NEWS RELEASE

CONTACT:

Gary S. Maier

Vice President, Corporate Communications & IR

(310) 972-5124

MOTORCAR PARTS OF AMERICA REPORTS RECORD SALES FOR FISCAL 2023 FOURTH QUARTER AND YEAR

- Provides Fiscal 2024 Guidance; Margin Improvement and Free Cash Generation Expected to Gain Momentum as Fiscal Year Evolves–

Fiscal 2023 Fourth Quarter Results

Fiscal fourth quarter results benefited from increasing product demand for the spring and summer seasons and recently implemented price increases.

Fiscal fourth quarter results were impacted by an income tax expense of $10.4 million, or an effective rate of 87.7 percent.

Interest expense increased by $7.8 million, or $0.30 per diluted share, to $11.9 million from $4.0 million a year ago.  The increase in interest expense was mainly due to higher market rates -- primarily related to customer vendor financing programs, representing $4.9 million of the increase.  The company expects to realize meaningful annualized price increases throughout the new fiscal year, which will contribute to net income enhancement.

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Non-cash items, as detailed in Exhibit 1, benefited results by approximately $1.5 million, or $0.07 per diluted share.  Net cash items, including an employee retention credit, partially offset by transitory costs related to supply chain disruptions, benefited results by $922,000, or $0.05 per diluted share, also detailed in Exhibit 1. Results for the quarter were also impacted byinflationary costs not fully absorbed by price increases.

Fiscal 2023 fourth quarter results included a $5.1 million employee retention credit (ERC) related to expenses incurred during the COVID-19 pandemic. Subsequent to the pandemic, cost-reduction initiatives related to employee-related expenses were implemented, along with other ongoing strategic opportunities to reduce costs -- resulting in approximately $5 million annual run-rate expense reductions, going forward.

Prior-year net loss of $322,000, or $0.02 per share, was impacted by approximately $1.9 million, or $0.10 per share, of non-cash items as detailed in Exhibit 1. The company also was impacted by approximately $3.2 million, or $0.17 per share, of other costs, including transitory costs related to supply chain disruptions for the prior year.

Gross margin improvement is expected to be enhanced as the full benefit of certain price increases is realized, and by higher sales volume and further anticipated operational efficiencies. A portion of the most recent price increases was realized late in the fiscal fourth quarter, with the balance taking effect in the fiscal 2024 first half.

“Fiscal 2023 record sales benefited from the strength of our products and excellent customer relationships, enhanced by being a critical supplier of non-discretionary automotive parts. We expect our position will gain further momentum with favorable industry data indicating that consumers are continuing to defer new car purchases, with the average vehicle age at a new record high of 12.5 years. In addition, as fiscal 2024 evolves, we expect to realize incremental operational efficiencies and increasing sales volume, particularly from our emerging brake-related product lines, as well as benefits from rational pricing increases across the board to help offset inflation and higher interest rates,” said Selwyn Joffe, chairman, president, and chief executive officer.

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“Despite headwinds during the year, we remain optimistic about our business. We have built a solid foundation for growth and profitability, as evidenced by our guidance for fiscal 2024 discussed below and expect improving margins and cash flow supported by multiple product line offerings,” Joffe said.

Twelve-Month Results

Sales benefited from increasing product demand for the spring and summer seasons and recently implemented price increases.

 

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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

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About Motorcar Parts of America, Inc.

 

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 2023 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.

 

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(Financial tables follow)

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MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

