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Motorcar Parts of America Reports Record Fiscal Third Quarter Results

1. MPAA reported record Q3 sales of $186.2 million, up 8.3%. 2. Gross profit surged to $44.9 million, a 49.4% increase. 3. Net income of $2.3 million contrasts sharply with last year's loss. 4. Generated $34.4 million cash from operations and reduced bank debt. 5. Continued optimism for shareholder value enhancement and growth prospects.

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FAQ

Why Very Bullish?

Strong financial performance and debt reduction could positively influence investor sentiment, similar to previous quarterly surges in profits.

How important is it?

The significant improvement in sales and profitability directly impacts steering investor confidence and reinforces MPAA's financial health.

Why Long Term?

Sustained profitability enhancements and market position may strengthen MPAA's long-term outlook, as evidenced in prior years of steady growth.

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LOS ANGELES--(BUSINESS WIRE)--Motorcar Parts of America, Inc. (Nasdaq: MPAA) today reported results for its fiscal 2025 third quarter and nine-month period ended December 31, 2024, with a continued favorable full-year outlook supported by record third quarter sales and gross profit, and the ongoing benefits of strategic initiatives to further enhance profitability. Key highlights for the fiscal third quarter. Net sales increased 8.3 percent to a fiscal third quarter record $186.2 million. Gross profit increased 49.4 percent to a record $44.9 million. Net income for the quarter was $2.3 million. Generated cash from operating activities of $34.4 million and reduced net bank debt by $30.3 million. Repurchased 268,130 shares for $2.1 million. Non-cash items reduced net income by $5.0 million and gross profit by $3.4 million for the quarter, as detailed in the exhibits. Fiscal 2025 Third Quarter Results Net sales for the fiscal 2025 third quarter increased 8.3 percent to a third quarter record $186.2 million from $171.9 million in the prior year. Gross profit for the fiscal 2025 third quarter increased 49.4 percent to a record $44.9 million from $30.0 million a year earlier. Gross margin for the fiscal 2025 third quarter was 24.1 percent compared with 17.5 percent a year earlier. Gross margin for the fiscal 2025 third quarter was impacted by $3.4 million, or 1.8 percent, of non-cash expenses, as detailed in Exhibit 3. Interest expense for the fiscal third quarter decreased by $3.9 million to $14.4 million from $18.3 million a year ago, impacted by lower average outstanding balances under the company’s credit facility and lower interest rates. Net income for the fiscal 2025 third quarter was $2.3 million, or $0.11 per diluted share, including the impact of non-cash expenses of $5.0 million, or $0.24 per diluted share, as detailed in Exhibit 1. Net loss for the prior year was $47.2 million, or $2.40 per share, including the impact of non-cash expenses of $40.4 million, or $2.06 per share, and cash expenses of $1.4 million, or $0.07 per share, as detailed in Exhibit 1. “We achieved solid results for the quarter and continue to benefit from strategic initiatives designed to enhance our performance. While customer specific internal dynamics can have a short-term impact on suppliers, we are optimistic about our ability to further leverage our leadership position within the non-discretionary aftermarket parts market – supported by quality products, customer-centric service and an industry recognized commitment to excellence,” said Selwyn Joffe, chairman, president, and chief executive officer. “The underlying fundamentals of our business continue to be strong and we remain focused on enhancing shareholder value and achieving continued success,” Joffe added. He highlighted that the company generated approximately $34.4 million of cash from operating activities during fiscal 2025 third quarter and reduced net bank debt by $30.3 million to $84.0 million from $114.3 million. Nine-Month Results Net sales for the fiscal 2025 nine-month period increased 6.8 percent to a record $564.2 million from $528.2 million a year ago. Gross profit for the fiscal 2025 nine-month period increased 18.0 percent to a record $115.3 million from $97.8 million a year earlier. Gross margin for the fiscal 2025 nine-month