Motorcar Parts of America, Inc. (Nasdaq: MPAA) today reported results for its fiscal 2024 first quarter ended June 30, 2023, and reiterated the company’s full-year outlook.

Net sales for the fiscal 2024 first quarter were $159.7 million compared with $164.0 million in the prior year – primarily reflecting timing of orders. The company noted that the fiscal second quarter is off to an excellent start based on record sales for a July month.

Net loss for the fiscal 2024 first quarter was $1.4 million, or $0.07 per share, compared with a net loss of $175,000, or $0.01 per share, a year ago – impacted by sharply higher interest rates not yet fully absorbed by price increases and product mix, MPA reported.

Interest expense increased by $4.8 million, or $0.18 per share, to $11.7 million from $6.9 million a year ago, mainly due to higher market rates. The company expects to realize annualized price increases throughout this fiscal year, which will contribute to net income enhancement.

Results for the quarter were impacted by changes in product mix and lingering inflationary costs not fully absorbed by price increases, the company said. In addition to the above, non-cash items impacted results by $461,000, or $0.02 per share and cash items impacted results by $1.7 million, or $0.09 per share.

Gross profit for the fiscal 2024 first quarter was $26.6 million compared with $30.3 million a year earlier, the company reported. Gross margin for the fiscal 2024 first quarter was 16.6 percent compared with 18.5 percent a year earlier. Gross margin for the fiscal 2024 first quarter was impacted by changes in product mix and inflationary costs not fully absorbed by price increases, as noted above. In addition to the above items, gross margin for the fiscal 2024 first quarter was impacted by $3.4 million, or 2.2 percent, of non-cash items, and $2 million, or 1 percent, of cash items.

Gross margin improvement is expected to be enhanced as price increases are realized; by higher sales volume; and further anticipated operational efficiencies. The most recent price increases late in the fiscal first quarter will be realized throughout the fiscal 2024 second quarter, the company said. Following the completion of the company’s second quarter, on a run-rate basis, all price increases will be realized.

Notwithstanding the use of cash for the quarter of $20.5 million to support operating activities, the company expects a positive reversal in the fiscal second quarter and strong operating cash flow for the fiscal year. The company strategically elected to lower collection of receivables by approximately $20 million paid through its customer-offered supply chain vendor finance programs during the fiscal first quarter, which resulted in interest savings of approximately $1.3 million. This enabled the company to defer interest expenses until price increases for interest rates are recognized.

The company’s liquidity allowed it to execute this strategy and additionally, subsequent to quarter end, pay down the company’s $11.25 million term loan, MPA reported. Interest rates on the term loan were approximately two percent higher than rates offered by the company’s customers’ supply chain vendor finance programs.

“With strong demand for critical non-discretionary automotive parts, we are on track to achieve our year-over-year targets, notwithstanding softness for the quarter – primarily due to timing of orders. Our optimism is supported by favorable industry trends, extreme hot weather across the country and further operational efficiency improvements with increasing sales volume,” said Selwyn Joffe, chairman, president and chief executive officer.

MPA listed the following considerations as fiscal year 2024 evolves:

• Sales volume is continuing to gain momentum;
• Ordering activity is strong;
• Extreme heat and strong industry fundamentals will enhance product demand;
• Margin improvement expected;
• Price increases;
• Better overhead absorption as the brake-related business grows;
• Overall gross profit is expected to increase in the interim;
• Operating efficiencies;
• Enhanced cash flow from working capital initiatives.