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DATE

Monday, Aug. 10, 2026 at 1 p.m. ET

CALL PARTICIPANTS

• Vice President of Corporate Communications and Investor Relations - Gary S. Maier
• Chairman, President and Chief Executive Officer - Selwyn H. Joffe
• Chief Financial Officer - David Lee

TAKEAWAYS

• Net Sales -- $168.0 million, reflecting a decline from $188.4 million in the prior year primarily due to the anticipated timing of customer orders.
• GAAP Gross Margin -- 16.2%, representing a decrease from 18.0% a year ago driven by non-cash expenses and unfavorable foreign exchange rates.
• Adjusted Gross Margin -- 20.2%, excluding 2.4% in non-cash expenses and 1.6% in one-time cash items.
• Foreign Exchange Impact -- $3.5 million, or approximately 2% of gross margin, due to the weakening of the U.S. dollar against the Mexican peso.
• Operating Income -- $3.5 million, compared with $20.1 million in the previous year, impacted by $4.7 million in non-cash expenses and $3.0 million in one-time transition items.
• Adjusted Operating Income -- $11.2 million, which includes the negative impact of foreign currency fluctuations.
• Net Loss -- $13.4 million, or $0.71 per share, compared to net income of $3.0 million, or $0.15 per diluted share, in the prior year.
• Interest Expense -- $12.0 million, reflecting a decrease from $12.8 million a year ago due to lower utilization of accounts receivable discount programs.
• Operating Cash Flow -- Used $11.3 million, driven by working capital requirements and an inventory ramp-up to support new business commitments.
• Net Bank Debt -- $99.7 million, consisting of a $118.8 million revolver loan less $19.1 million in cash as of June 30, 2026.
• Net Bank Debt to EBITDA Ratio -- 1.26, based on EBITDA before non-cash and one-time cash expenses of $79.1 million for the trailing 12 months.
• Share Repurchases -- $1.9 million, involving the buyback of 129,523 shares at an average price of $14.98 during the first quarter.
• Remaining Buyback Authorization -- $20.1 million, available under the company's current authorized share repurchase program.
• Fiscal 2027 Net Sales Guidance -- $780 million to $800 million, reflecting year-over-year growth between 7.5% to 10.2%.
• Fiscal 2027 Operating Income Guidance -- $86 million to $91 million, representing growth between 12.3% to 18.8% excluding non-cash and one-time expenses.
• Fiscal 2027 EBITDA Guidance -- $95 million to $100 million, supported by new business commitments expected to ramp up in the second half of the year.
• Annualized Net Sales Target -- $900 million by the end of fiscal 2027, including more than $100 million in additional annualized sales expected but not yet included in guidance.
• Average Vehicle Age -- 13 years, an increase from 12.6 years in 2024, which supports replacement demand for nondiscretionary parts.
• U.S. Light Vehicle Count -- 289 million, up from 286 million one year ago.
• Transition and Severance Costs -- $3.0 million, primarily associated with the relocation of heavy-duty operations from Canada to Mexico.
• Centric Parts Historical Sales -- $400 million, representing the peak annualized gross sales achieved by the brand prior to acquisition.

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RISKS

• Lee noted that gross margin was negatively impacted by approximately 2% due to foreign currency fluctuations, specifically the weakening of the U.S. dollar versus the Mexican peso.
• Management stated that the timing of a sales ramp-up was influenced by customers purchasing liquidated inventory from a competitor, delaying certain new business opportunities.

SUMMARY

Motorcar Parts of America, Inc. (MPAA -3.21%) reaffirmed its fiscal 2027 financial targets despite first-quarter sales headwinds related to order timing and competitor inventory liquidations. Management reported that business developments, including the relaunch of the Centric Parts brand and the relocation of heavy-duty operations to Mexico, are expected to drive growth in the second half of the year. The company's strategic focus remains on nondiscretionary aftermarket categories, supported by favorable industry dynamics such as the increasing average age of the U.S. vehicle fleet. Additionally, the company is evaluating strategic alternatives for its electric vehicle emulator business while expanding its international footprint in Mexico and Latin America.

