Motorcar Parts (MPAA) Q2 2027 Earnings Call Transcript

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DATE

Monday, Nov. 9, 2026

CALL PARTICIPANTS

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

TAKEAWAYS

• Net Sales -- $169.2 million, reflecting delayed customer orders and a reduction in tariff pass-throughs compared with $221.5 million in the prior-year quarter.
• Revised Net Sales Guidance -- $715 million to $740 million for fiscal 2027, updated from the previous range of $780 million to $800 million due to order delays and program timing.
• Gross Margin -- 24.2%, including 5.7 percentage points from onetime items such as $11.1 million in tariff refunds and offset by 2.8 percentage points in noncash expenses.
• Operating Income -- $10.0 million, impacted by $11.2 million in noncash expenses and a net $9.1 million benefit from onetime items.
• New Business Awards -- $60 million in incremental annualized awards, representing new product programs for existing and new customers expected to launch in the second half of fiscal 2027.
• Incremental Sales Target -- $25 million in annualized sales anticipated by March 31, 2027, as new programs ramp up into fiscal 2028.
• Net Income -- $1.4 million, or ($0.03) per diluted share, including a $6.0 million impact from noncash expenses and a $6.9 million benefit from onetime items.
• Interest Expense -- $11.3 million, a decrease from $12.7 million last year primarily because lower sales led to reduced utilization of accounts receivable discount programs.
• Inventory Realignment Impact -- $14.8 million in core revenue recognized in the prior-year quarter that did not repeat, contributing to the year-over-year sales decline.
• Foreign Exchange Impact -- 1.4 percentage points or approximately $2.4 million negative impact on gross margin due to the weakening of the U.S. dollar against the Mexican peso.
• Operating Income Guidance -- $37 million to $44 million for the full fiscal year, which includes $30 million in noncash expenses and $5 million for relocating operations.
• Second Half Sales Forecast -- $378 million to $403 million, representing projected growth of 5% to 11.9% when excluding prior-year core revenue from inventory realignments.
• Net Bank Debt -- $105.8 million at Sept. 30, 2026, calculated as revolver loans of $126.6 million minus cash of $20.8 million.
• Adjusted EBITDA -- $70 million for the 12 months ended Sept. 30, 2026, before the impact of noncash and onetime cash items.
• Net Bank Debt-to-EBITDA Ratio -- 1.5, based on adjusted EBITDA of $70 million.
• Liquidity -- $104.8 million, consisting of cash on hand and available revolver capacity as of the end of the second quarter.
• Share Repurchases -- $20.1 million remaining under the current authorization, following more than $11 million in repurchases over the trailing 12 months.
• Relocation Costs -- $5 million in transition expenses for moving heavy-duty manufacturing operations from Canada to Mexico.
• Operating Cash Flow -- Negative $4.1 million for the quarter, driven by working capital requirements and inventory ramp-ups for new business awards.

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RISKS

• Joffe stated, "our second quarter results reflect delayed customer orders," noting that these delays related to inventory realignment at certain customer distribution centers impacted near-term performance.
• Lee noted that gross margin "was negatively impacted by approximately $2.4 million... of unfavorable foreign currency fluctuations" during the quarter.
• Joffe indicated that while the company is a supplier to the DIY business, "some of those orders have got deferred" due to general industry softness.

SUMMARY

Motorcar Parts of America, Inc. (NASDAQ:MPAA) reported a decrease in quarterly revenue attributed to delayed customer orders and lower tariff pass-throughs, prompting management to lower its full-year sales guidance. Despite these near-term headwinds, the company secured significant new business awards and completed a strategic manufacturing relocation to Mexico to improve cost structures. Management expects a stronger second half of the fiscal year as new programs launch and inventory liquidations from competitors subside. The company remains focused on leveraging its diagnostic technology and expanding its brake product line to drive long-term market share gains.

