Motorcar Parts Of America Inc 10-Q for FY2025 Q2

Motorcar Parts Of America Inc (MPAA)

10-Q 2024-11-12 For: 2024-09-30

Added on April 05, 2026

About this 10-Q

Motorcar Parts Of America Inc filed this 10-Q on November 12, 2024, covering the quarter ended September 30, 2024 (FY2025 Q2).

Headline figures

Quarter ended September 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $208.19M; up 5.9% from $196.64M a year earlier
Net loss: $2.95M; compared with a net loss of $1.96M a year earlier
Diluted EPS: -$0.15; compared with -$0.10 a year earlier

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New York		11-2153962
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2929 California Street, Torrance, California		90503
(Address of principal executive offices)		(Zip Code)

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	MPAA	The Nasdaq Global Select Market

Large accelerated filer ☐	Accelerated filer ☑
Non-accelerated filer ☐	Smaller reporting company ☐
	Emerging growth company ☐

PART I — FINANCIAL INFORMATION
	Item 1. Financial Statements	4
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations	5
	Condensed Consolidated Statements of Comprehensive (Loss) Income	6
	Condensed Consolidated Statements of Shareholders’ Equity	7
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	9
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
	Item 3. Quantitative and Qualitative Disclosures About Market Risk	34
	Item 4. Controls and Procedures	34

PART II — OTHER INFORMATION
	Item 1. Legal Proceedings	35
	Item 1A. Risk Factors	35
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	35
	Item 3. Defaults Upon Senior Securities	35
	Item 5. Other Information	35
	Item 6. Exhibits	36
	SIGNATURES	39

	September 30, 2024		March 31, 2024
ASSETS	(Unaudited)
Current assets:
Cash and cash equivalents	$	10,413,000	$	13,974,000
Short-term investments		1,901,000		1,837,000
Accounts receivable — net		112,699,000		96,296,000
Inventory — net		378,776,000		397,328,000
Contract assets		24,956,000		27,139,000
Prepaid expenses and other current assets		19,457,000		23,885,000
Total current assets		548,202,000		560,459,000
Plant and equipment — net		32,561,000		38,338,000
Operating lease assets		71,792,000		83,973,000
Long-term deferred income taxes		5,637,000		2,976,000
Long-term contract assets		321,303,000		320,282,000
Goodwill and intangible assets — net		3,984,000		4,274,000
Other assets		2,763,000		1,700,000
TOTAL ASSETS	$	986,242,000	$	1,012,002,000
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	168,548,000	$	185,182,000
Customer finished goods returns accrual		37,495,000		38,312,000
Contract liabilities		45,517,000		37,591,000
Revolving loan		124,691,000		128,000,000
Other current liabilities		8,419,000		7,021,000
Operating lease liabilities		9,272,000		8,319,000
Total current liabilities		393,942,000		404,425,000
Convertible notes, related party		32,340,000		30,776,000
Long-term contract liabilities		219,891,000		212,068,000
Long-term deferred income taxes		573,000		511,000
Long-term operating lease liabilities		69,419,000		72,240,000
Other liabilities		6,114,000		6,872,000
Total liabilities		722,279,000		726,892,000
Commitments and contingencies
Shareholders’ equity:
Preferred stock; par value $0.01 per share, 5,000,000 shares authorized; none issued		-		-
Series A junior participating preferred stock; par value $0.01 per share, 20,000 shares authorized; none issued		-		-
Common stock; par value $0.01 per share, 50,000,000 shares authorized; 19,776,373 and 19,662,380 shares issued and outstanding at September 30, 2024 and March 31, 2024, respectively		198,000		197,000
Additional paid-in capital		238,089,000		236,255,000
Retained earnings		18,464,000		39,503,000
Accumulated other comprehensive income		7,212,000		9,155,000
Total shareholders’ equity		263,963,000		285,110,000
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	986,242,000	$	1,012,002,000

	Three Months Ended						Six Months Ended
	September 30,						September 30,
	2024			2023			2024			2023

