability to further reduce debt, repurchase shares and to take advantage of other opportunities to enhance shareholder value and achieve our financial performance targets.
As I've previously mentioned and as referenced in the exhibit to our earnings release, there are various factors related to our financial performance that are noncash and beyond our control, particularly with regard to noncash mark-to-market foreign exchange, which can have a positive or negative impact on our Mexico lease liabilities and forward contracts that we purchase. We are focused on opportunities to minimize noncash expenses, such as gains or losses related to foreign exchange, including funding our Mexican operations of pesos from our sales in Mexico. As our sales in Mexico continue to grow, we have reduced our purchases of forward peso contracts. We expect over time, we will eliminate the need to purchase these contracts. I would now like to turn the call over to David.
Thank you, Selwyn, and good morning, everyone. I would like to highlight key financial performance metrics for the first quarter of fiscal 2026, as detailed in this morning's news release. Later today, additional information will be available in the 10-Q filing. As mentioned earlier by Selwyn, net sales rose by 10.9% to a first quarter record of $188.4 million, and gross profit increased by 16.3% to a first quarter record of $33.9 million. Our operating income improved to $20.1 million, up from an operating loss of $6.5 million the previous year. We generated $10 million in cash from operations and decreased our net bank debt by $7 million to $74.4 million, also repurchasing 197,796 shares for $2 million at an average price of $9.94. Now, let’s delve into the details of our results. Net sales for the first quarter of fiscal 2026 reached $188.4 million, up from $169.9 million last year, representing an increase of 10.9%.
Gross profit for the same period hit $33.9 million, compared to $29.2 million a year prior, marking a 16.3% increase. It's important to note that gross profit was impacted by noncash expenses related to core and finished goods premium amortization and revaluation of cores on customer shelves, totaling approximately $3.9 million, which equated to a 2.1% impact on gross margin. The gross margin for this quarter was 18%, an increase from 17.2% a year earlier. In addition to the noncash expenses, gross margin also experienced an impact from cash expenses of $1.4 million, which had a 0.8% effect on gross margin. Beyond the higher sales volume, particularly from our newer product lines, we remain committed to initiatives aimed at enhancing gross margins. Operating expenses were $13.8 million, significantly down from $35.6 million the previous year, which was positively affected by an $8.3 million noncash mark-to-market foreign exchange gain, in contrast to an $11.1 million loss the prior year.
Our operating income for the first quarter increased to $20.1 million, compared to an operating loss of $6.5 million last year. If we exclude the noncash foreign exchange impact from lease liabilities and forward contracts, the operating income saw a growth of 153.6% to $11.7 million versus $4.6 million the prior year. Interest expense for the first quarter decreased by $1.6 million, now at $12.8 million compared to $14.4 million last year, due to lower average balances in our credit facility and reduced interest rates. Income tax expense for the first quarter was $2.4 million compared to an income tax benefit of $178,000 from the previous year. The effective tax rate for this quarter reflects our inability to recognize benefits from certain jurisdictions, although we anticipate that these losses will be utilized against future profits, positively affecting our tax rates. Net income for the first quarter of fiscal 2026 stood at $3 million, or $0.15 per diluted share, in contrast to a net loss of $18.1 million, or $0.92 per share, the previous year.
Net income included noncash items of $1.3 million, or $0.07 per diluted share, and was impacted by cash expenses of $1.1 million, or $0.05 per diluted share. As a reminder, higher sales volume and operational efficiencies are expected to further enhance our results. EBITDA for the first quarter was $20.7 million, benefiting from $1.7 million in noncash items, but also offset by $1.4 million of one-time cash expenses. Without the impact of these noncash and one-time cash expenses, EBITDA was $20.4 million for the quarter. Moving on to cash flow and key corporate matters, we generated around $10 million in operating activities during the first quarter, recovering from about $20.8 million used in operations last year. We are committed to enhancing our operating profit and gross margin while generating positive cash flow, supported by organic growth and improved operational efficiencies stemming from our global expansion.
In addition to our goal of increasing operating profit, we see further opportunities to streamline working capital through enhanced demand planning, better inventory management, and extended payment terms with vendors. Our net bank debt decreased by $7 million during the quarter to $74.4 million from $81.4 million. Over the last two years leading up to June 30, 2025, we have generated about $115 million from operating activities, translating to approximately $5.87 per outstanding share on average, while reducing net bank debt by around $94 million. Our liquidity remains robust, with total cash and availability around $147 million. I should also note that for each point reduction in interest rates, our interest expense related to accounts receivable discount programs offered by customers decreases by approximately $6 million. As a result of a solid start to the fiscal year, we have upgraded our sales guidance for fiscal 2026.
