Q1 2025 Motorcar Parts of America Inc Earnings Call

August 8, 2024

Thank you for standing by. My name is Kayla and I will be your conference operator today. At this time, I would like to welcome everyone to the Motorcar Parts of America Inc. Fiscal 2025 First Quarter Conference Call and Webcast.

Operator: At this time, I would like to welcome everyone to the Motorcar Parts of America Inc. Fiscal 2025 first quarter conference call and webcast. All lines have been placed on mute to prevent any background noise.

Operator: At this time, I'd like to welcome everyone to the Motorcar Parts of America Inc. fiscal 2025 first quarter conference call and webcast. All lines have been placed on mute to prevent any background noise.

Operator: At this time, I'd like to welcome everyone to the Motorcar Parts of America Inc. Fiscal 2025 First Quarter Conference Call-In Webcast. All lines have been placed on mute to prevent any background noise.

Operator: 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 star followed by the number one on your telephone keypad. If you'd like to withdraw your question, again, press the star and one.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, again press the star and 1. I would now like to turn the call over to Gary Maier, Vice President of Corporate Communications and Investor Relations. You may begin.

Operator: 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 would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, again press the star and 1.

Gary Maier: I would now like to turn the call over to Gary Maier, Vice President of Corporate Communications and Investor Relations. You may begin.

Operator: I would now like to turn the call over to Gary Maier, Vice President of Corporate Communications and Investor Relations. You may begin.

Gary Maier: Thank you, Kaelin. Thanks, everyone, for joining us for our call. Before I turn the call over to Selwyn Joffe, Chairman, President, 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. The Private Security's Litigation Reform Act of 1995 provides a safe harbor for certain forward-looking statements made during today's call. These forward-looking statements are based on the company's current expectations and beliefs concerning future developments and their potential effects on the company. There can be no assurance the future developments affecting the company will be those anticipated by Motorcar Parts of America.

Gary Maier: Thank you, Kayla. Thanks, everyone, for joining us on our call.

Gary Maier: Thank you, Kayla. Thank everyone for joining us for our call.

Gary Maier: Before I turn the call over to Selwyn Joffe, Chairman, President, 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. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for certain forward-looking statements made during today's call. These forward-looking statements are based on the company's current expectations and beliefs concerning future developments and their potential effects on the company.

Speaker Change: Thank you, Kayla. Thanks everyone for joining us for our call. Before I turn the call over to Selwyn Joffe, Chairman, President, 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.

Gary Maier: There can be no assurance that future developments affecting the company will be those anticipated by Motorcar Parts of America. However, actual results may differ from those projected in the forward-looking statements. These forward-looking statements involve significant risks and uncertainty, some of which are beyond the control of the company and are subject to change based upon various factors. In particular, expectations about anticipated future growth and opportunities with customers may not be achieved. The company undertakes no obligation to publicly revise or update any forward-looking statements, whether as a result of new information, future events, or other... For a 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. I would now like to turn the call over to Selwyn and begin today's call. Thank you, Gary.

Gary Maier: The Private Securities Litigation Reform Act of 1995 provides a safe harbor for certain forward-looking statements.

Gary Maier: made during today's call. These forward-looking statements are based on the company's current expectations and beliefs concerning future developments and their potential effects on the company.

Gary Maier: There can be no assurance that future developments affecting the company will be those anticipated by Motorcar Parts of America. However, actual results may differ from those projected in this forward-looking statement. These forward-looking statements involve significant risks and uncertainty, some of which are beyond the control of the company and are subject to change based upon various factors. In particular, expectations about anticipated future growth and opportunities with customers may not be achieved. The company undertakes no obligation to publicly revise or update any forward-looking statements, whether as a result of new information, future events, or other events.

Gary Maier: 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.

Gary Maier: 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 the control of the company and are subject to change based upon various factors. In particular, expectations about anticipated future growth and opportunities with customers may not be achieved. The company undertakes no obligation to publicly revise or update any forward-looking statements, whether as a result of new information, future events, or otherwise.

Gary Maier: These forward-looking statements involve significant risks and uncertainties, some of which are beyond the control of the company and are subject to change based upon various factors.

Gary Maier: In particular, expectations about anticipated future growth and opportunities.

Gary Maier: With customers, it may not be achieved. The company undertakes no obligation to publicly revise or update any forward-looking statements, whether as a result of new information, future events, or otherwise.

Gary Maier: For a 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.

Selwyn Joffe: I would now like to turn the call over to Selwyn and begin today's call.

Selwyn Joffe: Thank you, Gary. I appreciate everyone joining us today. We were encouraged by our record sales performance for the quarter and remain optimistic about the quarters ahead and achieving our full year target. For the quarter, our gross profit and gross margin metrics improved, which David will discuss in more detail, and we expect to realize further improvements through solid sales performance combined with ongoing strategic initiatives to further enhance our operations. Unfortunately, our results for the fiscal first quarter were impacted by sharply unfavorable non-cash mark-to-market foreign exchange laws from the lease liabilities and forward contracts due to a strong dollar versus the peso. Additionally, from an operational standpoint, results were impacted by one-time severance expenses related to strategic cost reduction.

Selwyn Joffe: Thank you, Gary. I appreciate everyone joining us today. We were encouraged by our record sales performance for the quarter and remain optimistic about the quarters ahead and achieving our full year target. For the quarter, our gross profit and gross margin metrics improved, which David will discuss in more detail, and we expect to realize further improvements through solid sales performance combined with ongoing strategic initiatives to further enhance our operations. Unfortunately, our results for the fiscal first quarter were impacted by sharply unfavorable non-cash mark-to-market foreign exchange laws from the lease liabilities and port contracts due to a strong dollar versus the peso. Additionally, from an operational standpoint, results were impacted by one-time severance expenses related to strategic cost reduction.

Selwyn Joffe: Thank you, Gary. I appreciate everyone joining us today. We were encouraged by a record sales performance for the quarter and remain optimistic about the quarters ahead and achieving our full-year targets. For the quarter, our gross profit and gross margin metrics improved, which David will discuss in more detail, and we expect to realize further improvements through solid sales performance combined with ongoing strategic initiatives to further enhance operations.

Selwyn Joffe: For the quarter, our gross profit and gross margin metrics improved, which David will discuss in more detail, and we expect to realize further improvements through solid sales performance combined with ongoing strategic initiatives to further enhance operations.

Selwyn Joffe: Unfortunately, our results for the first quarter were impacted by a sharply unfavorable non-cash mark to mark the foreign exchange laws from the lease liabilities and poor contracts due to a strong dollar bust of the peso. From an operational standpoint, results were impacted by one-time severance expenses related to strategic cost reductions. This initiative will generate expected annualized savings of approximately $7 million. Approximately 90% of the savings will reduce cost if it's sold, and the remainder will reduce operating expenses. This action was part of a multi-year relocation process to reduce cost, utilizing a new low-cost global footprint, and facilitate further operating efficiencies.

Selwyn Joffe: Unfortunately, our results for the fiscal first quarter were impacted by sharply unfavorable non-cash mark-to-market foreign exchange laws from the lease liabilities and forward contracts due to a strong dollar versus the peso.

Selwyn Joffe: From an operational standpoint, results were impacted by one-time severance expenses related to strategic cost reductions.

Selwyn Joffe: This initiative will generate expected annualized savings of approximately $7 million. Approximately 90% of this savings will reduce the cost of goods sold, and the remainder will reduce operating expenses. This action was part of a multi-year relocation process to reduce cost, utilizing a new low-cost global footprint, and facilitate further operating efficiencies. We're actively exploring additional initiatives to further reduce the cost of goods sold. I should note our results for the quarter reflected some industry choppiness, with the month of June regaining some momentum.

Selwyn Joffe: This initiative will generate expected annualized savings of approximately $7 million.

Selwyn Joffe: Approximately 90% of the savings will reduce cost of goods sold and the remainder will reduce operating expenses.

Selwyn Joffe: This action was part of a multi-year relocation process to reduce cost, utilizing a new low-cost global footprint, and facilitate further operating efficiencies.

Selwyn Joffe: We are actively exploring additional initiatives to further reduce cost of goods sold. I should note our results for the quarter reflected some industry choppiness, with the month of June regaining some momentum. This bodes well for the current fiscal second quarter, which historically is stronger than the first quarter. We are off to an excellent start for the second quarter with a strong July. We operated in a market where deferring repairs is not a viable option for too long, other than rotating electrical, which you can't defer at all; hardware that will certainly hasten the failure of all parts that we offer.

Selwyn Joffe: We are actively exploring additional initiatives to further reduce cost of goods sold.

Selwyn Joffe: I should note our results for the quarter reflected some industry choppiness with the month of June regaining some momentum.

Selwyn Joffe: This bodes well for the current fiscal second quarter, which historically is stronger than the first quarter. We are off to an excellent start for the second quarter with a strong July. We operate in a market where deferring repairs is not a viable option for too long, other than rotating electrical, which you can't defer at all. Hard weather will certainly hasten the failure of all parts that we are.

Selwyn Joffe: This bodes well for the current fiscal second quarter, which historically is stronger than the first quarter.

Selwyn Joffe: We are off to an excellent start for the second quarter with a strong July . We operate in a market where deferring repairs is not a viable option for too long, other than rotating electrical, which you can't defer at all. Hot weather will certainly hasten the failure of all parts that we offer.

Selwyn Joffe: Let me take a moment to highlight a few key near-term strategic initiatives that support our favorable outlook. As I noted during our urine call, volume increases in our break program will help absorb overhead, which in turn will result in accretion to overall margins. We expect accelerating break-related product sales will lead to more opportunities to take advantage of efficiencies from both purchasing and production. As many of you know, we started our break call of a business as a Greenfield operation in August of 2019. And today we are one of the leading suppliers in this category. As our newer break product lines gain traction, we expect more efficient inventory turns to further support initiatives to neutralize working capital.

Selwyn Joffe: Let me take a moment to highlight a few key near-term strategic initiatives that support our favorable outcomes. As I noted during our year-end call, volume increases in our brake program will help absorb overhead, which in turn will result in accretion to overall margin. We expect accelerating brake-related product sales will lead to more opportunity to take advantage of efficiencies from both purchasing and production. As many of you know, we started our brake caliper business as a greenfield operation in August of 2019.

Selwyn Joffe: Let me take a moment to highlight a few key near-term strategic initiatives that support our favorable outlook.

Selwyn Joffe: As I noted during our year-end call, volume increases in our brake program will help absorb overhead, which in turn will result in accretion to overall margins.

Selwyn Joffe: We expect accelerating brake-related product sales will lead to more opportunities to take advantage of efficiencies from both purchasing and production.

Selwyn Joffe: As many of you know, we started our brake caliper business as a greenfield operation in August of 2019.

Selwyn Joffe: And today, we are one of the leading suppliers in this category. As our newer brake product lines gain traction, we expect more efficient inventory turns to further support initiatives to neutralize wood. Second, with respect to generating cash from working capital on a year-over-year basis, we are focused on inventory and accounts payable, which David will expand upon shortly. We have implemented processes to extend days outstanding on accounts payable and to enhance inventory efficiency.

Selwyn Joffe: Today, we are one of the leading suppliers in this category.

Selwyn Joffe: As our newer brake product lines gain traction, we expect more efficient inventory turns to further support initiatives to neutralize working capital.

Selwyn Joffe: Second, with respect to generating cash from working capital on a Euro-bio basis, we are focused on inventory and accounts payable, which David will expand upon shortly. We have implemented processes to extend days outstanding on accounts payable and to enhance inventory efficiencies. These processes are still in their early stages. However, we are recognizing meaningful benefits in particular with our supplied chain finance program. We continue to evaluate allocation of capital to maximize shareholder value. The first quarter working capital ratios were somewhat negative, though we are confident that working capital ratios will move in the right direction as David will discuss further.

Selwyn Joffe: Second, with respect to generating cash from working capital on a year-over-year basis, we are focused on inventory and accounts payable, which David will expand upon shortly.

David: We have implemented processes to extend days outstanding on accounts payable and to enhance inventory efficiencies.

Selwyn Joffe: These processes are still in their early stages, but we are recognizing meaningful benefits, in particular with our Supply Chain Finance Program. We continue to evaluate the allocation of capital to maximize shareholder value. The first quarter working capital ratios were somewhat negative, though we are confident that working capital ratios will move in the right direction, as David will discuss further.

Selwyn Joffe: These processes are still in their early stages, but we are recognizing meaningful benefits, in particular with our Supply Chain Finance Group. We continue to evaluate the allocation of capital to maximize shareholder value. The first quarter working capital ratios were somewhat negative, but we are confident that working capital ratios will move in the right direction, as David will discuss further. Another positive ongoing initiative is the acceleration of our new part number introduction. Targeting at least 800 per year, as supported by the introduction of more than 150 new post numbers last month, covering an additional 49 million vehicles on the road.

Selwyn Joffe: These processes are still in their early stages. However, we are recognizing meaningful benefits.

David: in particular with our supply chain finance program.

David: We continue to evaluate allocation of capital to maximize shareholder value.

Selwyn Joffe: The first quarter working capital ratios were somewhat negative, though we are confident that working capital ratios will move in the right direction, as David will discuss further.

Selwyn Joffe: Another positive ongoing initiative is the acceleration of our new part number introductions, targeting at least 800 per euro, as supported by the introduction of more than 150 new part numbers last month, covering the additional 49 million vehicles on the road. This main town maintains our leadership position in the categories we supply, needs to consume a need, and adds organic growth to our sales base. Not only are we growing organically, but we have secured meaningful new business commitments across all of our product lines. With respect to our diagnostic business, as I have previously mentioned, we expect to sell more than $100 million of diagnostic equipment within the next three years, with further opportunities pending.

Selwyn Joffe: Another positive ongoing initiative is the acceleration of our new part number introduction, targeting at least 800 per year, as supported by the introduction of more than 150 new part numbers last month, covering an additional 49 million vehicles on the road. This maintains our leadership position in the categories we supply, meets a consumer need, and adds organic growth to our sales. Not only are we growing organically, but we have secured meaningful new business commitments across all of our products.

Selwyn Joffe: Another positive ongoing initiative is the acceleration of our new part number introductions.

Selwyn Joffe: targeting at least 800 per year, as supported by the introduction of more than 150 new part numbers last month, covering an additional 49 million vehicles on the road.

Selwyn Joffe: This maintains our leadership position in the categories we supply, meets a consumer need, and adds organic growth to our sales. Not only are we growing organically, but we have secured meaningful new business commitments across all of our products. With respect to our diagnostic business, as I've previously mentioned, we expect to sell more than $100 million of diagnostic equipment within the next three years, with further opportunities. We expect additional service revenue as more testers are deployed.

