Motorcar Parts of America, Inc.

Thank you. Ladies and gentlemen, thank you for standing by and welcome to the Motorcar Parts of America's fiscal 2021 second quarter conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to turn the call over to Gary Muir, Investor Relations.

Please go ahead. Thanks, Denise, and thanks, everyone, for joining us for our fiscal second quarter conference call. Before we begin, and I turn the call over to Selin Joffrey, Chairman, President, and Chief Executive Officer, and David Lee, the company's Chief Financial Officer, I'd like to remind everyone of the Safe Harbor statement included in today's press release. The Private Securities Litigation Reform Act of 1995 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. There can be no assurance that future developments affecting the company will be those anticipated by Motor Car 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. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether a result of new information, future events, or otherwise. For more detailed discussion of some of the ongoing risks and uncertainties, I refer you to the various filings with the Securities and Exchange Commission. I'd now like to begin the call and turn it over to Selwyn to begin.

Thank you, Gary. I appreciate everyone joining us today. We reported record results for our fiscal second quarter, which is particularly gratifying given the sharp impact to our business and across the automotive sector in our first fiscal quarter. Even with the impact of the global pandemic and related uncertainties, we remain cautiously optimistic as we continue to execute our strategic growth initiatives. As I mentioned during last quarter's call, we targeted the end of the fiscal second quarter to complete our strategic build-out in Mexico, and we formally announced the commencement of brake caliper production at this location last month. We are dedicated and focused on our current customer commitments and are excited by the interest we are receiving for calipers from new customers, as well as new opportunities in all of our other existing product lines. During last quarter's call, I highlighted that our facility expansion in Malaysia is now complete. We are extremely motivated to be able to increase capacity and productivity across multiple product lines and reduce dependence on outsourcing, whether components or products, as the changing geopolitical environment requires it. In short, we are in a unique position to take advantage of our long operating history in Malaysia and Singapore. It is important to reiterate industry statistics that I have highlighted on many previous calls and conference presentations. The market size for our current categories is more than $6 billion at the retail level. Vehicles will continue to age, with approximately 280 million vehicles currently on the road. This will fuel significant growth in the aftermarket parts replacement industry well beyond 2030. In short, our strategy before and since the pandemic has been to leverage our significant channel relationships for aftermarket parts and offer superior parts and solutions to our customers and consumers. Given the current situation, let me make a few observations. The vast majority of consumers in our target market are unable to work from home and reticent to use mass transportation or rideshare. As a result, these workers are more dependent than ever on their personal vehicles. We believe that personal vehicles will also continue to be the preferred mode of transportation for daily activities and vacations for the foreseeable future. All of this bodes well for our business. Furthermore, during the current environment and recessionary times, people keep their vehicles longer. Accordingly, we are seeing strong demand for used cars with consumers preferring used cars over new when faced with economic uncertainty. Obviously, this bodes well for the aftermarket parts replacement industry and our non-discretionary product offerings. All of this leads to an increased age fleet, which is currently at a new record high of approximately 12 years. As these vehicles age, the rate of replacement of parts increases substantially. For example, in cars in the zero to three-year age group, they have a replacement rate for alternators of 2.42%, compared with 6.65% in the 12-year and above age group. Nonetheless, new car sales should return at some point. But regardless, we expect to benefit because used car scrap rates are generally lower than new car sales, resulting in an increased car park and further opportunities for parts replacement. We are also making good progress on our integration of Dixie Electric and the rollout of our heavy duty program. I should mention that the team at Dixie recently received recognition as being an outstanding supplier from one of its leading OEM customers for providing service above and beyond during the pandemic. This is a testament to the spirit and commitment we adhere to throughout our entire organization, which is particularly critical during these challenging times. Our hard parts off-the-market program in Mexico through our new EPIC subsidiary is continuing to gain momentum, and we have expanded our product offerings since the initial introduction of rotating electrical in this market. While still a small percentage of our overall business, we are excited by the opportunities. In short, all our initiatives continue to enhance our position as a valued premier supplier of automotive off-the-market parts in North America. With respect to our diagnostic business, demand for our benchtop tester continues to grow, including from Mexico. Our customers are committed to upgrading their existing testers to meet the latest protocols for starters and alternators. They are now restarting expenditure programs for diagnostics, which were delayed when the pandemic began. As you may recall, these customer purchases support their mission to provide continuing trustworthy advice with regard to whether a consumer's alternator or starter is working properly. This helps significantly reduce a misdiagnosis of the vehicle's problem, which is one of the largest reasons for a return. To complement our internal combustion business, we have also embraced the advancements of a fast-growing world of electrified transportation. Consequently, as you know, we have made investments in the rapidly advancing diagnostics for automotive electric vehicles and electrification of the aerospace market, including military applications. Our offering of complete solutions for simulation, emulation, and production testing for the electric powertrain is regaining traction since the start of the pandemic, and sales activity is greatly improving as OE manufacturers resume production. In short, the increasing global demand for electronic testing products and subscription services is encouraging and remains an important driver to creating value today and in the future. In summary, our entire company is well positioned for sustainable top and bottom line growth. Despite being off to a solid start for the second half of the fiscal year and optimistic that the year will be strong, we believe it is still not prudent to provide annual guidance at this time we expect the number of vehicles and the prime parts replacement age will continue to grow and we are pleased to see the number of repairs and miles driven for our target customers continue to regain momentum notwithstanding the human and economic impact and the uncertainty of this terrible pandemic The paradox for the aftermarket business is that personal vehicles are becoming increasingly important in our, quote, new normal daily lives. All of this supports our optimism for growth and profitability over the next several years, and we remain more convinced than ever that our strategy to enhance shareholder value is on target. In fact, as noted in our fiscal second quarter news release this morning, we are resuming our stock buyback program subject to market conditions with current availability of $21.3 million under our existing authorization. I will now turn the call over to David to review the results for the fiscal second quarter.