Executive Summary

Q4 FY2025 delivered a modest top-line beat with net sales of $193.1M vs S&P Global consensus of $190.7M (+1.3%); gross margin expanded to 19.9% from 18.4% YoY, but GAAP diluted EPS was a loss of $0.04, driven by tariff timing and non-cash items . Revenue consensus and EPS consensus from S&P Global are noted below; values retrieved from S&P Global*.
EBITDA of $16.3M declined QoQ from $20.4M due to $4.6M tariff costs on products sold before price increases were effective and $3.5M non-cash items; EBITDA before these items was $24.6M, indicating underlying margin strength .
FY2026 guidance introduced: net sales $780–$800M (+3.0% to +5.6% YoY) and operating income $86–$91M (before certain non-cash and one-time items), excluding the impact of recently enacted tariffs; D&A ~ $11M .
Management emphasized tariff mitigation via price actions and supply chain shifts (China now <25% of components) and sees strategic share gains as competitors face higher tariff cash burdens; price increases have been “almost 100%” accepted . Potential stock catalysts: durability of margin improvement, pace of tariff offsets, and execution on brake/mexico growth.

What Went Well and What Went Wrong

What Went Well
- Gross margin expansion: Q4 GM 19.9% vs 18.4% YoY; Q3 was 24.1% as volume absorption and product mix improved . “We have substantially mitigated the current tariffs with customer price increases and supply chain initiatives” .
- Interest expense fell: Q4 interest expense declined to $12.5M from $14.6M YoY on lower average balances and rates .
- Cash and leverage trajectory: FY2025 cash from ops $45.5M; net bank debt reduced by $32.6M to $81.4M; liquidity of ~$144.6M (cash + availability) supports flexibility .
- Strategic positioning: China reliance <25%; USMCA-compliant North American footprint; strong non-discretionary categories (rotating electrical, brakes) gaining share .
What Went Wrong
- GAAP profitability: Q4 GAAP diluted EPS -$0.04; net loss of $0.7M due to $4.6M tariff costs and $2.6M non-cash items; EBITDA $16.3M missed S&P Global consensus (see Estimates Context) .
- Tariff timing: Gross margin impacted by 2.4% due to tariffs paid before price increases took effect; management expects offset over time but near-term timing is uncertain .
- FX volatility: Non-cash mark-to-market FX on Mexico leases and forwards continues to create earnings noise (Q4 operating expenses benefited by ~$3.1M non-cash gain, but full-year FX was sharply unfavorable) .

Financial Results

Metric	Q2 FY2025 (Sep 30, 2024)	Q3 FY2025 (Dec 31, 2024)	Q4 FY2025 (Mar 31, 2025)
Revenue ($USD Millions)	$208.186	$186.176	$193.105
Gross Profit ($USD Millions)	$41.277	$44.882	$38.495
Gross Margin %	19.8%	24.1%	19.9%
Operating Income ($USD Millions)	$12.520	$17.581	$16.278
Interest Expense ($USD Millions)	$14.182	$14.435	$12.546
Net Income ($USD Millions)	$(2.954)	$2.291	$(0.722)
Diluted EPS ($USD)	$(0.15)	$0.11	$(0.04)
EBITDA ($USD Millions)	$14.741	$20.373	$16.296

Q4 FY2025 Gross Margin Impact Detail	Amount ($USD Millions)	GM Impact (percentage points)
Non-cash items (core premium amortization, cores revaluation)	$3.214	1.7%
Tariff costs paid before price increases	$4.607	2.4%

Segment breakdown: MPAA does not disclose separate revenue segments in these filings; performance commentary highlights rotating electrical and brake-related categories rather than GAAP segments .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Sales ($USD Millions)	FY2026	N/A	$780–$800	New
Operating Income ($USD Millions)	FY2026	N/A	$86–$91 (before certain non-cash and one-time items; excludes tariff impacts)	New
Depreciation & Amortization ($USD Millions)	FY2026	N/A	~$11	New
Net Sales ($USD Millions)	FY2025	$746–$766 (guided in Q2)	Actual: $757.4	Achieved within range