Selwyn Joffe: This maintains our leadership position in the categories we supply.

Selwyn Joffe: meets a consumer need and adds organic growth to our sales base.

Selwyn Joffe: Not only are we growing organically,

Selwyn Joffe: that we have secured meaningful new business commitments across all of our product lines.

Selwyn Joffe: With respect to our diagnostic business, as I've previously mentioned, we expect to sell more than $100 million of diagnostic equipment within the next three years, with further opportunities. Additionally, we expect additional service revenue as more testers are deployed.

Selwyn Joffe: With respect to our diagnostic business, as I have previously mentioned, we expect to sell more than $100 million of diagnostic equipment within the next three years, with further opportunities pending.

Selwyn Joffe: We expect additional service revenue as more tests are deployed. We expect more opportunities outside North America as the business evolves. With regard to our heavy-duty business, we continue to leverage our reputation and industry position in this market, particularly with regard to supplying alternatives and starters to our channel partners, who are leaders in the heavy-duty aftermarket segment. Our growth opportunities continue to gain momentum across multiple platforms such as agriculture, Class A-trucks, refrigeration, construction, material handling, and transit-slush motor coaches. Dixies are also involved as an important supplier to the heavy-duty original equipment manufacturers. As the new fiscal year evolves, we remain focused on sales, profitability, and neutralizing work in capital.

Selwyn Joffe: We expect additional service revenue as more testers are deployed.

Selwyn Joffe: We expect more opportunities outside of North America as the business evolves. With regard to our heavy-duty business, we continue to leverage our reputation and industry position in this market, particularly with regard to supplying alternators and starters to our channel partners, who are leaders in the heavy-duty aftermarket sector. Our growth opportunities continue to gain momentum across multiple platforms, such as agriculture, Class A trucks, refrigeration, construction, Material Handling, and Transit Slush Motor Co. Dixie is also involved as an important supplier to heavy-duty original equipment manufacturers.

Selwyn Joffe: We expect more opportunities outside North America as the business evolves. With regard to our heavy-duty business, we continue to leverage our reputation and industry position in this market, particularly with regard to supplying alternators and starters to our channel partners, who are leaders in the heavy-duty aftermarket sector. Our growth opportunities continue to gain momentum across multiple platforms, such as agriculture, Class A trucks, refrigeration, construction, Material Handling, and Transit Slash Motor Coach.

Selwyn Joffe: We expect more opportunities outside North America as the business evolves.

Selwyn Joffe: With regard to our heavy-duty business, we continue to leverage our reputation and industry position in this market.

Selwyn Joffe: particularly with regard to supplying alternators and starters to our channel partners who are leaders in the heavy-duty aftermarket segment.

Selwyn Joffe: Our growth opportunities continue to gain momentum across multiple platforms.

Selwyn Joffe: such as Agriculture, Class A Trucks, Refrigeration, Construction.

Selwyn Joffe: Material Handling, and Transit Slash Motor Coaches.

Selwyn Joffe: Dixie is also evolving as an important supplier to heavy-duty original equipment manufacturers. As the new fiscal year progresses, we remain focused on sales, profitability, and neutralizing working capital. We are confident that our sales and profitability will grow organically and with our strong new business commitment. As I mentioned earlier, this, along with numerous efficiency initiatives, will enhance profitability and improve cash flow generation. From a strategic standpoint, we are continuing to leverage our strengths, including great products manufactured at state-of-the-art facilities.

Selwyn Joffe: Dixie is also involving as an important supplier to the heavy-duty original equipment manufacturers.

Selwyn Joffe: As the new fiscal year evolves, we remain focused on sales, profitability, and neutralizing working capital. We are confident that our sales and profitability will grow organically and with our strong new business commitment. As I mentioned earlier, this, along with numerous efficiency initiatives, will enhance profitability and improve cash flow generation. From a strategic standpoint, we are continuing to leverage our strengths, including great products manufactured at state-of-the-art facilities. Solid customer relationships, industry-leading SKU coverage, not to mention our value-added merchandising and marketing support.

Selwyn Joffe: As the new fiscal year evolves, we remain focused on sales, profitability, and neutralizing working capital.

Selwyn Joffe: We are confident that our sales and profitability will grow organically and with our strong new business commitments, as I mentioned earlier. This, along with numerous efficiency initiatives, will enhance profitability and improve cashflow generation.

Selwyn Joffe: We are confident that our sales and profitability will grow organically and with our strong new business commitments.

Selwyn Joffe: As I mentioned earlier.

Selwyn Joffe: This, along with numerous efficiency initiatives, will enhance profitability and improve cash flow generation.

Selwyn Joffe: From a strategic standpoint, we will continue to leverage our strengths, including great products, manufactured at state-of-the-art facilities, solid customer relationships, industry-leading skew coverage, not to mention our value-added merchandising and marketing support. I should mention that we opened a new facility in 2024 in Malaysia to support manufacturing of wheel hubs for direct shipping to our customers, which is expected to enhance our competitive position. Our hard part sales in Mexico continue to gain momentum as we experience increased demand for our after-market parts. The rate of growth in this market is exciting, and we are well positioned to utilize our footprint to meet the growing demand.

Selwyn Joffe: From a strategic standpoint, we are continuing to leverage our strengths, including great products manufactured at state-of-the-art facilities.

Selwyn Joffe: Solid Customer Relationships, industry-leading SKU coverage, not to mention our value-added merchandising and marketing support. I should mention that we opened a new facility in 2024 in Malaysia to support the manufacturing of wheel hubs for direct shipment to our customers, which is expected to enhance our competitive position. Our hard part sales in Mexico continue to gain momentum as we experience increased demand for our aftermarket parts. The rate of growth in this market is exciting, and we are well-positioned to utilize our footprint to meet the growing demand. We are focused on increasing share in this region. We continue to benefit from and grow sales via relationships with U.S.-based retailers who are gaining a presence in this emerging market.

Selwyn Joffe: Solid customer relationships, industry-leading SKU coverage, not to mention our value-added merchandising and marketing support.

Selwyn Joffe: I should mention that we opened a new facility in 2024 in Malaysia to support the manufacturing of wheel hubs for direct shipment to our customers, which is expected to enhance our competitive position. Our hard part sales in Mexico continue to gain momentum as we experience increased demand for our aftermarket parts. The rate of growth in this market is exciting, and we are well-positioned to utilize our footprint to meet the growing demand. We are focused on increasing our share in this region. We continue to benefit from and grow sales via relationships with U.S.-based retailers who are gaining a presence in this emerging market.

Selwyn Joffe: I should mention that we opened a new facility in 2024 in Malaysia to support manufacturing of wheel hubs for direct shipment to our customers.

Selwyn Joffe: which is expected to enhance our competitive position.

Selwyn Joffe: Our hard part sales in Mexico continue to gain momentum as we experience increased demand for our aftermarket parts.

Selwyn Joffe: The rate of growth in this market is exciting and we are well-positioned to utilize our footprint to meet the growing demand.

Selwyn Joffe: We are focused on increasing share in this region. We continue to benefit and grow sales via relationships with U.S. based retailers who are gaining a presence in this emerging market. Favorable long-term industry dynamics continue to bow to all for the company, and we are extremely well positioned for sustainable top and bottom-line growth in our hard parts business, as well as our testing solutions business. We are focused on growth across all product lines, including our quality build brand, which is gaining market share within the professional install of market. This includes our most recent addition to our portfolio of great telephs, great pads, and great roadies.

Selwyn Joffe: We are focused on increasing share in this region.

Selwyn Joffe: We continue to benefit and grow sales by our relationships with U.S.-based retailers who are gaining a presence in this emerging market.

Selwyn Joffe: Favorable long-term industry dynamics continue to bode well for the company, and we're extremely well positioned for sustainable top and bottom line growth in our hard parts business, as well as our testing solution. We are focused on growth across all product lines, including our quality-built brand, which is gaining market share within the professional installation. This includes our most recent additions to our portfolio of brake calipers, brake pads, and brake rotors. I reiterate, as we grow these product lines, we expect overall gross margin appreciation.

Selwyn Joffe: Favorable long-term industry dynamics continue to bode well for the company and we are extremely well positioned for sustainable top and bottom line growth in our hard parts business.

Selwyn Joffe: as well as our testing solutions business.

Selwyn Joffe: We are focused on growth across all product lines, including our quality-built brand, which is gaining market share within the professional installer market.

Selwyn Joffe: This includes our most recent additions to our portfolio of brake calipers, brake pads, and brake rotors.

Selwyn Joffe: I reiterate, as we grow these product lines, we expect overall growth, margin, and appreciation. In short, we have the capacity and capabilities to support our customers' increasing demand across multiple lines. Our expected positive cash flow on an annualized basis will enable us the flexibility to further pay down debt and pursue other related opportunities to enhance shareholder value. In conclusion, non-disgressionally aftermarket parts of the internal combustion engine market will be here for decades. An outlook supported by recently updated industry data showing that the average age of vehicles is not 12.8 years. It is worth highlighting that 98.8 percent of the U.S.

Selwyn Joffe: I reiterate, as we grow these product lines, we expect overall gross margin accretion.

Selwyn Joffe: In short, we have the capacity and capabilities to support our customers' increasing demand across multiple lines. Our expected positive cash flow on an annualized basis will enable us the flexibility to further pay down debt and pursue other related opportunities to enhance shareholding. In conclusion, non-discretionary aftermarket parts for the internal combustion engine market will be here for the long haul, an outlook supported by recently updated industry data showing that the average age of vehicles is now 12.8 years. It is worth highlighting that 98.8% of the U.S. car park is comprised of hybrid and internal combustion vehicles.

Selwyn Joffe: In short, we have the capacity and capabilities to support our customers' increasing demand across multiple lines.

Selwyn Joffe: Our expected positive cash flow on an annualized basis will enable us the flexibility to further pay down debt and pursue other related opportunities to enhance shareholder value.

Selwyn Joffe: In conclusion, non-discretionary aftermarket parts for the internal combustion engine market will be here for decades.

Selwyn Joffe: An outlook supported by recently updated industry data showing that the average age of vehicles is now 12.8 years.

Selwyn Joffe: car park is comprised of hybrid and internal combustion environments. One of our key competitive advantages is our ability to offer a broad range of applications for all makes and models to remain focused on newer model applications and our ability to meet expected demand as these vehicles enter the replacement market.

Selwyn Joffe: It is worth highlighting that 98.8% of the U.S. car park is comprised of hybrid and internal combustion vehicles.

Selwyn Joffe: One of our key competitive advantages is our ability to offer a broad range of applications for all makes and models. We remain focused on newer model applications and our ability to meet expected demand as these vehicles enter the replacement market. Finally, before I turn the call over to David, I'd like to comment on our recent announcements regarding Jack Lebow and Anil Sridivastava, who are standing for election to our board at the company's annual meeting.

David Lee: One of our key competitive advantages is our ability to offer a broad range of applications for all makes and models. We remain focused on newer model applications and our ability to meet expected demand as these vehicles enter the replacement market. Finally, before I turn the call over to David, I'd like to comment on our recent announcements regarding Jack Lebow and Anil Sridivastava, who are standing for election to our board at the company's annual meeting.

David Lee: One of our key competitive advantages is our ability to offer a broad range of applications for all makes and models.

David Lee: We remain focused on newer model applications and our ability to meet expected demand as these vehicles enter the replacement market.

Selwyn Joffe: Finally, before I turn the call over to David, I'd like to comment on our recent announcements regarding Jack Liebel and a Neil Street disaster who are standing for election to our board at the company's annual meeting. next month. Their impressive backgrounds and qualifications are detailed in the press releases in Proxy State. Let me just say both of these candidates offer unique perspectives and insights that will complement our commitment to driving shareholder value at a particularly exciting point in the company's history. These two fine candidates are indicative of our commitment to our board professional program. I encourage everyone to read their biographies and support the nominees.

Selwyn Joffe: Their impressive backgrounds and qualifications are detailed in the press releases and proxies. Let me just say both of these candidates offer unique perspectives and insights that will complement our commitment to driving shareholder value at a particularly exciting point in the company's history. These two fine candidates are indicative of our commitment to our board refreshment program. I encourage everyone to read their biographies and support them. I'll now turn the call over to David to review our results in greater detail.

David Lee: Their impressive backgrounds and qualifications are detailed in the press releases and proxies. Let me just say both of these candidates offer unique perspectives and insights that will complement our commitment to driving shareholder value at a particularly exciting point in the company's history. These two fine candidates are indicative of our commitment to our board refreshment program. I encourage everyone to read their biographies and support them. I'll now turn the call over to David to review our results in greater detail.

David Lee: Finally, before I turn the call over to David, I'd like to comment on our recent announcements regarding Jack Lebow and Anil Sridivastava, who are standing for election to our board at the company's annual meeting next month.

David Lee: Their impressive backgrounds and qualifications are detailed in the press releases and proxy statements.

David Lee: Let me just say both of these candidates offer unique perspectives and insights that will complement our commitment to driving shareholder value at a particularly exciting point in the company's history.

David Lee: These two fine candidates are indicative of our commitment to our board refreshment program.

David Lee: I encourage everyone to read their biographies and support the nominees.

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

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

David Lee: Thank you, Selwyn, and good morning everyone. I encourage everyone to read the earnings press release issued this morning as well as a 10-Q that will be filed later today. Let me first reiterate key financial performance metrics for our fiscal 25 first quarter that we highlighted in this morning's news release. Net sales increased 6.4% to a first quarter record of $169.9 million. Gross profit increased 9.8% to $29.2 million, and gross margin increased modestly to 17.2%.

David Lee: Thank you, Selwyn, and good morning, everyone. I encourage everyone to read the earnings press release issued this morning, as well as the 10-Q that will be filed later today. Let me first reiterate key financial performance metrics for our fiscal 25 first quarter that we highlighted in this morning's news release. Net sales increased 6.4% to a first quarter record of $169.9 million. Gross profit increased 9.8% to $29.2 million, and gross margin increased modestly to 17.2%.

David Lee: Thank you, Selwyn.

David Lee: Good morning, everyone. I encourage everyone to read the earnings press for these issues this morning, as well as the 10-Q that will be filed later today. Let me first reiterate key financial performance metrics for our fiscal 25 first quarter that we highlighted in this morning's news release. Net sales increased 6.4% to a first quarter record of 169.9 million. Gross profit increased 9.8% to 29.2 million. Gross margin increased modestly to 17.2%. Offering results impacted by an unfavorable non-tash 11.1 million foreign exchange loss from lease liability and floor contracts. Implement cost reduction initiatives to provide expected annualized savings of approximately $7 million.

