Motorcar Parts of America — Fiscal 2027 Second Quarter Earnings Summary

Financial Performance:

• Net sales for the three months ended September 30, 2026, were $169.2 million, a decrease from $221.5 million in the prior-year quarter; the prior year included $14.8 million of core revenue from inventory realignment.
• Net sales for the six months ended September 30, 2026, were $337.2 million, a decrease from $409.8 million in the prior-year period; the prior year included $14.8 million of core revenue from inventory realignment.
• Gross profit for the quarter was $40.9 million compared to $42.7 million a year earlier, with gross margin at 24.2% versus 19.3%.
• Gross profit for the six-month period was $68.1 million compared to $76.6 million a year earlier, with gross margin at 20.2% versus 18.7%.
• Operating income for the quarter was $10.0 million compared to $16.4 million a year earlier.
• Operating income for the six-month period was $13.5 million compared to $36.4 million a year earlier.
• Net income for the quarter was $1.4 million ($0.07 basic EPS), compared to a net loss of $2.1 million ($0.11 loss per share) in the prior year.
• Net loss for the six-month period was $12.1 million ($0.64 loss per share), compared to net income of $893,000 ($0.04 diluted EPS) in the prior year.
• Interest expense decreased to $11.3 million for the quarter from $12.7 million, and to $23.3 million for the six months from $25.5 million.
• Revolver borrowings were $126.6 million as of September 30, 2026, with cash at $20.8 million and total availability plus cash of approximately $104.8 million.
• Approximately $20.1 million remained available under the authorized share repurchase program as of September 30, 2026.
• Gross margin was impacted by non-cash expenses of 2.8 percentage points (quarter) and 2.6 percentage points (six months), and benefited from one-time items of 5.7 percentage points (quarter) and 2.1 percentage points (six months), including $11.1 million in IEEPA tariff refunds.

Guidance and Future Outlook:

• Fiscal 2027 net sales guidance revised to $715 million–$740 million, down from the previous $780 million–$800 million.
• Fiscal 2027 operating income guidance estimated at $37 million–$44 million.
• Fiscal 2027 guidance includes estimated non-cash expenses of approximately $30 million and transition expenses of approximately $5 million for heavy-duty operations relocation.
• Fiscal 2027 depreciation and amortization expense is estimated at approximately $9 million.
• Net sales for the six months ending March 31, 2027, are estimated at $378 million–$403 million, representing a 0.5% decline to 6.1% increase year-over-year.
• Excluding $19.9 million of core revenue in the prior year period, net sales for the six months ending March 31, 2027, are estimated to increase between 5.0% and 11.9%.
• Operating income for the six months ending March 31, 2027, is estimated at $23 million–$30 million, including approximately $14 million in non-cash expenses and $5 million in depreciation and amortization.
• The company expects increased sales in the second half of fiscal 2027 compared to the same period a year ago.
• Approximately $60 million in new annualized business awards are expected to start shipping by the end of fiscal 2027.
• The company expects to secure approximately $25 million of additional new annualized business awards by fiscal year end.

Business Segments and Product Lines:

• Initial shipments of newly awarded business have commenced, with the majority of the $60 million in awards and $25 million in expected additional business launching later in fiscal 2027.
• Centric Parts brand potential sales contributions are not yet included in current growth estimates.
• The heavy-duty program relocation to Mexico has been completed, with expected reductions in manufacturing costs.
• Rotating electrical diagnostic testing equipment program continues to expand with major automotive aftermarket customers across North America and internationally.
• Growth opportunities in Mexico include expansion by major existing customers.
• Potential opportunities in Canada exist as major customers expand geographically.
• Margin improvement opportunities are expected from increased utilization of existing brake-related manufacturing capacity.

Market and Competitive Landscape:

• The bankruptcy of First Brands has created opportunities for Motorcar Parts of America to expand its presence in the braking business.
• The liquidation of existing First Brands inventories temporarily impacted the timing of certain new orders, but benefits are now being realized.
• The company is well-positioned for additional business, including the relaunch of Centric Parts.
• Large customers are focused on expanding operations in Mexico and Canada, creating opportunities to support their growth.

Risks and Challenges:

• Results reflected delayed customer orders and launches of new business awards, necessitating revised guidance.
• A $37.5 million decline in quarterly sales (excluding inventory realignment) was driven by delayed customer orders and lower tariff pass-throughs.
• Gross margin was negatively impacted by approximately $2.4 million (1.4 percentage points) of unfavorable foreign currency fluctuations in the quarter and $5.9 million (1.8 percentage points) in the six-month period.
• Forward-looking statements are subject to risks including changes in customer ordering patterns, customer concentration, competitive conditions, supply-chain constraints, inflation, tariffs, interest rates, credit availability, labor and production costs, inventory levels, and operational execution.

Management Commentary and Tone:

• Selwyn Joffe, Chairman, President, and CEO, stated confidence in the underlying aftermarket despite industry softness and delayed orders.
• Management highlighted substantial opportunities created through new customer awards, geographic expansion, and improved operating competitiveness.
• Joffe emphasized that the Centric Parts relaunch represents a significant opportunity to expand presence in the brake aftermarket and is not included in current growth estimates.
• Management expressed confidence that new business awards, the Centric Parts relaunch, expanding North American opportunities, diagnostic equipment growth, and manufacturing efficiency will generate sales growth and improved profitability as programs mature.

Other Key Points:

• The company received approximately $60 million in annualized new customer business awards, all expected to start shipping by fiscal year end.
• The company expects to secure an additional $25 million in annualized new business awards by fiscal year end.
• The company completed the relocation of its heavy-duty program to Mexico to leverage existing infrastructure and reduce manufacturing costs.
• The company's electrical vehicle subsidiary designs and manufactures testing solutions for the electrification of automotive and aerospace industries.
• The press release includes non-GAAP measures, specifically EBITDA, with reconciliations provided in the financial tables.