Motorcar Parts of America, Inc. (Nasdaq: MPAA) today reported results for its fiscal 2020 first quarter ended June 30, 2019 — reflecting record sales for a fiscal first quarter, and expectations for continued top-line growth and sequential margin and operating cash flow improvement as fiscal 2020 evolves.
Net sales for the fiscal 2020 first quarter increased 19.1 percent to $109.1 million from $91.7 million for the same period a year earlier, reflecting sales increases for both hard parts and diagnostic products.
Adjusted net sales for the fiscal 2020 first quarter increased 15.7 percent to $108.6 million from $93.8 million a year earlier.
“We achieved record sales in our hard parts categories for a first quarter, despite relative softness throughout the industry during this period. The company’s sales growth for both existing and new product lines is expected to gain momentum throughout fiscal 2020, and should further accelerate later in the fiscal year. Notwithstanding the short-term impact to profitability, related to new business costs and transition expenses associated with our expansion in Mexico and Malaysia, our investment to position the company as a leading supplier of multiple non-discretionary hard parts is transformational. This will become increasingly evident as the fiscal year evolves.
“Equally exciting, we expect our emerging diagnostic and testing equipment business, which includes applications for rotating electrical, electric vehicles and aerospace, to provide further growth opportunities, with favorable economics as the business gains traction. In summary, the outlook remains favorable, our customer relationships are strong and we expect solid value creation as a result of our strategic investments,” said Selwyn Joffe, chairman, president and chief executive officer.
The results for the quarter and gross margin were primarily impacted by four items totaling $8.5 million.
- Non-cash expenses of $5.7 million, including a write-down of $4.6 million associated with the quarterly revaluation for cores on customers’ shelves, and $1.1 million of amortization related to the premium for core buy backs.
- Transition costs of $1.4 million associated with the move into the new Mexico facilities to support the growth in sales.
- Net tariff costs of $1.1 million for products sold before cost increases were passed through to customers.
- Cost accrual of $426,000 related to a pending resolution of a previously cancelled customer contract.
Net loss for the fiscal 2020 first quarter was $6.2 million, or $0.33 per share, reflecting the impact of the items listed above, compared with net loss of $5.5 million, or $0.29 per share, a year ago.
Adjusted net income for the fiscal 2020 first quarter was $1.7 million, or $0.09 per diluted share, compared with $3.0 million, or $0.16 per diluted share, a year earlier.
Gross profit for the fiscal 2020 first quarter was $17.6 million compared with $16.4 million a year earlier. Gross profit as a percentage of net sales for the fiscal 2020 first quarter was 16.1 percent compared with 17.8 percent a year earlier.
Adjusted gross profit for the fiscal 2020 first quarter was $26.2 million compared with $22.9 million a year ago. Adjusted gross profit as a percentage of adjusted net sales for the three months was 24.1 percent compared with 24.4 percent a year earlier.
Use of Non-GAAP Measures
This press release includes the following non-GAAP measures – adjusted net sales, adjusted net income (loss), adjusted EBITDA, adjusted gross profit and adjusted gross margin, which are not measures of financial performance under GAAP, and should not be considered as alternatives to net sales, net income (loss), EBITDA, income from operations, gross profit or gross profit margin as a measure of financial performance. The Company believes these non-GAAP measures, when considered together with the corresponding GAAP measures, provide useful information to investors and management regarding financial and business trends relating to the company’s results of operations. However, these non-GAAP measures have significant limitations in that they do not reflect all of the costs associated with the operations of the company’s business as determined in accordance with GAAP. 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 reconciliation of adjusted net sales, adjusted net income (loss), adjusted EBITDA, adjusted gross profit and adjusted gross margin to their corresponding GAAP measures, 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 these adjustments.
Teleconference and Web Cast
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 Web broadcast at www.motorcarparts.com or live by calling (877)-776-4016 (domestic) or (973)-638-3231 (international). For those who are not available to listen to the live broadcast, the call will be archived for seven days 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 August 8, 2019 through 8:59 p.m. Pacific time on August 15, 2019 by calling (855)-859-2056 (domestic) or (404)-537-3406 (international) and using access code: 3797116.
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