Q3 2022 Motorcar Parts of America Inc Earnings Call

Okay.

Speaker 1: Good morning. My name is David and I'll be your conference operator today.

Good morning My.

My name is David and I'll be your conference operator today.

Speaker 1: At this time, I would like to welcome everyone to Motor Car Parts of America Fiscal 2022 3Q Conference Call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you'd like to withdraw your question, press star 1 once again. Thank you, Gary Mayer. With investor relations, you may begin your conference.

At this time I would like to welcome everyone to motorcar parts of America fiscal 2022 three Q Conference call. Today's conference is being recorded all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply prestige Starkey followed by the number one.

One on your telephone keypad, if you like to withdraw your question Press Star one once again, thank you Gary Maier with Investor Relations you May begin your conference.

Speaker 2: Thank you, Dave, and thanks everyone for joining us today for our call. Before I turn the call over to Selwyn Jaffe, Chairman, President and Chief Executive Officer, and David Lee, the company's Chief Financial Officer, I'd like to remind everyone of the Safe Harbor statement included in today's press release.

Thank you, Dave and thanks to everyone for joining us today for our call before I turn the call over to Joe and Jonathan <unk>, Chairman, President and Chief Executive Officer, and David Lee The company's Chief Financial Officer.

Like to remind everyone of the Safe Harbor statement included in today's press release the.

Speaker 2: The Private Securities Litigation Reform Act of 1995 provides a safe harbor for certain forward-looking statements, including statements made during today's conference call. Such forward-looking statements are based on the company's current expectations and beliefs concerning future developments and their potential effects on the company.

Private Securities Litigation Reform Act of 1095 provides a safe harbor for certain forward looking statements, including statements made during today's conference call.

Such forward looking statements are based on the company's current expectations and beliefs concerning future developments and their potential effects on the company.

Speaker 2: There can be no assurance that future developments affecting the company will be those anticipated by motor car parts of America. Actual results may differ from those projected in the forward-looking statements. These forward-looking statements involve significant risks and uncertainties, some of which are beyond control of the company and are subject to change based upon various factors.

There can be no assurance that future developments affecting the company will be those anticipated by motorcar parts of America actual results may differ from those projected in the forward looking statements. These forward looking statements involve significant risks and uncertainties some of which are beyond control of the company and are subject to change based upon various factors.

Speaker 2: company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or other.

The company undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information future events or otherwise.

Speaker 2: For more detailed discussion of some of the ongoing risks and uncertainties of the company's business, I refer you to the various filings with the Securities and Exchange Commission.

For a more detailed discussion of some of the ongoing risks and uncertainties of the company's business.

Refer you to the various filings with the Securities and Exchange Commission.

Speaker 3: With that, I'd like to begin our call and turn it over to Selwyn Jaffee to begin. Okay. Thank you, Gary. I appreciate everyone joining us today. I hope you're all safe and healthy. Let me begin by highlighting our very strong fiscal third quarter results and the drivers behind this exceptional growth despite the well-known industry supply chain challenges that were a modest drag on reaching our full potential.

With that I'd like to begin our call and I'll turn it over to Selwyn Jaffe to begin.

Okay. Thank you Gary I appreciate everyone joining us today, I hope, you're all safe and healthy.

Let me begin by highlighting our very strong fiscal third quarter results and the drivers behind this exceptional growth. Despite the well known industry supply chain challenges that were a modest drag on reaching our full potential.

Speaker 3: We delivered record net sales of 161.8 million, a 32% year-over-year increase.

We delivered record net sales of $161 8 million or 32% year over year increase.

Speaker 3: It is also notable that net sales growth was 30.5% on a nine-month basis.

It is also notable that net sales growth was 35% on a nine month basis.

Speaker 3: also reaching another record for the company, despite quarter-to-quarter variabilities in customer order patterns.

Also reaching another record for the company despite quarter to quarter variability in customer order patterns.

Yes.

Speaker 3: More exciting than this exceptional growth are the reasons behind it and the sustainable long-term momentum that we are building. I will share detail on several.

More exciting than this exceptional growth are the reasons behind it and the sustainable long term momentum that we are building.

We'll share detail onset on seven.

Speaker 3: First, we have new and existing customer expansion across all of our products.

First we have new and existing customer expansion across all of our product lines second we have growing opportunities and break related categories.

Speaker 3: Second, we have growing opportunities in break related categories.

Speaker 3: Third, there are emerging opportunities in the electric vehicle space.

Third there are emerging opportunities in the electric vehicle space and finally <unk>.

Speaker 3: favorable underlying fundamentals in the aftermarket parts industry.

Favorable underlying fundamentals in the aftermarket parts industry.

Let's start with demand for our product lines, which continues to grow across the board.

Speaker 3: Let's start with demand for our product lines, which continues to grow across the board.

Speaker 3: Our strategic focus on multi-growth platforms in our hard parts business contributed to our strong third quarter performance.

Our strategic focus on multi growth platforms, and our hard goods business contributed to our strong third quarter performance.

Speaker 3: It is also further establishing MPA as a value partner to our customers from a quality and supply standpoint.

It is also further establishing <unk> as a valued partner to our customers from a quality and supplier standpoint, we expect this momentum to continue.

Speaker 3: has a complement to a strong and growing position within the automotive aftermath.

As a complement to a strong and growing position within the automotive aftermarket.

Speaker 3: Our diagnostic business for alternators and starters continues to roll out at retail customer store locations.

Diagnostic business for Alternators and starters continues to roll out at retail customer store locations.

These bench top tester is enable retailers to offer accurate advice with the latest protocols to diagnose problems for consumers and reduce unnecessary returns.

Speaker 3: These benchtop testers enable retailers to offer accurate advice with the latest protocols to diagnose problems for consumers and reduce unnecessary returns.

This provides a value added benefit for the retailer while strengthening their consumer relationships.

Speaker 3: This provides a value added benefit for the retailer while strengthening their consumer relationship.

Speaker 3: The global automotive testing market is also very large at approximately $5.4 billion, and we believe our efforts in this market will generate solid results.

Global automotive testing market is also very large at approximately $5 $4 billion and we believe our efforts in this market will generate solid results.

Speaker 3: A strong growth in the quarter was unfortunately constrained by manufacturing challenges in Malaysia related to the shutdown of the country by the government due to COVID.

Our strong growth in the quarter was unfortunately constrained by manufacturing challenges in Malaysia related to the shutdown of the country by the government due to Covid.

This impacted our operations in the country and significantly reduced our capacity.

Speaker 3: This impacted our operations in the country and significantly reduced our capacity.

Speaker 3: However, our team in Malaysia did an exceptional job outsourcing production to help meet customer demand. Fortunately, operations are now back up and running in Malaysia.

However, our team in Malaysia did an exceptional job outsourcing production to help meet customer demand. Unfortunately operations are now back up and running in Malaysia.

Speaker 3: David will have more to share on the impact of this important development momentarily.

David will have more to share on the impact of this important development momentarily.

Turning to our break related products as I mentioned earlier. This is an area, where we're seeing very strong success.

Speaker 3: As I mentioned earlier, this is an area where we are seeing very strong success. To put our break related

To put a break related growth in perspective products in this category as a percentage of overall sales increased to 15% for the nine month period from 9% in the same period a year ago.

Speaker 3: Products in this category as a percentage of overall sales increased to 15% for the nine month period.

Speaker 3: At the same time, rotating electrical cells and all other product lines also…

At the same time rotating electrical sales and all other product lines also increased.

Speaker 3: Our state-of-the-art brake caliper remanufacturing operation continues to gain momentum.

Our state of the art brake caliper re manufacturing operation continues to gain momentum now.

Speaker 3: and understanding supply chain challenges that constrained our robust growth.

Notwithstanding supply chain challenges that constrained our robust growth.

