Motorcar Parts of America confirms fiscal 2026 guidance as sales rise 6.4% amid market share gains in brake business

Earnings Call Insights: Motorcar Parts of America (MPAA) Q2 2026

MANAGEMENT VIEW

* CEO Selwyn Joffe indicated that "we have experienced strong consecutive quarters" and highlighted first half sales growth of $31.8 million or 8.4%, along with gross profit improvement and strong operating cash flow. He stated the company remains committed to being the "leading supplier of nondiscretionary automotive aftermarket parts" and underscored the strategic focus on continuous improvement and market leadership.
* Joffe noted, "We are excited by the opportunities for growth moving forward, particularly given the rapidly changing industry environment." He emphasized the company's financial strength and flexibility as a competitive advantage.
* The CEO also pointed to industry dynamics, citing the average age of U.S. light vehicles rising to 12.8 years and the vehicle population increasing to 293.5 million, which supports increased replacement part opportunities.
* Joffe reported continued market share gains for the brake offerings, especially brake calipers, and highlighted growth momentum in the heavy-duty rotating electric market, the Mexico aftermarket, and the diagnostic business.
* He addressed two unusual events during the quarter: a onetime gain of $14.8 million from reduced customer core returns accrual, and a temporary purchase delay by a major customer, both of which offset each other in net sales impact. He confirmed, "we are confirming our guidance for fiscal 2026. This onetime core revenue is not included in our revenue guidance."
* CFO David Lee reported, "Net sales increased 6.4% to $221.5 million. Gross profit increased 3.5% to a second quarter record of $42.7 million, generated $21.9 million of cash from operating activities and reduced net bank debt by $17.7 million to $56.7 million, repurchased 90,114 shares for $1.4 million at an average price of $15.41."

OUTLOOK

* Management reaffirmed its fiscal 2026 guidance, with Joffe stating the company expects continued organic growth supported by industry tailwinds and a strong financial position.
* Joffe indicated that higher sales volumes and operational efficiencies should "further improve results" and pointed to ongoing cost reduction and supply chain initiatives to enhance margins.
* The CEO emphasized, "we are confirming our guidance for fiscal 2026," and clarified that the onetime core revenue from the quarter is excluded from the guidance.

FINANCIAL RESULTS

* Net sales for the fiscal '26 second quarter increased by $13.3 million or 6.4% to $221.5 million from $208.2 million in the prior year.
* Gross profit increased 3.5% to $42.7 million, with gross margin at 19.3% compared to 19.8% a year earlier, impacted by $3.6 million of noncash expenses and $698,000 of onetime cash expenses.
* Operating income increased 30.8% to $16.4 million from $12.5 million in the prior year.
* Interest expense decreased by $1.5 million to $12.7 million due to lower average outstanding balances and reduced interest rates.
* Net loss for the quarter was $2.1 million or ($0.11) per share, compared with a net loss of $3 million or ($0.15) per share in the prior year, impacted by $4.8 million of noncash expenses and $523,000 of onetime cash expenses.
* EBITDA for the quarter was $16.5 million, with $6.3 million in noncash expenses and $698,000 in onetime cash expenses; EBITDA before these was $23.5 million.
* The company generated $21.9 million in operating cash flow and reduced net bank debt by $17.7 million to $56.7 million. Liquidity was reported at approximately $161 million.

Q&A

* Brian Nagel, Oppenheimer: Asked about the impact of customer deferral on the quarter and consumer demand deferrals. Joffe explained, "there's a customer that has gone through some operational changes... we've had some purchases deferred for the quarter. We believe that customer is committed to continuing inventory levels and don't believe that there is any fundamental difference to that." He added that any deferral in nondiscretionary products is "more nominal on us than others."
* Derek Soderberg, Cantor Fitzgerald: Asked about market share trends in core and brake business, and effects from First Brands. Joffe responded, "market share for us, I mean, it fluctuates a little bit, but I don't see any major material changes... our brake-related products are certainly the ones that are picking up momentum faster than others." On First Brands, he declined to comment directly but suggested industry challenges may open new opportunities for reliable suppliers.
* Soderberg followed up on cash flow and share repurchases. Joffe stated, "to the extent we have liquidity to the extent that we think that there's an undervaluation... we'll continue to buy back stock" and expressed comfort with current debt levels and a focus on maintaining liquidity for future opportunities.

SENTIMENT ANALYSIS

* Analysts' questions focused on demand deferral, market share, and capital allocation, reflecting a neutral to slightly positive tone. There was interest in operational specifics, but no pressing skepticism.
* Management maintained a confident, optimistic tone throughout, emphasizing operational execution, financial flexibility, and growth opportunities. Joffe repeatedly used language such as "we are excited by our progress and future opportunities" and "we continue to be bullish about our outlook."
* Compared to the previous quarter, analyst tone remained constructive, with management displaying similar or slightly increased confidence in margin enhancement and growth initiatives.

QUARTER-OVER-QUARTER COMPARISON

* Guidance was reaffirmed, with explicit clarification that onetime items were excluded from forward projections, while the previous quarter saw a guidance increase attributed to strong performance and tariff pass-throughs.
* Strategic focus remained steady, emphasizing organic growth, market share gains (notably in brakes), and operational efficiency.
* Analysts this quarter inquired more about deferrals and operational impacts, whereas the previous quarter included questions about tariffs and product segment growth.
* Key metrics such as sales, gross profit, and cash flow continued to improve, while the company emphasized margin resilience despite noncash and onetime expenses.
* Management confidence remained strong, with consistent emphasis on liquidity, low leverage, and future opportunities.

RISKS AND CONCERNS

* Management cited temporary purchase deferrals by a major customer, offset by a onetime gain from customer core returns accrual.
* Joffe identified recent industry headwinds from consumer repair deferrals and the government shutdown but minimized their long-term impact on nondiscretionary products.
* Noncash expenses, foreign exchange impacts, and onetime cash expenses were highlighted as key financial factors.

FINAL TAKEAWAY

Motorcar Parts of America highlighted another quarter of sales and margin growth, underpinned by robust demand for nondiscretionary parts, increased market share in brake products, and expansion in Mexico and diagnostics. Management reaffirmed fiscal 2026 guidance and expressed confidence in the company's liquidity, operational momentum, and ability to continue returning value to shareholders through buybacks and debt reduction, even as the industry navigates short-term headwinds and customer purchase timing shifts.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/mpaa/earnings/transcripts]

MORE ON MOTORCAR PARTS OF AMERICA

* Motorcar Parts of America, Inc. (MPAA) Q2 2026 Earnings Call Transcript [https://seekingalpha.com/article/4841458-motorcar-parts-of-america-inc-mpaa-q2-2026-earnings-call-transcript]
* Motorcar Parts Of America: Shares Are Cheap Enough And Growth Attractive Enough To Be Bullish [https://seekingalpha.com/article/4827386-motorcar-parts-of-america-shares-cheap-growth-attractive-bullish]
* Motorcar Parts of America: Why I'm Sticking To Hold [https://seekingalpha.com/article/4827378-motorcar-parts-of-america-why-im-sticking-to-hold]
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* Motorcar Parts of America Non-GAAP EPS of $0.17 misses by $0.21, revenue of $221.5M [https://seekingalpha.com/news/4519266-motorcar-parts-of-america-non-gaap-eps-of-0_17-misses-by-0_21-revenue-of-221_5m]