David Lee: Thank you, Selwyn, and good morning, everyone. I encourage everyone to read the earnings press release issue this morning, as well as the 10-Q that will be filed later today.

David Lee: Offering results impacted by an unfavorable non-cash $11.1 million foreign exchange loss from lease liabilities and forward contracts, implemented cost reduction initiatives to provide expected annualized savings of approximately $7 million. Net sales for the fiscal 25 first quarter increased 6.4% to a first quarter record $169.9 million from $159.7 million in the prior year.

Speaker Change: Let me first reiterate key financial performance metrics for our Fiscal 25 first quarter that we highlighted in this morning's news release.

David Lee: Net sales increased 6.4% to a first quarter record of $169.9 million.

David Lee: Gross profit increased 9.8% to $29.2 million.

David Lee: Gross margin increased modestly to 17.2 percent.

David Lee: Offering results impacted by an unfavorable non-cash $11.1 million foreign exchange loss from lease liabilities and foreign contracts, the company implemented cost reduction initiatives to provide expected annualized savings of approximately $7 million. Net sales for the fiscal 25 first quarter increased 6.4% to a first quarter record $169.9 million from $159.7 million in the prior year.

David Lee: Operating results impacted by an unfavorable non-cash $11.1 million foreign exchange loss from lease liabilities and forward contracts.

David Lee: Implemented cost reduction initiatives to provide expected annualized savings of approximately $7 million.

David Lee: Net sales for the fiscal 25 first quarter increased 6.4% to a first quarter record 169.9 million from 159.7 million in the prior year. Gross profit for the fiscal 25 first quarter increased 9.8% to 29.2 million from 26.6 million a year earlier. I should mention that gross profit for the quarter was impacted by non-cash items. The non-cash items reflect core and finished good premium amortization and revaluation of cores on customer shelves, which are unique to certain of our products and required by GAAP. The total for these non-cash items in the quarter was approximately 2.7 million. A more detailed explanation of core accounting is available in a video posted on the company's website.

David Lee: Net sales for the fiscal 25 first quarter increased 6.4% to a first quarter record $169.9 million from $159.7 million in the prior year.

David Lee: Gross profit for the fiscal 25 first quarter increased 9.8% to $29.2 million from $26.6 million a year earlier. I should mention that gross profit for the quarter was impacted by non-cash items. The non-cash items reflect core and finished goods premium amortization and revaluation of cores on customer shelves, which are unique to certain of our products required by GAAP. The total for these non-cash items in the quarter was approximately $2.7 million. A more detailed explanation of core accounting is available in a video posted on the company's website.

David Lee: Gross Profit for the Fiscal 25 First Quarter.

David Lee: increased 9.8% to 29.2 million from 26.6 million a year earlier.

David Lee: I should mention that gross profit for the quarter was impacted by non-cash items.

David Lee: The non-cash items reflect core and finished good premium amortization and reevaluation of cores on customer shelves, which are unique to certain of our products and required by GAAP.

David Lee: The total for these non-cash items in the quarter was approximately $2.7 million. A more detailed explanation of core accounting is available in a video posted on the company's website.

David Lee: Gross margin for the fiscal 25 first quarter increased to 17.2% from 16.6% a year earlier. Gross margin for the fiscal first quarter was negatively impacted by higher returns as a percent of the sales, but we expect to return to normalize return levels going forward. Additional prices and increases in effect and operating efficiencies will enhance gross margin. Due primarily to a 15.3 million increased non-cash market foreign exchange loss compared with the prior year and a 1.9 million increased expense resulting from current exchange rates compared with the prior year. As well as 2.9 million, seven expenses operating expenses were 35.6 million compared with 16.1 million last year.

David Lee: Gross margin for the fiscal 25 first quarter increased to 17.2% from 16.6% a year earlier. Gross margin for the fiscal first quarter was negatively impacted by higher returns as a percentage of sales, but we expect to return to normalized return levels going forward. Additional price increases in effect, and operating efficiencies will enhance gross margins. Due primarily to a $15.3 million increased non-cash mark-to-market foreign exchange loss compared with the prior year and a $1.9 million increased expense resulting from current exchange rates compared with the prior year.

David Lee: Gross margin for the fiscal 25 first quarter increased to 17.2% from 16.6% a year earlier. Gross margin for the fiscal first quarter was negatively impacted by higher returns as a percentage of sales, but we expect to return to normalize return levels going forward. Additional prices and increases in effect, and operating efficiencies will enhance gross margins. Due primarily to a $15.3 million increased non-cash mark-to-market foreign exchange loss compared with the prior year, and a $1.9 million increased expense resulting from current exchange rates compared with the prior year.

David Lee: Gross margin for the fiscal 25 first quarter increased to 17.2% from 16.6% a year earlier.

David Lee: Gross margin for the fiscal first quarter was negatively impacted by higher returns as a percentage of sales, but we expect to return to normalized return levels going forward.

David Lee: Additional prices increases in effect and operating efficiencies will enhance gross margin.

David Lee: Due primarily to a $15.3 million increased non-cash market-to-market foreign exchange loss compared with the prior year and a $1.9 million increased expense resulting from currency exchange rates compared with the prior year.

David Lee: As well as $2.9 million in severance expenses, operating expenses were $35.6 million, compared with $16.1 million last year. I should note that excluding these items, operating expenses decreased by $644,000 to $20.7 million, compared with $21.3 million a year earlier. Non-cash loss for the foreign exchange impact of lease liabilities and forward contracts was $11.1 million, compared with a non-cash gain of $4.3 million a year earlier

David Lee: as well as $2.9 million severance expenses.

David Lee: Operating expenses were $35.6 million compared with $16.1 million last year.

Operator: At this time, I would like to welcome everyone to the Motorcar Parts of America Inc, fiscal 2025 first quarter conference call and webcast. 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 press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, again, press the star and one.

David Lee: I should note that excluding these items, above operating expenses decreased by 644,000 to 20.7 million compared with 21.3 million a year earlier. Non-cash loss for the foreign exchange impact of least high abilities and forward contracts was 11.1 million, compared with a non-cash gain of 4.3 million a year earlier. In addition, the company incurred 2.9 million sevens expenses due to headcount reductions in connection with our strategy to utilize our global footprint to enhance operating efficiencies, with expected annualized cost reductions of approximately 7 million, which includes salary, infrastructure, and other related operating expenses. Results for the fiscal first quarter were impacted by 2.7 million of higher interest expenses, primarily due to increased collection of receivables utilizing accounts receivable discount programs on higher sales.

David Lee: I should note that excluding these items above, operating expenses decreased by $644,000 to $20.7 million, compared with $21.3 million a year earlier.

David Lee: Non-cash loss for the foreign exchange impact of lease liabilities and forward contracts was $11.1 million, compared with a non-cash gain of $4.3 million a year earlier.

Gary Maier: I would now like to turn the call over to Gary Maier, Vice President of Corporate Communications and Investor Relations. You may begin. Thank you, Kaelin. Thanks, everyone, for joining us for our call. Before I turn the call over to Selwyn Joffe and Chairman President 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. The Private Security's litigation reform act of 1995 provides a safe harbor for certain forward-looking statements made during today's call.

David Lee: In addition, the company incurred $2.9 million in severance expenses due to headcount reductions in connection with our strategy to utilize our global footprint to enhance operating efficiency, with expected annualized cost reductions of approximately $7 million, which includes salary, infrastructure, and other related operating expenses. Results for the fiscal first quarter were impacted by $2.7 million of higher interest expenses, primarily due to increased collection of receivables, utilizing accounts receivable discount programs on higher sales.

David Lee: In addition, the company incurred $2.9 million in severance expenses due to headcount reductions in connection with our strategy to utilize our global footprint to enhance operating efficiency, with expected annualized cost reductions of approximately $7 million, which includes salary, infrastructure, and other related operating expenses. Results for the fiscal first quarter were impacted by $2.7 million of higher interest expenses primarily due to increased collection of receivables utilizing accounts receivable discount programs on

David Lee: In addition, the company incurred $2.9 million severance expenses due to headcount reductions in connection with our strategy to utilize our global footprint to enhance operating efficiencies.

David Lee: With expected annualized cost reductions of approximately $7 million, which includes salary, infrastructure, and other related operating expenses.

David Lee: Results for the fiscal first quarter were impacted by $2.7 million of higher interest expenses, primarily due to increased collection of receivables, utilizing accounts receivable discount programs on higher sales.

Gary Maier: These forward-looking statements are based on the company's current expectations and beliefs concerning future developments and their potential effects on the company. There can be no assurance the 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 the control of the company and are subject to change based upon various factors.

David Lee: Partially offset by lower average outstanding balances under the company's credit facility. Interest expense was 14.4 million compared with the 11.7 million for last year, which is primarily related to accounts receivable discount programs. Interest expense related to accounts receivable discount programs was 9.5 million compared with 6.3 million for the prior year. We are working diligently to address the higher interest environment, particularly areas that we can control. In addition, we continue to work with our customers to mitigate higher interest rates. For the first quarter, income tax benefit was 178,000 compared with 9,000 income tax benefit for the prior year.

David Lee: Partially offset by lower average outstanding balances under the company's credit facility.

David Lee: Partially offset by lower average outstanding balances under the company's credit facility. Interest expense was $14.4 million, compared with $11.7 million for last year, which is primarily related to accounts receivable discount programs. Interest expense related to accounts receivable discount programs was $9.5 million compared with $6.3 million for the prior year. We are working diligently to address the higher interest environment, particularly areas that we can control. In addition, we continue to work with our customers to mitigate higher interest rates.

David Lee: Partially offset by lower average outstanding balances under the company's credit facility. Interest expense was $14.4 million, compared with $11.7 million for last year, which is primarily related to accounts receivable discount programs. Interest expense related to accounts receivable discount programs was $9.5 million, compared with $6.3 million for the prior year. We are working diligently to address the higher interest environment, particularly areas that we can control. In addition, we continue to work with our customers to mitigate higher interest rates.

David Lee: Interest expense was $14.4 million compared with $11.7 million for last year, which is primarily related to accounts receivable discount programs.

David Lee: Interest expense related to accounts receivable discount programs was $9.5 million compared with $6.3 million for the prior year.

Gary Maier: In particular, expectations about anticipated future growth and opportunities with customers may not be achieved. The company undertakes no obligation to publicly revise or update any forward-looking statements, whether as a result of new information future events or otherwise.

David Lee: We are working diligently to address the higher interest environment, particularly areas that we can control.

David Lee: In addition, we continue to work with our customers to mitigate higher interest rates.

David Lee: For the first quarter, the income tax benefit was $178,000 compared with $9,000 for the prior year. The low effective tax rate benefit for the fiscal first quarter was due in part to the inability to recognize the benefit of losses at specific jurisdictions.

David Lee: For the first quarter, income tax benefit was $178,000, compared with $9,000 income tax benefit for the prior year.

David Lee: The low-effective tax rate benefit for the fiscal first quarter was due in part to the inability to recognize the benefit of losses at specific jurisdictions. However, we expect these losses will be utilized against future profits, which will benefit future tax rates. Obviously, there are various factors impacting the tax effect. As a result of items discussed above, net loss for the fiscal 25 first quarter was 18.1 million, compared with a net loss of 1.4 million a year ago. With higher expected sales volume moving forward, and the full impact of certain price increases already in effect, as well as operating efficiencies, results are expected to further improve.

David Lee: The low effective tax rate benefit for the fiscal first quarter was due in part to the inability to recognize the benefit of losses at specific jurisdictions. However, we expect these losses will be utilized against future profits, which will benefit future tax rates.

David Lee: However, we expect these losses will be utilized against future profits, which will benefit future taxes. Obviously, there are various factors impacting the. As a result of the items discussed above, the net loss for the fiscal 25 first quarter was $18.1 million, compared with a net loss of $1.4 million a year ago. With higher expected sales volume moving forward and the full impact of certain price increases already in effect, as well as operating efficiencies, results are expected to further improve, due primarily to the items I discussed previously.

Selwyn Joffe: I would now like to turn the call over to Selwyn and begin today's call. Thank you, Gary. I appreciate everyone joining us today. We were encouraged by a record sales performance for the quarter and remain optimistic about the quarters ahead and achieving our full-year targets. For the quarter, our gross profit and gross margin metrics improved, which David will discuss in more detail, and we expect to realize further improvements through solid sales performance combined with ongoing strategic initiatives to further enhance operations.

David Lee: Obviously, there are various factors impacting the tax effect.

David Lee: As a result of the items discussed above, net loss for the fiscal 25 first quarter was $18.1 million, compared with a net loss of $1.4 million a year ago.

David Lee: With higher expected sales volume moving forward, and the full impact of certain price increases already in effect, as well as operating efficiencies, results are expected to further improve.

David Lee: Do primarily to the items I discussed previously, EBITDA for the fiscal first quarter was negative 1.1 million, reflecting the negative 12.6 million impact of non-cash items and 2.9 million in cash items in Exhibit three of this morning's earnings press release. EBITDA before the impact of non-cash and cash items mentioned above was 14.4 million for the first quarter.

David Lee: EBITDA for the fiscal first quarter was negative $1.1 million, reflecting the negative... 12.6 million impact of non-cash items and 2.9 million in cash items. It exhibits three of this morning's earnings press. EBDOT before the impact of non-cash and cash items mentioned above was $14.4 million for the first quarter.

David Lee: EBITDA for the fiscal first quarter was negative 1.1 million, reflecting the negative, 12.6 million impact of non-cash items and 2.9 million in cash items. It exhibits three of this morning's earnings press. EBDA before the impact of non-cash and cash items, mentioned above, was $14.4 million for the first quarter.

David Lee: due primarily to the items I discussed previously.

David Lee: EBITDA for the fiscal first quarter was negative 1.1 million, reflecting the negative

David Lee: 12.6 million impact of non-cash items, and 2.9 million in cash items. It exhibits three of this morning's earnings press release.

David Lee: EBDA, before the impact of non-cash and cash items mentioned above, was $14.4 million for the first quarter.

David Lee: Now we will move on to cash low and key corporate items. The company used cash of approximately 20.8 million in operating activities during the fiscal 25 first quarter, impacted by a reduction of accounts payable related to the seasonal inventory growth during the second half of fiscal year 2024 to support expected business increases for fiscal year 2025. We anticipate an increase in operating profit on a year-over-year basis for fiscal 25 and the generation of positive cash below for the year, supported by organic growth from customer demand and operating efficiencies from our global footprint expansion. In addition to our goal of generating increased operating profits, we're diligently focused on opportunities to neutralize working capital, including customer demand planning, enhance inventory management, and further extending our vendor payment terms. Respect increasing financial performance from both new and existing product lines, including our emerging break categories.