		Three Months Ended March 31,								Year Ended March 31,
		2023				2022				2023				2022
		(Unaudited)
Net sales		$	194,727,000			$	163,916,000			$	683,074,000			$	650,308,000
Cost of goods sold			158,576,000				138,148,000				569,112,000				532,443,000
Gross profit			36,151,000				25,768,000				113,962,000				117,865,000
Operating expenses:
General and administrative			12,677,000				15,943,000				54,756,000				57,499,000
Sales and marketing			4,487,000				5,671,000				21,729,000				22,833,000
Research and development			1,992,000				2,871,000				10,322,000				10,502,000
Foreign exchange impact of lease liabilities and forward contracts			(6,738,000	)			(3,442,000	)			(9,291,000	)			(1,673,000	)
Total operating expenses			12,418,000				21,043,000				77,516,000				89,161,000
Operating income			23,733,000				4,725,000				36,446,000				28,704,000
Interest expense, net			11,880,000				4,045,000				39,555,000				15,555,000
Income (loss) before income tax expense			11,853,000				680,000				(3,109,000	)			13,149,000
Income tax expense			10,394,000				1,002,000				1,098,000				5,788,000
Net income (loss)		$	1,459,000			$	(322,000	)		$	(4,207,000	)		$	7,361,000
Basic net income (loss) per share		$	0.07			$	(0.02	)		$	(0.22	)		$	0.38
Diluted net income (loss) per share		$	0.07			$	(0.02	)		$	(0.22	)		$	0.38
Weighted average number of shares outstanding:
Basic			19,492,962				19,104,198				19,340,246				19,119,727
Diluted			19,603,394				19,104,198				19,340,246				19,559,646

MOTORCAR PARTS OF AMERICA, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

		March 31, 2023				March 31, 2022
ASSETS
Current assets:
Cash and cash equivalents		$	11,596,000			$	23,016,000
Short-term investments			2,011,000				2,202,000
Accounts receivable — net			119,868,000				85,075,000
Inventory — net			339,675,000				370,503,000
Inventory unreturned			16,579,000				15,001,000
Contract assets			25,443,000				27,500,000
Income tax receivable			2,156,000				301,000
Prepaid expenses and other current assets			20,150,000				13,387,000
Total current assets			537,478,000				536,985,000
Plant and equipment — net			46,052,000				51,062,000
Operating lease assets			87,619,000				81,997,000
Deferred income taxes			32,625,000				26,982,000
Long-term contract assets			318,381,000				310,255,000
Goodwill			3,205,000				3,205,000
Intangible assets — net			2,143,000				3,799,000
Other assets			1,062,000				1,413,000
TOTAL ASSETS		$	1,028,565,000			$	1,015,698,000
LIABILITIES AND SHAREHOLDERS'  EQUITY
Current liabilities:
Accounts payable		$	119,437,000			$	147,469,000
Accrued liabilities			22,329,000				20,966,000
Customer finished goods returns accrual			37,984,000				38,086,000
Contract liabilities			40,340,000				42,496,000
Revolving loan			145,200,000				155,000,000
Other current liabilities			4,871,000				11,930,000
Operating lease liabilities			8,767,000				6,788,000
Current portion of term loan			3,664,000				3,670,000
Total current liabilities			382,592,000				426,405,000
Term loan, less current portion			9,279,000				13,024,000
Convertible notes, related party			30,994,000				-
Contract liabilities, less current portion			193,606,000				172,764,000
Deferred income taxes			718,000				126,000
Operating lease liabilities, less current portion			79,318,000				80,803,000
Other liabilities			11,583,000				7,313,000
Total liabilities			708,090,000				700,435,000
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; 19,494,615 and 19,104,751 shares issued and outstanding at March 31, 2023 and 2022, respectively			195,000				191,000
Additional paid-in capital			231,836,000				227,184,000
Retained earnings			88,747,000				92,954,000
Accumulated other comprehensive loss			(303,000	)			(5,066,000	)
Total shareholders' equity			320,475,000				315,263,000
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	1,028,565,000			$	1,015,698,000

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 twelve months ended March 31, 2023 and 2022. 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 March 31, 2023 and 2022