Speaker 3: Manufacturing efficiencies will improve as this operation matures, volumes increase, and we continue to mitigate supply chain issues.

Manufacturing efficiencies will improve as this operation matures volumes increase and we continue to mitigate supply chain issues.

Moving to our emerging opportunities in the electric vehicle space, our presence in electric vehicle testing applications in the areas of development and production continues to gain traction as demand for test equipment related to performance endurance and production of electric vehicle products continues to gain.

Speaker 3: Moving to our emerging opportunities in the electric vehicle space, our presence in electric vehicle testing applications in the areas of development and production continues to gain traction as demand for test equipment related to performance, endurance, and production of electric vehicle products continues to gain momentum.

Momentum.

Speaker 3: We remain enthusiastic about the outlook and are encouraged by new strategic partnerships, engineering strength, industry leading technology, and the significant opportunities in front of us as electric mobility evolves.

We remain enthusiastic about the outlook and are encouraged by new strategic partnerships engineering strength industry, leading technology and the significant opportunities in front of us as electric mobility evolves.

Speaker 3: While we are not providing details on this segment just yet, let me just make a few comments about this exciting business that complements our hard parts business and relationships with our customers.

While we're not providing details on this segment just yet.

Let me just make a few comments about this exciting business that complements our hard parts business and relationships with our customers.

Last quarter, we announced that our electric motor emulator was selected to support the development of the Rota Motor controllers for Johns Hopkins applied Physics laboratory under our contract with NASA for its dragonfly emissions assessments Moon Titan.

Speaker 3: Last quarter, we announced that our electric motor emulator was selected to support the development of the rotor motor controllers for Johns Hopkins Applied Physics Laboratory under a contract with NASA for its Dragonfly mission to Saturn's moon Type II.

Speaker 3: In addition, our vision is to offer EV manufacturers contract testing services via our newly established Detroit Technical Center.

In addition, our vision is to offer EV manufacturers contract testing services via our newly established Detroit Technical Center.

Also offer significant growth opportunities our initial customer will commence this quarter and we plan to host a formal opening ceremony in the spring.

Speaker 3: Our initial customer will commence this quarter, and we plan to host a formal opening ceremony in the spring.

This is clearly a testament to our EV technology, it's exciting applications and the potential from our acquisition of <unk> electronics.

Speaker 3: This is clearly a testament to our EV technology, its exciting applications, and the potential for my acquisition of DMV alerts.

Speaker 3: Now, moving to the favorable industry environment in which we operate.

Now moving to the favorable industry environment in which we operate industry.

Speaker 3: Industry reports continue to show that people are keeping the vehicles longer, and used car sales continue to climb to record levels.

Industry reports continue to show that people are keeping their vehicles longer and used car sales continue to climb to record levels.

Speaker 3: The result is an increase in miles driven by our kind of vehicles, or OK vehicles.

The result is an increase in miles driven by all kinds of vehicles or <unk> was approximately 287 million vehicles now on the road in the United States alone and the average age of vehicles is now at $12 one years and Asia the.

Speaker 3: with approximately 287 million vehicles now on the road in the United States alone. And the average age of vehicles is now at 12.1 years and ages.

Speaker 3: The market for our current hard parts categories represent more than $6 billion at the retail level.

The market for our current hard parts categories represent more than $6 billion at the retail level.

Speaker 3: I would also note that car lease residuals relative to the value of the vehicle at lease end are now sharply lower than the value of the vehicle.

I would also note that car lease residuals relative to the value of the vehicle at lease and are now sharply lower than the value of the vehicle.

Speaker 3: As a result, consumers are buying out their leases rather than leasing new vehicles, further contributing to an increase.

As a result consumers are buying out their leases rather than leasing new vehicles.

Further contributing to an increased aging of the vehicle population.

Speaker 3: All of this bodes well for the aftermarket parts replacement industry, and these favorable dynamics fuel are up.

All of this bodes well for the after market parts replacement industry and these favorable dynamics fuel our optimism.

Speaker 3: We are very well positioned with our significant channel relationships for aftermarket parts and our superior parts and solutions for our customers and consumers.

We are very well positioned with our significant channel relationships for aftermarket parts and our superior parts and solutions for our customers and consumers.

Speaker 3: We are building on this through our strategic focus on moving into new product areas as we are dealing with brake caliper.

We are building on this through our strategic focus on moving into new product areas. As we are dealing with brake calipers and taking market share in the product categories, where we have advantaged opportunities.

Speaker 3: and taking market share in the product categories where we have advantage up.

Speaker 3: Certainly, there continue to be challenges facing the aftermarket industry in the near term.

Certainly there continue to be challenges facing the aftermarket industry in the near term.

Speaker 3: supply chain, freight, raw materials, and other pandemic-related headwinds.

Supply chain freight raw materials and other pandemic related headwinds.

Speaker 3: We are working hard every day to mitigate these challenges with our global team in collaboration with our suppliers and logistics providers, including through price increases and freight surcharges, for example. We are making very good progress as David will share shortly.

We are working hard every day to mitigate these challenges with our global team in collaboration with our suppliers and logistics providers, including through price increases and freight surcharges for example.

We are making very good progress as David will share shortly.

Let me summarize my comments.

Speaker 3: Our multi-year strategic expansion initiatives are coming to fruition, putting us in a strong position to further benefit from our growth investments.

Multiyear strategic expansion initiatives are coming to fruition, putting us in a strong position to further benefit from our growth investments are.

Speaker 3: Our footprint of the future is now the footprint of today.

Footprint for the future is now the footprint off today and.

Speaker 3: and we are encouraged by the favorable underlying demand fundamentals of the automotive replacement of the drive efficiency of the greenhouse gas emissions Microbling economy

And we are encouraged by the favorable underlying demand fundamentals of the automotive replacement parts market.

Speaker 3: In short, our company is well positioned for sustainable, long-term, top-line and bottom-line growth for the non-discretionary parts and solutions that move our world.

In short our.

Company is well positioned for sustainable long term topline and bottomline growth for the non discretionary parts and solutions that move our world.

I'll now turn the call over to David to review our results in greater detail.

Speaker 3: I'll now turn the call over to David to review our results in greater detail.

Speaker 4: Thank you, Selwyn, and good morning, everyone. I would like to encourage everyone to read the earnings press release file as an 8K earlier today. It contains more detailed explanations of our results, including our nine-month results. Here on this call, I will focus on our fiscal third quarter. So let's begin with our record reported net sales, which increased 32% to $161.8 million from $122.6 million in the year-ago period.

Thank you sell in and good morning, everyone.

I would like to encourage everyone to read the earnings press release filed as an 8-K earlier today. It contains more detailed explanations of our result, including our nine month results here on this call I will focus on our fiscal third quarter. So let's begin with our record reported net sales which increased 32%.

Two $161 8 million from $122 6 million in the year ago period.

Speaker 4: Reported gross profit was 32.6 million, an increase of 34.4% from 24.2 million in the year ago period.

Reported gross profit was $32 6 million an increase of 34, 4%.

24, 2 million in the year ago period.

Speaker 4: reported gross profit was impacted by non-cash items as well as cash items.

Reported gross profit was impacted by noncash items as well as cash items.

Speaker 4: Let me provide details for each and then I will detail out the financial impacts on each line and an additional line item so you can accurately understand and compare the underlying fundamentals between periods and appreciate the reasons for our optimism moving forward.

Let me provide the details for each and then I will detail on the financial impact on each line and an additional line item. So you can accurately understand and compare the underlying fundamentals between periods and appreciate the reasons for optimism moving forward.

Speaker 4: The non-cash items reflect core and finished goods premium amortization and revaluation of cores on customer shelves.

The noncash items reflect core and finished goods premium amortization and revaluation of cores <unk> question Michelle.