David Lee: Now, we will move on to cash flow and key corporate items. The company used cash of approximately $20.8 million in operating activities during the fiscal 25 first quarter, impacted by a reduction of accounts payable related to seasonal inventory growth during the second half of fiscal year 2024 to support expected business increases for fiscal year 2025. We anticipate an increase in operating profit on a year-over-year basis for fiscal 25 and the generation of positive cash flow for the year, supported by organic growth from customer demand and operating efficiencies from our global footprint expansion.

David Lee: Now, we will move on to cash flow and key corporate items. The company used cash of approximately $20.8 million in operating activities during the fiscal 25 first quarter, impacted by a reduction of accounts payable related to seasonal inventory growth during the second half of fiscal year 2024 to support expected business increases for fiscal year 2025. We anticipate an increase in operating profits on a year-over-year basis for Fiscal 25 and the generation of positive cash flow for the year, supported by organic growth from customer demand and operating efficiencies from our global footprint expansion.

David Lee: Now, we will move on to Cash Flow and Key Corporate Items.

Selwyn Joffe: This action was part of a multi-year relocation process to reduce cost, utilizing a new low-cost global footprint, and facilitate further operating efficiencies. We are actively exploring additional initiatives to further reduce cost of goods sold. I should note our results for the quarter reflected some industry choppiness with the month of June regaining some momentum. This bodes well for the current fiscal second quarter, which historically is stronger than the first quarter. We are off to an excellent start for the second quarter with a strong July.

David Lee: The company used cash of approximately $20.8 million in operating activities.

David Lee: during the fiscal 25 first quarter, impacted by a reduction of accounts payable related to the seasonal inventory growth during the second half of fiscal year 2024 to support expected business increases for fiscal year 2025.

David Lee: We anticipate an increase in operating profit on a year-over-year basis for Fiscal 25, and a generation of positive cash flow for the year, supported by organic growth from customer demand and operating efficiencies from our global footprint expansion.

Selwyn Joffe: We operated in a market where deferring repairs is not a viable option for too long, other than rotating electrical, which you can't defer at all, hardware that will certainly hasten the failure of all parts that we offer.

David Lee: In addition to our goal of generating increased operating profits, we're diligently focused on opportunities to neutralize working capital, including customer demand planning, enhanced inventory management, and further extending our vendor payment. We expect increasing financial performance from both new and existing product lines, including our emerging gray category. Net bank debt was $136.3 million at the end of the quarter, compared with $114 million as of March 31st, 2024. However, net debt was lower, compared with $168.1 million at the prior year, June 30th, 2024.

David Lee: In addition to our goal of generating increased operating profits, we're diligently focused on opportunities to neutralize working capital, including customer demand, planning,

David Lee: Enhanced Inventory Management, and further extending our vendor payment terms.

David Lee: We expect increasing financial performance from both new and existing product lines, including our emerging gray categories.

David Lee: Net bank debt was 136.3 million at the end of the quarter, compared with 114 million as of March 31, 2024; however, net debt was lower compared with 168.1 million at prior year June 30, 2023. Total cash and availability was approximately 90 million. As previously provided, our expectation for fiscal 25 is to achieve sales in the range of 746 and 766 million, representing between 3.9% and 6.7% increase of 6% year-over-year growth, respectively. We expect to see margin accretion from efficiencies related to higher volume, price increases, and cost-cutting initiatives. With respect to cash flow, our expectation is to generate positive cash flow for the full fiscal year, as I previously highlighted.

David Lee: Net bank debt was $136.3 million at the end of the quarter, compared with $114 million as of March 31, 2024. However, net debt was lower, compared with $168.1 million at prior year June 30, 2023.

David Lee: Total cash and availability was approximately $90 million. As previously provided, our expectation for Fiscal 25 is to achieve sales in the range of $746 and $735 million. 66 million, representing between 3.9% and 6.7% year-over-year growth, respectively.

Selwyn Joffe: And today we are one of the leading suppliers in this category. As our newer break product lines gain traction, we expect more efficient inventory turns to further support initiatives to neutralize working capital. Second, with respect to generating cash from working capital on a Euro-Bio basis, we are focused on inventory and accounts payable, which David will expand upon shortly. We have implemented processes to extend days outstanding on accounts payable and to enhance inventory efficiencies.

David Lee: Total cash and availability was approximately $90 million.

David Lee: As previously provided, our expectation for Fiscal 25 is to achieve sales in the range of $746 million.

David Lee: and seven hundred

David Lee: $66 million, representing between 3.9% and 6.7% year-over-year growth.

David Lee: We expect to see margin accretion from efficiencies related to higher volume, price increases, and cost-cutting initiatives. With respect to cash flow, our expectation is to generate positive cash flow for the full fiscal year, as I previously highlighted. Operating income is expected to be between $62 and $67 million before the non-cash foreign exchange impact of lease liabilities and forward contracts and the non-cash impact of revaluation of cores and customer shelves, and also before one-time severance. The company estimates other non-cash items will be approximately $17 million, including core and finished good premium amortization and share-based compensation.

David Lee: respectively. We expect to see margin accretion from efficiencies related to higher volume, price increases, and cost-cutting initiatives.

Selwyn Joffe: These processes are still in their early stages. However, we are recognizing meaningful benefits in particular with our supplied chain finance program. We continue to evaluate allocation of capital to maximize shareholder value. The first quarter working capital ratios were somewhat negative, though we are confident that working capital ratios will move in the right direction as David will discuss further. Another positive ongoing initiative is the acceleration of our new part number introductions, targeting at least 800 per Euro, as supported by the introduction of more than 150 new part numbers last month, covering the additional 49 million vehicles on the road.

David Lee: With respect to cash flow, our expectation is to generate positive cash flow for the full fiscal year, as I previously highlighted.

David Lee: Operating income is expected to be between 62 and 67 million before the non-cash foreign exchange impact of lease liabilities and foreign contracts, and the non-cash impact of revaluation of cores and customer shelves, and also before one-time, seven expenses. The company estimates other non-cash items will be approximately 17 million, including core and finished-foot premium amortization and share-based compensation. The company estimates depreciation and amortization will be approximately 11 million. In summary, operating income before the impact of the non-cash and cash items mentioned previously, and before depreciation and amortization, is expected to be between 90 and 95 million.

David Lee: Operating income is expected to be between $62 and $67 million before the non-cash foreign exchange impact of lease liabilities and forward contracts, and the non-cash impact of revaluation of cores and customer shelves, and also before one-time severance expenses.

David Lee: The company estimates other non-cash items will be approximately $17 million.

David Lee: including core and finished good premium amortization and share-based compensation.

David Lee: The company estimates depreciation and amortization will be approximately $11 million.

David Lee: The company estimates depreciation and amortization will be approximately $11 million. In summary, operating income before the impact of the non-cash and cash items mentioned previously and before depreciation and amortization is expected to be between $90 and $95 million. For further explanation on the reconciliation of items that impacted results and non-GAAP financial measures, please refer to Exhibits 1-3 in this morning's Earnings Press release. I would now like to open the line for questions.

Selwyn Joffe: This main town maintains our leadership position in the categories we supply, needs to consume a need and adds organic growth to our sales base. Not only are we growing organically, but we have secured meaningful new business commitments across all of our product lines. With respect to our diagnostic business, as I have previously mentioned, we expect to sell more than $100 million of diagnostic equipment within the next three years with further opportunities pending.

David Lee: In summary, operating income before the impact of the non-cash and cash items mentioned previously and before depreciation and amortization is expected to be between $90 and $95 million.

David Lee: For further explanation on the reconciliation items that impact the results and non-GAAP financial measures, please refer to exhibits one through three in this morning's earnings press release.

David Lee: For further explanation on the reconciliation of items that impacted results and non-GAAP financial measures, please refer to Exhibits 1 through 3 in this morning's Earnings Press release.

Operator: I would now like to open the line for questions. And at this time, I'd like to remind everyone: in order to ask the question, press star, then the number one on your telephone keypad.

David Lee: I would now like to open the line for questions.

Operator: And 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. Our first question comes from the line of Matt Koranda with Roth Capital Partners. Your line is open.

Selwyn Joffe: We expect additional service revenue as more tests are deployed. We expect more opportunities outside North America as the business evolves. With regard to our heavy-duty business, we continue to leverage our reputation and industry position in this market, particularly with regard to supplying alternatives and starters to our channel partners, who are leaders in the heavy-duty aftermarket segment. Our growth opportunities continue to gain momentum across multiple platforms such as agriculture, class A-trucks, refrigeration, construction, material handling, and transit-slush motor coaches.

Operator: And 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.

Matthew Koranda: Our first question comes from the line of Matt Caranda with Roth Capital Partners. Your line is open.

Operator: Our first question comes from the line of Matt Koranda with Roth Capital Partners. Your line is open.

Joseph: Good afternoon. This is Joseph on for Matt today.

Joseph: Good afternoon, this is Joseph on behalf of Matt.

Joseph: Good afternoon. This is Joseph on behalf of Matt.

David Lee: All right, Joseph. And we wanted to ask if you guys could provide a breakdown of revenue by product line in OneQ and if you guys could comment on inventory at retail customers and the sell-through versus sell-in dynamics in your key product categories during OneQ and through quarter-to-date.

Selwyn Joffe: All right, Joseph. Bye. And we wanted to ask if you guys could provide a breakdown of revenue by product line in OneCue and if you guys could comment on inventory at retail customers and the sell-through versus sell-in dynamics in your key product categories during OneCue and through the quarter-to-date.

David Lee: Good afternoon, this is Joseph on for Matt today.

Joseph: Joseph.

Joseph: Hi, I wanted to ask if you guys could provide a breakdown over revenue by product line in one queue.

Anna: Hi, Joseph. Hi, Anna.

David Lee: And we wanted to ask if you guys could provide a breakdown of revenue by product line in OneQ.

Selwyn Joffe: And if you guys can comment on an inventory at retail customers and sell-through versus sell-in dynamic in your key product category during one queue and through quarter to date. Okay, I could start. For the first quarter, the product mix was 65% rotating electrical. We'll pause with 7%; drinks were 24%; and others was 4%. Yeah, in terms of just moving forward and talking about the retailers and inventory levels, I mean, I think in general, what we're seeing is that there's a pickup in the business. I mean, I think we've had some softness; I think that there's been, we have, there's been a possibility for the consumer to defer maintenance. They've had that deferral, but I think the hot weather and, you know, we're seeing, we're certainly our sales in July, but frankly, it was the highest July we've ever had in the history of the company.

David Lee: And if you guys can comment on inventory at retail customers and sell-through versus sell-in dynamic in your key product categories during 1Q and through quarter to date.

Selwyn Joffe: Dixies are also involved as an important supplier to the heavy-duty original equipment manufacturers. As the new fiscal year evolves, we remain focused on sales, profitability, and neutralizing work in capital. We are confident that our sales and profitability will grow organically and with our strong new business commitments, as I mentioned earlier. This along with numerous efficiency initiatives will enhance profitability and improve cashflow generation. From a strategic standpoint, we will continue to leverage our strengths, including great products, manufactured at state-of-the-art facilities, solid customer relationships, industry leading skew coverage, not to mention our value added merchandising and marketing support.

David Lee: Okay, I can start. For the first quarter, the product mix was 65% rotating electrical, wheel hubs were 7%, brakes were 24%, and others were 4%.

David Lee: Okay, I can start. For the first quarter, the product mix was 65% rotating electrical, wheel hubs was 7%, brakes were 24%, and others was 4%.

Selwyn Joffe: Yeah, and in terms of just

Selwyn Joffe: Moving forward and talking about the retailers and inventory levels. I mean, I think in general, what we're seeing is that there's a pickup in the business. I mean, I think we've had some softness. I think that there's been.

Selwyn Joffe: Wherever there's been a possibility for the consumer to defer maintenance, they've had that deferral. But I think the hot weather and, You know, we're seeing, we're suddenly ourselves... In July, quite frankly, it was the highest July we've ever had in the history of the company. So, we're seeing customers bring in inventory, and with the expectation of..., some pickup. I mean, I don't think we're totally there yet, but as an industry, due to, you know, again, disposable income of the consumer, but suddenly, I think we are on our way and we're extremely encouraged by our progress right now. I think that, by the way, with the significant cost savings initiatives, one we've completed, others that are still in process. We're excited about where we're moving to.

Selwyn Joffe: Wherever there's been a possibility for the consumer to defer maintenance, they've had that deferral. But I think the hot weather and, You know, we're suddenly ourselves in July. But, frankly, it was the highest July we've ever had in the history of the company. So we're seeing customers bring in inventory with the expectation of some pickup.

Selwyn Joffe: Wherever there's been a possibility for the consumer to defer maintenance, they've had that deferral. But I think the hot weather and...

Selwyn Joffe: You know, we're seeing, we're suddenly, our sales in July , quite frankly, it was the highest July we've ever had in the history of the company. So, we're seeing customers bring in inventory and with the expectation,

Selwyn Joffe: So, we're seeing customers bring in inventory, and what the expectation of some pickup. I don't think we're totally there yet, but as an industry, but to do, you know, again, disposable income with the consumer. But certainly, I think we were on our way, and we're extremely encouraged by our progress right now.

Selwyn Joffe: I should mention that we opened a new facility in 2024 in Malaysia to support manufacturing of wheel hubs for direct shipping to our customers, which is expected to enhance our competitive position. Our hard part sales in Mexico continue to gain momentum as we experience increased demand for our after-market parts. The rate of growth in this market is exciting and we are well positioned to utilize our footprint to meet the growing demand.

Selwyn Joffe: I mean, I don't think we're totally there yet, but as an industry, due to, you know, again, disposable income of the consumer, but suddenly, I think we were on our way, and we're extremely encouraged by our progress right now. I think that, by the way, with the significant cost savings initiatives, one we've completed, others that are still in process. We're excited about where we're moving.

Selwyn Joffe: of some pickup. I don't think we're totally there yet as an industry, but

Selwyn Joffe: Due to, you know, again, disposable income of the consumer, but suddenly I think we were on our way and we're extremely encouraged by our progress right now.

Selwyn Joffe: I think that in conjunction, by the way, with the significant cost savings in nation, that's one we've completed; others that are still in process, we're excited about where we're moving to.

Selwyn Joffe: I think that in conjunction, by the way, with the significant cost savings initiatives, one we've completed, others that are still in process.