• Management completed the relocation of heavy-duty rotating electric operations from Canada to Mexico to reduce manufacturing costs and improve production efficiencies.
• The relaunch of the Centric Parts brand provides an additional growth opportunity in the professional brake aftermarket that is not yet factored into management's current growth estimates.
• Joffe stated that Mexico is "becoming an increasingly important growth market for us" as major customers expand their operations in the region.
• The JBT-1 diagnostic testing equipment continues to expand within North American customer networks and is being marketed for international deployment.
• Management noted that October sales trends showed improvement compared to the end of the second quarter.
• The company is focusing on neutralizing working capital by extending vendor payment terms and enhancing inventory management.

INDUSTRY GLOSSARY

• Rotating Electrical Components: Automotive parts such as alternators and starters that involve moving electrical parts to generate or use power.
• Core Revenue: Income related to the value of "cores," which are used automotive parts that can be remanufactured.
• IEEPA Tariff Refunds: Refunds received under the International Emergency Economic Powers Act related to previously paid import duties.
• DIY Business: The "do-it-yourself" segment of the automotive aftermarket where consumers perform their own vehicle repairs.
• Supply Chain Finance Program: A financing solution where a company's bank pays its suppliers early, allowing the company to extend its own payment terms.
• Compound Net Derivative Liability: A financial instrument where the value is derived from multiple underlying variables, requiring periodic fair value adjustments.

Full Conference Call Transcript

Operator: Hello, everyone. Thank you for joining us, and welcome to the Motorcar Parts of America, Inc. Fiscal 2027 Second Quarter Conference Call. [Operator Instructions] I will now hand the conference over to Gary Maier, Vice President of Corporate Communications and Investor Relations. Please go ahead.

Gary Maier: Thank you, Kay, and thanks, everyone, for joining us. Before I turn the call over to Selwyn Joffe, Chairman, President and Chief Executive Officer; and David Lee, our 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 regarding future financial performance, sales growth, margin improvement, operating efficiencies, customer demand, new business strategies, capacity utilization, working capital liquidity, debt levels, cash flows, strategic initiatives and market conditions. These statements are based on current expectations, estimates, forecasts and assumptions and are not guarantees of future performance.

Actual results may differ materially from those expressed or implied in these forward-looking statements due to risks and uncertainties, including changes in customer ordering patterns, customer concentration, competitive conditions, supply chain constraints, inflation, tariffs, interest rates, credit availability, labor and production costs, inventory levels, operational execution and macroeconomic conditions and other risks described in the company's most recent Form 10-K, 10-Q and other filings with the Securities and Exchange Commission. The company undertakes no obligation to update or revise any forward-looking statements, except as required by law. For a more detailed discussion of some of our ongoing risks and uncertainties of the company's business, I refer you to the various filings.

With that, I'd like to begin the call and turn the call over to Selwyn Joffe.

Selwyn Joffe: Thank you, Gary. Good morning, everyone, and thank you for joining us. As outlined in our earnings release this morning, our second quarter results reflect delayed customer orders. There were also delayed orders relating to the realignment of inventory at certain customer distribution centers. Also, there were lower tariff pass-throughs compared with the prior year. While these conditions have affected our near-term performance, we remain confident in the underlying fundamentals of our industry and most importantly, in the substantial opportunities we are developing to expand our business and improve profitability. I want to focus today on several developments that we believe will strengthen Motorcar Parts of America's competitive position and provide a foundation for meaningful future growth.

First, we have secured nearly $60 million in incremental annualized new business awards from both existing and new customers. These awards represent product programs we were not previously supplying with anticipated annual volumes based on customer requirements and historical sales activity. This is an important distinction. We are not simply forecasting opportunities. We have been awarded business that we expect to translate into additional revenue as the programs launch and mature. Small initial shipments have already commenced, and we expect all these programs to launch during the second half of this fiscal 2027, with the majority of these programs launching towards fiscal year-end.

We also currently anticipate approximately $25 million in incremental annualized sales by the end of March, with additional contributions expected as these programs ramp during fiscal 2028. We believe these awards demonstrate our ability to gain market share even during a period of softer industry demand. Turning to our Brake business. Brakes have become our second major product category, building on more than 50 years of experience and our established leadership in rotating electrical products. We believe this is particularly attractive because Brakes represent an essential nondiscretionary wear category with multiple replacement opportunities over the life of the vehicle.