Speaker 4: The total for non-cash items in the quarter was approximately $4 million.

Total for noncash items in the quarter was approximately $4 million.

Speaker 4: A more detailed explanation of core accounting is available on our website and I would encourage anyone with questions about this topic to review the video.

More detailed explanation of core accounting is available on our website and I would encourage anyone with questions about this topic to review the video.

Speaker 4: In terms of the cash items, let's begin with Malaysia. The shutdown of the country by the government due to COVID, and then the slow reopening impacted our facility and our regional network of key suppliers, as someone mentioned.

In terms of the cash items, let's begin with Malaysia, the shutdown of the country by the government due to Covid and then the slow reopening impacting our facility and our regional network of key suppliers as Simon mentioned.

Speaker 4: In response, we quickly moved to outsource certain products from China, but these products were unfortunately subject to 25% tariff.

In response, we quickly moved to outsource certain products in China, but these products were unfortunately subject to 25% tariffs. These transitory disruptions in the supply chain as well as timing of shipments are being eliminated as you ramp back up in Malaysia, and our suppliers recover as a reminder.

Speaker 4: These transitory disruptions in the supply chain, as well as timing of shipments, are being eliminated as we ramp back up in Malaysia and our suppliers recover.

Speaker 4: As a reminder, one of the benefits of production in Malaysia is low tariffs. A return to production there results in a fairly immediate release on tariffs.

Minder, one of the benefits of production in Malaysia as low tariffs.

Return to production there resolve fairly immediate relief on tariffs.

Speaker 4: Next, we incurred higher freight costs that were in excess of the customer freight surcharges that we already implemented.

Next we incurred higher freight costs that were in excess of the customer freight surcharges that we already implemented we.

Speaker 4: We have taken swift action to implement even higher freight surcharges and further price increases to mitigate this impact going forward.

We have taken Swift action to implement even higher freight surcharges and further price increases to mitigate this impact going forward.

These are expected to be in effect in the fiscal first quarter, ending June 32022, and should offset the higher freight costs based on current rates.

Speaker 4: These are expected to be in effect in the fiscal first quarter ending June 30, 2022, and should offset the higher freight costs based on current rates.

Speaker 4: Freight costs have stabilized for the time being, though we continue to monitor the situation closely.

Freight costs have stabilized for the time being that we continue to monitor the situation closely.

Speaker 4: The total cash impact of these predatory cost pressures related to supply chain disruptions on gross profit was $4.3 million. A summary of each can be found in Exhibit 3 of this morning's earnings press release.

The total cash impact of these transitory cost pressures related to supply chain disruptions on gross profit was $4 3 million.

A summary of each can be found in exhibit three of.

This morning's earnings press release.

Speaker 4: Before moving on, I should note that there were no ramp up and transition expenses related to our Mexico expansion this quarter compared with 4.2 million in the prior period and from approximately 1 million in the preceding quarter. We are pleased that brake caliper production is increasing nicely.

Before moving on.

Note that there were no ramp up and transition expenses related to our Mexico expansion this quarter compared with $4 2 million in the prior period and from approximately $1 million in the preceding quarter. We are pleased that brake caliper production is increasing nicely.

Speaker 4: In addition to the non-cash items and impact of predatory cost pressures related to supply chain disruptions, as you would expect, gross profit was further pressured by inflationary costs related to raw materials and supplies and offshore wage inflation. The freight surcharges and further price increases that I mentioned a moment ago will help offset these pressures.

In addition to the noncash items and impact the transitory cost pressures related to supply chain disruptions. As you would expect gross profit was further pressured by inflationary costs related to raw materials and supplies and offshore wage inflation.

The freight surcharges and further price increases that I mentioned, a moment ago will help offset these pressures.

Speaker 4: Even in this inflationary environment, reported gross profit as a percentage of net sales was 20.1% and up from 19.8% a year earlier. Reported gross margin was impacted by 250 basis points from the previously mentioned non-cash items, as well as 270 basis points from the previously mentioned cash items from the transitory cost pressures related to supply chain disruptions.

Even in this inflationary environment reported gross profit as a percentage of net sales was 21% and up from 19, 8% a year earlier.

Reported gross margin was impacted by 250 basis points from the previously mentioned noncash items as well as 270 basis points from the previously mentioned cash items from the transitory cost pressures related to supply chain disruptions.

Moving on to reported operating expenses.

Speaker 4: They were $23.9 million compared with $8.3 million for the prior year period. The increase is primarily due to a non-cash gain of $12.5 million in the prior period for the March to Market Foreign Exchange impact of lease liabilities and forward contracts.

They were $23 9 million compared with $8 3 million for the prior year period. The increase was primarily due to a noncash gain of $12 5 million in the prior period for the Mark to market foreign exchange impact of lease liabilities in foreign contracts.

Speaker 4: I should note that the non-cash foreign exchange impact was a $385,000 loss for the current quarter.

Should note that the non cash foreign exchange impact was <unk> 385000 lots for the current quarter.

Speaker 4: The remaining $2.7 million increase was primarily due to increased share-based compensation, commissions, and marketing and advertising expenses.

The remaining $2 7 million increase was primarily due to increased share based compensation commissions and marketing and advertising expenses.

Speaker 4: Reported net income was $3.1 million, or $0.16 per diluted share. I should emphasize that results were impact of items that totaled $8.5 million, or $0.44 per diluted share, reflecting non-cash items totaling $4.8 million, or $0.25 per diluted share, and transitory cost pressures related to supply chain disruptions totaling $3.7 million, or $0.19 per diluted share.

Reported net income was $3 1 million or <unk> 16 per diluted share.

I emphasize that results were impact of items that totaled $8 5 million or <unk> 44 per diluted share, reflecting noncash items totaling $4 8 million or <unk> 25 per diluted share and transitory cost pressures related to supply chain disruptions totaling $3 7 million.

<unk> 19 per diluted share.

Speaker 4: I should note that reported net income reflects 3.9 million in interest expense compared with 4.1 million for last year, primarily due to lower interest rates on our accounts receivable discount programs, as well as 1.6 million in income tax expense compared with 3.4 million in the prior year period.

I should note that reported net income reflects $3 9 million in interest expense compared with $4 $4 1 million from last year, primarily due to lower interest rates on our accounts receivable discount programs as well as $1 6 million and income tax expense compared with $3 4 million in the prior year period.

Reported net income in the quarter compares with net income of $8 5 million or <unk> 44 per diluted share in the year ago period.

Speaker 4: Reported net income in the quarter compares with net income of $8.5 million or $0.44 per diluted share in the year-ago period.

Speaker 4: Results for the prior period were favorably impacted by a total of $1.7 million, or $0.09 per dilute share. These include the favorable impact of non-cash items totaling $6.1 million, or $0.31 per dilute share, and cash items totaling $4.3 million, or $0.22 per dilute share, related to break startup costs and other product relocation expenses, related to the expansion in Mexico, and COVID-related expenses.

Results for the prior period were favorably impacted by a total of $1 7 million or <unk> <unk> per diluted share. These include the favorable impact of noncash items totaling $6 1 million or <unk> 31 per diluted share and cash items totaling $4 3 million or <unk> 22 per diluted share.

They're related to break caliber set up costs and other product relocation expenses related to the expansion in Mexico and Covid related expenses.

Speaker 4: EBITDA was $11.9 million. EBITDA was impacted by $6.4 million of non-cash items, as well as $4.9 million in cash items due to the transitory cost pressures related to supply chain disruption.

EBITDA was $11 9 million EBITDA was impacted by $6 4 million of noncash items as well as $4 9 million in cash items due to the transitory cost pressures related to supply chain disruptions.