Selwyn Joffe: We are focused on increasing share in this region. We continue to benefit and grow sales via relationships with U.S, based retailers who are gaining a presence in this emerging market. Favorable long-term industry dynamics continue to bow to all for the company and we are extremely well positioned for sustainable top and bottom-line growth in our hard parts business, as well as our testing solutions business. We are focused on growth across all product lines, including our quality build brand, which is gaining market share within the professional install of market.

Selwyn Joffe: We're excited about where we're moving to.

Selwyn Joffe: And if I can just squeeze one more in there, we want to see what your latest thinking on interest expense, given rates are coming down.

David Lee: And if I could just squeeze one more in there, we wanted to see your latest thinking on interest expense, given rates are coming down. How should we think about the cash interest savings potentially to come for the rest of the year?

Selwyn Joffe: And if I could just squeeze one more in there, we wanted to see your latest thinking on interest expense, given rates are coming down. How should we think about the cash interest savings potentially to come for the rest of the year?

David Lee: And if I could just squeeze one more in there. We wanted to see what your latest thinking on interest expense given rates are coming down. How should we think about the cash interest savings potentially to come for the rest of the year?

Selwyn Joffe: I wish we think about the cash interest savings potentially to come for the rest of the year. Well, I mean, every point in interest reduction, just on the supply chain factoring, is worth $7 million to us. So, you know, we're encouraged; we're encouraged by the reduction in interest in, and that's certainly been a tremendous headwind for us. We're encouraged at the rate to coming down. And, you know, we're excited about that, but we're not stopping at that. I mean, we're taking every bit of waste or, you know, when we've used the concept of lean manufacturing and lean operations, waste has to be eliminated.

Selwyn Joffe: Well, I mean, every point in interest reduction just on the supply chain factoring is worth $7 million to us. So we're encouraged by the reduction in interest. I mean, that's certainly been a tremendous headwind for us.

Selwyn Joffe: Well, I mean, every point in interest reduction, just on the...

Selwyn Joffe: on the supply chain factoring is worth $7 million to us. So, you know, we're encouraged by the reduction in interest. I mean, that's certainly been a...

Selwyn Joffe: This includes our most recent addition to our portfolio of great telephs, great pads, and great roadies. I reiterate as we grow these product lines, we expect overall growth, margin, and appreciation. In short, we have the capacity and capabilities to support our customers increasing demand across multiple lines. Our expected positive cash flow on an annualized basis will enable us the flexibility to further pay down debt and pursue other related opportunities to enhance shareholder value.

Selwyn Joffe: Tremendous headwind for us. We are encouraged that the rates are coming down and

Selwyn Joffe: We're encouraged that the rates are coming down, and And, you know, we're excited about that, but we're not stopping at that. I mean, we're taking every bit of waste or, you know, when we use the concept of lean manufacturing and lean operations. Waste has to be eliminated, and with the volumes that we're getting now in some of our new product lines, we can take, and it's not, and I hate to use the word waste a little bit, but we can take our efficiencies up pretty dramatically. But that is a sort of term of art for the. So, we're excited. I mean, we think that there are a lot of tailwinds for us on the owning side moving forward.

Selwyn Joffe: And, you know, we're excited about that, but we're not stopping at that. I mean, we're taking every bit of waste or, you know, when we use the concept of lean manufacturing and lean operations.

Selwyn Joffe: And, you know, we're excited about that. But we're not stopping at that. I mean, we're taking every bit of waste or, you know, what, when we use the concept of lean manufacturing and lean operations. Waste has to be eliminated, and with the volumes that we're getting now in some of our new product lines... We can take, and it's not, I hate to use the word waste a little bit, but we can take our efficiencies up pretty dramatically, but that is a sort of term of art for So we're excited. I mean, we think that there are a lot of tailwinds for us on the earnings side moving forward.

Selwyn Joffe: And with the volumes that we're getting now and some of our new product lines, we can take, and it's not, I hate to use the wood waste a little bit, but we can take our efficiencies up pretty dramatically. But that is a sort of turn of art for lean manufacturing. So, we're excited. I mean, we think that there's a lot of tailwinds for us on the earnings side moving forward.

Selwyn Joffe: Waste has to be eliminated and with the volumes that we're getting now and our new, some of our new product lines, we can take, and it's not, and I hate to use the word waste a little bit, but we can take our efficiencies up pretty dramatically, but that is a sort of term of art for the manufacturer.

Selwyn Joffe: In conclusion, non-disgressionally aftermarket parts of the internal combustion engine market will be here for decades. An outlook supported by recently updated industry data showing that the average age of vehicles is not 12.8 years. It is worth highlighting that 98.8 percent of the U.S, car park is comprised of hybrid and internal combustion environments. One of our key competitive advantages is our ability to offer broad range of applications for all makes and models to remain focused on newer model applications and our ability to meet expected demand as these vehicles enter the replacement market.

Selwyn Joffe: So we're excited. I mean, we think that there's a lot of tailwinds for us on the earning side moving forward.

Joseph: All right, thank you for taking my question, guys. I'll be back in the queue. Thank you very much.

Operator: All right, thank you for taking my question, guys. I'll go back in the queue. Thank you very much.

Joseph: All right. Thank you for taking my question, guys. I'll go back in the queue. Thank you.

Operator: Thank you very much. Thank you.

Operator: Alright, thank you for taking my question guys. I'll back in the queue.

Operator: Thank you.

Bill: And your next question comes from the line of a bill, disillusionment with Titan Capital. Your line is open.

Bill DeZellman: And your next question comes from the line of Bill DeZellman with Titan Capital. Your line is open. Thank you.

Bill DeZellman: Thank you very much. Thank you.

Speaker Change: And your next question comes from the line of Bill DeZellman with Titan Capital. Your line is open.

Bill DeZellman: Thank you. Would you please start with inventory and discuss kind of why you saw that increase versus a year ago?

David Lee: Thank you. Would you please start with inventory and discuss kind of why you saw that increase versus a year ago?

Bill: Thank you. Would you please start with inventory and discuss why you saw that increase versus a year ago level?

David Lee: Thank you. Would you please start with inventory and discuss kind of why you saw that increase versus a year ago level?

Selwyn Joffe: Finally, before I turn the call over to David, I'd like to comment on our recent announcements regarding Jack Liebel and a Neil Street disaster who are standing for election to our board at the company's annual meeting, next month. Their impressive backgrounds and qualifications are detailed in the press releases in proxy state. Let me just say both of these candidates offer unique perspectives and insights that will complement our commitment to driving shareholder value at a particularly exciting point in the company's history.

Selwyn Joffe: So, the inventory number of small growth in the first quarter, primarily for the update, upcoming sales increases we're expecting.

David Lee: So the inventory, there was a small growth in the first quarter, primarily for the upcoming sales increases that were expected. So we are ramping up. Our guidance, again, is for strong growth for the full fiscal year. So we need the inventory to supply our demand.

David Lee: So the inventory, there was small growth in the first quarter, primarily for the upcoming sales increases we're expecting. So we are ramping up. Our guidance, again, is for strong growth for the full fiscal year, so we need the inventory to supply our demand.

David Lee: So the inventory, there was a small growth in the first quarter, primarily for the update, upcoming sales increases we're expecting.

Selwyn Joffe: So, we are wrapping up. Our guidance, again, is a strong growth for the full fiscal year. So, we need the inventory to supply our demand. Yeah, and I think you'll see that moderate pretty dramatically. I mean, as we're coming into the season, a second quarter is much stronger than our first quarter. So, you'll see significant progress in working capital as we get through this.

David Lee: So we are wrapping up. Our guidance again is strong growth for the full fiscal year. So we need the inventory to supply our demand

Selwyn Joffe: Yeah, and I think you'll see that moderate pretty dramatically as we're coming into our season. Our second quarter is much stronger than our first quarter, so you'll see... You'll see significant progress in working capital as we get through this quarter. Thank you.

Selwyn Joffe: Yeah, and I think you'll see that moderate pretty dramatically, I mean, as we're coming into our season. Our second quarter is much stronger than our first quarter, so you'll see significant progress in working capital as we get through this quarter.

Selwyn Joffe: These two fine candidates are indicative of our commitment to our board professional program. I encourage everyone to read their biographies and support the nominees.

Operator: with us.

Operator: Thank you.

Bill DeZellman: And then, on that note, when does the next tranche of break business come into your revenue?

Selwyn Joffe: And then, on that note, when does the next tranche of break business come into your revenue?

Selwyn Joffe: And then, on that note, when does the next tranche of a break business come into your revenues?

Gary Maier: I'll now turn the call over today to review our results in greater detail. Thank you, Selwyn.

Speaker Change: Thank you. And then on that note, when does the next tranche of break business come into your revenues?

David Lee: Good morning, everyone. I encourage everyone to read the earnings press for these issue this morning, as well as the 10Q that will be filed later today. Let me first reiterate key financial performance metrics for our fiscal 25 first quarter that we highlighted in this morning's news release. Net sales increased 6.4% to a first quarter record of 169.9 million. Gross profit increased 9.8% to 29.2 million. Gross margin increased modestly to 17.2%. Offering results impacted by an unfavorable non-tash 11.1 million foreign exchange loss from lease liability and floor contracts.

Selwyn Joffe: Let me try and, you know, the biggest, the biggest piece starts in January, but we have other new business that's starting between now and then. We have a new business in, you know, Wheelhops that's starting now, and we have additional rotating electrical business that's starting in the next few, two to three months, and then additional brake business starting, and significant new business in our diagnostic business and some additional odd parts categories. And again, we don't want to get ahead of our skis. I mean, we've got this in our guidance, but the amount of opportunities that we're getting and seeing at the correct pricing with the correct operating efficiencies, certainly a driving to see better profit metrics as we get through this year.

Selwyn Joffe: Let me try and, you know, the biggest piece starts in January, but we have other new business that's starting between now and then. We have a new business in... and Wheel Hubs, that's starting now. We have additional rotating electrical business that's starting in the next few two to three months, and then Additional breakfasts are starting. Significant new business in our diagnostic business and some additional odd parts categories, and, Again, we don't want to get ahead of ourselves.

Selwyn Joffe: Let me try and, you know, the biggest, the biggest piece starts in January, but we have other new business that's starting between now and then. We have a new business in... We have additional rotating electrical business that's starting in the next few two to three months and then additional breakfasts and starting significant new business in our diagnostic business and some additional odd parts categories. And again, we don't want to get ahead of ourselves.

Selwyn Joffe: Uh...

Selwyn Joffe: Let me try and, you know, the biggest, the biggest piece starts in January .

Selwyn Joffe: But we have other new other new business that's starting between now and then we have a new business in

Selwyn Joffe: You know, wheel hubs, that's starting now.

Selwyn Joffe: We have additional rotating electrical business that's starting in the next few, two to three months.

Selwyn Joffe: Additional brake business starting and...

Selwyn Joffe: Significant new business in our diagnostic business and some additional hard parts categories.

Selwyn Joffe: I mean, we've got this in our guidance, but the amount of opportunities that we're getting and seeing, at the correct prices with the correct operating efficiencies, certainly driving us to see better profit metrics as we get through this year.

Selwyn Joffe: And again, we don't want to get ahead of our skis. I mean, we've got this in our guidance, but the amount of opportunities that we're getting and seeing.

David Lee: Implement cost reduction initiatives to provide expected annualized savings of approximately $7 million. Net sales for the fiscal 25 first quarter increased 6.4% to a first quarter record 169.9 million from 159.7 million in the prior year. Gross profit for the fiscal 25 first quarter increased 9.8% to 29.2 million from 26.6 million a year earlier. I should mention that gross profit for the quarter was impacted by non-cash items. The non-cash items reflect core and finished good premium amortization and revaluation of cores on customer shelves which are unique to certain of our products and required by gap.

Selwyn Joffe: at the correct pricing with the correct operating efficiencies.

David Lee: The total for these non-cash items in the quarter was approximately 2.7 million. A more detailed explanation of core accounting is available in a video posted on the company's website. Gross margin for the fiscal 25 first quarter increased to 17.2% from 16.6% a year earlier. Gross margin for the fiscal first quarter was negatively impacted by higher returns as a percent of the sales but we expect to return to normalize return levels going forward.

Selwyn Joffe: Certainly a driving to see better profit metrics as we get through this year.

Operator: Thank you.

Bill DeZellman: Thank you, and I think in your opening remarks, David, you mentioned that returns were higher than normal. Would you walk through the dynamics behind that and what aspect of that is unique versus something that may naturally happen again?

David Lee: Thank you, and I think in your opening remarks, David, you mentioned that returns were higher than normal. Would you walk through the dynamics behind that and what aspect of that is unique versus something that may naturally happen again?

Operator: And I think in the opening remarks, David, you had mentioned that returns were higher than normal.

David Lee: Thank you. And I think in the opening remarks, David, you had mentioned that returns were higher than normal. Would you walk through the dynamics behind that and what aspect of that is unique versus something that may naturally happen again?

David Lee: Would you walk through the dynamics behind that and what aspect of that is unique versus something that may naturally happen again? Yeah, so it happens every now and again, and I'm not going to call out customers. We have one customer, a very large customer whose purchases were at a lower level, but returns are there's a general right of return and so you get the same returns back regardless of the purchases. So the returns as a percentage of purchases for this particular customer were high. Now that has changed and there's already reversed out in this quarter.

David Lee: Yeah, so it happens every now and again, Bill, and I'm not going to call out customers. We have one customer, a very large customer, whose purchases were at a lower level. But returns, there's a general right of return, and so you get the same returns back regardless of the purchases. So returns are a percentage of purchases for this particular customer, and... Well, hi.

David Lee: Yeah, so it's it happens every now and again Bill and it's and I you know, I'm not going to call out customers. We have one customer

David Lee: a very large customer whose purchases were at a lower level.

David Lee: Now, that has changed. It has already reversed itself in this quarter, so... Again, we're a little early in the quarter, but so far, very, very, very strong, and those return levels should come back to normalized levels. They are at normalized levels now, and hopefully, that will maintain itself. And then we had one more, one more, and it's not that it won't come back, but we had one more large incentive program that was taken early as a result of the renewal of a contract.

David Lee: Well, hi. Now, that has changed. It is already reversed out in this quarter, so...

David Lee: So again, we're a little early in the quarter, but so far, very, very, very strong, and those return levels should come back to normalize levels. They are at normalize levels now; hopefully that will maintain itself.

David Lee: Again, we're a little early in the quarter, but so far very, very, very strong, and those return levels should come back to normalized levels. They are at normalized levels now. Hopefully, that will maintain itself.

