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    MPAA
    Earnings call· Mar 2026(Q4 FY26)

    MOTORCAR PARTS OF AMERICA Q4 FY26 earnings call MPAA

    Jun 8, 2026 Source

    Executive summary

    Motorcar Parts of America, Inc. Q4 FY26 — Strong Q4 Performance and New Business Commitments

    Motorcar Parts of America delivered a strong fourth quarter, marked by significant sales growth and improved profitability, driven by cost reductions and operational efficiencies. The company is focused on leveraging new business commitments and its global platform to neutralize working capital and further reduce debt, despite some near-term inventory and accounts receivable impacts from strong sales and new business ramp-up timing.

    Highlights

    5

    • Net sales increased 9.9% for the quarter and 4.3% for the full fiscal year.

    • Gross margin expanded to 23.7% for the quarter, up from 19.9% a year earlier, driven by cost reductions and efficiencies.

    • Net income for the quarter was $9.7 million, a significant improvement from a net loss of $722,000 in the prior year.

    • Generated $19.2 million in cash from operating activities for the full fiscal year, with over $100 million generated over the last three years.

    • Reduced net bank debt to $80 million, resulting in a net bank debt-to-EBITDA ratio of 0.93x.

    Concerns

    3

    • Cash used from operating activities was $4.5 million in the quarter, primarily due to a $32.5 million increase in accounts receivable from strong late-quarter sales.

    • Working capital was impacted by an inventory ramp-up for new business in the upcoming fiscal year and increased accounts receivable.

    • New business commitments are expected to ramp up in the second half of fiscal year 2027 due to customers working through liquidated inventory from a previous supplier.

    Guidance & targets

    6
    CategoryTargetConfidence
    Net sales
    $780 million to $800 million
    high materiality
    High
    Additional annualized net sales
    more than $100 million
    medium materiality
    Medium
    Annualized net sales run rate
    more than $900 million
    high materiality
    Medium
    Operating income
    $86 million and $91 million
    high materiality
    High
    Depreciation and amortization
    approximately $9 million
    medium materiality
    High
    EBITDA
    $95 million and $100 million
    high materiality
    High

    Operational metrics

    24
    Cash used from operating activities
    $4.5 million
    Q4 FY26

    Primarily due to an increase in accounts receivable of $32.5 million, reflecting strong sales towards the end of March.

    Cash generated from operating activities
    $19.2 million
    FY26

    Generated before working capital reuse of $37.8 million.

    Cash generated from operating activities (3-year total)
    $103.8 million
    3 years ended March 31, 2026

    Supports further debt reduction and share repurchases.

    Net bank debt
    $80 million
    March 31, 2026

    After share repurchases of $11.4 million for fiscal year 2026.

    EBITDA
    $76.4 million
    12 months ended March 31, 2026

    Reported EBITDA.

    Adjusted EBITDA
    $86.1 million
    12 months ended March 31, 2026

    Before the impact of noncash and one-time cash expenses.

    Net bank debt-to-EBITDA ratio
    0.93x
    March 31, 2026

    Calculated using adjusted EBITDA of $86.1 million.

    Share repurchase amount
    $11.4 million
    FY26

    Part of the authorized share repurchase program.

    Remaining share repurchase authorization
    $22.1 million
    March 31, 2026

    Under the current authorized share repurchase program.

    Total cash and availability
    $133.7 million
    March 31, 2026

    Reflects strong liquidity.

    Noncash expenses impact on gross margin
    1.8%
    Q4 FY26

    Added back to reported gross margin for adjusted figure.

    One-time cash items impact on gross margin
    0.3%
    Q4 FY26

    Unfavorable impact, added back to reported gross margin for adjusted figure.

    Adjusted gross margin
    25.8%
    Q4 FY26

    Excluding noncash expenses and one-time cash items.

    One-time cash items benefit on operating income
    $791,000
    FY26

    Benefit detailed in Exhibit 6 of earnings press release.

    Average age of US light vehicles
    12.8 yearsup from 12.5 years in 2024
    Current

    Industry data showing increased replacement opportunities.

    Number of vehicles on the road
    295.9 millionup from 291.1 million a year ago
    Current

    Industry data showing increased replacement opportunities.

    Customer store closures impact
    15%
    Q3 FY26

    One large customer shut down 15% of their stores, impacting baseline revenue.

    Customer baseline revenue post-closures
    85%of previous revenues
    Q4 FY26

    Estimated new baseline for a large customer after store closures.

    Accounts receivable increase
    $32.5 million
    Q4 FY26

    Reflecting strong sales towards the end of March, impacting working capital.

    Working capital reuse
    $37.8 million
    FY26

    Impacted by inventory ramp-up for new business and increased accounts receivable.