Speaker 4: EBDOT was $18.8 million in the prior year period, favorably impacted by $8.1 million of non-cash items, primarily related to foreign exchange items, and unfavorably impacted by $5.7 million of cash expenses, which were primarily driven by the company's expansion of its new brake caliper product line.

EBITDA was $18 8 million in the prior year period favorably impacted by $8 1 million of noncash items.

Primarily related to foreign exchange items, and unfavorably impacted by $5 7 million of cash expenses, which were primarily driven by the company's expansion of its new brake caliper product line.

Speaker 4: As someone highlighted earlier, we are driving significant growth in brake calipers and production is increasing.

As <unk> highlighted earlier, we are driving significant growth in brake calipers and production is increasing.

Now, we'll move on to cash flow and key corporate items.

Speaker 4: Now we'll move on to cash flow and key corporate items.

Speaker 4: Net cash provided by operating activities during the third quarter was $2.2 million versus $33.2 million in the prior period.

Net cash provided by operating activities during the third quarter was $2 2 million versus $33 2 million in the prior year period.

Speaker 4: This reflects working capital requirements to support record sales growth and inventory increases for anticipated business growth, as well as a proactive strategy to address potential supply chain destruction due to the Chinese New Year and COVID-related issues. We believe that these investments in our business will not only mitigate risk, but will also spur further growth for the company on an ear-over-ear basis.

This reflects working capital requirements to support record sales growth and inventory increases for anticipated business growth as well as a proactive strategy to address potential supply chain disruptions due to the Chinese new year and Covid related issues. We believe that these investments in our business will not only mitigate risk.

But we'll also.

Spur further growth for the company on a year over year basis.

Speaker 4: Our return on invested capital on a pre-tax basis at the end of the calendar year was 23.1% compared with 18% a year earlier. We are continuing to realize the benefits of expanding our Mexican operations and the launch of our new break categories, with expectations of increased returns from both the new and existing product lines, as the benefits of our strategic expansion are more fully realized.

Our return on invested capital on a pre tax basis at the end of the calendar year was 23, 1% compared with 18% a year earlier, we are continuing to realize the benefits of expanding our Mexican operations and the launch of our new brake categories with expectations of increased returns from both new and existing products.

Lines as the benefits of our strategic expansion are more fully realized.

Speaker 4: During the quarter, we repurchased approximately 106,000 shares of the company's common stock under our share repurchase program for approximately 1.9 million. As of the end of the quarter, we have utilized 18.7 million of the 37 million common stock authorization.

During the quarter, we repurchased approximately 106000 shares of the company's common stock under our share repurchase program for approximately $1 9 million.

As of the end of the quarter, we have utilized $18 7 million after 37 million common stock authorization.

Speaker 4: Lastly, our net debt at the end of the quarter was approximately $122.9 million, while total cash and availability on the revolving credit facility was approximately $108 million.

Lastly, our net debt at the end of the quarter was approximately $122 9 million, while our total cash and availability on the revolving credit facility was approximately $108 million.

Speaker 4: For further explanation of the reconciliation of items that impacted results and non-GAF financial measures, please refer to Exhibits 1 to 5 in this morning's Earnings Press staggering.

A further explanation of the reconciliation of items that impacted results and non-GAAP financial measures. Please refer to exhibits one through five in this morning's earnings press release.

I would now like to open the line for questions.

Speaker 1: Thank you. At this time, I'd like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q and A roster. We'll take our first question from Matt Coranda with Roth Capital.

Thank you at this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.

Our first question from Matt Koranda with Roth capital.

Hey, guys good morning.

Speaker 5: Hey guys, good morning. Can we start off with a breakdown?

Can we just start off with a breakdown.

Speaker 5: Can we just start off with a breakdown of rotating electrical versus brake products? We'll have an other from you, David, maybe. And then just maybe, Selwyn, if you could touch on if there were any update orders or any inventory bill in the quarter from your customers that you think was sort of short-term in nature, or does this feel sort of representative of the underlying demand in the industry at question mark.

Sure.

Can we just start off with a breakdown of rotating electrical versus brake products wheel hub and other from you David maybe.

And then just maybe to sell what if you could touch on if there were any update orders or any inventory build in the quarter from your customers that you think was sort of short term in nature or does this feel sort of representative of the underlying demand in the industry at the moment.

Speaker 4: Okay, this is David Alstar. So for the quarter, rotating electrical was 68% of sales. Wheelhouse products were 13%. Brake related products were 15% and other products were 4%.

Okay. This is David I'll start so for the quarter rotating electrical was 68% of sales we will have products were up 13%.

<unk> related products were 15% and other products were 4%.

Excellent Thanks, and then sell them to the partner.

Speaker 3: Yeah, so I think first of all update orders normally are in the fourth quarter. So you know none of that, I think this is indicative of the sales trends we're seeing in the aftermarket, increase in used car population, increase in miles driven.

Yes so.

I think first of all update orders normally are in the fourth quarter.

So none of that I think this is indicative of the sales trends, we're seeing in the aftermarket increase in used car population increase in miles driven.

Speaker 3: particularly in our target market. So, you know, and I think, you know, just historically, we're seeing more cars come into their prime replacement age I think I've talked about that in the past.

And particularly in our target market.

So.

I think just historically, we are seeing more cars come into their prime replacement.

I think I've talked about that in the past.

Speaker 3: I think the fundamentals of our business are strong.

I think the fundamentals of our business are strong.

I do think that.

Speaker 3: We built significant inventory for Chinese New Year. Our customers have not really done that in my opinion. I don't think they're, I think they're experiencing strong revenue as well. I mean, so we'll wait to see what they're...

We built significant inventory for Chinese new year, our customers not really done that in my opinion.

I don't think there I think they're experiencing strong revenue as well.

So we'll wait to see what the results show that.

Speaker 3: I just think it's the fundamentals. I mean, it's a strong time for us.

I'd just say.

The fundamentals of minutes.

<unk>.

Speaker 5: Okay, good to hear. On the pricing front, can you guys just be super explicit about sort of the rounds of price increases that you put through? I think there were supposed to be two rounds as of the last quarter when you guys were kind of talking through the impacts and that second round was supposed to go into effect.

Okay good to hear.

On the pricing front.

Can you guys just be super explicit about sort of the rounds of price increases you put through I think they were supposed to be two rounds as over the last quarter. When you guys were kind of talking through the impacts in that second round was supposed to go into effect and fully impact the fourth quarter. So have we fully priced for all of that and then the additional.

Speaker 5: and fully impact the fourth quarter. So have we fully priced for all of that? And then the additional price, is the price that you guys have discussed in the prepared remarks and in the release.

Is the price that you guys are as I've discussed in the prepared remarks.

Elyse, we're referring to incremental pricing action over and above those two rounds and then maybe just talk more explicitly about the sort of the timing and the magnitude of that if that is the case sort of how.

Speaker 5: Referring to incremental pricing action over and above those 2 rounds. And then maybe just talk more explicitly about the sort of the timing and the magnitude of that. If that is the case, sort of how much is split out between surcharge versus sort of. Ongoing price.

How much is split out between surcharge versus sort of ongoing price tag.

Yes, very difficult for us to give you exact price increases, Matt, but <unk> is a third round that we've implemented.

Speaker 3: Yeah, very difficult for us to give you exact price increases, Matt. Yeah, there is a third round that we've implemented.

Speaker 3: And that will be fully captured in the first quarter of the next fiscal year. At that point I believe assuming status quo, which who knows what status quo is anymore.

And that will be fully captured in the first quarter of.

Our next fiscal year and at that point, I believe assuming status quo, which who knows what status quo is anymore.

Speaker 3: These adjustments will fall away and that will neutralize the effect of the inflationary impacts on numbers.

These adjustments will fall away in.

And that will neutralize the effect of the inflationary impacts of numbers both for freight and for some of have for inflation and I think the second thing Thats important to note is what we did and this is not directly related to your question, but I thought I'd add it is.

