Motorcar Parts of America Reports Fiscal 2026 Third-Quarter Results Amid Customer Disruption and Strengthening
Motorcar Parts of America, a leading supplier of aftermarket automotive components, reported its financial results for the fiscal 2026 third quarter, a period marked by temporary customer-related disruptions alongside meaningful strategic progress and encouraging signs of recovery. While quarterly results reflected a significant reduction in ordering activity from one of the company’s largest customers, management emphasized that this decline was largely transitional in nature and is already reversing as the company enters the fiscal fourth quarter.
The ordering slowdown stemmed primarily from the customer’s decision to close select retail stores and consolidate its distribution center network—a move that temporarily reduced demand but is now stabilizing. According to Motorcar Parts of America, sales to this customer are increasing sequentially in the current quarter, reinforcing management’s confidence in a return to more normalized purchasing patterns.
Despite the short-term headwinds, the company continues to benefit from favorable industry dynamics, expanding new business commitments, operational efficiencies, and margin improvement initiatives, positioning it for renewed growth and enhanced shareholder value.
Industry Tailwinds and Strategic Momentum
Motorcar Parts of America highlighted several positive drivers shaping its outlook, even as the company navigated near-term challenges.
A changing competitive landscape—most notably the bankruptcy of a competitor—has opened the door to new business opportunities. These shifts, combined with broader industry trends such as the aging vehicle population and increasing miles driven, are fueling rising demand for replacement automotive parts across key categories.
At the same time, the company is seeing accelerating momentum in its brake-related product lines. Higher utilization of brake manufacturing capacity has contributed to margin accretion, while continued improvements in operating efficiency across its manufacturing and distribution footprint are further supporting profitability.
Management also reaffirmed its commitment to exploring strategic alternatives related to electric vehicle (EV) technology, signaling a measured approach to participating in long-term electrification trends while maintaining a strong focus on its core aftermarket strengths.
Fiscal 2026 Third-Quarter Financial Performance
Revenue Trends Reflect Temporary Customer Disruption
For the fiscal third quarter ended December 31, 2025, Motorcar Parts of America reported net sales of $167.7 million, down from $186.2 million in the same period a year earlier. The decline was primarily attributable to an approximately $17 million reduction in sales to a major customer, as previously disclosed.
Management emphasized that the sales decrease was not the result of lost market share or competitive pressure, but rather a temporary operational adjustment by the customer. Importantly, ordering activity from this customer has already begun to rebound in the fiscal fourth quarter, supporting expectations for sequential revenue improvement.
Gross Profit and Margin Performance
Gross profit for the third quarter totaled $32.9 million, compared with $44.9 million in the prior-year period. Gross margin declined to 19.6 percent, down from 24.1 percent a year earlier, reflecting the adverse impact of lower sales volumes from the affected customer.
On a sequential basis, however, margin performance showed steady improvement. Gross margin increased from 18.0 percent in the fiscal first quarter and 19.3 percent in the fiscal second quarter, demonstrating the company’s ability to partially offset revenue pressure through improved operational execution and product mix.
Motorcar Parts of America expects gross margin to continue improving in the fiscal fourth quarter as ordering activity normalizes and production volumes rise, particularly in higher-margin brake-related categories.
Operating Income and Expense Management
Operating income for the fiscal third quarter was $8.3 million, compared with $17.6 million in the prior-year quarter. The decline was largely driven by lower sales, though partially mitigated by disciplined cost control and operating efficiency gains.
A notable bright spot during the quarter was the reduction in interest expense. Interest expense declined by $3.5 million year over year to $10.9 million, down from $14.4 million in the prior year. The improvement reflected lower average outstanding balances under the company’s credit facility, reduced utilization of accounts receivable discount programs, and more favorable interest rates.
Net Income and Earnings Per Share
Net income for the fiscal 2026 third quarter was $1.8 million, or $0.09 per diluted share, compared with net income of $2.3 million, or $0.11 per diluted share, in the prior-year period.