Our brake-related product offerings, including calipers, pads, rotors, master cylinders, power boosters, wheel hubs and brake shoes provide opportunities to expand our relationships with major retailers and professional aftermarket customers. The relaunch of our Centric Parts brand represents an important additional opportunity. Centric is an established name in the professional brake aftermarket, and we believe that combining that brand with our existing manufacturing capabilities, product coverage and distribution infrastructure significantly strengthens our competitive position. Importantly, potential Centric sales are not included in our current incremental growth estimates. We also believe increased utilization of our existing brake manufacturing capacity can contribute to improved operating leverage and profitability as these volumes grow.

We are also encouraged by the expansion of our business opportunities beyond the United States. Mexico is becoming an increasingly important growth market for us. Some of our largest customers are expanding their operations there, creating additional opportunities for Motorcar Parts of America to supply products through our established relationships, capability and performance. Some of these opportunities are included in our current new business expectations, while others represent additional potential growth. We also see opportunities as major aftermarket customers expand geographically into Canada. Our established North American relationships, combined with our manufacturing and distribution capabilities provide a strong platform to support these exciting developments. Turning to our heavy-duty rotating electric business.

We have completed the relocation of this operation from Canada into our existing manufacturing facility in Mexico, where production has commenced. This initiative is an important part of our continuing efforts to improve our manufacturing competitiveness. By leveraging existing infrastructure, manufacturing resources and operating capabilities, we expect to reduce costs, improve production efficiencies and benefit from operating synergies. We believe this will strengthen our competitive position in the heavy-duty aftermarket and improve our ability to pursue additional business. Another business demonstrating continued positive momentum is our rotating electric diagnostic testing equipment program. Our JBT-1 diagnostic testing equipment has an established presence with major automotive aftermarket customers across the United States, Mexico and Canada.

We continue to expand installations within existing customer networks while pursuing additional opportunities, including international markets. We believe there is significant long-term potential for broader deployment of this technology throughout the automotive aftermarket. Stepping back, we remain constructive about the long-term fundamentals of the automotive aftermarket. The average age of vehicles on the road continues to increase and consumers are keeping their vehicles longer. Higher new vehicle prices also reinforce the economic incentive to maintain and repair existing vehicles. These dynamics are particularly relevant to our business because we supply essential components required for vehicles to start, stop and operate safely. Although repairs and purchases can be deferred temporarily, the underlying need for replacement parts remains.

While we see temporary deferrals, we believe that a catch-up is ahead as the economy stabilizes. We believe our broad product coverage, manufacturing capabilities, customer relationships and global operating platform uniquely position us to participate and meet the long-term demand. In summary, while the current operating environment remains challenging, we are making progress on several important fronts. We have secured significant incremental new business. We are expanding our brake platform through Centric. We are pursuing additional opportunities as major customers expand geographically. Our rotating electrical diagnostic business continues to gain momentum, and we have completed an important heavy-duty manufacturing relocation designed to improve our competitiveness. These developments are not dependent solely on an industry recovery.

They reflect initiatives we are undertaking to strengthen our market position and improve our long-term operating performance. We remain focused on converting these opportunities, improving manufacturing utilization, generating cash flow and delivering sustainable profitability. With that, I will turn the call over to David to review our financial results and updated outlook.

David Lee: Thank you, Selwyn, and good morning, everyone. Let's start with analytics for the fiscal second quarter. Fiscal second quarter ended September 30, 2026, net sales of $169.2 million were impacted by delayed customer orders and a reduction in tariff pass-throughs. Broader economic uncertainty, including inflation, tariffs and uneven consumer spending also contributed to a cautious operating environment. Additionally, net sales for the prior year reflect $14.8 million of core revenue in connection with the realignment of inventory at certain customer distribution centers. We believe higher sales and a continued focus on efficiency and cost reductions will favorably continue to favorably contribute to results for the second half of fiscal 2027.