Notes: FY2026 guidance explicitly excludes the impact of tariffs due to uncertainty and continuing changes .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 FY2025)	Previous Mentions (Q3 FY2025)	Current Period (Q4 FY2025)	Trend
Tariffs/Macro	No explicit tariffs; focus on onboarding costs and operating efficiencies	No explicit tariffs; FX impacts and cost absorption; strong cash generation	Tariffs front-and-center; timing impacts Q4 GM; offsets via price increases and supply chain; expect full mitigation over time	Rising importance; near-term headwind, medium-term strategic advantage
Supply Chain/China Reliance	Transition of operations; efficiency initiatives	Working capital neutralization, efficiency focus	China <25%; USMCA-compliant NA footprint; direct-from-factory shipping reduces tariff cash burden vs competitors	Improving resilience and strategic positioning
Product Performance (Brakes/Rotating Electrical)	Record sales; GM pressured by one-time onboarding costs; category momentum	Strong quarter; brake momentum; volume absorption driving GM	Continued gains, especially brake calipers; non-discretionary nature supports share and margins	Positive momentum
Regional Trends (Mexico)	Not highlighted	Noted strong cash generation; limited regional detail	Mexico hard parts sales gaining momentum; leveraging footprint; opportunities with U.S. retailers and local distributors	Expansion opportunity accelerating
FX/Financial Noise	FX in operating expenses (+$5.4M in Q2) creating non-cash variability	FX non-cash items significant; YOY comparisons impacted	FX mark-to-market non-cash gain in Q4 operating expenses (~$3.1M); full-year FX sharply unfavorable	Ongoing noise; mitigation in progress
Diagnostics/Technology	EV subsidiary testing solutions; category mentioned in profile	Limited	JBT1 tester success; service revenues (repairs/software/database) to grow with installed base; potential OUS expansion	Emerging growth vector

Management Commentary

“We have substantially mitigated the current tariffs with customer price increases and supply chain initiatives. We are confident that all the current tariffs imposed as of today will be fully offset, notwithstanding some short-term timing differences.” — Selwyn Joffe, CEO .
“Chinese suppliers today provide less than 25 percent, and [we] have an established footprint in North America that could be utilized to further reduce this reliance going forward.” .
“EBITDA before the impact of non-cash expenses and one-time cash expenses…was $24.6 million for the fourth quarter.” — David Lee, CFO .
“We have accomplished almost 100% of our price increases have been accepted.” — CEO, on tariff offsets .
“Our liquidity remains very strong, with total cash and availability of approximately $144.6 million.” — CFO .

Q&A Highlights

Tariffs and market share: Management believes tariff cash-flow dynamics favor MPAA (direct factory shipping; cash neutrality post price increases) vs competitors with U.S.-based inventory, positioning for share gains .
Price increases acceptance: Nearly 100% of customer price increases accepted, supporting offset of tariff impacts and margin trajectory .
Gross margin outlook: CFO noted tariffs alone slightly dilute GM math (numerator/denominator), but ongoing initiatives should offset; capacity absorption and cost reductions targeted .
Guidance and margin expansion catalysts: Operating efficiency, cost per unit reductions, volume-driven overhead absorption underpin FY2026 margin expansion expectations .
Tariff timing uncertainty: Near-term unpredictability acknowledged; management expects effects to fade as offsets fully take hold .

Estimates Context

Metric	Consensus (S&P Global)*	Actual	Surprise
Revenue ($USD Millions)	$190.7*	$193.105	+$2.405M (+1.3%) — bold beat
Primary EPS ($USD)	$0.20*	$(0.04) GAAP	-$0.24 — bold miss (note: consensus “Primary EPS” may reflect normalized methodology not directly comparable to GAAP)
EBITDA ($USD Millions)	$22.7*	$16.296	-$6.404M (−28.2%) — bold miss

Values retrieved from S&P Global*.
Interpretation notes: MPAA’s reported GAAP EPS includes significant non-cash FX and other items; S&P Global “Primary EPS” is often normalized and may not be directly comparable to GAAP diluted EPS .

Key Takeaways for Investors

Revenue resilience with a beat vs consensus and improving gross margin trends suggests underlying demand and operational execution remain intact despite tariff noise .
Near-term earnings volatility from tariff timing and FX should diminish as accepted price increases flow through and supply chain repositioning advances; monitor gross margin progression and EBITDA before adjustments as cleaner indicators .
FY2026 guide implies continued organic growth and operating income expansion (pre-items), signaling confidence in demand and cost initiatives; watch for tariff policy developments given guidance excludes their impact .
Interest expense tailwinds from lower rates and reduced net bank debt enhance earnings leverage; each 100bp interest rate reduction cuts discount program expense by ~$6M per CFO .
Strategic positioning (China <25%, USMCA-compliant North American footprint) and direct-from-factory shipping offer competitive advantages under elevated tariff regimes; supports potential share gains in core non-discretionary categories .
Growth vectors: Brake calipers and Mexico market expansion, plus diagnostics service revenues as JBT1 installed base matures; these can diversify margin and reduce cyclicality .
Near-term trading lens: Expect stock to react to clarity on tariff offset timing, margin cadence, and confirmation of FY2026 trajectory in Q1 FY2026 (August) updates; any additional price actions or cost wins likely positive catalysts .

MOTORCAR PARTS OF AMERICA INC (MPAA)·Q4 2025 Earnings Summary