Motorcar Parts of America (MPA) has reported results for its fiscal 2023 second quarter ended Sept. 30, 2022.

Net sales for the fiscal 2023 second quarter were $172.5 million – representing a 6.6 percent increase compared with $161.8 million in the prior year, which excludes $13.7 million of core revenue due to a realignment of inventory at customer distribution centers with sales benefits evolving as product mix changes. 

MPA said fiscal second quarter results were sharply impacted by certain customers delaying orders. The bulk of these delayed orders are expected to be shipped by the fiscal 2023 fourth quarter. 

Fiscal second quarter results also were impacted by the company’s heavy-duty products, which experienced lower than anticipated sales due in large part to critical component shortages. Sales are expected to increase in the second half of the fiscal year, starting in the current fiscal third quarter. 

The company’s diagnostics products also experienced supply chain disruptions for semi-conductor chips, which delayed order shipments to certain EV customers. Sales are expected to increase in the second half of the fiscal year, starting in the current fiscal third quarter. 

Order flow for the company’s JBT-1 diagnostic testing equipment for automotive retail stores continues to be robust, with expectations for strong sales contributions from this product in the fiscal second half, the company said.

Net loss for the fiscal 2023 second quarter was $6.5 million, or $0.34 per share, compared with net income of $3.7 million, or $0.19 per diluted share, a year ago – impacted by approximately $5.0 million, or $0.26 per share, of non-cash items. The company also was impacted by approximately $3.9 million, or $0.20 per share, of other costs, primarily transitory costs related to supply chain disruptions. In addition to the above items, results for the quarter were primarily impacted by unusual supply chain shortages of critical components for the company’s diagnostic products and heavy-duty products, as referenced above. 

Results for the fiscal second quarter were also impacted by $5.7 million of higher interest expenses compared with the prior year, with price increases expected to help offset higher rates and certain costs. 

Gross profit for the fiscal 2023 second quarter was $26.5 million compared with $36 million a year earlier. Gross profit as a percentage of net sales for the fiscal 2023 second quarter was 15.4 percent compared with 20.5 percent a year earlier. 

“Despite the inflationary cost environment and the impact on gross margin from order delays due to supply chain challenges primarily for our heavy-duty and diagnostics products, we remain optimistic about our business on a year-over-year basis. We are encouraged by easing supply chain conditions and the demand outlook for our product lines in the second half of the fiscal year,” said Selwyn Joffe, chairman, president, and CEO. 

Six-Month Results

Net sales for the fiscal 2023 six-month period were $336.5 million – representing an 8.3 percent increase compared with $310.8 million in the prior year, which excludes $13.7 million in core revenue due to a realignment of inventory at customer distribution centers with sales benefits evolving as product mix changes. 

Net loss for the fiscal 2023 six-month period was $6.7 million, or $0.35 per share, compared with net income of $4.5 million, or $0.23 per diluted share, a year ago – impacted by approximately $9.2 million, or $0.48 per share, of non-cash items. The company also was impacted by approximately $6.6 million, or $0.35 per share, of other costs, primarily transitory costs related to supply chain disruptions. In addition to the above items, results for the six-month period were primarily impacted by unusual supply chain shortages of critical components for the company’s diagnostic products and heavy-duty products, as referenced above. 

Results for the fiscal 2023 six-month period were also impacted by $8.6 million of higher interest expenses compared with the prior year, with price increases expected to help offset higher rates and certain costs. 

Gross profit for the fiscal 2023 six-month period was $56.8 million compared with $59.5 million a year earlier. Gross profit as a percentage of net sales for the fiscal 2023 six-month period was 16.9 percent compared with 18.3 percent a year earlier. 

Fiscal 2023 Second Half Considerations

Reaffirming previously announced guidance – including year-over-year record sales targets between $680 million and $700 million, representing between 4.6 and 7.6 percent year-over-year growth. 

Expected margin improvement from additional price increases, easing supply chain constraints and further operational efficiencies. 

Improved cash flow from enhanced profitability across all product lines. 

Fiscal 2023 Guidance Reaffirmed

MPA said it expects net sales for its fiscal year ending March 31, 2023, to be between $680 million and $700 million, representing between 4.6 and 7.6 percent year-over-year growth –ramping up throughout the year. Excluding $13.3 million of core revenue realized in fiscal year 2022 (which the company does not expect in fiscal 2023), net sales are expected to increase between 6.8 and 9.9 percent in fiscal year 2023. Operating income is expected to be between $57 million and $61 million, before the non-cash foreign exchange impact of lease liabilities and forward contracts, the non-cash impact of revaluation of cores on customers’ shelves, and supply chain disruptions and costs related to COVID-19. The company estimates other non-cash items will be approximately $21 million, including core and finished goods premium amortization and share-based compensation, and cash expenses will be approximately $2 million for special EV-related research and development expenses, impacting operating income. The company estimates depreciation and amortization will be approximately $13 million.