From a sales perspective, as sales momentum increases, combined with new business commitments that Selwyn referenced earlier, which has had a small impact through September 30, 2026, 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 debt reduction and opportunities to increase shareholder value. In short, we believe the fundamentals of our business are strong. Regarding gross margin, let me first discuss the second quarter in more detail. Gross margin was 24.2% compared with 19.3% a year earlier.

Gross margin was impacted by noncash expenses of 2.8 percentage points and benefited from onetime items of 5.7 percentage points, including approximately $11.1 million of IEEPA tariff refunds as detailed in Exhibit 3 of this morning's earnings press release. In addition, gross margin was impacted by unfavorable foreign exchange rates of approximately 1.4 percentage points or approximately $2.4 million due to the weakening of the U.S. dollar versus the Mexican peso. Excluding the noncash expenses and onetime items as well as the foreign exchange impact, gross margin was approximately 22.7% for the quarter. Fiscal 2027 gross margin is expected to be favorably impacted by increased sales 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 from both existing and new business. 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.

Our cash flow, balance sheet and liquidity for the quarter was impacted by working capital inventory ramp-up for new business, and we used cash in operating activities of approximately $4.1 million for the second quarter. The company's revolver loan of $126.6 million, less cash of $20.8 million at September 30, 2026, resulted in net bank debt of $105.8 million. For the prior 3 years ended March 31, 2026, the company generated cash from operating activities of approximately $103.8 million. While quarters fluctuate, the company continues to expect to generate positive cash flow. Our liquidity of total cash plus revolver availability was approximately $104.8 million as of September 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 offered to our vendors. Recently, MPA received a highly commended award in the category for best use of supply chain finance by a leading provider of supply chain programs.

Regarding our debt leverage, based on information in our filing today, EBITDA for the 12 months ended September 30, 2026, was $58.9 million. EBITDA before the impact of noncash and onetime cash items was approximately $70 million for the same period. To recap, our net bank debt was $105.8 million at September 30, 2026, compared with EBITDA before the impact of noncash and onetime cash items mentioned above of $70 million for the 12 months ended September 30, 2026, resulting in a net bank debt-to-EBITDA ratio of 1.5. I should mention that under the company's authorized share repurchase program, there was approximately $20.1 million available to repurchase shares at September 30, 2026. Turning to our outlook.

We are revising our fiscal 2027 guidance to reflect delayed customer orders in both our existing business and contributions from new business awards. For the fiscal year ending March 31, 2027, we now expect net sales of $715 million to $740 million compared with our previous guidance of $780 million to $800 million. The revised outlook reflects a challenging ordering environment and the timing of new program launches. As Selwyn discussed, we expect all of the awarded programs to launch during the second half, with most launching toward fiscal year-end and continuing to ramp during fiscal 2028. We expect full year operating income of $37 million to $44 million.

This outlook reflects approximately $30 million in noncash expenses, approximately $5 million in expenses associated with relocating our heavy-duty operations to Mexico and excluding approximately $11 million in IEEPA tariff refunds recognized in the second quarter. In addition, full year depreciation and amortization is estimated at approximately $9 million. To put the revised outlook into perspective, our guidance implies second half net sales of $378 million to $403 million. This compares with $380 million in the prior year period, representing a decline of approximately 0.5% to growth of approximately 6.1%. The prior year second half included $19.9 million in core revenue in connection with the realignment of inventory at certain customer distribution centers.

Excluding that revenue from the prior year comparison, our projected second half sales represent growth of approximately 5% to 11.9%. We expect second half operating income of $23 million to $30 million, reflecting approximately $14 million in noncash expenses. In addition, second half depreciation and amortization is estimated at approximately $5 million. Our expected second half improvement is supported by contributions from new business, better utilization of our manufacturing capacity and continued cost reductions and operating efficiencies. While the timing of customer orders remain a source of uncertainty, our focus is clear: execute the scheduled launches, improve margins and convert sales to cash. With that, we will open the call for questions.

Operator: Your first question comes from the line of Brian Nagel with Oppenheimer.