• Chief Executive Officer Selwyn Joffe stated, "We are excited to bring these customers the original Magic Sauce formulation they love reunited with their recognized brands," referring to the relaunch of Centric Parts.
• The company is exploring strategic alternatives for its electric vehicle emulator business, with CFO David Lee noting that the company continues "to secure prestigious new OE customer commitments" during the evaluation process.
• Management reported that the U.S. light-duty aftermarket is projected to grow 5.2% in 2026, reaching a total market value forecasted to exceed $500 billion by 2029.
• The company completed a loan agreement renewal with PNC Bank that extends the maturity of its credit facility to August 2031, which Joffe noted recognizes the company's "milestones" and "solid position" in the industry.
• MPAA is leveraging its manufacturing footprint in Mexico to serve increasing demand from U.S.-based retailers expanding into Latin America and South America.
• The relocation of heavy-duty operations from Canada to Mexico is near completion, an initiative management expects will improve long-term operating efficiencies and margins.

INDUSTRY GLOSSARY

• Core: The old automotive part returned by a customer to be remanufactured and used as a replacement part.
• Rotating Electrical: An automotive category primarily consisting of alternators and starters.
• SKU: Stock Keeping Unit, a unique identifier for a specific product or service.
• OE: Original Equipment, referring to parts produced by the vehicle's manufacturer.
• Emulator: A hardware or software tool that replicates the behavior of a system, such as an electric vehicle powertrain, for testing and diagnostic purposes.
• Hard Parts: Essential mechanical components of a vehicle, typically involving the engine, transmission, or brakes.
• Nondiscretionary Parts: Essential replacement components required to keep a vehicle operational, such as starters, alternators, and brakes.

Full Conference Call Transcript

Operator: Hello, everyone. Thank you for joining us, and welcome to the Motorcar Parts of America Incorporated Fiscal 27 First Quarter Conference Call. After today's prepared remarks, we will host a question-and-answer. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. I will now hand the conference over to Gary S. Maier. Vice president of corporate communications and investor relations. Please go ahead.

Gary S. Maier: Thank you. Thank you, Caleb, and thanks, everyone, for joining us. Before I turn the call over to Selwyn H. Joffe, Chairman, President and Chief Executive, and David Lee, the company's Chief Financial Officer. I would like to remind everyone of the Safe Harbor statement included in today's press release. The Private Securities Litigation Reform Act of 2 thousand provides a safe harbor for certain forward looking statements. Including statements made during today's conference call. Such forward looking statements are based on the company's current expectations and beliefs concerning future developments, and their potential effects on the company. It can be no assurance that future developments affecting the company will be those anticipated. Motorcar Parts of America.

Actual results may differ from those projected in the forward looking statements. These forward looking statements involve significant risks and uncertainties some of which are beyond the control of the company and are subject to change based upon various factors. In particular, expectations about anticipated future growth and opportunities customers may not be achieved. The company undertakes no obligation to publicly revise or update any forward looking statements whether as a result of new information future events, or otherwise. For a more detailed discussion of some of the ongoing risks and uncertainties of the company's business. I refer you to the company's various filings with the Securities and Exchange Commission.

With that said, I would now like to begin the call and turn it over to Selwyn H. Joffe.

Selwyn H. Joffe: Okay. Thank you, Gary. I appreciate everyone joining us today. As stated in our earnings release issued this morning, we are still on target to meet our expectations for fiscal 27 notwithstanding anticipated headwinds we and the industry experienced during fiscal first quarter. Our confidence is bolstered by numerous new sales commitments. Business developments, and opportunities phasing in throughout fiscal 27. Some of which are being enhanced by the changing competitive landscape. Regarding the latter, let me start with a brief discussion of our recently announced Centric Parts brake Brands acquisition. Which we expect to relaunch by the current fiscal year end.