    Revolver loan balance
    $94.7 million
    March 31, 2026

    Part of the calculation for net bank debt.

    Cash balance
    $14.7 million
    March 31, 2026

    Used in the calculation for net bank debt.

    Noncash expenses impact on operating income
    $11.6 million
    FY26

    Impact on operating income before adjustments.

    Gross profit impact from sales and COGS
    negative 0.9%
    Q4 FY26

    Combined impact of sales and cost of goods sold on gross profit from a specific item (Letter A, negative $6.5 million).

    Industry KPIs

    6
    MetricValueDetails
    Revenue9.9%%
    Inventory—
    Net income$9.7 millionUSD
    Gross margin23.7%%
    Operating income EBIT29.4%%
    Share buyback capital return$11.4 millionUSD

    Risks & headwinds

    5
    Customer inventory liquidation impacting new business ramp-upSecond half of fiscal year 2027

    New business commitments expected to ramp up in H2 FY27 due to customers working through liquidated inventory.

    Mitigation: Commitments are firm, company is ready to ship, but customers are reducing inventory.

    Increased accounts receivable impacting cash flowQ4 FY26

    $32.5 million increase in accounts receivable in Q4 FY26, contributing to $4.5 million cash use from operating activities in the quarter.

    Mitigation: Exploring AI tools and other initiatives to neutralize working capital; expect to continue generating positive annual cash flow.

    Working capital impacted by inventory ramp-upFY26

    Working capital reuse of $37.8 million for FY26, impacted by inventory ramp-up for new business.

    Mitigation: Neutralizing working capital through customer product demand planning, enhanced inventory management, and extending vendor payment terms.

    Macroeconomic factors affecting miles drivenOngoing

    Higher fuel prices affecting miles driven.

    Mitigation: Focus on nondiscretionary aftermarket products, which are less impacted than discretionary items; fundamental tailwinds of increasing vehicle age and population.

    Customer store closures impacting baseline revenueQ3 FY26 onwards

    One large customer shut down about 15% of their stores, leading to an estimated new baseline of 85% of previous revenues.

    Mitigation: Optimistic about overall customer performance and industry fundamentals.

    Q&A highlights

    6

    How much of the $100M incremental opportunity is from the competitor bankruptcy, and how sticky is it?

    A good portion of the incremental business is tied to the competitor bankruptcy, but there's also significant organic growth unrelated to it. The company is benefiting from both fronts.

    “Yes. I think a good portion of that is, but we've also got some other good organic growth coming that's unrelated to that. So we're benefiting on both fronts.”

    asked by Andrew Casino · answered by Selwyn Joffe

    2 min read6 chapters

    Detailed Narrative

    01

    Q4 and Full-Year Financial Highlights

    The company reported a strong Q4 FY26 with net sales up 9.9% and gross profit up 30.9%. For the full fiscal year, net sales increased 4.3% and operating income surged 64.9%. Net income for Q4 was $9.7 million, a significant turnaround from a $722,000 loss a year prior, contributing to a full-year net income of $12.4 million.

    02

    Working Capital and Cash Flow Management

    Despite generating $19.2 million in cash from operating activities for the year, the company used $4.5 million in Q4, primarily due to a $32.5 million increase in accounts receivable from strong late-quarter sales and an inventory ramp-up for new business. Management is exploring AI tools and other initiatives to neutralize working capital and expects to continue generating positive annual cash flow.

    03

    Market Position and Growth Drivers

    Motorcar Parts of America is focused on gaining market share across all product categories, leveraging its leadership, financial strength, and quality-built brand. The average age of US light vehicles has risen to 12.8 years, and the number of vehicles on the road increased to 295.9 million, creating increased replacement opportunities for the company's nondiscretionary aftermarket parts.

    04

    Operational Efficiencies and Global Footprint

    The company is committed to continuous improvement, including relocating its heavy-duty operations to Mexico from Canada in late FY26 to enhance operating efficiencies. Increased demand for aftermarket parts in Mexico and the ability to support US-based customers expanding into Latin and South America further leverage its low-cost global footprint.

    05

    Brake Business and EV Strategy

    The brake-related business is expected to support overall margin goals through efficiencies and increased facility utilization, with management noting the brake pad opportunity is unfolding in a bigger way than anticipated. The company is also exploring strategic alternatives for its non-core EV emulated business, which has secured new OE customer commitments for its proprietary technology.

    06

    Debt Reduction and Shareholder Returns

    The company reduced net bank debt to $80 million, achieving a net bank debt-to-EBITDA ratio of 0.93x. It repurchased $11.4 million of shares during FY26 at an average price of $11.88, with $22.1 million remaining under the current authorization, demonstrating a commitment to debt reduction and shareholder returns.

    AI-generated summary of the company’s earnings call. Not investment advice.