Brian Nagel: I was hoping, Selwyn, you could just go into more detail with the -- I guess, I would always call the sales dislocations that happened here in the quarter and then we've given the guidance look like they'll persist through the balance of the year. You mentioned -- I guess, activity on part of your customers and then some tariff dynamic. But I guess the first one is you just want more detail on what happened here and what disrupted so significantly the sales run rates?

Selwyn Joffe: Yes. So let me sort of focus on three major points. We had a reallocation where we moved our business opportunities from certain warehouses to newer different warehouses. The ramp-up in the newer warehouses is, I think, the economy affected, but the number of stores in those newer warehouses has been slower than was anticipated. We believe that's going to catch up. So what happens is you lose -- you give up certain warehouses and you get certain warehouses and that ramps up slower, I mean, there's a sort of gap between the revenue. Now we're starting to see that change.

Just as a matter of backdrop, Brian, is that certainly in the last 4 weeks, we're seeing more vibrancy coming back to the entire categories that we're in. So that was number one. Then number two is we picked up a nice amount of new business from the First Brands' bankruptcy or liquidation in the brake business. And in that brake business, what happened is that the First Brands' inventory got -- it was being liquidated. And so a number of the existing customers bought inventory in that liquidation. So that deferred the ramp-up volume in what we received. Now we think that, that's substantially over, and we're receiving that now.

We're receiving that now, and we think that, that is going to be vibrant. And then last but not least is we've had some softening in the -- just in basically in the fundamentals, mostly in the DIY business. We're a big supplier to the DIY business, and some of those orders have got deferred. Now we're starting again to see some more vibrancy in that area. And those are the 3 major items that really somewhat took us by surprise. I mean, we saw a couple of months of really soft revenue and then it came -- has come back now, and we're hoping to see that continue.

Brian Nagel: So as a follow-up to that, to the first point there with regard to, I guess, the warehouse movement, is this one customer? Or is this something you're seeing more pervasive through the sector?

Selwyn Joffe: That is one customer. That's one customer. That particular event is one customer. If you had to look in general, I'd say across the spectrum, we're seeing some softness. Again, in general, we're seeing a pickup as well across the spectrum.

Brian Nagel: Oh, go ahead. Sorry to interrupt. Go ahead.

Selwyn Joffe: No, no. I mean, I think in general, I mean, that certain customers are weaker than others. But in general, that's the trend.

Brian Nagel: And then I guess maybe more for David. So you had this -- I'm going to use the word dislocation here in the fiscal second quarter, but you took down guidance substantially for the year itself, and I hear you saying trends got better maybe in the last month of the fiscal quarter. So as you're thinking about the guidance and the thinking behind that guidance, what's embedded there? Is this reflect basically the weakness that was in the earlier part of the quarter? Or is it all embedded in some of the pickup we're seeing or saw late in the quarter?

Selwyn Joffe: No, I think what you're seeing in the guidance, and I'll turn it over to David, is that the first 6 months, obviously was significantly weaker than we thought, but we believe the back 6 months is going to return. So David, I'll turn it over to you to talk more about that.

David Lee: That's a good question. We're already seeing October sales have increased compared to the end of the trend in fiscal second quarter, and we expect that trend to continue. So we're already seeing orders pick up.

Selwyn Joffe: Yes. And I think that the guidance, we're assuming that the tide for our existing business will increase, but not all the way. We do think it's going to get stronger. And then the significant amount of new business that's coming on will further enhance that. So I mean, the question is how high is the tide going to come back to -- is it going to come back to our normal or even greater because there is, I think, some discussion in the industry that there may be some catch-up because these are -- when you say nondiscretionary, I mean, people are delaying these repairs.

Their cars don't work, but they're not scrapping their vehicles because they're not replacing a component in the vehicle. So there's a potential for some tailwinds catching up, but we're not assuming all of that. We're being -- we do think that there is a recovery coming, but not -- we're not assuming a significant tailwind at this point, but there is a possibility of that.

Operator: Your next question comes from the line of Derek Soderberg with Cantor Fitzgerald.