Speaker 3: both for freight and for inflation.

Speaker 3: And I think the second thing that's important to note is, you know, what we did.

Speaker 3: and this is not directly related to your question, but I thought I'd add it is, we got very aggressive on an inventory build for two reasons.

We got very aggressive on an inventory build for two reasons.

Speaker 3: We wanted to, we ourselves wanted to get ahead of the Chinese New Year. The Chinese New Year came in later this year, it's just happening now.

We want to do.

We ourselves wanted to get ahead of the Chinese new year Chinese new year came in later this year, it's just it's happening now.

Speaker 3: And this is a big time where we expect in the first quarter, as we come out into the spring, that there's gonna be significant amount of inventory built getting ready for the summer months.

This is a big time.

Where we expected in the first quarter as we come out into the spring that theres going to be significant amount of inventory build getting rid of foot ready for the summer months.

Speaker 3: And so we believe we have excess inventory and we believe we're in a good position to manage the demand.

So we we believe we have excess inventory.

And we.

We believe we are in a good position to manage to manage the demand.

Speaker 3: So we're excited about our outlook as we come into the new fiscal year.

So we're excited about in our outlook as we come into the new fiscal year.

Speaker 5: Okay, great. Very helpful, someone. And just wanted to cover the sort of the supply chain bucket, if you could, in more detail. I know you guys broke out 4.9 million in sort of headwinds from supply chain, but maybe you could just put a finer point on.

Okay, great very helpful and.

Just wanted to cover the.

Sort of the supply chain bucket if.

If you cut in more detail I know you guys broke out the $4 9 million and sort of headwinds from supply chain, but maybe you could just put a finer point on.

Speaker 5: You know, how much of that is coming from elevated, excuse me, inbound freight versus sort of outsourcing. Anything in that bucket from, you know, elevated raw material costs that you've broken out as well would be helpful just to get a sense for what all is going into that bucket. And then how quickly do we think that that breakout will abate here? Should we expect it to roll off in the next?

How much of that is coming from elevated excuse me inbound freight.

Versus sort of outsourcing.

Anything in that bucket from elevated raw material costs that you've broken out.

Yeah.

As well would be helpful. Just to get a sense for what all is going into that bucket.

How quickly do we think that that breakout will abate here.

Should we expect it to roll off in the next quarter.

Speaker 5: quarter or really next fiscal year is probably the more likely scenario, but I'd love to get your thoughts.

Quarter or really next fiscal year is probably probably the more likely scenario, but would love to get your thoughts there.

Speaker 4: Okay Matt, this is David. So that $4.9 million, good question. More than half of that is going to be freight, and we also mentioned tariffs on our prepared remarks.

Okay. Matt This is David so that $4 9 million a good question and more than half of that is going to be freight and we also mentioned tariffs on our prepared remarks, so with the price increases that we mentioned that those numbers will definitely be decreasing in subsequent quarters. The remaining balance in a big part of that is still going to be the.

Speaker 4: So with the price increases we mentioned that those numbers will definitely be decreasing in subsequent quarters. The remaining balance, a big part of that is still going to be the wage, the bonuses that are paid to our frontline workers in our Mexican facilities.

Wage the bonuses that are paid to our frontline workers in our Mexican facilities. So.

Speaker 4: So that is also coming down. So overall, in the subsequent quarters, that number will be coming down. That was $6 million at the September quarter, down to $4.9 million, and it will still continue to come down.

And that is also coming down so overall in the subsequent quarters.

That number will be coming down that was $6 million at the September quarter down to $4 nine and they will still continue to come down.

Got it.

Helpful. I'll leave it there guys. Thank you.

Speaker 1: And next we'll go to Scott Stember with CL King. Good afternoon.

Okay and next we'll go to Scott timber with CL King.

Good afternoon, or good morning for you guys.

Hey, good morning.

Speaker 3: The issues in Malaysia, which sounds like will not be a problem going forward. Were there any related disruption costs in that 4.9 million that you have listed in exhibit one?

The issues in Malaysia, which it sounds like we will not be a problem going forward.

Were there any related disruption costs in that $4 9 million that you have listed and exhibit one.

Speaker 4: Yes, a little over a million dollars relates to those tariffs.

Yes, a little over $1 million related to those tariffs.

Okay. That's included in the $4 nine.

Speaker 4: And those tariffs, as we mentioned in our prepared remarks, so we were outsourcing with 25% tariffs. So as Malaysia is now back up and running and our key suppliers in the region are recovering, we will no longer be reducing those higher tariffs from China.

And those tariffs as we mentioned in our prepared remarks. So we were we were.

Outsourcing from.

With 25% tariff so as Malaysia is now back up and running and our key suppliers in the region are recovering we will no longer be reducing those tire test from China.

Okay. So the first couple of rounds of price increases that went through I'm, just trying to match things up I mean was that.

Speaker 3: Okay, so the first couple of rounds of price increases that went through, I'm just trying to match things up. I mean, was that

Speaker 3: to cover raw materials, to cover Malaysian tariffs, and to cover freight and surcharges, like an all-inclusive price increase, or is this last price increase going to be for something else?

To cover raw materials to cover Malaysia, tariffs and to cover freight freight and surcharges. If I can all inclusive price increase or is this last price increase going through.

And to be for something else.

Speaker 4: Yes, the third round is going to cover those inflationary costs as someone mentioned primarily. So the tariff, they go away because we're no longer outsourcing from higher tariff countries. But the third round is primarily focused on inflationary costs.

Yes, the third round.

Cover those inflationary costs as someone mentioned.

<unk> so the tariffs they go away because we're no longer outsourcing from higher tariff country.

But the third round, it's primarily focused on inflationary costs.

Speaker 4: and a little bit of freight and all those will contribute to offsetting these items that we've identified that impacted the quarter due to supply chain disruption. And by that first quarter, we'll definitely see significantly reduced items that impacted the results.

And a little bit of a freight and all those will contribute to offsetting these items that we've identified that impacted the quarter due to supply chain disruption and by that first quarter.

We will definitely see us significantly reduced items that impacted.

The results.

Speaker 3: And just last question, the first two rounds of price increases, I'm just trying to frame it out. Just I know you guys, it's hard to tell how much it actually was, but the last few quarters, there's been multiples of millions of dollars that have been on this exhibit one when we tried to come up with an adjusted number. I'm just trying to get a sense the level of price increases, offsetting price increases, which have been going through on the line without being backed up.

Alright.

And just last question. The first two rounds of price increases I'm, just trying to frame it out.

I know you guys, it's hard to say how much it actually was but the last few quarters has been multiples of millions of dollars.

We've been on this exhibit one when.

When we tried to come up with an adjusted number.

I'm, just trying to get a sense of the level of price increases offsetting price increases which have been going through.

On.

The.

But the line without being backed out just trying to get a sense.

Speaker 3: of how big these price increases are so far and just the magnitude of the third one.

Of how big these price increases are so far and just the magnitude of the third one.

Speaker 3: Yeah, I think the way just to summarize all three of them, if you look at what we've called out as excess expenses, the price increases will cover all of those expenses.

Yes, I think.

The way just to summarize all three of them if you look at.

What we've called out as excess expenses the price increases will cover all of those expenses.

Speaker 3: So, you know, starting in the first quarter of the new fiscal year, we don't expect to, again, assuming status quo, we don't expect to have to even call these out. These numbers are, you know, it's a transitory expense that will disappear or be offset by these price increases. So, if you look at those adjustments, that's a pretty good indicator of everything that's being passed through. Okay, got it. All right, that's all I have. Thank you. Thank you.

So starting in the first quarter of the new fiscal year, we don't expect to again, assuming status quo or we don't expect to have.

To even called these out these.

These numbers are trading.