David Lee: Additional prices and increases in effect and operating efficiencies will enhance gross margin. Due primarily to a 15.3 million increased non-cash market foreign exchange loss compared with the prior year and a 1.9 million increased expense resulting from current exchange rates compared with the prior year. As well as 2.9 million seven expenses operating expenses were 35.6 million compared with 16.1 million last year. I should note that excluding these items above operating expenses decreased by 644,000 to 20.7 million compared with 21.3 million a year earlier.

David Lee: And then we had one other, one other, and it's not that we want to come back, but we had one other large incentive program that was taken early as a result of a renewal of a contract. So it's one time to that particular event, but I mean that affected us a little bit as well. But again, those are both behind us, and again, we've seen significantly more positive energy sales right now. So thank you.

David Lee: And then we had one other, one other, and that's not, that won't come back, but we had one other large incentive program that was taken early.

David Lee: So, and that's just one time for that particular event, but I mean, that affected us a little bit as well, but we, again, those are both behind us, and, again, we've seen significantly more positive energy sales right now.

David Lee: So, and that's just one time for that particular event, but I mean, that affected us a little bit as well. We, again, those are both behind us, and, again, we've seen significantly more positive energy sales right now.

David Lee: as a result of renewal of a contract so and that's

David Lee: Again, those are both behind us, and again, we've seen significantly more positive energy in sales right now.

Bill DeZellman: Thank you. What was the, I missed in the opening remarks, dollar impact of that on income?

David Lee: What was the, I missed in the opening remarks that the dollar impact of that to income? Now we did not disclose the dollar amount, but it did have a small impact on the gross margin percentage as well as sales.

Speaker Change: Thank you. What was the, I missed in the opening remarks, the dollar impact of that to income?

David Lee: Non-cash loss for the foreign exchange impact of least high abilities and forward contracts was 11.1 million compared with a non-cash gain of 4.3 million a year earlier. In addition, the company incurred 2.9 million sevens expenses due to headcount reductions in connection with our strategy to utilize our global footprint to enhance operating efficiencies with expected annualized cost reductions of approximately 7 million which includes salary, infrastructure, and other related operating expenses. Results for the fiscal first quarter were impacted by 2.7 million of higher interest expenses primarily due to increased collection of receivables utilizing accounts receivable discount programs on higher sales.

David Lee: We did not disclose the dollar amount, but it did have a small impact on gross margin, as well as sales.

Speaker Change: You know, we did not disclose the dollar amount, but it did have a small impact on the gross margin percentage.

Bill DeZellman: And then one additional question relative to the quality built brand. Are you seeing any spillover from that brand's success in the professional market on the brake side for the rotating electrical side of the business, or are those different enough that there really is not an opportunity for a benefit?

Operator: Great, thank you.

Bill: And then one additional question relative to the Quality Built brand.

Bill DeZellman: as well as sales.

Speaker Change: Great, thank you. And then one additional question relative to the quality built.

Selwyn Joffe: Are you seeing any spillover from that brand's success in the professional market on the brake side for the rotating electrical side of the business? Or those are different enough that there really is not an opportunity for a benefit?

Bill DeZellman: brand. Are you seeing any spillover from that brand's success in the professional market on the brake side for the rotating electrical side of the business or are those different enough that that there really is not a...

Selwyn Joffe: You know, I'm going to give you a little more of some background, some great feedback that we're getting, and then I'm going to try and answer your question. On the break side, I've had very unique calls from customers that are particular one large customer that are saying that the acceptance rate and the renewal rate of installers that are using our product is extraordinarily good. And unusual call from a particular customer saying how they think we've got something extremely special, and when you hear that from the field, I mean, that's pretty exciting. So when the installer sees that name and has a great experience on it, it will spill over and his spill and so we'll continue.

Selwyn Joffe: Yeah, you know, you open, I'm going to give you a little more of some background, some great feedback that we're getting, and then I'm going to try and open up, answer your question. On the break side.

Selwyn Joffe: an opportunity for a benefit.

Selwyn Joffe: Yeah, I'm going to give you a little more of some background, some great feedback that we're getting, and then I'm going to try and answer your question. On the break side...

David Lee: Partially offset by lower average outstanding balances under the company's credit facility. Interest expense was 14.4 million compared with the 11.7 million for last year which is primarily related to accounts receivable discount programs. Interest expense related to accounts receivable discount programs was 9.5 million compared with 6.3 million for the prior year. We are working diligently to address the higher interest environment, particularly areas that we can control. In addition, we continue to work with our customers to mitigate higher interest rates.

Selwyn Joffe: I've had very unique calls from customers, particularly one large customer that is saying that the acceptance rate and the renewal rate of installers that are using our product are extraordinarily good. And an unusual call from a particular customer saying how they think we've got something extremely special. And when you hear that from the field, I mean, that's pretty exciting. When the installer sees that name and has a great experience with it, it will spill over and is spillable.

Selwyn Joffe: I've had very unique calls from customers, particularly one large customer that is saying that the acceptance rate and the renewal rate of installers that are using our product is extraordinarily good. And an unusual call from a particular customer saying how they think we've got something extremely special, and when you hear that from the field, I mean, that's pretty exciting when the installer sees that name and has a great experience with it. It will spill over and is already spilling over.

Selwyn Joffe: and unusual call from a particular customer saying how

Selwyn Joffe: They think we've got something extremely special and when you hear that from the field, I mean that's that's pretty exciting so

Selwyn Joffe: When the installer sees that name and has a great experience on it, it will spill over and is spilling over. So we'll continue, I think, to see strong sales.

David Lee: For the first quarter income tax benefit was 178,000 compared with 9,000 income tax benefit for the prior year. The low-effective tax rate benefit for the fiscal first quarter was due in part to the inability to recognize the benefit of losses at specific jurisdictions. However, we expect these losses will be utilized against future profits which will benefit future tax rates. Obviously there are various factors impacting the tax effect.

Selwyn Joffe: And so we'll continue, I think, to seek strong sales. You know, I think we're going to see strong sales clearly from quality built across the professional and still market across all of our product lines, certainly will help all of that. Depending on which one leads, we have a portfolio of excellent products. Any experience with a quality built brand should add to experience in other product lines for the quality.

Selwyn Joffe: And so we'll continue, I think, to see strong sales. You know, I think we're going to see strong sales clearly from quality built across the professional and still market across all of our product lines, certainly will help all of that. Depending on which one leads, we have a portfolio of excellent products. Any experience with a quality built brand should add to experience in other product lines for the quality.

Selwyn Joffe: I think to see strong sales. You know, I think we're going to see strong sales clearly from quality built across the professional install market across all of our product lines, and certainly will help all of them. And depending on which one leads, we have a portfolio of excellent products. So any experience with the quality build brand should add to experiencing other product lines for the quality build brand.

Selwyn Joffe: You know, I think we're going to see strong sales clearly from quality built across the professional and store market across all of our product lines.

Selwyn Joffe: and certainly will help all of them.

Selwyn Joffe: Depending on which one leads, we have a portfolio of excellent products. So.

Selwyn Joffe: Any experience with a quality-built brand should add to experience in other product lines for the quality-built brand.

Selwyn Joffe: And I also want to say, while I've got you, Bill, and I appreciate you just giving me the floor here a little bit, but the growth in the Mexican opportunity for us has proven to be significant. And, you know, we'll get more granular later as we go into the year, but the growth there continues to be very, very exciting. We think there's a big opportunity for us. And then, not last, but not least, but a couple more things: diagnostic businesses are now pretty much being embraced by every major chain out there.

Selwyn Joffe: I also want to say, while I got you, Bill, and I appreciate you just giving me the floor here a little bit, but the growth in the Mexican opportunity for us is proven to be significant. And you know, we'll get more granular later as we go into the year, but the growth there continues to be very, very exciting, and we think there's a big opportunity for us there.

David Lee: As a result of items discussed above, net loss for the fiscal 25 first quarter was 18.1 million compared with a net loss of 1.4 million a year ago. With higher expected sales volume moving forward, and the full impact of certain price increases already in effect, as well as operating efficiencies, results are expected to further improve. Do primarily to the items I discussed previously, EBITDA for the fiscal first quarter was negative 1.1 million, reflecting the negative 12.6 million impact of non-cash items and 2.9 million in cash items in exhibit three of this morning's earnings press release.

Selwyn Joffe: I also want to say, while I got you Bill, and I appreciate you just giving me the floor here a little bit, but...

Selwyn Joffe: The growth in the Mexican opportunity for us has proven to be significant.

Selwyn Joffe: And, you know, we'll get more granular later as we go into the year, but the growth there continues to be very, very exciting.

Selwyn Joffe: And then not last, but not last, but a couple more things is diagnostic businesses now pretty much being embraced by every major chain out there. And so we can see for the growth and high margin of that diagnostic business. And then, and then our heavy duty rotating electrical business. I mean, just the amount of momentum that's coming in and, you know, the outlook and the opportunity on that is also. You know, it's, it's also embrace, it's really, you know, we're embracing that, and that's really, I mean, really positive.

Selwyn Joffe: We think there's a big opportunity for us there.

Selwyn Joffe: And then not last, but not last, but a couple more things is...

Selwyn Joffe: Diagnostic businesses are now pretty much being embraced by every major chain out there, and so we're going to see further growth. High Margin Outlet Diagnostics, and then our heavy-duty rotating electrical business. I mean, it's just the amount of momentum that's coming in at the end.

Selwyn Joffe: Diagnostic business is now

Selwyn Joffe: Pretty much being embraced by every major chain out there.

Selwyn Joffe: And so we're going to see further growth. High Margin Outlet, Diagnostic Business, and then our heavy-duty rotating electrical business. I mean, the amount of momentum that's coming in and... You know, the outlook on the opportunity for that is also, you know, also embrace is really, you know, we're embracing that, and that's really, I mean, really positive. So those are all tailwinds that we see, you know, going through, going through our system and whatever, on the negative side, and it's just, it's pretty small, but...

David Lee: EBITDA before the impact of non-cash and cash items mentioned above was 14.4 million for the first quarter. Now we will move on to cash low and key corporate items. The company used cash of approximately 20.8 million in operating activities during the fiscal 25 first quarter impacted by a reduction of accounts payable related to the seasonal inventory growth during the second half of fiscal year 2024 to support expected business increases for fiscal year 2025.

Selwyn Joffe: And so we're going to see further growth and high margin out of that diagnostic business.

Selwyn Joffe: and then our heavy-duty rotating electrical business.

Selwyn Joffe: I mean, it's just the amount of momentum that's coming in at the end.

Selwyn Joffe: You know, the outlook on the opportunity for that is also. You know, it's also embraced; it's really, you know, we're embracing that, and that's really, I mean, it's really positive. So,

Selwyn Joffe: and

Selwyn Joffe: You know, the outlook on the opportunity on that is also...

Selwyn Joffe: You know, it's also embraced, it's really, you know, we're embracing that and that's really, I mean, really positive. So, you know, so those are all tailwinds that we see, you know, going through, all through the

Selwyn Joffe: So, you know, so those all tailwinds that we see, you know, going through all through the.

Selwyn Joffe: You know, so those are all tailwinds that we see, you know, going through, going through our system and whatever, on the negative side, and it's just, it's pretty small, but the Electric Vehicle Testing Business. We're going to look at what to do strategically with that business, but that's a little bit slower for us. Very, very small part of our business, but... But, you know, a lot slower.

David Lee: We anticipate an increase in operating profit on a year-over-year basis for fiscal 25 and the generation of positive cash below for the year supported by organic growth from customer demand and operating efficiencies from our global footprint expansion. In addition to our goal of generating increased operating profits, we're diligently focused on opportunities to neutralize working capital, including customer demand planning, enhance inventory management, and further extending our vendor payment terms. Respect increasing financial performance from both new and existing product lines, including our emerging break categories.

Selwyn Joffe: Through our system and whatever on the negative side, and it's just, it's pretty small, but, you know, the electric vehicle testing business, and, you know, we're going to look at what to do strategically with that business, but that's a little bit slower for us. Very, very small part of our business, but, but, but a lot of you know, let's load the electric and listen to the good news and the bad news. The electric vehicle space is not unfolding the way I think many people photo would just be an instant media, you know, everything's electric vehicle.

Selwyn Joffe: through our system and whatever on the negative side. And it's just it's pretty small. But, you know, the electric vehicle testing business and, you know, we're going to look at, you know, what to do strategically with that business. But that's a little bit slower for us. Very, very small part of our business, but.

Selwyn Joffe: The Electric Vehicle Testing Business, and we're going to look at what to strategically do with that business. But that's a little bit slower for us. A very, very small part of our business. That, that's, you know, a lot slower.

Selwyn Joffe: The electric car, and this is the good news and the bad news, the electric... Vehicle Space. It is not unfolding the way... I think many people thought it would just be an instant, immediate, you know, everything's an electric vehicle. Well, you start reading, I think, Car Magazine and the Wall Street Journal had articles this week about how these major automotive companies are now rethinking and scrapping their combustion engine lines and actually trying to re-damp them and put them back in place, so you know, the combustion engine hybrid technology arena.

Selwyn Joffe: That's, you know, a lot slower. The electric, and this is the good news and the bad news, the electric...

Selwyn Joffe: Vehicle Space

Selwyn Joffe: It is not unfolding the way

Selwyn Joffe: I think many people thought it would just be an instant, immediate, you know, everything's electric vehicle. Well, you start reading, I think, Car Magazine and the Wall Street Journal had articles this week.

Selwyn Joffe: Well, you start reading the car magazine and the Wall Street Journal at articles this week. about how these major automotive companies are rethinking and scrapping their combustion engine lines and actually trying to revamp them and put them back in place. And so the combustion engine hybrid technology arena seems to be gaining far more momentum than the electric vehicle arena seems to be losing a lot of momentum. And so that boasts well for us at the end of the day. Sorry for a bit of a run-on answer. I hope I hit all your things.

David Lee: Net bank debt was 136.3 million at the end of the quarter, compared with 114 million as of March 31, 2024, however, net debt was lower compared with 168.1 million at prior year June 30, 2023. Total cash and availability was approximately 90 million. As previously provided, our expectation for fiscal 25 is to achieve sales in the range of 746 and 766 million, representing between 3.9% and 6.7% increase of 6% year-over-year growth, respectively.

Selwyn Joffe: about how these major automotive companies are now rethinking and scrapping their combustion engine lines and actually trying to re-damp them and put them back in place.

Selwyn Joffe: And so, you know, the combustion engine hybrid technology arena seems to be gaining far more momentum and the electric vehicle arena seems to be losing a lot of momentum.

Selwyn Joffe: Seems to be gaining far more momentum, and the electric vehicle arena seems to be losing a lot of power. And so that bodes well for us. Sorry for a bit of a run-on answer. I hope I hit all your points, but okay.