Derek Soderberg: So I wanted to start with the new business, the $60 million. I was curious how fast you can ramp that opportunity. It sounds like some of it is going to start shipping by the end of the fiscal year. But I was just wondering if you can kind of talk about how fast you can really ramp to that $60 million level. And then the $25 million announcement on new business, is that related to the $60 million? Is that the same kind of group of customers, same products? Can you talk a little bit more about the $25 million piece as well?

Selwyn Joffe: Yes. So the $60 million is firm commitments that we have right now. That's annualized revenue. We believe we'll begin shipping all of it this fiscal year. It's already started. I mean we're ready -- pretty much ready to go as the customer demand starts ramping now. Many of these, they have to transition between the old supply and the new supplier. And in some cases, you have a changeover where boxes have to be changed or replaced. So -- but we are very confident that all of that $60 million will begin this year. On the $25 million, that's incremental to the $60 million, similar story. That $25 million is very advanced discussions. The $60 million is firm commitments.

The $25 million is a very advanced discussions with the expectations. And we believe we can get to hopefully all of that $25 million by year-end as well, but that's going to be a little later in the year. There may be some of that, that goes into the following year. And then we've got a significant backlog lined up for next year, and that excludes the Centric opportunity. The Centric opportunity is really shaping up. There's a number of very large players that are interested in it. And certainly, we're evaluating how and what the most productive way is for us to launch that program, in particular, in light of the Quality-Built program that we already have out there.

That's doing quite well. So we'll see how that unfolds. More news or more guidance on that to come still as we get through that.

Derek Soderberg: Got it. And sticking to this -- sticking to the $60 million new business, is this accretive to gross margin? And David, I don't know if you can talk a little bit about kind of the near-term gross margin target or give us maybe some commentary on like a normalized gross margin target maybe for next fiscal year. Just maybe talk about kind of the pricing, what you're seeing on that front in this kind of maybe softer market, what we should expect on -- how should we expect -- how should we think about gross margin kind of from here?

David Lee: That's a good question. So with the additional business, gross margin should be comparable to what we've been reporting. So if we look at the most recent history, including last fiscal year, if you go through the tables in the back of our earnings press release where we exclude the items that impact the results that are noncash we've been averaging about 22-plus percent on gross margin. So we expect that when we bring on the new business, it's going to be comparable. However, with the increasing volume that we're adding and the overhead absorption that's going to be favorable and continued focus on cost reductions, we do expect to see accretion in the margins.

Operator: We have reached the end of our question-and-answer session. I will now turn the call back to Selwyn Joffe for closing remarks.

Selwyn Joffe: Well, I just want to thank everyone for their questions. I'd like to close by reinforcing a few important points. We recognize that our near-term results have been affected by delayed customer orders. We are focused on addressing these challenges and improving operating performance. At the same time, we believe the company's competitive position continues to strengthen. Our nearly $60 million in new annualized business commitments will generate additional revenue as these programs launch and ramp. We also see further growth potential through Centric Parts, the geographic expansion of our major customers, our rotating electrical diagnostic equipment business and our improved heavy-duty manufacturing platform and business.

We believe these initiatives provide multiple avenues for revenue growth, greater operating efficiencies and improved profitability. Our priorities remain clear: execute the new business launches, support our customers, improve margins, generate cash and create long-term shareholder value. I want to thank our employees for their continued dedication and our shareholders for their support, and we look forward to updating you on our progress during our next earnings call. Thank you, everyone.

Operator: Before we conclude today's call, we have one final question from George Berman with Cabot Lodge Securities.

George Berman: I'd say congratulations, a very elaborative conference call, and we'll be looking to use today's market price to add to our position substantially. Question I have is with the recent election now over, is there -- if we have any anticipated reduction in the tariff situation between U.S. and Canada, U.S. and Mexico, would that have a positive influence for you?