We are excited about the strategic growth opportunities that we expect from the introduction of our new original Centric Brake brands product lines. Preliminary customer feedback indicates pent up demand and confidence in our ability to offer a quality product with strong consumer brand recognition. And the benefit of an industry leading team to reestablish market position. At the heart of Centric success were 2 enduring strengths. Uniformly consistent, excellent consumer satisfaction. With the brand and best in class catalog accuracy. Installers have consistently praised the brake pads not to mention all the other brake related products as being industry leading. We are particularly excited to have the product with the brake pad formulations.

These trends will be powerfully amplified by MPA's proven manufacturing, engineering, cataloging, and related capabilities. We are excited to bring these customers the original Magic Sauce formulation they love reunited with their recognized brands. Together, these attributes have established a deep history and foundation of customer confidence. Built on the consistent delivery of the highest quality brake products. This commitment to quality and precision will be reestablished drive stronger consumer satisfaction and loyalty. Positioning Centric for projected strong growth and long term sustainability. As you probably know, we have been strategically focused on expanding our position within brake related product categories for several years. Clearly, the centric brake pad brands purchase complements this strategy.

I should mention that at its peak, we believe Centric generated $400 million in gross annualized sales. Indicative of the meaningful opportunities we anticipate moving forward. Even before the opportunities, we expect from the centric purchase brake related product sales have from the Centric purchase, brake-related product sales have climbed resulting in a second mega category built upon our 50-plus-year flagship rotating electrical category and the industry reputation. The market opportunities within the nondiscretionary quote, wear categories are significant. Enhanced by multiple replacement sales during the life of a vehicle. With our repairs being done by do-it-yourself, do-it-for-me professional service provider. In either case, we have a growing presence in both markets.

Across the big 3 automotive retailers along with NAPA and the major traditional warehouse distributors. In short, we have the capacity financial strength, and strategic vision to achieve meaningful market share gains across all of our nondiscretionary aftermarket categories. We offer our retail and traditional customers great products, industry leading SKU coverage, and order fill rates. Supported by value added merchandising and marketing support. As I have highlighted before, the average age of US light vehicles continues to rise. Most recent industry data indicates that the average age has risen to 13 years from 12.6 years in 2024. In addition, the number of vehicles on the road climbed to 289 million. From just from 286 million just a year ago.

We expect increased replacement opportunities for the life of vehicles. Particularly with consumers holding on to their vehicles longer. Trend is also supported by broader aftermarket and new vehicle affordability data. According to Auto Care Association and BEMA data, provided to S and P Global Market Intelligence, The US light duty aftermarket is projected to grow 5.2% in 2026. Reflecting continued strength in hard parts fluids and service labor, and is forecasted to exceed $500 billion by 2029. At the same time, new vehicle affordability remains a constraint for many consumers. With Kelley Blue Book reporting that the average new vehicle transaction price exceeded $50 thousand for the first time in September 2025.

We believe these dynamics reinforce the consumer's tendency to maintain and repair existing vehicles rather than accelerate new car purchases. This supports long term demand for non discretionary aftermarket categories. In short, industry dynamics are favorable, and we are all committed and focused on our customers. Offering quality products and services with rational pricing. A heavy duty rotating electrical strength also offer great opportunities going forward. We are continuing to leverage our reputation and industry position in this market. While focusing on opportunities to further enhance operating efficiencies and margins. In this regard, I should highlight the relocation of our heavy duty operations to Mexico. From Canada that started in the latter part of fiscal 26.

As part of our ongoing commitment to continuous improvement. Which is near completion. We look forward to further opportunities to enhancing operating efficiencies as we near the completion of this transaction. Industry reports indicate that fleet operators are holding on to vehicles longer. Which bodes well for our business because of our ability to offer dependable replacement. Parts. These dynamics also support our vision to leverage the reputation of our quality built brand name. We anticipate this will build momentum enhance our market position, particularly with regard to supplying alternators in starters to our channel partners who are leaders in the heavy duty aftermarket segment. And the overall heavy duty rotating electrical market.