Selwyn Joffe: And so that bodes well for us at the end of the day.

Operator: But gave me an opportunity to express myself to these items. Help those did hit my questions, but did create two others.

Selwyn Joffe: Sorry for a bit of a run-on answer. I hope I hit all your things, but it gave me an opportunity to express myself.

Selwyn Joffe: and others.

Selwyn Joffe: Those did hit my questions, but did create two others. Relative to the call that you've received that the

David Lee: We expect to see margin accretion from efficiencies related to higher volume, price increases, and cost-cutting initiatives. With respect to cash flow, our expectation is to generate positive cash flow for the full fiscal year, as I previously highlighted. Operating income is expected to be between 62 and 67 million before the non-cash foreign exchange impact of lease liabilities and foreign contracts, and the non-cash impact of revaluation of cores and customer shelves, and also before one time, seven expenses.

Bill DeZellman: Those did hit my questions but did create two others. Relative to the call that you've received that the renewal rate with the installers and the quality built brand is very high, was that specific to the brake pad and rotors or was it broader than that or on a different product line?

Bill DeZellman: Those did hit my questions, but they created two others. Relative to the call that you've received that the renewal rate with the installers and the quality-built brand is very high. Was that specific to the brake pad and rotors, or was it broader than that or on a different product line?

Bill: Relative to the call that you've received that the renewal rate with the installers and the quality bill brand is very high, was that specific to the brake pad and rotors?

Speaker Change: Renewal rate with the installers and the quality built brand is very high. Was that specific to the brake pad and rotors or was it broader than that or on a different product line?

Selwyn Joffe: Or was it broader than that or on a different product line specifically to the pad and roto program? So, you know, very, very, very encouraging there. I will say one of the things that's happening in the industry around pads and rotors is that there's a general significant softness in the tire industry. I'm hearing that it's getting a little bit better but still very soft, and what happens when that happens is that the installer usually they get the opportunity to replace all four tires on the vehicle will cross-sell the brake program. What's happening is the consumers just electing to go with the least expensive repair and only repair the one tire or whatever they need.

Selwyn Joffe: specifically to the Pat and Rhoda program. So, you know, very, very, very encouraging there. I will say, one of the things that's happening in the industry around pads and rotors is that there's a general significant softness in the tire industry. I'm hearing that it's getting a little bit better, but still very soft, and what happens when that happens is that the installer, usually, usually gets the opportunity to replace all four tires on the vehicle will cross sell the brake program.

Selwyn Joffe: specifically to the Pat and Rhoda program. So, you know, very, very, very encouraging there. I will say one of the things that's happening in the industry around pads and rotors is that there's a general significant softness in the tire industry. I'm hearing that it's getting a little bit better, but still very soft, and what happens when that happens is that the installer, usually, usually gets the opportunity to replace all four tires on the vehicle will cross sell the brake program.

Selwyn Joffe: specifically to the Pad and Rotor program.

Selwyn Joffe: So, you know, very, very, very encouraging there. I will say one of the things that's happening in the industry around pads and rotors.

David Lee: The company estimates other non-cash items will be approximately 17 million, including core and finished-foot premium amamilization and share-based compensation. The company estimates depreciation and amamilization will be approximately 11 million. In summary, operating income before the impact of the non-cash and cash items mentioned previously, and before depreciation and amamilization, is expected to be between 90 and 95 million.

Selwyn Joffe: is that there's a general...

Selwyn Joffe: significant softness in the tire industry. I'm hearing that it's getting a little bit better but still very soft and what happens in when that happens is that the installer usually they get the opportunity to replace all four tires on the vehicle will cross sell the brake program.

Selwyn Joffe: What's happening is the consumer is just electing to go with the least expensive repair and only repair the one tire or whatever they need, and so the cross-selling opportunity on these brake jobs is much slower than it has been in a while. And that's providing some headwinds in those categories. Having said that, we're coming off a very small base, but we expect it to continue to grow despite that. That will change as well, as ties don't last forever, so consumers are going to need to replace them.

Selwyn Joffe: What's happening is the consumer's just electing to go with the least expensive repair and only repair the one tire or whatever they need. And so the cross-selling opportunity on these brake jobs is.

David Lee: For further explanation on the reconciliation items that impact the results and non-gap financial measures, please refer to exhibits one through three in this morning's earnings press release.

Selwyn Joffe: And so the cross selling opportunity on these brake jobs is much slower than the pads being a while, and that's providing some headwind in those categories. Having said that, becoming up a very small base, and you know we expect that to continue to grow despite that, but that will change as well as tires don't last forever and the consumer is going to need to replace them.

Selwyn Joffe: is much slower than it has been in a while. And that's providing some headwind in those categories. Having said that, we're coming off a very small base.

Operator: I would now like to open the line for questions. And at this time, I'd like to remind everyone in order to ask the question, press star than the number one on your telephone keypad.

Selwyn Joffe: We expect that to continue to grow despite that, but that will change as well as ties don't last forever and consumers are going to need to replace them.

Joseph: Our first question comes from the line of Matt Caranda with Roth Capital Partners. Your line is open. Good afternoon. This is Joseph on for Matt today. Joseph.

Bill DeZellman: Great, and the second question... I'm sorry, Selwyn, go ahead.

Bill: Great and second question, I'm sorry, so I'll go ahead. No, but the pads, as you mentioned, I just just summarizing back that's where extreme satisfaction on the pad road approach.

Selwyn Joffe: I don't know, but the pads, as you had mentioned, just summarizing back, that's where extreme satisfaction on the pad wrote a program.

Selwyn Joffe: I don't know, but the pads, as you had mentioned, just summarizing back, that's where Extreme Satisfaction on the pad wrote a program.

Selwyn Joffe: Great, and the second question. I'm sorry, Selwyn, go ahead. No, no, but the pads, as you had mentioned, just summarizing back, that's where extreme satisfaction on the pad wrote a program.

Selwyn Joffe: Hi, I wanted to ask if you guys could provide a breakdown over revenue by product line in one queue. And if you guys can comment on an inventory at retail customers and sell through versus sell-in dynamic in your key product category during one queue and through quarter to date. Okay, I could start. For the first quarter, the product mix was 65% rotating electrical. We'll pause with 7%, drinks were 24% and others was 4%.

Bill: Great, and then relative to the opportunity in Mexico, I've been a little unclear how to think about that opportunity because the installed base of vehicles is much smaller than the US. My impression this is not I don't know this to be factually correct, but my impression is that the average age of the vehicles in Mexico would be older than the US. So how are you thinking about this if my perception is correct that the fleet is smaller but the age is higher, which would lead to more repairs.

Bill DeZellman: Great, and then relative to the opportunity in Mexico... I've been a little unclear how to think about that opportunity because the installed base of vehicles is much smaller than the U.S. My impression, I don't know this to be factually correct, but my impression is that the average age of the vehicles in Mexico would be older than the U.S. So how are you thinking about this? If my perception is correct that the fleet is smaller but the age is higher, which would lead to more repairs, what's the right way to be thinking about Mexico?

Bill DeZellman: Great, and then relative to the opportunity in Mexico... I've been a little unclear how to think about that opportunity because the installed base of vehicles is much smaller than the U.S. My impression, this is not, I don't know this to be factually correct, but my impression is that the average age of the vehicles in Mexico would be older than the U.S. So how are you thinking about this? If my perception is correct, that the fleet is smaller but the age is higher, which would lead to more repairs, what's the right way to be thinking about Mexico?

Bill DeZellman: Great, and then relative to the opportunity in Mexico...

Bill DeZellman: I've been a little unclear how to think about that opportunity because the installed base of vehicles is much smaller than the U.S.

Bill DeZellman: My impression, I don't know this to be factually correct, but my impression is that the average age of the vehicles in Mexico would be older than the U.S.

Selwyn Joffe: Yeah, in terms of just moving forward and talking about the retailers and inventory levels, I mean, I think in general, what we're seeing is that there's a pickup in the business, I mean, I think we've had some softness, I think that there's been, we have there's been a possibility for the consumer to defer maintenance, they've had that deferral, but I think the hot weather and, you know, we're seeing, we're certainly our sales in July, but frankly, it was the highest July we've ever had in history of the company. So, we're seeing customers bring in inventory and what the expectation of some pickup, I don't think we're totally there yet, but as an industry, but to do, you know, again, disposable income with the consumer, but certainly, I think we were on our way, and we're extremely encouraged by our progress right now. I think that in conjunction, by the way, with the significant cost savings in nation, that's one we've completed, others that are still in process, we're excited about where we're moving to.

Bill DeZellman: So, how are you thinking about this? If my perception is correct, that the fleet is smaller...

Bill DeZellman: But the age is higher, which would lead to more repairs. What's the right way to be thinking about Mexico?

Selwyn Joffe: What's the right way to be thinking about Mexico? Yeah, so you're correct. I mean the fleet is definitely smaller than the United States; it's still a pretty significant fleet. and the average age continues to get older there, but disposable income. I mean, this is a bad thing for us, as minimum wages in Mexico keep going up, disposable income in Mexico keeps going up and the market is evolving then. So historically you've had what I would classify as an R&R market, where something that went wrong with the car, if an alternator went bad, that pulled it off and the mechanic would rebuild it or they would replace componentry in it.

Selwyn Joffe: Yeah, so, you're correct. I mean, the fleet is definitely smaller than the United States. It's still a pretty significant fleet, um, and the average age continues to get older there. But disposable income, I mean, and this is a bad thing for us, is that minimum wages in Mexico keep going up. Disposable income in Mexico keeps going up, and the market is evolving there. And so historically, you've had what I would classify as an R&R market, where something that went wrong with a car, if an alternator went bad, they'd pull it off, and the mechanic would rebuild it, or they would replace componentry in it.

Selwyn Joffe: Yeah, so you're correct. I mean, the fleet is definitely smaller than the United States. It's still a pretty significant fleet, and the average age continues to get older there. But disposable income, I mean, and this is a bad thing for us, is that minimum wages in Mexico keep going up. Disposable income in Mexico keeps going up, and the market is evolving. So historically, you've had what I would classify as an R&R market, where something that went wrong with a car, if an alternator went bad, they'd pull it off, and the mechanic would rebuild it, or they would replace componentry in it.

Selwyn Joffe: Yeah, so you're correct. I mean the fleet is definitely smaller than the United States. It's still a pretty significant fleet.

Selwyn Joffe: and I'm Gary Maier. Bye.

Selwyn Joffe: And the average age continues to get older there. But disposable income, I mean, and this is a bad thing for us, is minimum wages in Mexico keep going up. Disposable income in Mexico keeps going up, and the market is evolving there. And so...

Selwyn Joffe: Historically, you've had what I would classify as an R&R market, where something that went wrong with the car, if an alternator went bad, they'd pull it off and the mechanic would rebuild it, or they would replace componentry in it.

Selwyn Joffe: Today you're seeing the order zones and the varieties of the world who are leading the US charge into Mexico are selling finished goods. And so the average price point of the repair for these vehicles is thrown out; people are spending more money, and they're more concerned about how they repair that vehicle and the amount of penetration, formal penetration. The market there is defined as other. You know, there's so many small players that have been in that market, and now you've got big consolidators that are rolling into that market and opening up significant stores.

Selwyn Joffe: Today you're seeing, you know, the Autozones and the O'Reillys of the world who are leaving the U.S. charger in Mexico selling finished goods. And so the average price point of the repair for these vehicles is going up. People are spending more money, and they're more concerned about how they repair that vehicle.

Selwyn Joffe: Today you're seeing, you know, the AutoZones and the O'Reillys of the world who are leading the U.S. charger to Mexico selling finished goods.

Selwyn Joffe: And so the average price point of the repair for these vehicles is going up. People are spending more money and they're more concerned about how they...

Selwyn Joffe: And the amount of penetration, formal penetration that, you know, the market there is defined as other, you know, there are so many small players that have been in that market. Now you've got big consolidators that are rolling into that market and opening up significant stores. I'd encourage you just to listen to both Riley and AutoZone, you know, public announcements about Mexico. And we're, we're playing, and not only that, I mean, we're playing. We have a great product lineup for the Mexican market.

Selwyn Joffe: And the amount of penetration, formal penetration that, you know, the market there is defined as other. You know, there are so many small players that have been in that market. Now you've got big consolidators that are rolling into that market and opening up significant stores.

Selwyn Joffe: how they repair that vehicle and the amount of penetration, formal penetration that, you know, the market there is defined as other. You know, there's so many small players that have been in that market. Now you've got

Selwyn Joffe: And if I can just squeeze one more in there, we want to see what your latest thinking on interest expense given rates are coming down. I wish we think about the cash interest savings potentially to come for the rest of the year. Well, I mean, every point in interest reduction, just on the supply chain factoring is worth $7 million to us. So, you know, we're encouraged, we're encouraged by the reduction in interest in, and that's certainly been a tremendous headwind for us.

Selwyn Joffe: Big consolidators that are rolling into that market and opening up significant stores I'd encourage you just to listen to both Riley and AutoZones

Selwyn Joffe: I'd encourage you just to listen to both Riley and AutoZone, you know, public announcements about Mexico. And we're, we're playing, and not only that, I mean, we're playing. We have a great product lineup for the Mexican market. We're in Mexico. We have state-of-the-art capabilities right there. We're doing well, and we're going to do a lot better in Mexico. It's going to turn out to be a great business. I mean, I do think that it's a month of $100 million opportunity for us.

Selwyn Joffe: I would I encourage you just to listen to both Riley and order zones, you know public announcements on Mexico and and we're playing and not only that I mean we're playing. We have a great product lineup for the Mexican market where in Mexico we have state-of-the-art capabilities right there and we're doing well and we're going to do a lot better in Mexico. It's going to turn out to be a great business. I mean I do think it's a north of a hundred million dollar opportunity for us.

Selwyn Joffe: You know, public announcements on Mexico.

Selwyn Joffe: And we're playing, and not only that, I mean, we're playing...

Selwyn Joffe: We're in Mexico. We have state-of-the-art capabilities right there, and um... We're doing well, and we're going to do a lot better in Mexico. It's going to turn out to be a great business. I mean, I do think. It's a month of $100 million opportunity for us.

Selwyn Joffe: We have a great product lineup for the Mexican market. We're in Mexico. We have state-of-the-art capabilities right there and

Selwyn Joffe: We're encouraged at the rate to coming down. And, you know, we're excited about that, but we're not stopping at that. I mean, we're taking every bit of waste or, you know, when we've used the concept of lean manufacturing and lean operations, waste has to be eliminated. And with the volumes that we're getting now and some of our new product lines, we can take, and it's not, I hate to use the wood waste a little bit, but we can take our efficiencies up pretty dramatically, but that is a sort of turn of art for lean manufacturing.