The new guidance ranges between $800 million and $820 million, indicating growth between 5.6% and 8.3% year-over-year. We reaffirm our operating income guidance between $86 million and $91 million, which shows a year-over-year growth of 4.3% to 10.4%, factoring in tariff effects and cost reduction measures. We estimate depreciation and amortization to be around $11 million. These figures consider the impact of currently enacted tariffs and do not account for certain non-cash items or one-time expenses. For further details on the reconciliations of items affecting our results and non-GAAP financial measures, please refer to the exhibits provided in this morning's earnings press release. I would now like to open the line for questions.
分析師問答
Really good results here. Wondering if you could sort of give a high-level description of what you faced this quarter as it relates to tariffs versus last quarter? It looks like there was a smaller impact from tariffs. What was sort of the difference there? And then just looking at guidance, it looks like you're assuming some additional pass-throughs than maybe you previously expected. What are some of your assumptions on that you're making on tariffs for this year? Can you just kind of take a high-level approach to explaining what you're seeing out there for tariffs?
Derek, that's a good question. So to recap, in our March quarter, we had approximately $4.6 million impact of those net tariff costs. As you pointed out in this June quarter, we had a much lower $1.4 million net impact of tariffs. For our September quarter, which is our second quarter, we do expect a little bit more impact, but it will sequentially continue to come down. So less impact.
Got it. And then for full year guidance, I mean, you cited some pass-throughs on tariffs. I guess what are some of the assumptions you made for the full year for tariffs? It looks like we had kind of that blanket tariff come off and there's a bit of a pause, but maybe that comes back on. What were some of the assumptions that you guys sort of made for the full year that led you to raise the revenue range?
So we did increase our sales guidance. We're not breaking out how much of that increase is related to tariff pass-throughs, it's confidential sensitive information regarding customer price increases. So it's all included in that higher guidance.
Yes. And I do want to point out that regardless of tariffs, we have record sales.
That's right.
Got it. That's helpful. And then Selwyn, just sort of looking at the rotating electric and braking businesses, what's sort of the next major growth opportunity in either of those segments? I think you've sort of mentioned geographic expansion in Mexico, obviously, market share growth as you guys have seen that. Maybe it's going to be new products in those segments. What's sort of the next major growth opportunity in either of those segments?
We're still quite small in the professional installer market, especially in the pure professional installer sector. We do have a substantial share in the customers who cater to both installers and DIY, but we have significant potential for growth in our branded products, which we're already starting to see. I'm very optimistic about what the brand can achieve with Quality-Built, and I see opportunities across all our categories. Regarding our brake-related products, we're still in the early stages and have a long way to go. We have ample capacity and become more efficient as we expand. This is just within the North American market, and frankly, we have numerous opportunities worldwide. Although we are currently focused on North America, we are starting to explore bigger global opportunities. We are excited about our brake pad business, as it is just beginning, and we believe we offer the leading product in the market. The impact of this growth has yet to be fully realized, but it's on the way. This year's narrative is relatively standard, while next year's story will gain more momentum.
Got it. Well, congrats on the results, guys.
There are no further questions at this time. I would like to turn the call back over to Selwyn Joffe for closing remarks.
Great. Well, I appreciate everybody listening today. In summary, I can just repeat, we're bullish about our outlook for fiscal '26 and forward. We remain laser-focused on further efficiencies and fully benefiting from a not easily duplicated global platform to meet demand and grow market share for our nondiscretionary products emphasize nondiscretionary as well as from our diagnostic testing capabilities. We continue to leverage our expertise in solid customer and supplier partnerships. Our liquidity is strong. Our leverage is very low, and we have the resources, capacity and capability to further enhance shareholder value. Let me reiterate our strategic focus, growing sales of our existing product lines, continuous operational efficiency improvements to further enhance margins, mitigating tariffs and increasing cash conversion by neutralizing working capital, and we are positive on all those fronts.
In closing, we appreciate the contributions of all of our team members who are continuously focused on providing the highest level of service. We are all committed to being the industry leader for parts and solutions that move our world today and tomorrow. We also appreciate the continued support of our shareholders, and we thank everyone again for joining us on the call. We look forward to speaking with you when we host our fiscal 2026 second quarter call in November and at various investor conferences and meetings in the interim. Thank you.
This concludes today's conference call. You may disconnect.