Transitory expense that will disappear.

Offset by these price increases so if you look at those adjustments that's a pretty good indicator of everything that's being.

Pass through.

Okay got it alright, thats all I have thank you.

Yes.

Next we'll go to Brian Nagel with Oppenheimer.

Your line is open.

Hey, guys congrats.

Congrats on nice quarter high.

Speaker 6: Thank you. Appreciate it.

Thank you appreciate it.

So I guess.

Well, Mike I want to focus just bigger picture on the Mike Mike with my questions.

Speaker 7: So in going back to your kind of your opening your prepared comments and talking about the two issues I mean one this what seems to be a very healthy demand environment and then to

So going back to your kind of your opening your prepared comments and talking about the two issues. One is it seems to be a very healthy demand environment then too.

On the supply chain side, so how it is.

With regard to demand.

And as you called out the dynamic of consumers now holding on to cars longer.

Speaker 7: Is I guess is you're watching your business you're watching this dynamic take hold is it getting better or is it just hold?

I guess as you're watching your business your Washington does dynamic take hold is it getting better or is it just holding better.

Speaker 7: And then how do you view the sustainability? I mean, you think this is really a structural shift that's happening within this space, or is this more a function of, you know, the just ongoing-

And how do you view the sustainability I mean do you think this is really a structural shift thats happening within the space or is this more a function of.

They are just ongoing disruptions, whether it be chips or whatever and then a similar type question with regard to sharp put us at a wonder with supply chain. I mean are you starting to see any real significant easing any supply chain constraints and at what point with MPA number should we see should we see that taking hold.

Speaker 7: with supply chain? I mean, are you starting to see any real significant easing?

Speaker 6: Let me start with demand, then I'll move to supply chain, if that's okay. So on the demand side, we've been tracking the statistics for a long period of time and forget about COVID for a second, but as you look at the chart and you look at the aging of the vehicles, the amount of vehicles that are entering or have entered into the primary placement age has gone up fairly significantly.

Let me start with demand and then I'll move to supply chain.

That's okay. So on the demand side, we've been tracking the statistics for a long period of time.

Forget about Covid for a second but as you look at the chart. When you look at the aging of the vehicles that amount of vehicles that are entering or have entered into the prime replacement age has gone up fairly significantly and that was as a result of the very low new cloud sales.

Speaker 6: And that was as a result of the very low new car sales 7, 8, 9, 10 years ago. So as these cars accumulate in these greater than 11 year old range, which is what's happened.

708, 910 years ago.

And.

So as these cause accumulate in these greater than 11 year old range, which is what's happening.

Speaker 6: more and more cars are accumulating in an older age which contributes to your high average age, replacement rates go up exponentially for those parts.

Cause are accumulating in our ultra age, which contributes to a high average age replacement rates go up exponentially for those parts.

Speaker 6: I think we're certainly benefiting in that new car sales are low, but we would actually prefer new car sales to be high as well and just expand the car population, enable... Used car prices are pretty high, so people who have less economic means have a more difficult time owning a vehicle.

I think.

We're certainly benefiting in the new call. We had our sales are low, but we would actually prefer new car sales to be high as well and just expand the car population enable used car prices are pretty high so people who.

Have less economic means to have a more difficult time owning a vehicle and so as new car sales come back, which I'm sure. They will I don't anticipate these views costs are going to go off the road I anticipate we will have more opportunity for other drivers who have less.

Speaker 6: And so as new car sales come back, which I'm sure they will, I don't anticipate these used cars are going to go off the road. I anticipate we'll have more opportunity for other drivers who have less.

Speaker 6: disposable income right now that can afford it and new car prices will come down, which means more people will buy them and the average age will continue to grow. I think scrap rates will be lower than new cars coming on the road, so the car population will grow. So I believe demand is sustainable. I think we got many years of demand sustainability. So we can continue to grow.

Disposable income right now.

In order to and used car prices will come down which means more people will buy them and the average age will continue to grow.

I think scrap rates will be lower than the new cars coming on the road for the call population will grow. So I believe demand is sustainable I think we got many years of demand sustainability, whether we can continue to grow.

Speaker 6: And again, I'm not sure how you benchmark what the growth rates are in the industry. I'm certainly not one who believes in a perpetual 30% growth being sustainable. We've had some very good organic growth and we've also had some market share contributions where we've gained share. We expect...

And again I'm not sure how you how you benchmark what the growth rates are on the industry.

I'm certainly not one who believes in a perpetual 30% growth being sustainable.

We've had some very.

Good organic growth and we've also had some market share contributions where we've gained share we expect.

Speaker 6: organic growth to continue and to remain fairly stable and we're very optimistic about our market share.

Organic growth to continue and to remain fairly stable and we are very optimistic about our market share growth.

Speaker 6: And so, you know, we laid out a plan a number of years ago to expand capacity and expand our low-cost footprint and we've completed it now. And as you've noticed probably in the numbers, there's no more adjustments for that. And now we focus on ramping into the production capacity that we have.

So we laid out a plan a number of years ago to expand capacity and expand.

Our low cost footprint and we've completed that now and as you noticed probably in the numbers and no more adjustments for that and now we we focus on ramping into the production capacity that we have in.

Speaker 6: So I think for MPA, I think we've got a combination of fundamental organic growth within the industry and we have market share growth. And then the last but not least is getting...

So I think for NPA I think we've got a combination of fundamental organic growth within the industry and we have market share growth and then the last but not least is getting.

Speaker 6: you know, getting, you know, we have a lot of momentum in the electric vehicle space. And I wouldn't even call it electric vehicles, I call it electric mobility. We're doing a lot of, we've had a lot of wins. We can't mention customer names of drone technology. I mean, NASA is an example of that, right? So, and a lot of wins and new, you know, new automotive wins and new truck wins and all across the board. So.

Getting.

We have a lot of momentum in the electric vehicle space and I wouldn't even call electric vehicles, our code electric mobility.

We are doing a lot of we've had a lot of wins, we can't mention customer names of drone technology.

This is an example of that right.

And a lot of wins with new new new automotive ones, new truck wins in all across the board. So.

Speaker 6: I think the fundamental aftermarket will remain solid. I can't tell you the growth rates, but I think it will remain solid for years to come. I think exponential growth the way we have it is great, but I would caution to be optimistic but conservative.

I think the fundamental after market will remain solid at a con tell you the growth rates, but.

It will remain solid for years to come.

I think exponential growth the way we have it is great but budd.

I would caution to be optimistic but conservative.

That's very helpful.

Then with.

On the supply chain.

Speaker 6: Sorry, I guess I'm sorry. Yeah. Sorry the supply chain, you know, I didn't interview with aftermarket news Fairly recent a few weeks ago and

I guess sorry.

Sorry, yes, sorry, the supply chain.

I did an interview.

With aftermarket news fairly recent a few weeks ago.

Speaker 6: or about a month ago and in that interview I said supply chain was getting better and you know as you look at things change I'm not so sure I somehow wish that I wouldn't have said it as much.

Or about a month ago and another end of use said supply chain was getting better.

As you look at things change I am not so sure.

Somehow we said I wouldn't have said it as much but.

Speaker 6: It's up and down, you know, it depends on the luck of the draw as to what you're getting out of the ports.

It's up and down depends on the luck of the draw as to what Youre getting out of the ports, but I think on a more macro basis I think the delays are still their production constraints are still there from outside suppliers component constraints continue.

Speaker 6: But I think on a more macro basis, I think the delays are still there, production constraints are still there from outside suppliers.

Speaker 6: component constraints continue. We certainly think that update orders will be pushed out.

We certainly think that update orders will be pushed out.

Speaker 6: further and managed in a different way by the retailer so they can manage their labor. I think you see updates going in slower.

Further in.

And managed in a different way by the retailers. So they can manage that labor. So I think you'll see updates cone and slower.