period was 20.4 percent compared with 18.5 percent a year earlier. Gross margin for the fiscal 2025 nine-month period was impacted by $10.3 million, or 1.8 percent, of non-cash expenses, and $1.3 million, or 0.2 percent, of one-time cash expenses, as detailed in Exhibit 4. In addition to the items detailed in Exhibit 4, gross profit for the current nine-month period was also impacted by $4.0 million, or 0.7 percent, of certain one-time expenses for onboarding new business. Interest expense decreased by $2.4 million for the nine months to $43.0 million from $45.4 million a year ago, impacted by lower average outstanding balances under the company’s credit facility and lower interest rates. Net loss for the fiscal 2025 nine-month period was $18.7 million, or $0.95 per share, including the impact of non-cash expenses of $22.4 million, or $1.13 per share, and one-time cash expenses of $3.3 million, or $0.17 per share, as detailed in Exhibit 2. Net loss for the prior year nine-month period was $50.6 million, or $2.58 per share, including the impact of non-cash expenses of $49.5 million, or $2.53 per share, and cash expenses of $5.8 million, or $0.30 per share, as detailed in Exhibit 2. In addition to the items detailed in Exhibit 2, as previously noted, results for the current nine-month period were also impacted by $4.0 million, or $0.15 per share, of certain one-time expenses for onboarding new business. During the fiscal third quarter, the company repurchased 268,130 shares for $2.1 million at an average share price of $7.82 under its current authorization program, supported by solid cash generation from operating activities. The company anticipates further opportunities to build shareholder value through enhanced profitability and strong cash generation. 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 10, 2025 through 8:59 p.m. Pacific time on February 17, 2025 by calling (800) 770-2030 (domestic) or (609) 800-9909 (toll) 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 United States, Canada, and Mexico, with facilities located in California, New York, Mexico, Malaysia, China and India, and administrative offices located in California, Tennessee, Mexico, Singapore, Malaysia, and Canada. In addition, the company’s electrical vehicle subsidiary designs and manufactures testing solutions for performance, endurance, and production of multiple components in the electric power train – providing simulation, emulation, and production applications for the electrification of both automotive and aerospace industries, including electric vehicle charging systems. Additional information is available at www.motorcarparts.com. 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 2024 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, 2024 2023 2024 2023   Net sales $ 186,176,000 $ 171,862,000 $ 564,249,000 $ 528,206,000 Cost of goods sold 141,294,000 141,819,000 448,916,000 430,448,000 Gross profit 44,882,000 30,043,000 115,333,000 97,758,000 Operating expenses: General and administrative 16,212,000 15,198,000 47,934,000 42,125,000 Sales and marketing 5,621,000 5,931,000 16,904,000 17,038,000 Research and development 3,008,000 2,539,000 7,884,000 7,352,000 Foreign exchange impact of lease liabilities and forward contracts 2,460,000 (3,149,000 ) 18,966,000 (2,659,000 ) Total operating expenses 27,301,000 20,519,000 91,688,000 63,856,000 Operating income 17,581,000 9,524,000 23,645,000 33,902,000 Other expenses: Interest expense, net 14,435,000 18,297,000 43,004,000 45,400,000 Change in fair value of compound net derivative liability (260,000 ) 1,160,000 (2,460,000 ) 1,690,000 Loss on extinguishment of debt - - - 168,000 Total other expenses 14,175,000 19,457,000 40,544,000 47,258,000 Income (loss) before income tax expense 3,406,000 (9,933,000 ) (16,899,000 ) (13,356,000 ) Income tax expense 1,115,000 37,281,000 1,849,000 37,226,000   Net income (loss) $ 2,291,000 $ (47,214,000 ) $ (18,748,000 ) $ (50,582,000 ) Basic net income (loss) per share $ 0.12 $ (2.40 ) $ (0.95 ) $ (2.58 ) Diluted net income (loss) per share $ 0.11 $ (2.40 ) $ (0.95 ) $ (2.58 )   Weighted average number of shares outstanding: Basic 19,783,170 19,634,306 19,739,481 19,580,960 Diluted 20,416,958 19,634,306 19,739,481 19,580,960     MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES Consolidated Balance Sheets   December 31, 2024 March 31, 2024 ASSETS (Unaudited) Current assets: Cash and cash equivalents $ 10,810,000 $ 13,974,000 Short-term investments 1,909,000 1,837,000 Accounts receivable — net 82,040,000 96,296,000 Inventory — net 367,028,000 397,328,000 Contract assets 22,213,000 27,139,000 Prepaid expenses and other current assets 20,304,000 23,885,000 Total current assets 504,304,000 560,459,000 Plant and equipment — net 30,954,000 38,338,000 Operating lease assets 67,552,000 83,973,000 Long-term deferred income taxes 5,664,000 2,976,000 Long-term contract assets 334,424,000 320,282,000 Goodwill and intangible assets — net 3,846,000 4,274,000 Other assets 2,764,000 1,700,000 TOTAL ASSETS $ 949,508,000 $ 1,012,002,000 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 158,113,000 $ 185,182,000 Customer finished goods returns accrual 40,732,000 38,312,000 Contract liabilities 36,239,000 37,591,000 Revolving loan 94,802,000 128,000,000 Other current liabilities 9,417,000 7,021,000 Operating lease liabilities 9,308,000 8,319,000 Total current liabilities 348,611,000 404,425,000 Convertible notes, related party 32,377,000 30,776,000 Long-term contract liabilities 231,962,000 212,068,000 Long-term deferred income taxes 524,000 511,000 Long-term operating lease liabilities 66,833,000 72,240,000 Other liabilities 6,530,000 6,872,000 Total liabilities 686,837,000 726,892,000 Commitments and contingencies Shareholders' equity: Preferred stock; par value $.01 per share, 5,000,000 shares authorized; none issued - - Series A junior participating preferred stock; par value $.01 per share, 20,000 shares authorized; none issued - - Common stock; par value $.01 per share, 50,000,000 shares authorized; 19,583,711 and 19,662,380 shares issued and outstanding at December 31, 2024 and March 31, 2024, respectively 196,000 197,000 Additional paid-in capital 236,988,000 236,255,000 Retained earnings 20,755,000 39,503,000 Accumulated other comprehensive income 4,732,000 9,155,000 Total shareholders' equity 262,671,000 285,110,000 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 949,508,000 $ 1,012,002,000   Additional Information and Non-GAAP Financial Measures To supplement the consolidated financial statements presented in accordance with U.S. generally accepted accounting principles ("GAAP"), the company has included the following additional information and non-GAAP financial measures for the three and nine months ended December 31, 2024 and 2023. Among other things, the company uses such additional information and non-GAAP adjusted financial measures in addition to and together with corresponding GAAP measures to help analyze the performance of its business. 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, 2024 and 2023 Exhibit 1   Three Months Ended December 31, 2024 2023 $ Per Share $ Per Share GAAP net income (loss) $ 2,291,000 $ 0.11 $ (47,214,000 ) $ (2.40 )   Non-cash items impacting net income Core and finished goods premium amortization $ 2,664,000 $ 0.13 $ 2,838,000 $ 0.14 Revaluation - cores on customers' shelves 758,000 0.04 1,607,000 0.08 Share-based compensation expenses 993,000 0.05 1,425,000 0.07 Foreign exchange impact of lease liabilities and forward contracts 2,460,000 0.12 (3,149,000 ) (0.16 ) Change in fair value of compound net derivative liability (260,000 ) (0.01 ) 1,160,000 0.06 Tax effect (a) (1,654,000 ) (0.08 ) (970,000 ) (0.05 ) Tax valuation allowance 37,461,000 1.91 Total non-cash items impacting net income $ 4,961,000 $ 0.24 $ 40,372,000 $ 2.06   Cash items impacting net income Supply chain disruptions and related costs (b) $ - $ - $ 1,555,000 $ 0.08 New product line start-up costs and transition expenses, and severance and other (c) - - 296,000 0.02 Tax effect (a) - - (463,000 ) (0.02 ) Total cash items impacting net income $ - $ - $ 1,388,000 $ 0.07   (a) Tax effect is calculated by applying an income tax rate of 25.0% to items listed above; this rate may differ from the period's actual income tax rate. (b) For the three months ended December 31, 2023, consists of $1,555,000 impacting gross profit. (c) For the three months ended December 31, 2023, consists of $296,000 included in operating expenses.   