Net sales	$	208,186,000		$	196,639,000		$	378,073,000		$	356,344,000
Cost of goods sold		166,909,000			155,491,000			307,622,000			288,629,000
Gross profit		41,277,000			41,148,000			70,451,000			67,715,000
Operating expenses:
General and administrative		15,052,000			14,325,000			31,722,000			26,927,000
Sales and marketing		5,834,000			5,688,000			11,283,000			11,107,000
Research and development		2,443,000			2,438,000			4,876,000			4,813,000
Foreign exchange impact of lease liabilities and forward contracts		5,428,000			4,760,000			16,506,000			490,000
Total operating expenses		28,757,000			27,211,000			64,387,000			43,337,000
Operating income		12,520,000			13,937,000			6,064,000			24,378,000
Other expenses:
Interest expense, net		14,182,000			15,383,000			28,569,000			27,103,000
Change in fair value of compound net derivative liability		380,000			390,000			(2,200,000	)		530,000
Loss on extinguishment of debt		-			168,000			-			168,000
Total other expenses		14,562,000			15,941,000			26,369,000			27,801,000
Loss before income tax expense (benefit)		(2,042,000	)		(2,004,000	)		(20,305,000	)		(3,423,000	)
Income tax expense (benefit)		912,000			(46,000	)		734,000			(55,000	)
Net loss	$	(2,954,000	)	$	(1,958,000	)	$	(21,039,000	)	$	(3,368,000	)
Basic net loss per share	$	(0.15	)	$	(0.10	)	$	(1.07	)	$	(0.17	)
Diluted net loss per share	$	(0.15	)	$	(0.10	)	$	(1.07	)	$	(0.17	)
Weighted average number of shares outstanding:
Basic		19,760,028			19,599,162			19,717,517			19,554,142
Diluted		19,760,028			19,599,162			19,717,517			19,554,142

	Common Stock
	Shares		Amount		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total

Balance at March 31, 2024		19,662,380	$	197,000	$	236,255,000		$	39,503,000		$	9,155,000		$	285,110,000
Compensation recognized under employee stock plans		-		-		1,000,000			-			-			1,000,000
Issuance of common stock upon vesting of RSUs, net of shares withheld for employee taxes		91,205		1,000		(182,000	)		-			-			(181,000	)
Foreign currency translation		-		-		-			-			(675,000	)		(675,000	)
Net loss		-		-		-			(18,085,000	)		-			(18,085,000	)
Balance at June 30, 2024		19,753,585	$	198,000	$	237,073,000		$	21,418,000		$	8,480,000		$	267,169,000
Compensation recognized under employee stock plans		-		-		1,016,000			-			-			1,016,000
Issuance of common stock upon vesting of RSUs, net of shares withheld for employee taxes		22,788		-		-			-			-			-
Foreign currency translation		-		-		-			-			(1,268,000	)		(1,268,000	)
Net loss		-		-		-			(2,954,000	)		-			(2,954,000	)
Balance at September 30, 2024		19,776,373	$	198,000	$	238,089,000		$	18,464,000		$	7,212,000		$	263,963,000

	September 30, 2024			March 31, 2024
Accounts receivable — trade	$	126,925,000		$	118,500,000
Allowance for credit losses		(92,000	)		(189,000	)
Customer payment discrepancies		(1,983,000	)		(1,206,000	)
Customer returns RGA issued		(12,151,000	)		(20,809,000	)
Total accounts receivable — net	$	112,699,000		$	96,296,000

	September 30, 2024		March 31, 2024
Short-term contract assets
Cores expected to be returned by customers	$	13,580,000	$	15,409,000
Core premiums paid to customers		9,380,000		9,567,000
Upfront payments to customers		1,301,000		1,407,000
Finished goods premiums paid to customers		695,000		756,000
Total short-term contract assets	$	24,956,000	$	27,139,000