Selwyn Joffe: Well, clearly, I think the challenge that's out there today is that the cost of repair for the consumer has gone up substantially, in particular, in light of the tariff pass-throughs that have gone through. So to the extent the consumer can repair the vehicle for a lesser cost for them, our margins basically remain unchanged because we would reduce our prices to reflect the reduction in the tariffs. But the volume and the demand at the consumer level, I believe, will accelerate dramatically. So I think that's a very positive event. In particular, when you talk about the significant role that we play in selling new units, not only remanufactured new units.

And most of our remanufactured product is exempt because it's coming out of Mexico. But we're fast becoming leaders in the new unit business, both for brake calipers and for rotating electrical. And those are made in our Malaysia facilities, which are extremely efficient, but they have the burden of bearing some tariffs. So to the extent that those tariffs come off, it will be very advantageous to pricing and to our margins.

George Berman: Great. Maybe another quick question on Mexico. Over the last few quarters, you've alluded to the fact that Mexico is growing quite nicely for you. I saw that one of your customers, AutoZone has recently been also expanding into Brazil. Do you see the South American market in general being another growth opportunity for you?

Selwyn Joffe: That's a great question. I mean what's happening is because of the success in Mexico and all of the South American trade contracts and free enterprise zones between different countries between Mexico and South America as well as AutoZone going into Brazil, we think South America is probably the biggest opportunity as far as a new continent for us. Our Mexico sales are growing significantly, and we're seeing a lot of Mexican interest in them wanting to export into South America, which opens the door for us to move into South America as well. I think another exciting part of that is that our diagnostics equipment is all bilingual.

It's not bilingual, but right now, trilingual, but we have the flexibility of even adding Portuguese to our diagnostics. The diagnostics capability in the rotating electrical segment for us is extremely strong. And right now, to the best of my knowledge, we are the only tester that's available that can actually test the communication protocols. So to the extent you don't test communication protocols, you're getting false -- you may get false positives on testing. So having these testing units in locations where rotating electrical alternators and starters are sold is critical. And we're fast reaching the point where we have a majority of the locations in the United States.

We still have a lot more to go, but significant demand there. We have the same demand brewing in Mexico, the same demand brewing in Canada, where we have French and English and obviously, Spanish in Mexico. The diagnostics demand is -- continues to go up, and that's a pretty exciting opportunity as we get into multiple. And then the rotating electrical, I mean, we are one of the -- we have one of the broadest product offerings and our cataloging capabilities allow us to be able to reach these international markets fairly quickly and with a breadth that I think is world leading.

So I appreciate that question, but I definitely think that as you look into the future, that's a big growth opportunity. The other side is the Centric formulations. If you look at the formulations and the acceptance and the amount of Centric out at a time is around $400 million in revenue. And these brake pads, in particular, that unique formulation of these pads is so highly accepted by the installer that we have no doubt that as they start reaching reintroduced into the United States, which we already see the research that the installers are waiting to see this product, especially the professional installer market.

But we think that the applicability as we move into Mexico and other countries on the brake product line and the utilization of the Centric as well as our Quality-Built, we see a big opportunity across our whole product line spectrum in these new countries. So it's very exciting again for the future.

George Berman: And one quick housekeeping question. How many shares have you bought back in the current quarter? I saw that your interest costs are coming down dramatically as well.

Selwyn Joffe: That is true. Our interest cost -- I mean, unfortunately, that interest cost comes down because some of the sales is lower, and we don't use the supply chain finance programming as much. But we still got $20 million available on our buyback. We bought back, I mean, over -- I think, over $11 million or $12 million. David, more than that, what do we have?

David Lee: As of June 30, the trailing 12 months was about $11 million.

Selwyn Joffe: A little over $11 million. So we have still another $20 million in the current authorization available. And so we're optimistic about our potential and our future, and we continue to keep that as a potential for capital allocation.

George Berman: And I think you do have a poison pill in place, right?

Selwyn Joffe: No, we do not have a poison pill.

George Berman: That might be something you want to think about because it seems to me the equity valuation is extremely low right now.

Selwyn Joffe: Yes. Well, I certainly agree with that, yes. We'll take that under consideration. I appreciate that.

Operator: There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.

Selwyn Joffe: Thank you very much.

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