Motorcar Parts of America, Inc.

Thank you for standing by. My name is Eric and I will be a conference operator today. At this time, I would like to welcome everyone to the Motor Car Parts of America Incorporated fiscal 2026 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'd now like to turn the call over to Gary Mayer, Vice President, Corporate Communications and Investor Relations. Please go ahead.

Thank you, Eric, and thanks, everyone, for joining us for our fiscal second quarter call. 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 affect those anticipated by the company. 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. With that, I'd like to begin the call and turn the call over to Selin. Thank you, Gary.

I appreciate everyone joining us today. We have experienced strong consecutive quarters And I want to highlight our first half performance, and David will discuss both the quarter and six-month period in more detail, as well as trailing 12-month metrics. For the first half, we reported continued sales growth of $31.8 million, or 8.4%, gross profit improvement of $6.2 million, or 8.8%, strong operating cash flow of $31.9 million, and net bank debt reduction of $24.6 million. as well as share repurchases of 287,910 shares for $3.4 million at an average share price of $11.65. This reflects well on our annual guidance and the future. We continue to focus on opportunities to further enhance shareholder value. We remain focused and committed to being the leading supplier of non-discretionary automotive aftermarket parts. Our team is focused on continuous improvement and success. We are excited by the opportunities for growth moving forward, particularly given the rapidly changing industry environment. Equally important, we believe our financial strength and flexibility provide a distinct competitive advantage. As you know, we offer a well-respected portfolio of products and services and have the capacity and ability to benefit from a state-of-the-art North American operational footprint. In short, we are well positioned to be the industry leader. As I've highlighted before, the average age of U.S.-like vehicles has risen to 12.8 years from 12.6 years in 2024. In addition, the number of vehicles on the road climbed to 293.5 million from 289 million a year ago. we expect increased replacement opportunities for the life of vehicles, particularly with consumers holding onto their cars for longer and new car prices recently reaching all-time highs. We are encouraged by the continued success of our second-largest product category, brake offerings, which includes brake calipers manufactured at our production operation in Mexico. Our team is doing an exceptional job to further gain market share for the entire Brake product line, as well as of our other non-discretionary product offerings. We continue to leverage our strengths, offering our customers great products, industry-leading SKU coverage, and order fill rates, supported by value-added merchandising and marketing support. In short, we are all committed and focused on our customers, offering quality products and services with rational pricing. Our quality built brand name products are offered to the professional installer market through warehouse distributors and continue to gain market share. As production volume increases for certain new or hard part products, such as brake related offerings, we expect enhanced operating efficiency and overall margin improvement. 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 sector. Our growth opportunities continue to gain momentum. We are becoming an increasingly important supplier to the heavy-duty rotating electric market with opportunities to expand our quality-built brand name. We are experiencing increased demand for our aftermarket products in Mexico, which complements our existing strategic, operational, and distribution footprint there. As our U.S.-based retailers and warehouse distributor customers expand throughout Latin and South America, we are well-positioned to benefit while supporting their growth. With regard to our diagnostic business, our JBT1 benchtop tester leads the industry, and the installed bases continue to grow, with additional service-related revenue related to software, and database updates anticipated. We also expect more opportunities outside North America as the business evolves, including potential new applications that complement and real leverage our technology. We remain focused on benefiting from cost reduction initiatives to enhance margins, including strategic supply chain sourcing changes and capitalizing on our North American footprint. As I mentioned, we believe the outlook is bright for non-discretionary off-market parts for the internal combustion engine market, and we are focused on leveraging our capability and capacity to offer a broad range of SKUs for all makes and models, whether new or older vehicles. While the industry has expressed some recent headwinds due to consumers deferring certain repairs, as well as the impact of the recent government shutdown, deferment is not really a long-term option for our non-discretionary products. If your car doesn't start or stop, you're not driving. We believe that there are meaningful opportunities for further growth as the competitive landscape changes. Before I turn the call over to David to review our results in details, let me summarize. From a sales perspective, we expect continued organic growth for our business, supported by favorable long-term industry tailwinds and our strong financial position. Our commercial heavy-duty market continues to grow. Our breakaway business is gaining further traction, particularly brake calipers. In addition, our sale in the Mexico market are growing nicely, and we expect this momentum will continue and expand throughout the region. Finally, our diagnostic business continues to grow nicely, and we look forward to ongoing success. I should mention that net sales for the quarter reflected two unusual events that offset each other. We reduced our customer call returns of pool in connection with the realignment of inventory at certain customer distribution centers, which resulted in a one-time gain for the quarter. This one-time revenue recognition of $14.8 million nominally contributed $643,000 to profitability, reduced gross margin by 1.1%, and was completely neutral to cash flow. In simple terms, we lost some business and picked up some other business. Second, one of our largest customers delayed purchases in an amount that offset the core revenue. This delay is temporary, and we anticipated it will result in increased orders during the second half of the year. I want to emphasize that we're excited by our progress and future opportunities, and that we are confirming our guidance for fiscal 2026. This one-time core revenue is not included in our revenue patterns. As referenced in the exhibits to our earnings release, there are various factors relating to our financial performance that are non-cash and beyond our control, particularly non-cash mark-to-market foreign exchange, which can have a positive or negative impact on our Mexican lease liabilities and forward contracts that we purchase. We are focused on opportunities to minimize non-cash expenses, such as gains or losses, related to foreign exchange, including funding our Mexican operations with pesos from our sales in Mexico. As our sales in Mexico continue to grow, we have reduced our purchases of forward peso contracts. We expect over time we will eliminate the need to purchase these contracts. I would now like to turn the call over to David.