Motorcar Parts of America (NASDAQ:MPAA) reported stronger fiscal fourth-quarter and full-year results, with management pointing to sales momentum, new business commitments and improving profitability as key drivers heading into fiscal 2027.
Chairman, President and Chief Executive Officer Selwyn Joffe said the company ended the year with “a strong fourth quarter” and “numerous new business commitments” expected to phase in during fiscal 2027, along with additional pending opportunities. Management emphasized that the company remains focused on increasing profitability, gaining market share and managing working capital while continuing to generate positive annual cash flow.
Fourth-Quarter Profitability Improves
Operating income increased 29.4% in the fourth quarter and 64.9% for the full year. The company reported quarterly net income of $9.7 million, compared with a net loss of $722,000 in the prior-year period. For the full year, net income was $12.4 million, compared with a net loss of $19.5 million a year earlier.
Chief Financial Officer David Lee said fourth-quarter gross margin was 23.7%, up from 19.9% a year earlier, helped by cost reduction efforts. Excluding non-cash expenses and certain one-time cash items, Lee said gross margin was 25.8% for the quarter.
For fiscal 2026, operating income was $65.8 million. Lee said operating income was $76.6 million before the impact of non-cash expenses and the benefit of one-time cash items detailed in the company’s earnings release.
Cash Flow, Debt and Share Repurchases
Motorcar Parts of America used $4.5 million of cash from operating activities during the fourth quarter, which Joffe said was primarily due to a $32.5 million increase in accounts receivable tied to strong sales near the end of March. For the full year, the company generated $19.2 million of cash from operating activities.
Management said the company generated $57 million of cash before using $37.8 million for working capital. Working capital was affected by inventory built for new business expected in the current fiscal year, as well as the increase in accounts receivable at year-end.
The company reduced net bank debt to $80 million as of March 31, 2026, despite repurchasing $11.4 million of shares during the fiscal year. Lee said Motorcar Parts of America repurchased 955,608 shares at an average price of $11.88. The company has $22.1 million remaining under its current share repurchase authorization.
Lee said liquidity remained strong, with total cash and availability of approximately $133.7 million at fiscal year-end. EBITDA for the 12 months ended March 31, 2026, was $76.4 million, or $86.1 million before non-cash and one-time cash expenses. Based on net bank debt of $80 million, Lee said the company’s net bank debt-to-EBITDA ratio was 0.93 on that adjusted basis.
Guidance Points to Higher Fiscal 2027 Sales
For fiscal 2027, Motorcar Parts of America expects net sales of $780 million to $800 million, representing year-over-year growth of 7.5% to 10.2%. Lee said the guidance excludes certain non-recurring items, including tariff passthroughs due to reduced import tariffs and non-recurring core revenue.
The outlook includes new business commitments expected to ramp up in the second half of the fiscal year. Lee said the timing reflects customers working through liquidated inventory purchased from a previous supplier.
In addition to the formal guidance, Lee said the company expects to add more than $100 million of additional annualized net sales by the end of fiscal 2027, though those sales are not included in guidance because of uncertainty around timing. Management expects annualized net sales to exceed $900 million by the end of fiscal 2027.
Operating income is expected to range from $86 million to $91 million, representing growth of 12.3% to 18.8%. The company expects depreciation and amortization of approximately $9 million and EBITDA of $95 million to $100 million.
Management Highlights Product and Market Opportunities
Joffe said Motorcar Parts of America continues to see opportunity in non-discretionary aftermarket products, citing industry data showing the average age of U.S. light vehicles has increased to 12.8 years from 12.5 years in 2024. He also said the number of vehicles on the road rose to 295.9 million from 291.1 million a year earlier.
Management highlighted momentum in brake-related products, with Joffe saying the company expects accelerating gains in that business to support margin goals. He also said the company’s Quality-Built brand continues to gain recognition and market share in traditional distribution and repair markets.
In the heavy-duty business, Joffe said the company has begun relocating its heavy-duty operations from Canada to Mexico as part of its effort to improve efficiency. He also said Motorcar Parts of America is seeing increased demand for aftermarket parts in Mexico and is positioned to support U.S.-based retailers and warehouse distributors as they expand in Latin and South America.
Joffe also pointed to the company’s diagnostic business, saying its JBT-1 benchtop tester “leads the industry” and that the installed base continues to grow. Lee added that the company continues to explore strategic alternatives for its EV emulator business, which he described as a non-core asset, while noting that the business has secured new original equipment customer commitments.
Analysts Ask About Competitive Dislocation and Macro Trends
During the question-and-answer session, Andrew Chasno, speaking on behalf of Brian Nagel of Oppenheimer, asked how much of the company’s incremental $100 million opportunity was tied to a competitor bankruptcy. Joffe said “a good portion” was related to that dislocation, while adding that the company also has organic growth opportunities unrelated to it.
Derek Soderberg of Cantor Fitzgerald asked about customers working through inventory related to First Brands. Joffe said customers had built inventory after hearing of problems at that supplier and are now reducing those inventories. He said Motorcar Parts of America has firm commitments and is shipping smaller quantities currently, with volumes expected to ramp later in the year.
Asked about macroeconomic assumptions, Joffe said the company’s guidance largely incorporates a status quo outlook. He acknowledged that higher fuel prices could affect miles driven and that milder weather can affect sales, but said the company’s focus on non-discretionary products limits the effect of deferrals compared with discretionary categories.
Joffe closed the call by saying management remains “bullish” on the outlook despite fiscal 2026 headwinds, citing strong liquidity, low leverage and opportunities to gain share across product categories.
About Motorcar Parts of America (NASDAQ:MPAA)
Motorcar Parts of America, Inc is a leading North American designer, manufacturer and distributor of aftermarket automotive replacement parts. The company’s product portfolio spans collision and mechanical components, providing solutions for steering and suspension, brake systems, engine cooling, electrical and drivelines. Through a combination of proprietary brands and exclusive licensing agreements, Motorcar Parts of America offers an extensive selection of both new and remanufactured parts to meet the needs of automotive service professionals and retailers.
In addition to its core collision and under-hood product lines, the company markets specialty items such as performance accessories, tools and equipment.