Exhibit 1

		Three Months Ended March 31,
		2023								2022
		$				Per Share				$				Per Share
GAAP net income (loss)		$	1,459,000			$	0.07			$	(322,000	)		$	(0.02	)
Non-cash items impacting net income (loss)
Core and finished goods premium amortization		$	2,608,000			$	0.13			$	2,947,000			$	0.15
Revaluation - cores on customers' shelves			1,032,000				0.05				1,154,000				0.06
Share-based compensation expenses and earn-out accruals			1,164,000				0.06				1,830,000				0.10
Foreign exchange impact of lease liabilities and forward contracts			(6,738,000	)			(0.34	)			(3,442,000	)			(0.18	)
Tax effect (a)			484,000				0.02				(622,000	)			(0.03	)
Total non-cash items impacting net income (loss)		$	(1,450,000	)		$	(0.07	)		$	1,867,000			$	0.10
Cash items impacting net income (loss)
Supply chain disruptions and related costs (b)		$	2,951,000			$	0.15			$	3,938,000			$	0.21
New product line start-up costs and transition expenses, and severance (c)			923,000				0.05				358,000				0.02
Employee retention credit (d)			(5,104,000	)			(0.26	)			-				-
Tax effect (a)			308,000				0.02				(1,074,000	)			(0.06	)
Total cash items impacting net income (loss)		$	(922,000	)		$	(0.05	)		$	3,222,000			$	0.17
(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 March 31, 2023, consists of $2,913,000 impacting gross profit and $38,000 included in operating expenses.
For the three-months ended March 31, 2022, consists of of $3,337,000 impacting gross profit and $601,000 included in operating expenses.
(c) For the three-months ended March 31, 2023, consists of $923,000 included in operating expenses.
For the three-months ended March 31, 2022, consists of $358,000 included in operating expenses.
(d) For the three-months ended March 31, 2023, consists of ($2,034,000) impacting gross profit and ($3,070,000) included in operating expenses.

Items Impacting Net Income for the Twelve Months Ended March 31, 2023 and 2022

Exhibit 2

		Twelve Months Ended March 31,
		2023								2022
		$				Per Share				$				Per Share
GAAP net (loss) income		$	(4,207,000	)		$	(0.22	)		$	7,361,000			$	0.38
Non-cash items impacting net (loss) income
Core and finished goods premium amortization		$	11,791,000			$	0.61			$	11,960,000			$	0.61
Revaluation - cores on customers' shelves			3,736,000				0.19				4,671,000				0.24
Share-based compensation expenses and earn-out accruals			4,685,000				0.24				7,384,000				0.38
Foreign exchange impact of lease liabilities and forward contracts			(9,291,000	)			(0.48	)			(1,673,000	)			(0.09	)
Tax effect (a)			(2,730,000	)			(0.14	)			(5,586,000	)			(0.29	)
Total non-cash items impacting net (loss) income		$	8,191,000			$	0.42			$	16,756,000			$	0.86
Cash items impacting net (loss) income
Supply chain disruptions and related costs (b)		$	12,914,000			$	0.67			$	20,195,000			$	1.03
New product line start-up costs and transition expenses, and severance (c)			3,565,000				0.18				3,425,000				0.18
Employee retention credit (d)			(5,104,000	)			(0.26	)			-				-
Gain due to realignment of inventory at customer distribution centers			-				-				(4,862,000	)			(0.25	)
Tax effect (a)			(2,844,000	)			(0.15	)			(4,690,000	)			(0.24	)
Total cash items impacting net (loss) income		$	8,531,000			$	0.44			$	14,068,000			$	0.72
(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 twelve-months ended March 31, 2023, consists of $11,485,000 impacting gross profit and $1,429,000 included in operating expenses.
For the twelve-months ended March 31, 2022, consists of $17,894,000 impacting gross profit and $2,301,000 included in operating expenses.
(c) For the twelve-months ended March 31, 2023, consists of $3,565,000 included in operating expenses.
For the twelve-months ended March 31, 2022, consists of $2,744,000 included in cost of goods sold and $681,000 included in operating expenses.
(d) For the twelve-months ended March 31, 2023, consists of ($2,034,000) impacting gross profit and ($3,070,000) included in operating expenses.