Speaker 6: but still going in. Development of new part numbers takes longer.

But still going in developing a new part numbers takes longer.

Speaker 6: So I can't predict it, but I would tell you Brian , I don't think it's got much better. I mean, I said something different a little bit ago, but as I review and see how things are unfolding, I still think port issues are very real all over the world.

So.

Our comp predictive, but I would tell you Brian I don't think its got much better assets.

I said something different and a little bit ago, but.

As I review and see how things are unfolding as full thing port issues are very real.

All over the world.

Alright.

That's helpful. I appreciate it and congrats again.

Thank you very much thank you.

Speaker 1: Next we'll go to Bill DeZellum with Titan Capital. Your line is open. Thank you and congratulations on another really great top line quarter.

And next we'll go to Bill <unk> with Titan Capital. Your line is open great. Thank you and congratulations on another really great topline quarter.

Speaker 8: So, relative to the sales and marketing expense growth that you experienced, how much of that is new people versus one year ago?

So thank you relative to the sales and marketing expense growth that you experienced how much of that is new people versus one year ago.

Speaker 4: Well, included in that line is commissions. So with a very solid growth in our sales, commissions have increased. We also attended the aftermarket trade show. So that's all part of the December increase.

Included in that line as commissions, so with a very solid growth in our sales commissions have increased we also attended.

Aftermarket trade show so that's all part of the December increase.

Speaker 4: So it's more on trade show and sales versus headcount.

So it's more more on trade show in sales versus head count, Yes, there's no real head count growth.

It's more it's more just during the Covid times, we will enable obviously sales growth and commissions is a big driver in.

Speaker 6: It's more just during the COVID times we weren't able, obviously SalesWorth and commissions is a big driver and APEX which is a big national...

And apex, which is a big national.

Speaker 6: International trade show which happens on an annual basis in Las Vegas. The prior year we never attended, in fact I never had it, and this year we attended quite vigorously, so....

International Trade show, which happens on an annual basis in Las Vegas. The prior year. We never attended in fact in Nevada and this year we attended.

Quite vigorously so.

That's the swing in revenue.

Speaker 8: That's helpful. Thank you. And then shifting to inventories, I'd actually like to.

That's helpful. Thank you and then shifting to inventories I'd actually like to continue down this path, but from a slightly different angle.

Speaker 8: down this path, but from a slightly different angle. So you've talked about increasing inventories aggressively, and yet inventories were up more like 20% rather than the 30% that your sales were up. Was there some degree of intentionalness kind of behind the scenes there, or is that really indicative of supply chain tightness? Maybe I could just.

So you've talked about increasing inventories aggressively and yet inventories were up.

More like 20% rather than the 30% that your sales were up.

Was there some degree of intention on this kind of behind the scenes there or is that really indicative of of supply chain tightness, maybe I could just ask you to try to.

Speaker 8: reconcile might be a little bit strong, but put those pieces together for us.

Reconcile might be a little bit strong, but put those pieces together for us.

Speaker 6: I'll do I'll give you some some.

I'll do I'll give you some some.

Speaker 6: inside into it without going through the numbers and then you can follow up with David on the specific numbers.

Inside answered without going through the numbers and then you can follow up with David on the specific numbers, but.

Speaker 6: You know, we saw Chinese New York coming at a very vulnerable time in the demand cycle for us. You know, coming into summer is really when our customers and the consumer really starts to make a replace.

We saw Chinese new year coming at it at a very vulnerable time and the demand cycle for us coming into some of it is really with our customers and the consumer really starts to make replacements. We all.

Speaker 6: We also have good visibility on some significant new business that we'll be adding over the next, certainly over the next 12 months, but hopefully on an ongoing basis. But you're not planning.

So we have good visibility on some significant new business that will be adding.

Over the next.

Suddenly over the next 12 months, but hopefully on an ongoing basis, but in our planning.

Speaker 6: So when we came into the quarter, even though we had 32% growth, we were coming in with higher inventory.

So when we came into the quarter, even though we have 32% growth we were coming in with higher inventories and I think what bodes well for US now is twofold as I think that a lot of the.

Speaker 6: And I think what bodes well for us now is twofold, which is I think that a lot of the

Speaker 6: the incremental expenditures that we've had because of the supply chain challenges.

The increase.

Incremental expenditures.

But we've had because of the supply chain challenges will be mitigated by these.

Speaker 6: will be mitigated by these surcharges and price increases and then we're in a fairly comfortable position.

Surcharges and price increases in them.

We are in a fairly comfortable position.

Speaker 6: growing into our next year's revenue, which we hope to give guidance at the end of next quarter. And we think that will help.

Growing into next.

Next year's revenue, which we hope to give guidance at the end of next quarter.

And we think that will help.

Speaker 6: We certainly believe we'll be generating positive cash from operations.

Suddenly believe we will be generating positive cash from operations.

Speaker 6: And I think we've got some tailwinds in the inventory numbers.

And I think we've got some some tail winds in the inventory numbers as well so the quarter may be a little bit lower but we've had a much longer term outlook.

Speaker 6: So the quarter may be in a little bit lower, but we've had a much longer term outlook, probably the last year and a half really getting ready for, making sure that we were ready to fulfill demand for our customers during the COVID times and then also planning for new business that's rolling.

Over the last year, and a half really getting ready for.

Making sure that we were ready to fulfill demand for our customers during the Covid times.

And then also in our planning for new business.

Rolling in.

Speaker 8: Thank you, Selwyn. I'm actually going to take the bait you mentioned as part of this answer that...

Thank you Selwyn I'm actually going to take the bait.

You mentioned as part of this answer that.

Speaker 8: new business that you are planning on for the next twelve months and I believe last quarter on the call you made reference to line of sight on a significant amount of new business would you would you please discuss in as much detail as you can that that you

For new business that you were planning on for the next 12 months and I believe last quarter on the call you made reference to.

Line of sight on a significant amount of new business would you would you. Please discuss in as much detail as you can.

That that new business that you're referring to there.

Speaker 6: Yeah, and I think I've alluded in the past to $100 million of opportunity for us.

Yes.

I think.

Alluded in the past $2 million to $100 million of opportunity for us.

Speaker 6: Certainly that hasn't changed. Although we're not, at this point, I don't want to, we're not giving guidance right now. And the speed of the ramp up for all of that will vary. But we hope to give you some good guidance.

And suddenly that Hasnt changed.

Although we are not at this point I don't want to we're not giving guidance right now.

The speed of the ramp up for all of that will vary but.

We hope we hope to give you some good guidance.

Speaker 6: in the next quarter. So business continues to be strong on an organic basis for us, business continues to be strong on a market share gain perspective, and business continues to be strong on an evolving technology basis. I'm cautiously saying that this economic recovery works. I feel that regulatory

And the next and the next the next quarter so.

Our business continues to be strong on an organic basis for us business continues to be strong on a.

Our market share gain perspective, and business continues to be strong on an evolving technology basis. So.

I'm cautiously.

<unk>.

Optimistic very optimistic actually is probably more accurate than cautiously.

Speaker 8: All right, I'm going to continue to push on this just a bit more. So is that 100 million business that you feel has a high probability of becoming revenue, or is that business that you have won, and now with all the supply chain questions?

Alright, I'm going to continue to push on this just a bit more so.

Is that a is that 100 million business that you feel has a high probability of of <unk>.

Becoming revenue or is that a business that you have won and now with all of the supply chain questions.

Speaker 8: and typical customer ramp process, the unknown factor is really more the timing of when that 100 million rolls in rather than if you get.

And typical customer.

Ramp process.

Known factor is really more of the timing of when that $100 million roles in rather than if you get it.

Well I think when you look at new business. The only way you can judge of gauge what you're getting at is what the historical volumes of being the most cost you don't know exactly what the demand is going to be in the next 12 months.