In addition, we continue to experience increased demand for our aftermarket parts in Mexico. Which complements our existing strategic operational and distribution footprint. There. As our US based retailers and warehouse distributor customers expand through Latin and South America, we are well positioned to benefit while supporting that growth. Regarding our diagnostic business, our JBT-1 benchtop tester leads the industry. And the installed base is continued to grow. We also expect more opportunities outside North America as the business evolves. Including potential new applications that complement and leverage our technology. In short, we believe the outlook is bright for our non-aftermarket parts, both for passenger vehicles and for heavy duty applications.

And we are focused on leveraging our capability and capacity to offer a broad range of SKUs for all makes and models. with either newer or older vehicles. As I previously mentioned, deferment not really a long term option for our nondiscretionary products. If your car or heavy duty vehicle does not start or stop, you are not driving. We believe we have meaningful opportunities for further growth and profitability. As the competitive landscape continues to change. I would now like to turn the call over to David.

David Lee: Thank you, Selwyn, and good morning, everyone. Let me begin by outlining several topics I want to discuss. We will go over analytics for the fiscal first quarter, sales momentum and opportunities, gross margin, cash flow, balance sheet, liquidity, and debt leverage, share repurchases, potential strategic alternatives for our EV emulator business, and reaffirming guidance for the current fiscal 27 year ending March 31, 2027. Let's start with analytics for the fiscal first quarter. Fiscal first quarter ended June 30, 2026, net sales of $168 million as expected were impacted by timing of orders.

As the fiscal year progresses, we believe higher sales and the continued focus on efficiency and cost reductions will favorably contribute to fiscal 27 results From a sales perspective, as sales momentum increases, combined with new business commitments that Selwyn referenced earlier, as well as other meaningful opportunities we believe the company will benefit in several ways near term. Including favorable impact to gross margin, continued annual cash flow generation, net bank debt reduction and opportunities to increase shareholder value. In short, the fundamentals of our business are strong. Regarding gross margin, let me first discuss the first quarter in more detail.

Gross margin was 16.2%, compared with 18% a year ago a year earlier, Gross margin was impacted by noncash expenses of 2.4% and onetime items of 1.6% as detailed in exhibit 2 of this morning's earnings press release. Excluding these noncash and certain onetime cash items, gross margin was 20.2%, In addition, gross margin was impacted by unfavorable foreign exchange rates of approximately 2% or approximately $3.5 million due to the weakening of the US dollar versus the Mexican peso. Gross margin was also impacted by lower sales due to timing of orders. Fiscal 27 gross margin is expected to continue. To be favorably impacted by increased sales, over absorption, and overall cost reductions and efficiencies.

Overall, regarding gross margin, we remain focused on overall margin accretion supported by strong momentum and greater utilization of brake related capacity. We are also focused on positive impacts to overall margin from further improvements in operating efficiencies supported by benefiting from our tariff mitigation initiatives, better pricing for scrap sales as we gain more market share for our products, additional opportunities to relocate certain operations to our low cost facilities globally, including Mexico, and further strategic cost reductions. These initiatives are expected to positively impact overall gross margin.

Regarding our cash flow balance sheet of liquidity for the quarter, as a result of working capital use, impacted by an inventory ramp up for new business We used cash and operating activities of $11.3 million for the first quarter. After share repurchases of $1.9 million for the fiscal 20 first quarter, the company's revolver loan of $118.8 million, less cash of $19.1 million at 06/30/2026, resulted in net bank debt of $99.7 million The company has $20.1 million remaining to repurchase shares under its current authorized share repurchase program.