Items Impacting Gross Profit for the Three Months Ended March 31, 2023 and 2022

Exhibit 3

		Three Months Ended March 31,
		2023								2022
		$				Gross Margin				$				Gross Margin
GAAP gross profit		$	36,151,000				18.6	%		$	25,768,000				15.7	%
Non-cash items impacting gross profit
Core and finished goods premium amortization		$	2,608,000				1.3	%		$	2,947,000				1.8	%
Revaluation - cores on customers' shelves			1,032,000				0.5	%			1,154,000				0.7	%
Total non-cash items impacting gross profit		$	3,640,000				1.9	%		$	4,101,000				2.5	%
Cash items impacting gross profit
Supply chain disruptions and related costs		$	2,913,000				1.5	%		$	3,337,000				2.0	%
Employee retention credit			(2,034,000	)			-1.0	%			-				-
Total cash items impacting gross profit		$	879,000				0.5	%		$	3,337,000				2.0	%

Items Impacting Gross Profit for the Twelve Months Ended March 31, 2023 and 2022

Exhibit 4

		Twelve Months Ended March 31,
		2023								2022
		$				Gross Margin				$				Gross Margin
GAAP gross profit		$	113,962,000				16.7	%		$	117,865,000				18.1	%
Non-cash items impacting gross profit
Core and finished goods premium amortization		$	11,791,000				1.7	%		$	11,960,000				1.8	%
Revaluation - cores on customers' shelves			3,736,000				0.5	%			4,671,000				0.7	%
Total non-cash items impacting gross profit		$	15,527,000				2.3	%		$	16,631,000				2.6	%
Cash items impacting gross profit
Supply chain disruptions and related costs		$	11,485,000				1.7	%		$	17,894,000				2.8	%
New product line start-up costs and transition expenses			-				-				2,744,000				0.4	%
Employee retention credit			(2,034,000	)			-0.3	%			-				-
Gain due to realignment of inventory at customer distribution centers (a)			-				-				(4,862,000	)			-0.4	%
Total cash items impacting gross profit		$	9,451,000				1.4	%		$	15,776,000				2.8	%

Items Impacting EBITDA for the Three and Twelve Months Ended March 31, 2023 and 2022

Exhibit 5

		Three Months Ended March 31,								Twelve Months Ended March 31,
		2023				2022				2023				2022
GAAP net  income (loss)		$	1,459,000			$	(322,000	)		$	(4,207,000	)		$	7,361,000
Interest expense, net			11,880,000				4,045,000				39,555,000				15,555,000
Income tax (benefit) expense			10,394,000				1,002,000				1,098,000				5,788,000
Depreciation and amortization			3,122,000				3,295,000				12,444,000				12,886,000
EBITDA		$	26,855,000			$	8,020,000			$	48,890,000			$	41,590,000
Non-cash items impacting EBITDA
Core and finished goods premium amortization		$	2,608,000			$	2,947,000			$	11,791,000			$	11,960,000
Revaluation - cores on customers' shelves			1,032,000				1,154,000				3,736,000				4,671,000
Share-based compensation expenses and earn-out accruals			1,164,000				1,830,000				4,685,000				7,384,000
Foreign exchange impact of lease liabilities and forward contracts			(6,738,000	)			(3,442,000	)			(9,291,000	)			(1,673,000	)
Total non-cash items impacting EBITDA		$	(1,934,000	)		$	2,489,000			$	10,921,000			$	22,342,000
Cash items impacting EBITDA
Supply chain disruptions and related costs		$	2,951,000			$	3,938,000			$	12,914,000			$	20,195,000
New product line start-up costs and transition expenses, and severance (a)			923,000				358,000				3,565,000				3,194,000
Employee retention credit			(5,104,000	)			-				(5,104,000	)			-
Gain due to realignment of inventory at customer distribution centers			-				-				-				(4,862,000	)
Total cash items impacting EBITDA		$	(1,230,000	)		$	4,296,000			$	11,375,000			$	18,527,000

(a) Excludes depreciation, which is included in the depreciation and amortization line item.

Note:  Results for the three and twelve months ended March 31, 2023 include a $5.1 million, employee retention credit (ERC).  The ERC was reimbursement for prior incurred expenses during the COVID-19 pandemic. Subsequent to the pandemic, cost-reduction initiatives related to employee-related expenses were implemented, along with other ongoing strategic opportunities to reduce costs -- resulting in approximately $5 million annual run-rate expense reductions, going forward.

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