Speaker 6: Well, I think when you look at new business, the only way you can judge or gauge what you're getting is what the historical volumes of being them. Of course, you don't know exactly what the demand is going to be in the next 12 months.

Speaker 6: but that's an indication of business that we are very confident of.

But that's an indication of business.

That we are very confident of.

<unk>.

Speaker 6: I really, you know, Bill, I know you want to hear everything in much more detail, but it's just very difficult to talk about new business wins.

And I really believe I know you want to hear everything in much more detail, but it's just very difficult to talk about new business wins.

At this point.

No worries I was just giving you the opportunity to just say as much as you are as much as you were yes.

Speaker 8: No worries, I was just giving you the opportunity to say as much as you were going to.

Speaker 6: Yeah, I think the message is hopefully clear that we're optimistic about our growth. That will continue on more importantly and as importantly we're optimistic about our expense structure coming into being and generating positive cash. And so we're very excited about that.

I think the message is hopefully it's clear that we are optimistic about our growth that will continue on more importantly, and as importantly, we are optimistic about our.

Our expense structure coming into into being and generating positive cash and so.

We're very excited about that.

Those developments.

Speaker 8: And actually on that note, I have two additional questions. Number one is, when did Malaysia uh...

And actually on that note I have two additional questions number one is when did Malaysia.

The manufacturing restarted up there again and I'm just trying to gauge the reduction in tariffs and the timing for that and then secondarily Quinn.

Speaker 8: start up there again, and I'm just trying to gauge the reduction in tariffs and the timing for that. And then secondarily, when would you anticipate the break caliber efficiencies in Mexico to reach a level of maturation, of maturity?

When would you anticipate the brake caliper efficiencies in Mexico.

To reach a level of maturation of maturity.

Speaker 6: I'll start with the second question then I'm going to hand the first question to David. But the brake caliper, as we get through August , I think you'll see a complete transitional change in the brake caliper business both.

I'll start with the second question, then I'm going to have the first question today that the brake caliper.

As we get through August <unk>, you will see a complete transitional change in on the brake caliper business both.

Speaker 6: you know, from a real efficiency perspective and...

From a from a real efficiency perspective.

And.

Speaker 6: And that factory, I mean, it's a state-of-the-art lean manufacturing facility.

Yes.

Factory, it's a state of the art lean manufacturing facility.

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We're very excited about the opportunities and capabilities of that facility.

Speaker 6: We're very excited about the opportunities and capabilities of that facility. I think every day we work to make it better and I think in the next 6 to 8 months.

Every every day, we work to make it better.

And I'll take it in the next six.

To eight months.

Speaker 6: it'll really, when you say maximize, I mean, we never accept maximum.

It'll it'll really wouldn't you say maximize this never we never accept maximum.

Speaker 6: There's always we have a philosophy of continuous improvement

There is always we have a philosophy of continuous improvement.

Speaker 6: So hopefully we'll never stop reaching for more margin.

And so hopefully we will never stop reaching for more margin.

Speaker 6: But I think it's six to eight months where you'll see material effects on the number of people who are in the hospital.

But I think it's six to eight months, where youll see in our <unk>.

Material effects on the numbers.

And this is David on Malaysia at the beginning of the quarter definitely much lower utilization, but the team did a great job of ramping back up so towards the latter part of the quarter. It was recovery of much better utilization. So we're very excited about that.

Speaker 4: And this is David on Malaysia. At the beginning of the quarter, definitely much lower utilization, but the team out there did a great job of ramping back up. So towards the latter part of the quarter, there was recovery and much better utilization. So we're very excited about it.

Speaker 8: So you would have been, you would have started manufacturing early in...

So you would have been.

You would've started manufacturing early in <unk>.

Speaker 8: December quarter, so that would be the month of October . But December is when you were really ramped up to more full production. Is that kind of the correct interpretation?

In the December quarter, So what would that be the month of October but December is when when you were really ramped up tomorrow full production is that the correct interpretation.

Yes.

Speaker 6: It takes time, you know, because there are a lot of constraints in labor and movement around the country. But they're doing great and obviously it takes time to get the inventory from Malaysia to the US and in particular with some of the port delays. So you may see some lingering tariffs.

And that takes it takes time because there are a lot of constraints on labor movement around the country.

But they are doing great.

Obviously, it takes time to get the inventory from Malaysia to the U S. In particular with some of the port delays. So you may see some lingering tariffs.

Speaker 6: You know, we only expense what we sell on the tariff, so you may see some of that linger, but that's as far as an ongoing cash cost, as the Malaysian goods come in, you don't have that tariff expense.

And because we.

The only expense what we sell on the tariffs. So we may see some of that linger, but thats.

As far as a ongoing cash costs and <unk>.

Malaysia goods come in.

You don't have that tariff expense.

Great. Thank you both for the time.

Thank you Bill appreciate it.

Speaker 6: Okay, there are no further questions at this time. I'll now turn the call back over to Selvin Joffe for any additional or closing remarks. Great, thanks David. Just our record performance for the quarter of nine months highlights our continued success. Moving forward, we remain intently focused on realizing the potential of our core hard parts off the market business and proactively managing and mitigating the supply chain challenge.

There are no further questions at this time I'll now turn the call back over to Selwyn Jaffe for any additional or closing remarks great.

Great. Thanks, David.

Just a record performance for the quarter nine months highlights. Our continued success moving forward, we remain intently focused on realizing the potential of our core hard parts aftermarket business and proactively managing and mitigating the supply chain challenges, we expect each of our product lines, including our electric vehicle subsidiary.

Speaker 6: We expect each of our product lines, including our electric vehicle subsidiary, to be solid platforms for long-term growth. And we see complementary growth opportunities, particularly within brake-related categories.

To be solid platform for long term growth and we see complementary growth opportunities, particularly within brake related categories.

Speaker 6: Also, as our new production facilities mature, we will realize increased productivity and efficiency.

Also as our new production facilities mature, we will realize increased productivity and efficiencies. While there are many variables and cost today. We expect this to stabilize we expect our margins to improve through a combination of more appropriate pricing on the enhanced efficiencies discussed earlier.

Speaker 6: While there are many variables in cost today, we expect this to stabilize. We expect our margins to improve through a combination of more appropriate pricing and the enhanced efficiencies discussed earlier.

Speaker 6: Overall, we anticipate having far fewer items impacting results.

Overall, we anticipate having far fewer items impacting results.

Speaker 6: This, in conjunction with our accelerated revenue growth, bodes well for increased earnings and shareholder return.

This in conjunction with accelerated revenue growth bodes well for increased earnings and shareholder returns.

Speaker 6: In closing, I want to thank all our team members for their ongoing commitment and customer-centric focus on service. I want to thank all our team members for their ongoing commitment and customer-centric focus

In closing I want to thank all our team members for their ongoing commitment and customer centric focus on service. During these challenging times, we are focused on the safety and wellbeing of our employees and it is a testament of our employees commitment that more than 93% globally has been vaccinated.

Speaker 6: During these challenging times, we are focused on the safety and well-being of our employees.

Speaker 6: And it is a testament of our employees' commitment that more than 93% globally have been vaccinated, helping us mitigate operational risk. I'm extremely proud of our team members and company.

Helping us mitigate operational risk I am extremely proud of our team members and company.

Speaker 6: And we appreciate your continued support and thank you again for joining us for the call. We look forward to speaking with you and we host our fiscal 2022 Euron conference call in June and at investor conference.

And we appreciate your continued support and thank you again for joining us for the call and we look forward to speaking with you when we host our fiscal 2022 year end conference call in June .

Investor Conference.

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Speaker 1: This concludes today's conference call. You may now disconnect.

This concludes today's conference call you may now disconnect.

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