Remanufactured cores held at customers’ locations	$	285,815,000	$	279,427,000
Core premiums paid to customers		25,656,000		30,227,000
Long-term core inventory deposits		5,569,000		5,569,000
Finished goods premiums paid to customers		2,170,000		2,341,000
Upfront payments to customers		2,093,000		2,718,000
Total long-term contract assets	$	321,303,000	$	320,282,000

	Three Months Ended September 30,						Six Months Ended September 30,
	2024			2023			2024			2023
Net sales
Customer A		34	%		37	%		37	%		35	%
Customer C		31	%		27	%		29	%		27	%
Customer B		21	%		21	%		20	%		20	%

	September 30, 2024			March 31, 2024
Accounts receivable - trade
Customer A		31	%		35	%
Customer C		21	%		13	%
Customer B		19	%		25	%

	September 30, 2024			March 31, 2024

Principal amount of Convertible Notes	$	35,209,000		$	32,000,000
Less: unamortized debt discount attributed to Compound Net Derivative Liability		(7,089,000	)		(7,576,000	)
Less: unamortized debt discount attributed to debt issuance costs		(990,000	)		(1,058,000	)
Carrying amount of the Convertible Notes		27,130,000			23,366,000
Plus: Compound Net Derivative Liability		5,210,000			7,410,000
Net carrying amount of Convertible Notes, related party	$	32,340,000		$	30,776,000

	September 30, 2024		March 31, 2024
Short-term contract liabilities
Customer allowances earned	$	25,537,000	$	19,789,000
Customer core returns accruals		12,114,000		10,448,000
Accrued core payment		3,208,000		3,476,000
Customer deposits		2,536,000		1,735,000
Core bank liability		1,767,000		1,739,000
Finished goods liabilities		355,000		404,000
Total short-term contract liabilities	$	45,517,000	$	37,591,000
Long-term contract liabilities
Customer core returns accruals	$	203,572,000	$	193,545,000
Core bank liability		10,953,000		11,843,000
Accrued core payment		5,366,000		6,535,000
Finished goods liabilities		-		145,000
Total long-term contract liabilities	$	219,891,000	$	212,068,000

Leases	Classification	September 30, 2024		March 31, 2024
Assets:
Operating	Operating lease assets	$	71,792,000	$	83,973,000
Finance	Plant and equipment		3,634,000		4,611,000
Total leased assets		$	75,426,000	$	88,584,000

Liabilities:
Current
Operating	Operating lease liabilities	$	9,272,000	$	8,319,000
Finance	Other current liabilities		1,331,000		1,585,000
Long-term
Operating	Long-term operating lease liabilities		69,419,000		72,240,000
Finance	Other liabilities		1,451,000		1,893,000
Total lease liabilities		$	81,473,000	$	84,037,000

	September 30, 2024			March 31, 2024
Inventory — net
Raw materials	$	158,702,000		$	158,819,000
Work-in-process		9,954,000			7,943,000
Finished goods		210,861,000			227,650,000
		379,517,000			394,412,000
Less allowance for excess and obsolete inventory		(17,790,000	)		(17,372,000	)
Inventory		361,727,000			377,040,000
Inventory unreturned		17,049,000			20,288,000
Total inventory — net	$	378,776,000		$	397,328,000

	Three Months Ended September 30,						Six Months Ended September 30,
	2024			2023			2024			2023
Product line
Rotating electrical products		68	%		67	%		67	%		66	%
Brake-related products		21	%		20	%		22	%		21	%
Wheel hub products		7	%		9	%		7	%		10	%
Other products		4	%		4	%		4	%		3	%
		100	%		100	%		100	%		100	%

	Three Months Ended				Six Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Lease cost
Operating lease cost	$	3,523,000	$	3,761,000	$	7,282,000	$	7,503,000
Short-term lease cost		381,000		350,000		693,000		643,000
Variable lease cost		91,000		146,000		255,000		332,000
Finance lease cost:
Amortization of finance lease assets		295,000		391,000		653,000		794,000
Interest on finance lease liabilities		45,000		57,000		96,000		119,000
Total lease cost	$	4,335,000	$	4,705,000	$	8,979,000	$	9,391,000

