MOTORCAR PARTS OF AMERICA Q1 FY27 earnings call MPAA

Motorcar Parts of America recently acquired the Centric Brake Brands, which they expect to relaunch by the current fiscal year-end. This acquisition is a strategic move to expand their position in brake-related product categories, complementing their existing rotating electrical business. The company anticipates significant opportunities, noting Centric's peak annualized sales of approximately $400 million, and plans to reestablish the brand's reputation for quality and catalog accuracy using original brake pad formulations.

The automotive aftermarket is experiencing favorable trends, with the average age of U.S. vehicles rising to 13 years (from 12.6 years in 2024) and the total number of vehicles on the road increasing to 289 million. The U.S. light-duty aftermarket is projected to grow 5.2% in 2026, exceeding $500 billion by 2025, driven by consumers maintaining and repairing existing vehicles due to new vehicle affordability constraints (average new vehicle transaction price over $50,000 in September 2025).

The company is leveraging its heavy-duty rotating electrical strengths, with the relocation of heavy-duty operations to Mexico from Canada nearing completion. This move is part of an ongoing commitment to continuous improvement and operating efficiencies. Additionally, MPA is experiencing increased demand for aftermarket parts in Mexico, positioning them to benefit as U.S.-based retailers and warehouse distributors expand into Latin and South America.

Net sales for Q1 FY27 were $168 million, impacted by timing of^📎 orders. Gross margin was 16.2%, down from 18% a year prior, primarily due to noncash expenses (2.4%), one-time^📎 items (1.6%), and unfavorable foreign exchange rates (2% or $3.5 million). Management expects future gross margin accretion from increased sales, overhead absorption, cost reductions, tariff mitigation, better scrap sales pricing, and further relocation of operations to low-cost facilities.

The company used $11.3 million in cash from operating activities in Q1 FY27, mainly due to an inventory ramp-up for new business. Despite this, liquidity remains strong with $112.4 million in total cash and availability. Net bank debt stood at $99.7 million, resulting in a net bank debt-to-EBITDA ratio of 1.26x. MPA also renewed its revolver credit facility to August 2031, demonstrating lender confidence.

Motorcar Parts of America is exploring strategic alternatives for its noncore EV emulator business to capitalize on its proprietary technology, while continuing to secure new OE customer commitments. The company repurchased 129,523 shares for $1.9 million at an average price of $14.98 in Q1 FY27, with $20.1 million remaining under the current authorization, signaling a commitment to increasing shareholder value.