Motorcar Parts of America has reported results for its fourth quarter and 2022 fiscal year ended March 31, 2022 – reflecting record annual sales with strong demand for non-discretionary aftermarket parts and the completion of a multi-year build-out program for the company’s brake-related manufacturing operations. 

“We reported record sales for fiscal 2022, despite continued global supply chain constraints and fluctuations from historical customer order patterns during the fiscal fourth quarter. Demand for replacement parts remains strong, and we are confident in the long-term demand dynamics given tailwinds from an aging car fleet. Additionally, we anticipate accelerating momentum from our emerging brake-related products — including brake calipers and in particular pads and rotors, which were formally launched subsequent to year end and are experiencing strong demand. This highlights the success of our investments in the brake-related categories that we have made over the past several years to tap into the large market for both internal combustion engines and emerging electrical vehicles. We are optimistic as we start a new fiscal year and resume financial guidance, as discussed below,” said Selwyn Joffe, chairman, president and CEO. 

Joffe emphasized the company is keenly focused on gross profit growth. Upside opportunities are expected to be realized by increasing sales through product-line growth in each category, including the recently announced brake line expansion. In addition, the company expects to benefit from leveraging the company’s cost discipline, and mitigating increases in freight rates, freight surcharges, wage increases and other inflationary costs with operational efficiencies. As noted last quarter, price increases are also being implemented and continuously assessed. 

“We built higher than normal overall inventory levels during fiscal 2022 to meet expected demand and address an unstable supply chain. These levels should stabilize as fiscal 2023 evolves and customer order patterns are realigned, which should contribute to positive annual cash flow targets,” Joffe said. 

Joffe noted that after a multi-year period of elevated capital expenditures to fund expansion, with the formal launch of brake-related products, he expects a return to more normalized ranges. 

Net sales for the fiscal 2022 fourth quarter were $163.9 million compared with $168.1 million in the prior-year period — impacted by softness in January and February offset by strength in the last month of the quarter. 

Net loss for the same period was $332,000, or $0.02 per share, compared with net income of $835,000, or $0.04 per diluted share, a year ago — impacted by approximately $1.9 million, or $0.10 per share, of non-cash items as detailed in Exhibit 1. The company also was impacted by approximately $3.2 million, or $0.17 per share, of other costs, primarily due to increased shipping rates, higher tariffs, and other transitory cost pressures related to supply chain disruptions due to COVID-19. 

Net income for the prior-year fourth quarter was impacted by $6.9 million of non-cash items, or $0.35 per diluted share. Net income for the prior-year fourth quarter was also impacted by $6.8 million, or $0.35 per diluted share, of other costs, primarily due to brake caliper start-up costs, product relocation expenses related to the expansion in Mexico, and other costs associated with COVID-19. 

Gross profit for the fiscal 2022 fourth quarter was $25.8 million compared with $32.1 million a year earlier. Gross profit as a percentage of net sales for the fiscal 2022 fourth quarter was 15.7 percent compared with 19.1 percent a year earlier. Gross margin for the fiscal 2022 fourth quarter was impacted by 2.5 percent by the aforementioned non-cash items and 2.0 percent by the transitory supply chain disruptions that affected net loss. In addition to the items mentioned above, gross margin for the fourth quarter was further impacted by inflationary costs and new product line growth initiatives. 

Fiscal 2022 12-Month Results

Net sales increased 20.3 percent to a record $650.3 million from $540.8 million a year earlier. Net sales included $13.3 million in core revenue compared with $12.8 million in the prior-year period, due to a realignment of inventory at customer distribution centers with expected future sales benefits as product mix changes. 

Net income for fiscal 2022 was $7.4 million, or $0.38 per diluted share, compared with net income of $21.5 million, or $1.11 per diluted share, a year ago. Net income was impacted by approximately $16.8 million, or $0.86 per diluted share, of non-cash items compared with only $80,000 in non-cash gains for the prior year, as detailed in Exhibit 2. The company also incurred approximately $14.1 million, or $0.72 per diluted share, of costs from supply chain disruptions, brake caliper start-up costs, and other product relocation expenses related to the expansion in Mexico. The start-up costs primarily related to the brake calipers expansion in Mexico during the first half of fiscal 2022, with no costs incurred during the second half of fiscal 2022. In addition, the company says results for the 12-month period were impacted by other transitory cost pressures related to supply chain disruptions due to COVID-19. 

Net income for the prior-year period was impacted by other costs totaling $15.0 million, or $0.77 per diluted share, primarily due to brake caliper start-up costs, product relocation expenses related to the expansion in Mexico, and other costs associated with COVID-19. 

Gross profit for fiscal 2022 was $117.9 million compared with $109.5 million a year earlier. Gross profit as a percentage of net sales for fiscal 2022 was 18.1 percent compared with 20.2 percent a year earlier. Gross margin for fiscal 2022 was impacted by 2.6 percent of non-cash items and 2.8 percent for other costs, primarily by the transitory supply chain disruptions that affected net income. 

Fiscal 2023 Guidance

Motorcar Parts of America 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.