Maturity of lease liabilities	Operating Leases			Finance Leases			Total
2025 - remaining six months	$	6,753,000		$	819,000		$	7,572,000
2026		13,575,000			1,055,000			14,630,000
2027		11,711,000			564,000			12,275,000
2028		11,147,000			401,000			11,548,000
2029		11,142,000			203,000			11,345,000
Thereafter		43,524,000			17,000			43,541,000
Total lease payments		97,852,000			3,059,000			100,911,000
Less amount representing interest		(19,161,000	)		(277,000	)		(19,438,000	)
Present value of lease liabilities	$	78,691,000		$	2,782,000		$	81,473,000

	September 30, 2024			March 31, 2024
Lease term and discount rate
Weighted-average remaining lease term (years):
Finance leases		2.8			2.8
Operating leases		7.7			8.3
Weighted-average discount rate:
Finance leases		6.6	%		6.4	%
Operating leases		5.8	%		5.8	%

	September 30, 2024								March 31, 2024
			Fair Value Measurements								Fair Value Measurements
			Using Inputs Considered as								Using Inputs Considered as
	Fair Value		Level 1		Level 2		Level 3		Fair Value		Level 1		Level 2		Level 3
Assets
Short-term investments
Mutual funds	$	1,901,000	$	1,901,000	$	-	$	-	$	1,837,000	$	1,837,000	$	-	$	-
Prepaid expenses and other current assets
Forward foreign currency exchange contracts		-		-		-		-		2,516,000		-		2,516,000		-

Liabilities
Other current liabilities
Deferred compensation		1,901,000		1,901,000		-		-		1,837,000		1,837,000		-		-
Forward foreign currency exchange contracts		4,303,000		-		4,303,000		-		-		-		-		-
Convertible notes, related party
Compound Net Derivative Liability		5,210,000		-		-		5,210,000		7,410,000		-		-		7,410,000

	September 30, 2024			March 31, 2024
Risk free interest rate		3.55	%		4.36	%
Cost of equity		22.00	%		23.20	%
Weighted average cost of capital		13.10	%		14.90	%
Expected volatility of the Company’s common stock		45.00	%		50.00	%
EBITDA volatility		40.00	%		40.00	%

	Six Months Ended September 30,
	2023
Weighted average risk free interest rate		4.53	%
Weighted average expected holding period (years)		6.57
Weighted average expected volatility		51.29	%
Weighted average expected dividend yield		-
Weighted average fair value of options granted	$	3.75

	Number of Shares			Weighted Average Exercise Price
Outstanding at March 31, 2024		1,108,017		$	20.29
Granted		-		$	-
Exercised		-		$	-
Forfeited/Cancelled		(11,166	)	$	19.43
Expired		(36,733	)	$	22.93
Outstanding at September 30, 2024		1,060,118		$	20.21

	Number of Shares			Weighted Average Grant Date Fair Value
Outstanding at March 31, 2024		240,923		$	12.23
Granted		316,040		$	6.40
Vested		(109,382	)	$	14.83
Forfeited/Cancelled		(4,069	)	$	8.72
Outstanding at September 30, 2024		443,512		$	7.47

	Three Months Ended September 30, 2024
	Hard Parts			All Other		Total
Net sales to external customers	$	194,677,000		$	13,509,000	$	208,186,000
Intersegment sales		464,000			560,000		1,024,000
Operating income		11,283,000	(1)		1,199,000		12,482,000
Depreciation and amortization		2,401,000			200,000		2,601,000
Segment assets		997,018,000			57,418,000		1,054,436,000
Capital expenditures		548,000			9,000		557,000

	Three Months Ended September 30, 2023
	Hard Parts			All Other			Total
Net sales to external customers	$	184,421,000		$	12,218,000		$	196,639,000
Intersegment sales		68,000			38,000			106,000
Operating income (loss)		15,203,000	(1)		(1,300,000	)		13,903,000
Depreciation and amortization		2,589,000			344,000			2,933,000
Segment assets		1,074,783,000			51,668,000			1,126,451,000
Capital expenditures		91,000			38,000			129,000