For the prior 3 years ended March 31, 2026, the Company generated cash from operating activities of approximately $103.8 million Our liquidity remains strong with total cash and availability, of approximately $112.4 million as of June 30, 2026. We remain focused on increasing operating profit and gross margin, and generating positive cash flow supported by growth and operating efficiencies from our global footprint. In addition to our goal of generating increased operating profits, including benefits from our gross margin expansion initiatives previously explained, we expect further opportunities to neutralize working capital. Supported by customer product demand planning, enhanced inventory management, and extending our vendor payment terms, including growing our supply chain finance program offer to our vendors.

Regarding debt leverage, based on information in our filing today, EBITDA for the 12 months ended June 30, 2026 was $60 million EBITDA before the impact of noncash and onetime cash expenses was $79.1 million for the same period. To recap, our net bank debt was 99.7 million at 06/30/2026, compared with EBITDA before the impact of noncash and onetime cash expenses mentioned above of $79.1 million for the 12 months ended 06/30/2026 resulting in a net bank debt to EBITDA ratio of 1.26. In addition, the company recently announced the renewal of its loan agreement extension of the maturity date of the August 2031, set by PNC Bank.

The renewal recognizes the company's milestones, solid position within the automotive aftermarket, and management's commitment to strategic growth and profitability. We are also committed to further opportunities to increase share repurchases. For the fiscal first quarter, the company repurchased 130 thousand shares for $1.9 million at an average share price of $14.98. Regarding our EV emulator business, which is a noncore asset, we are continuing to explore strategic alternatives to capitalize on its proprietary industry leading technology including a state of the art next generation emulator. While we continue to explore strategic alternatives, we continue to secure prestigious new OE customer commitments for our emulator business.

Regarding guidance, Motorcar Parts of America reaffirms guidance and expects net sales for the fiscal year ending March 31, 2027 to increase between 7.5% to 10.2% year over year growth reflecting the exclusion of certain nonrecurring items, including tariff pass throughs due to the reduction of import tariffs, and non-recurring core revenue. Representing net sales of between $780 million to $800 million Current guidance includes new business commitments, that are expected to ramp up in the second half of the fiscal year. The timing of the ramp up has been somewhat impacted by customers taking advantage of liquidated inventory purchased from a previous supplier.

In addition, we expect to add more than $100 million of additional annualized net sales by the end of fiscal 27 which is not included in the guidance, due to the uncertainty of the timing. In summary, annualized net sales are expected to be more than $900 million by the end of fiscal 27. Operating income is expected to be between $86 million and $91 million representing between 12.3% to 18.8% year over year growth and these estimates reflect the expected impact of tariffs enacted as of August 10, 2026 and do not include certain noncash items and onetime expenses.

Depreciation and amortization are projected to be approximately $9 million Based on the above, EBITDA is expected to be between $95 million and $100 million For details on the results, refer to the earnings press release issued this morning. I would now like to open the line for questions.

Operator: We will now begin the question-and-answer session. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, please press *1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. There are no questions at this time. I will now turn the call back to Selwyn H. Joffe for closing remarks.

Selwyn H. Joffe: Okay. In summary, we are bullish about our outlook Our position within the nondiscretionary automotive aftermarket continues to strengthen. The changing competitive landscape bodes well for our short and long term position, which is being meaningfully enhanced by expanding presence within brake-related categories. Equally important, the number of vehicles on the road continues to climb, and age. In short, while seasonality and customer ordering dynamics can impact orders, our year over year expect expectations are exciting. We remain laser focused on further efficiencies and fully benefiting from a not easily duplicated global platform to meet demand and grow market share for our nondiscretionary products. As well as for our diagnostic testing business. Our liquidity is strong. Our leverage is low.

And we have the resources, capacity, and capability to further enhance shareholder value. In closing, appreciate the contributions of all our team members who are continuously focused on providing the highest level of service. We are all committed to being the industry leader for parts and solutions that move our world today and tomorrow. This concludes today's call. Thank you for attending.

Operator: You may now disconnect. Thank you. Thank you.