Selwyn Joffe: We're doing well and we're going to do a lot better in Mexico. It's going to turn out to be a great business. I mean I do think

Selwyn Joffe: It's a north of a hundred million dollar opportunity for us.

Bill: Great, thank you for taking all my questions. Thank you.

Bill DeZellman: Great, thank you for taking all my questions.

Bill DeZellman: Great. Thank you for taking all my questions.

Operator: And there are no further questions at this time.

Operator: And there are no further questions at this time. Selwyn Joffe, I'll turn the call back over to you. Okay, thank you so much.

Operator: And there are no further questions at this time. Selwyn Joffe, I'll turn the call back over to you. Okay, thank you.

Selwyn Joffe: Thank you.

Selwyn Joffe: Selwyn Jossi, I'll turn the call back over to you. Okay, thank you so much. So just to summarize, you know, we're bullish, as I've just spoken. As we begin our new fiscal year, we're laser focused on further efficiencies. And I and I accentuate that we're laser focused on further efficiencies and fully benefiting from a not easily duplicated global platform where we can meet demand for non-discretionary products as well as for my diagnostic testing capabilities. We're leveraging our expertise and solid customer and supplier partnerships. These include a recently launched supply chain vendor finance program. And that benefits our supplier significantly. Liquidity is strong.

Operator: And there are no further questions at this time. Selwyn Joffe, I'll turn the call back over to you.

Selwyn Joffe: Okay, thank you so much. So, just to summarize, you know, we're bullish, as I've just spoken, as we begin our new fiscal year. We're laser-focused on further efficiencies and fully benefiting from a not easily duplicated global platform where we can meet demand for non-discretionary products as well as for my diagnostic. We are leveraging our expertise in solid customer and supplier partnerships. These include our recently launched supply chain vendor finance program, which benefits our suppliers significantly.

Selwyn Joffe: Okay, thank you so much. So, just to summarize, you know, we're bullish as I've just spoken as we begin our new fiscal year. We're laser focused on further efficiencies, and I accentuate that. We're laser focused on further efficiencies.

Selwyn Joffe: So, we're excited. I mean, we think that there's a lot of tailwinds for us on the earnings side moving forward. All right, thank you for taking my question, guys. I'll be back in the queue. Thank you very much. Thank you.

Selwyn Joffe: and fully benefiting from a not easily duplicated global platform.

Selwyn Joffe: where we can meet demand for non-discretionary products as well as for my diagnostic testing capabilities.

Bill Dezellem: And your next question comes from the line of a bill, disillment with Titan Capital. Your line is open. Thank you.

Selwyn Joffe: We are leveraging our expertise in solid customer and supplier partnerships. These include our recently launched supply chain vendor finance program.

David Lee: Would you please start with inventory and discuss why you saw that increase versus a year ago level? So, the inventory number of small growth in the first quarter, primarily for the update, upcoming sales increases we're expecting. So, we are wrapping up. Our guidance, again, is a strong growth for the full fiscal year. So, we need the inventory to supply our demand. Yeah, and I think you'll see that moderate pretty dramatically. I mean, as we're coming into the season, a second quarter is much stronger than our first quarter. So, you'll see significant progress in working capital as we get through this, with us. Thank you.

Selwyn Joffe: And that benefits our suppliers significantly.

Selwyn Joffe: Our liquidity is strong, we have in excess of $90 million, and we have the resources, capacity, and professional expertise to capitalize on significant market opportunities in all of our products, particularly brick-related businesses, which are gaining solid momentum. In closing, I've got to recognize the contributions of all of our team members who are continuously focused on providing the highest level of service. They're outstanding.

Selwyn Joffe: We have an excess of 90 million dollars, and we have the resources capacity and professional expertise to capitalize on significant market opportunities in all of our product lines, particularly a break related businesses which are gaining solid momentum.

Selwyn Joffe: Our liquidity is strong. We have in excess of $90 million, and we have the resources, capacity, and professional expertise to capitalize on significant market opportunities in all of our product lines.

Selwyn Joffe: particularly at brick-related businesses which are gaining solid momentum.

Selwyn Joffe: In closing, I've got to recognize the contributions of all of our team members who are continuously focused on providing the highest level of service. They are outstanding. We are all committed to being the industry leader for parts and solutions that move our world today and in the future.

Selwyn Joffe: In closing, I've got to recognize the contributions of all of our team members who are continuously focused on providing the highest level of service.

Selwyn Joffe: We are all committed to being the industry leader for parts and solutions that move our world today and in the future. I would also like to extend best wishes to Rudy and Jamie, who are retiring from our board. I very significantly appreciate the great contributions. We also appreciate the continued support of our shareholders. Thank everyone again for joining us on the call. We look forward to speaking with you when we host our fiscal 2025 second quarter call, which is in November, and at various investor conferences and meetings as well.

Selwyn Joffe: We are all committed to being the industry leader for parts and solutions that move our world today and in the future. I would also like to extend best wishes to Rudy and Jamie, who are retiring from our board. We significantly appreciate their great contributions. We also appreciate the continued support of our shareholders. Thank everyone again for joining us on the call. We look forward to speaking with you when we host our fiscal 2025 second quarter call, which is in November, and at various investor conferences and meetings as well.

Selwyn Joffe: They are outstanding. We are all committed to being the industry leader for parts and solutions that move our world today and in the future. I would also like to extend best wishes to Rudy and Jamie who are retiring from our board.

Selwyn Joffe: I would also like to extend best wishes to Rudy and Jamie to a retiring from our board. We significantly appreciate the great contributions of the U.S. We also appreciate the continued support of our shareholders. I thank everyone again for joining us on the call. We look forward to speaking with you when we host our fiscal 2025 second quarter call, which is in November, and at various investor conferences and meetings. Thank you very much.

David Lee: And then on that note, when does the next tranche of a break business come into your revenues? Let me try and, you know, the biggest, the biggest piece starts in January, but we have other new business that's starting between now and then we have a new business in, you know, Wheelhops that's starting now and we have additional rotating electrical business that's starting in the next few, two to three months and then additional break business starting and significant new business in our diagnostic business and some additional odd parts categories.

Selwyn Joffe: We significantly appreciate the great contributions of the Oaths.

Selwyn Joffe: We also appreciate the continued support of our shareholders. Thank everyone again for joining us on the call. We look forward to speaking with you when we host our fiscal 2025 second quarter call, which is in November , and at various investor conferences and meetings as well.

Operator: And this concludes today's conference call. You may now disconnect.

Operator: Thank you very much.

Operator: When America Failed

Unnamed: UPBEAT PUBLIC STORIES

Operator: And this concludes today's conference call. You may now disconnect.

David Lee: And again, we don't want to get ahead of our skis. I mean, we've got this in our guidance, but the amount of opportunities that we're getting and seeing at the correct pricing with the correct operating efficiencies, certainly a driving to see better profit metrics as we get through this year. Thank you.

David Lee: And I think in the opening remarks, David, you had mentioned that returns were higher than normal. Would you walk through the dynamics behind that and what aspect of that is unique versus something that may naturally happen again? Yeah, so it happens every now and again, and I'm not going to call out customers. We have one customer, a very large customer whose purchases were at a lower level, but returns are there's a general right of return and so you get the same returns back regardless of the purchases.

David Lee: So the returns as a percentage of purchases for this particular customer were high. Now that has changed and there's already reversed out in this quarter. So again, we're a little early in the quarter, but so far very, very, very strong and those return levels should come back to normalize levels. They are at normalize levels now, hopefully that will maintain itself. And then we had one other, one other, and it's not that we want to come back, but we had one other large incentive program that was taken early as a result of a renewal of a contract.

David Lee: So it's one time to that particular event, but I mean that affected us a little bit as well. But again, those are both behind us and again, we've seen significantly more positive energy sales right now. So thank you.

Selwyn Joffe: And then one additional question relative to the quality built brand. Are you seeing any spillover from that brand's success in the professional market on the break side for the rotating electrical side of the business? Or those are different enough that there really is not an opportunity for a benefit? You know, I'm going to give you a little more of some background, some great feedback that we're getting and then I'm going to try and answer your question.

Selwyn Joffe: On the break side, I've had very unique calls from customers that are particular one large customer that are saying that the acceptance rate and the renewal rate of installers that are using our product is extraordinarily good. And unusual call from a particular customer saying how they think we've got something extremely special and when you hear that from the field, I mean, that's pretty exciting. So when when the installer sees that name and has a great experience on it, it will spill over and his spill and so we'll continue.

Selwyn Joffe: I think to see strong sales. You know, I think we're going to see strong sales clearly from quality built across the professional install market across all of our product lines and certainly will help all of them. And depending on which one leads we have a portfolio of excellent products. So any experience with the quality build brand should add to experiencing other product lines for the quality build brand.

Selwyn Joffe: I also want to say while I got you bill and I appreciate you just giving me the floor here a little bit, but the growth in the Mexican opportunity for us is proven to be significant. And you know, we'll get more granular later as we go into the year, but the growth there continues to be very, very exciting and we think there's a big opportunity for us there. And then not last, but not last, but a couple more things is diagnostic businesses now pretty much being embraced by every major chain out there.

Selwyn Joffe: And so we can see for the growth and high margin of that diagnostic business. And then and then our heavy duty rotating electrical business. I mean, just the amount of momentum that's coming in and and you know, the outlook and the opportunity on that is also. You know, it's is it's also embrace is it's really, you know, we're embracing that and that's really, I mean, really positive. So, you know, so those all tailwinds that we see, you know, going through all through the.

Selwyn Joffe: Through our system and whatever on the on the negative side and it's just it's pretty small, but, you know, the electric vehicle testing business and, you know, we're going to look at what to do strategically with that business, but that's a little bit slower for us. Very, very small part of our business, but, but, but a lot of you know, let's load the electric and listen to the good news and the bad news, the electric vehicle space is not unfolding the way I think many people photo would just be an instant media, you know, everything's electric vehicle.

Selwyn Joffe: Well, you start reading the car magazine and the Wall Street Journal at articles this week, about how these major automotive companies are rethinking and scrapping their combustion engine lines and actually trying to revamp them and put them back in place. And so the combustion engine hybrid technology arena seems to be gaining far more momentum than the electric vehicle arena seems to be losing a lot of momentum. And so that boasts well for us at the end of the day. Sorry for a bit of a run on answer. I hope I hit all your things.

Bill Dezellem: But gave me an opportunity to express myself to these items. Help those did hit my questions, but did create two others. Relative to the call that you've received that the renewal rate with the installers and the quality bill brand is very high was that specific to the brake pad and rotors? Or was it was it broader than that or on a different product line specifically to the pad and roto program so you know very very very encouraging there.

Bill Dezellem: I will say one of the things that's happening in the industry around pads and rotors is that there's a general significant softness in the tire industry. I'm hearing that it's getting a little bit better but still very soft and what happens when that happens is that the installer usually they get the opportunity to replace all four tires on the vehicle will cross sell the brake program. What's happening is the consumers just electing to go with the least expensive repair and only repair the one tire or whatever they need.

Bill Dezellem: And so the the cross selling opportunity on these brake jobs is much slower than the pads being a while and that's that's providing some headwind in those categories having said that becoming up a very small base and you know we expect that to continue to grow despite that but that will change as well as tires don't last forever and the consumer is going to need to replace them.

Bill Dezellem: Great and second question I'm sorry so I'll go ahead. No but the pads as you mentioned I just just summarizing back that's where extreme satisfaction on the pad road approach.

Selwyn Joffe: Great and then relative to the opportunity in Mexico I've been a little unclear how to think about that opportunity because the installed base of vehicles is much smaller than the US. My impression this is not I don't know this to be factually correct but my impression is that the average age of the vehicles in Mexico would be older than the US. So how are you thinking about this if my perception is correct that the that the fleet is smaller but the age is is higher which would lead to more more repairs.

Selwyn Joffe: What's the right way to be thinking about about Mexico? Yeah so you're correct I mean the fleet is definitely smaller than the United States it's still a pretty significant fleet, and the average age continues to get older there, but disposable income, I mean, this is a bad thing for us, as minimum wages in Mexico keep going up, disposable income in Mexico keeps going up and the market is evolving then. So historically you've had what I would classify as an R&R market, where something that went wrong with the car if an alternator went bad, that pulled it off and the mechanic would rebuild it or they would replace componentry in it.

Selwyn Joffe: Today you're seeing the order zones and the varieties of the world who are leading the US charge into Mexico are selling finished goods. And so the average price point of the repair for these vehicles is thrown out, people are spending more money and they're more concerned about how they repair that vehicle and the amount of penetration, formal penetration, the market there is defined as other. You know, there's so many small players that have been in that market and now you've got big consolidators that are rolling into that market and opening up significant stores.

Selwyn Joffe: I would I encourage you just to listen to both Riley and order zones, you know public announcements on Mexico and and we're we're playing and not only that I mean we're playing. We have a great product lineup for the Mexican market where in Mexico we have state of the art capabilities right there and we're doing well and we're going to do a lot better in Mexico it's it's going to turn out to be a great business. I mean I do think it's a north of a hundred million dollar opportunity for us.

Bill Dezellem: Great, thank you for taking all my questions. Thank you.

Operator: And there are no further questions at this time.

Selwyn Joffe: Selwyn Jossi, I'll turn the call back over to you. Okay, thank you so much. So just to summarize, you know, we're bullish as I've just spoken as we begin our new fiscal year, we're laser focused on further efficiencies. And I and I accentuate that we're laser focused on further efficiencies and fully benefiting from a not easily duplicated global platform where we can meet demand for non discretionary products as well as for my diagnostic testing capabilities.

Selwyn Joffe: We're leveraging our expertise and solid customer and supplier partnerships. These include a recently launched supply chain vendor finance program. And that benefits our supplier significantly liquidity is strong. We have an excess of 90 million dollars and we have the resources capacity and professional expertise to capitalize on significant market opportunities in all of our product lines, particularly a break related businesses which are gaining solid momentum.

Selwyn Joffe: I would also like to extend best wishes to Rudy and Jamie to a retiring from our board. We significantly appreciate the great contributions of the US. We also appreciate the continued support of our shareholders. I thank everyone again for joining us on the call. We look forward to speaking with you when we host our fiscal 2025 second quarter call, which is in November and at various investor conferences and meetings. Thank you very much.

Operator: And this concludes today's conference call.

Operator: You may now disconnect.

Q1 2025 Motorcar Parts of America Inc Earnings Call

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