Items Impacting Net Income for the Nine Months Ended December 31, 2024 and 2023 Exhibit 2   Nine Months Ended December 30, 2024 2023 $ Per Share $ Per Share GAAP net loss $ (18,748,000 ) $ (0.95 ) $ (50,582,000 ) $ (2.58 )   Non-cash items impacting net income Core and finished goods premium amortization $ 8,013,000 $ 0.41 $ 8,202,000 $ 0.42 Revaluation - cores on customers' shelves 2,316,000 0.12 4,380,000 0.22 Share-based compensation expenses 3,009,000 0.15 4,268,000 0.22 Foreign exchange impact of lease liabilities and forward contracts 18,966,000 0.96 (2,659,000 ) (0.14 ) Change in fair value of compound net derivative liability and loss on extinguishment of debt (2,460,000 ) (0.12 ) 1,858,000 0.09 Tax effect (a) (7,461,000 ) (0.38 ) (4,012,000 ) (0.20 ) Tax valuation allowance - - 37,461,000 1.91 Total non-cash items impacting net income $ 22,383,000 $ 1.13 $ 49,498,000 $ 2.53   Cash items impacting net income Supply chain disruptions and related costs (b) $ - $ - $ 6,738,000 $ 0.34 New product line start-up costs and transition expenses, and severance and other (c) 4,438,000 0.22 980,000 0.05 Tax effect (a) (1,110,000 ) (0.06 ) (1,930,000 ) (0.10 ) Total cash items impacting net income $ 3,328,000 $ 0.17 $ 5,788,000 $ 0.30   (a) Tax effect is calculated by applying an income tax rate of 25.0% to items listed above; this rate may differ from the period's actual income tax rate. (b) For the nine months ended December 31, 2023, consists of $6,738,000 impacting gross profit. (c) For the nine months ended December 31, 2024, consists of $1,298,000 impacting gross profit and $3,140,000 included in operating expenses. For the nine months ended December 31, 2023, consists of $980,000 included in operating expenses.   Items Impacting Gross Profit for the Three Months Ended December 31, 2024 and 2023 Exhibit 3   Three Months Ended December 31, 2024 2023 $ Gross Margin $ Gross Margin GAAP gross profit $ 44,882,000 24.1 % $ 30,043,000 17.5 %   Non-cash items impacting gross profit Core and finished goods premium amortization $ 2,664,000 1.4 % $ 2,838,000 1.7 % Revaluation - cores on customers' shelves 758,000 0.4 % 1,607,000 0.9 % Total non-cash items impacting gross profit $ 3,422,000 1.8 % $ 4,445,000 2.6 %   Cash items impacting gross profit Supply chain disruptions and related costs $ - - $ 1,555,000 0.9 % Total cash items impacting gross profit $ - - $ 1,555,000 0.9 %     Items Impacting Gross Profit for the Nine Months Ended December 31, 2024 and 2023 Exhibit 4   Nine Months Ended December 31, 2024 2023 $ Gross Margin $ Gross Margin GAAP gross profit $ 115,333,000 20.4 % $ 97,758,000 18.5 %   Non-cash items impacting gross profit Core and finished goods premium amortization $ 8,013,000 1.4 % $ 8,202,000 1.6 % Revaluation - cores on customers' shelves 2,316,000 0.4 % 4,380,000 0.8 % Total non-cash items impacting gross profit $ 10,329,000 1.8 % $ 12,582,000 2.4 %   Cash items impacting gross profit Supply chain disruptions and related costs $ - - $ 6,738,000 1.3 % New product line start-up costs and transition expenses 1,298,000 0.2 % - - Total cash items impacting gross profit $ 1,298,000 0.2 % $ 6,738,000 1.3 %     Items Impacting EBITDA for the Three and Nine Months Ended December 31, 2024 and 2023 Exhibit 5   Three Months Ended December 31, Nine Months Ended December 31, 2024 2023 2024 2023 GAAP net income (loss) $ 2,291,000 $ (47,214,000 ) $ (18,748,000 ) $ (50,582,000 ) Interest expense, net 14,435,000 18,297,000 43,004,000 45,400,000 Income tax expense 1,115,000 37,281,000 1,849,000 37,226,000 Depreciation and amortization 2,532,000 2,878,000 7,862,000 8,844,000 EBITDA $ 20,373,000 $ 11,242,000 $ 33,967,000 $ 40,888,000   Non-cash items impacting EBITDA Core and finished goods premium amortization $ 2,664,000 $ 2,838,000 $ 8,013,000 $ 8,202,000 Revaluation - cores on customers' shelves 758,000 1,607,000 2,316,000 4,380,000 Share-based compensation expenses 993,000 1,425,000 3,009,000 4,268,000 Foreign exchange impact of lease liabilities and forward contracts 2,460,000 (3,149,000 ) 18,966,000 (2,659,000 ) Change in fair value of compound net derivative liability and loss on extinguishment of debt (260,000 ) 1,160,000 (2,460,000 ) 1,858,000 Total non-cash items impacting EBITDA $ 6,615,000 $ 3,881,000 $ 29,844,000 $ 16,049,000   Cash items impacting EBITDA Supply chain disruptions and related costs $ - $ 1,555,000 $ - $ 6,738,000 New product line start-up costs and transition expenses, and severance and other - 296,000 4,438,000 980,000 Total cash items impacting EBITDA $ - $ 1,851,000 $ 4,438,000 $ 7,718,000

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