Results were impacted by $611,000 in non-cash and one-time expenses, equivalent to $0.03 per diluted share, as detailed in the company’s supplemental financial disclosures. Excluding these items, underlying performance reflected resilience despite the temporary revenue disruption.
Leadership Perspective and Strategic Focus
Commenting on the quarter, Selwyn Joffe, Chairman, President, and Chief Executive Officer of Motorcar Parts of America, acknowledged the near-term challenges while underscoring confidence in the company’s longer-term trajectory.
Notwithstanding our short-term revised guidance, our outlook remains positive and ordering activity by a large customer is beginning to return to more normalized levels,” Joffe said. “Equally important, we anticipate favorable benefits due to the changing competitive landscape, as evidenced by our new business commitments and opportunities.
Joffe also highlighted the company’s accelerating brake-related sales momentum, which is expected to provide a meaningful lift to overall gross profits as capacity utilization continues to rise.
Beyond organic growth, management remains focused on enhancing shareholder value through a range of strategic initiatives. These include evaluating opportunities to divest non-strategic assets, expanding operations in Latin America, and leveraging the company’s strong financial position and cash flow generation.
Cash Flow, Balance Sheet, and Liquidity Position
Motorcar Parts of America generated approximately $23.7 million in cash during the fiscal 2026 nine-month period. After accounting for $8.4 million in share repurchases, net bank debt declined by $10.9 million, falling to $70.5 million from $81.4 million.
During the third quarter alone, the company used approximately $8.2 million in operating cash flow, primarily due to increased inventory investment to support new business programs and anticipated growth.
As of December 31, 2025, the company reported cash and revolver availability of approximately $146 million, providing ample flexibility to pursue growth initiatives, fund share repurchases, and support strategic investments.
Nine-Month Financial Performance Highlights
Revenue Growth Despite Customer Impact
For the first nine months of fiscal 2026, net sales increased $13.3 million, or 2.4 percent, to $577.5 million, up from $564.2 million in the prior year. This growth was achieved despite an approximate $40 million reduction in sales related to the previously noted customer disruption.
Profitability and Expense Trends
Gross profit for the nine-month period was $109.5 million, compared with $115.3 million a year earlier. Gross margin declined to 19.0 percent from 20.4 percent, reflecting the same sales mix and volume challenges experienced during the third quarter.
Operating income for the nine-month period increased significantly to $44.8 million, up from $23.6 million in the prior year. This improvement was driven in part by foreign exchange impacts related to lease liabilities and forward contracts.
Interest expense for the nine months declined by $6.6 million to $36.4 million, reflecting reduced debt levels and lower interest rates.
Return to Profitability Year Over Year
Net income for the fiscal 2026 nine-month period totaled $2.7 million, or $0.13 per diluted share, compared with a net loss of $18.7 million, or $0.95 per share, in the prior year.
Results were impacted by $3.8 million in non-cash expenses and $1.9 million in one-time cash expenses, but still represented a significant improvement year over year and reflected stronger operational performance and financial discipline.
Share Repurchase Activity and Capital Allocation
Motorcar Parts of America continued to actively return capital to shareholders through its share repurchase program. During the first nine months of fiscal 2026, the company repurchased 669,472 shares for $8.4 million, at an average price of $12.47 per share.
In the fiscal third quarter alone, the company repurchased 381,562 shares for $5.0 million, at an average price of $13.10 per share. As of the end of the quarter, approximately $25.1 million remained available under the company’s authorized repurchase program.
Positioned for Recovery and Sustainable Growth
Motorcar Parts of America anticipates a return to more normalized ordering activity from its major customer, supporting renewed sales growth and margin expansion. Combined with strong industry tailwinds, expanding new business commitments, and continued operational improvements, management believes the company is well positioned to deliver enhanced profitability and long-term shareholder value.
As the automotive aftermarket continues to benefit from aging vehicles and rising miles driven, Motorcar Parts of America’s diversified product portfolio, disciplined capital allocation, and improving balance sheet provide a solid foundation for future growth—even amid evolving industry dynamics.
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