Motorcar Parts of America, Inc.

Thank you for standing by. My name is Novi, and I will be your conference operator today. At this time, I would like to welcome everyone to the Motor Car Parts of America, Inc. fiscal 2025 second quarter conference call and webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the call over to Gary Mayer, Vice President of Corporate Communications and Investor Relations at Motorcar Parts of America.

Thank you, Novi. And thanks, everyone, for joining us for our call this morning. Before I turn the call over to Selin Jaffe, 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. In particular, expectations about anticipated future growth and opportunities with customers may not be achieved. The company undertakes no obligation to publicly update or revise 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 various filings with the SEC that we make. I will now turn the call over to Selma Jaffe to begin our call.

Thank you, Gary. I appreciate everyone joining us today. We are gratified by our continued record sales performance for the quarter and six months. We were excited by the opportunities we see on the horizon and remain optimistic about the second half of fiscal 2025 and achieving our full year targets. We reported record gross profit for the quarter and six months, and gross margin metrics showed continued improvement, which David will discuss in more detail. We generated approximately $23 million of cash from operating activities, primarily due to strong operating results. Our initiatives to enhance profitability and neutralize working capital are progressing well. The result of these initiatives is to increase profitability and cash flow, which will enhance shareholder value. We are particularly excited by the operational efficiencies we are realizing from our emerging break-related products, which have grown to be our second largest category. New break business, commencing in January, will further enhance our production efficiencies, which should result in consolidated margin improvement. Clearly, our accelerating break-related product sales are contributing to efficiencies from both purchasing and production. Our team is doing an exceptional job to enhance performance metrics and we look forward to continued growth and gross margin accretion for our important non-discretionary products. There are various factors related to our financial performance that are non-cash and beyond our control, particularly the current sharply unfavorable non-cash mark-to-market foreign exchange laws from Mexican lease liabilities and forward contracts. A strengthening dollar versus the peso results in large non-cash mark-to-market expenses which we internally eliminate when evaluating underlying results. We are continuing to look at opportunities to minimize these non-cash expenses, including funding our Mexico operations with pesos from sales in Mexico. As our sales in Mexico continue to grow, we will purchase fewer forward contracts to meet our peso obligations, which will lessen the impact of non-cash foreign exchange expense fluctuations. Obviously, interest rates, particularly applicable to vendor finance programs utilized by our customers, are a headwind. On a positive note, interest rates are headed lower, which will have a meaningful impact on profitability moving forward. From an operational standpoint, results in the first half of fiscal 2025 were impacted by one-time severance expenses related to strategic cost reductions. This strategic relocation will generate expected annual savings of approximately $7.1 million. Approximately 90% of these savings will reduce the cost of goods sold, and the remainder will reduce operating costs. As I noted last quarter, this culminating action was part of a multi-year relocation process to reduce costs, utilizing our low-cost global footprint and will facilitate further operating efficiencies. we are actively exploring additional initiatives to further reduce cost of goods sold. Let me take a moment to highlight a few key near-term strategic objectives that support our favorable outlook. With respect to generating cash, we remain diligently focused on improving profitability and increasing margins. In addition, as the fiscal second half evolves, we expect our working capital metrics to gain momentum. We have implemented initiatives to enhance inventory efficiencies and have also implemented processes to extend days outstanding on accounts payable. Our supply chain finance program is ramping up nicely and being enthusiastically accepted by our suppliers. Most importantly, we continue to evaluate allocation of capital to maximize shareholder value. Another positive ongoing initiative is the acceleration of new part number introductions, targeting at least 800 per year, as supported by the introduction of 505 additional new part numbers announced last month, covering 302 million vehicles on the road. This maintains our leadership position in the categories we supply, which meets the needs of consumers and adds organic growth to our sales base. Not only are we growing organically, that we have secured meaningful new business commitments across all of our product lines. With respect to our diagnostic business, as I've previously mentioned, we expect to sell more than $100 million of diagnostic equipment within the next three years with further opportunities pending. We expect additional service revenue as more testers are deployed. We also expect more opportunities outside the United States as the business evolves. With regard to our heavy-duty business, we continue to leverage our reputation and industry position in this market, particularly with regard to supplying alternators and starters to our channel partners who are leaders in the heavy-duty aftermarket segment. Our growth opportunities continue to gain momentum across multiple platforms, such as agriculture, Class A trucks, refrigeration, construction, material handling, and transit motor coaches. Our Dixie brand is also evolving as an important supplier for the heavy-duty original equipment service for manufacturers. In the second half of the current fiscal year, we will remain focused on sales growth, profitability, and neutralizing working capital. As I noted earlier, we expect our sales and profitability will continue to grow organically, and new business is gaining solid traction. From a strategic standpoint, we will continue to leverage our strengths, including great products manufactured at state-of-the-art facilities, solid customer relationship, industry-leading skew coverage, and order fill rates, not to mention our value-added merchandising and marketing support. Our hard part sales in Mexico continue to gain momentum as we experience increased demand for our aftermarket parts. The rate of growth in this market is exciting. and we are well positioned to utilize our footprint to meet the growing demand. We are focused on increasing share in this region. We continue to benefit and grow sales via our relationships with U.S.-based retailers and warehouse distributors who are gaining a presence in this emerging market, as well as through independent Mexican distributors. Favorable long-term industry dynamics continue to bode well for the company. And we are extremely well positioned for sustainable top and bottom line growth in our hard parts business, as well as our testing solutions. We are focused on growth across all product lines, including our quality built brand, which is gaining market share within the professional installer market. This includes our most recent additions to our portfolio of brake calipers, brake pads, and rotors. I reiterate that as we grow these product lines, we expect overall gross margin accretion. We are beginning to see the benefits of this. In short, we have the capacity and capabilities to support our customers' increasing demand across multiple product lines. Our positive cash flows enable us to reduce net debt by $22 million during the quarter and will allow us to pursue opportunities to further enhance shareholder value. It is worth highlighting that 98.8% of the US car park is comprised of hybrid and internal combustion engine vehicles. Non-discretionary aftermarket parts for the internal combustion engine market will be here for decades, an outlook supported by recently updated industry data showing that the average age of vehicles is now 12.8 years. One of our key competitive advantages is our ability to offer a broad range of applications for all makes and models. We remain focused on newer model applications and our ability to meet expected demand as these vehicles enter the replacement market. I will now turn the call over to David to review our results in greater detail.