	Six Months Ended September 30, 2024
	Hard Parts			All Other		Total
Net sales to external customers	$	352,864,000		$	25,209,000	$	378,073,000
Intersegment sales		496,000			572,000		1,068,000
Operating income		4,824,000	(1)		1,193,000		6,017,000
Depreciation and amortization		4,926,000			404,000		5,330,000
Capital expenditures		801,000			246,000		1,047,000

	Six Months Ended September 30, 2023
	Hard Parts			All Other			Total
Net sales to external customers	$	334,168,000		$	22,176,000		$	356,344,000
Intersegment sales		200,000			133,000			333,000
Operating income (loss)		26,709,000	(1)		(2,379,000	)		24,330,000
Depreciation and amortization		5,268,000			698,000			5,966,000
Capital expenditures		131,000			38,000			169,000

Periods	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1)

July 1 - July 31, 2024:
Open market and privately negotiated purchases		-	$	-		-	$	18,255,000
August 1 - August 31, 2024:
Open market and privately negotiated purchases		-	$	-		-		18,255,000
September 1 - September 30, 2024:
Open market and privately negotiated purchases		-	$	-		-		18,255,000

Total		0				0	$	18,255,000

(a)	None.

(b)	None.

(c)	During the quarter ended September 30, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” as each such term is defined in Item 408 of Regulation S-K.

Number	Description of Exhibit	Method of Filing
3.1	Certificate of Incorporation of the Company	Incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form SB-2 declared effective on March 22, 1994 (the “1994 Registration Statement”).
3.2	Amendment to Certificate of Incorporation of the Company	Incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 (No. 33-97498) declared effective on November 14, 1995.
3.3	Amendment to Certificate of Incorporation of the Company	Incorporated by reference to Exhibit 3.3 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 1997.

3.4	Amendment to Certificate of Incorporation of the Company	Incorporated by reference to Exhibit 3.4 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 1998 (the “1998 Form 10-K”).
3.5	Amendment to Certificate of Incorporation of the Company	Incorporated by reference to Exhibit C to the Company’s proxy statement on Schedule 14A filed with the SEC on November 25, 2003.
3.6	Amended and Restated By-Laws of Motorcar Parts of America, Inc.	Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on August 24, 2010.
3.7	Certificate of Amendment of the Certificate of Incorporation of the Company	Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on April 17, 2014.
3.8	Amendment to the Amended and Restated By-Laws of Motorcar Parts of America, Inc., as adopted on June 9, 2016	Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on June 14, 2016.
3.9	Amendment to the Amended and Restated By-Laws of the Company	Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on February 22, 2017.
3.10	Third Amendment to the Amended and Restated By-Laws of Motorcar Parts of America, Inc., as adopted on January 26, 2022	Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K filed on February 1, 2022.
4.1	Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934	Incorporated by reference to Exhibit 4.1 to Quarterly Report on Form 10-Q filed on August 9, 2022.
4.2	2004 Non-Employee Director Stock Option Plan	Incorporated by reference to Appendix A to the Proxy Statement on Schedule 14A for the 2004 Annual Shareholders Meeting.
4.3	2010 Incentive Award Plan	Incorporated by reference to Appendix A to the Proxy Statement on Schedule 14A filed on December 15, 2010.
4.4	Amended and Restated 2010 Incentive Award Plan	Incorporated by reference to Appendix A to the Proxy Statement on Schedule 14A filed on March 5, 2013.

	MOTORCAR PARTS OF AMERICA, INC

Dated: November 12, 2024	By:	/s/ David Lee
		David Lee
		Chief Financial Officer

Dated: November 12, 2024	By:	/s/ Kamlesh Shah
		Kamlesh Shah
		Chief Accounting Officer

Date: November 12, 2024	/s/ Selwyn Joffe
	Selwyn Joffe
	Chief Executive Officer