Ladies and gentlemen, thank you for standing by. My name is Brent and I will be your conference operator today. At this time, I would like to welcome everyone to Motorcar Parts of America's Fiscal 2022 Fourth Quarter and Yearend Conference Call. 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. It is now my pleasure to turn today's call over to Mr. Gary Maier Investor Relations. Sir, please go ahead.

Thank you, Brent. Thanks everyone for joining us. Before I begin the call and I turn it over to Selwyn Joffe, 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 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 us. 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. 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 Securities and Exchange Commission. With that said, I'd like to begin our call and turn it over to Selwyn for our prepared remarks.

Thank you, Gary. I appreciate everyone joining us today. I hope you're all safe and healthy. As announced this morning, we delivered record net sales of $650.3 million for fiscal 2022, representing a year-over-year increase of 20.3%. We achieved this exceptional growth despite continued global supply chain challenges and the continued COVID environment. I should also highlight several additional successes during the year. We developed a comprehensive line of brake pads, utilizing an industry-leading formulation and brake rotors,, serving the professional installer market under the company's quality built brand. We secured multi-year new business commitments and opportunities of more than $100 million, primarily across multiple brake-related products. We have successfully expanded sales through additional product line offerings in Mexico. We completed a multi-year expansion programs of our facilities in Mexico, including completion of the new brake caliper remanufacturing facility. We have added capacity to support anticipated future growth with limited additional CapEx investment. We extended the maturity date of our credit facility from June, 2023 to May, 2026, to enhance our liquidity and capital resources. We secured inventory, which enabled us to support our customers, meet demand and obtain new business, despite worldwide supply chain and logistics challenges. We secured purchase orders from all major automotive retailers for rotating electrical benchtop testing equipment. We opened an electric vehicle contract testing center in Detroit, Michigan with customer business signed up. We continued a series of prestigious tier one wins for our EV technology with orders from major global automotive, aerospace and research institutions, and equally important, we continued our social responsibility initiatives with plans to launch an agri farm organic food and community program in Mexico and continued our focus on opportunities to enhance our environmental, social and governance practices on a global basis. All of these accomplishments enable us to…

Thank you, Selwyn and good morning, everyone. I would like to encourage everyone to read the earnings press release filed as an 8-K earlier today. It contains more detailed explanations of our results, including our full fiscal year results. On this call today, I will review both our fiscal fourth quarter together with the full fiscal year. Before I get into details, I would like to emphasize that our quarterly results are not indicative of our year-over-year potential. As we have stated on previous calls, it is not unusual to experience quarter to quarter fluctuations due to timing of orders. We also continue to experience extraordinary global supply chain challenges and inflationary cost pressures, while our price increases were not fully in effect. And we made strategic inventory investments to support business growth and mitigate supply chain challenges. Net sales for the quarter were $163.9 million compared with $168.1 million for the prior year period. However, for the full fiscal year, net sales, as Selwyn mentioned increased 20.3% to a record $650.3 million from $540.8 million a year earlier. Gross profit for the quarter was $25.8 million compared with $32.1 million a year earlier. Again for the full fiscal year, gross profit increased to $117.9 million from $109.5 million a year earlier. Gross profit for the quarter was impacted by non-cash items as well as cash items. Let me provide details for each and then I will provide further details on the impact on each additional line item, so you can accurately understand the underlying fundamentals between periods and appreciate our optimism as a new fiscal year evolves. The non-cash items reflect core and finished good premium amortization and revaluation of cores on customer shelves, which are unique to certain of our products and required by GAAP. The total for…

Your first question is from the line of Matt Koranda with ROTH Capital. Your line is open.

Hey guys, it's Mike Zabran on for Matt. Could we just start with a breakdown between rotating electrical brake products and wheel hub revenue for the quarter?

Yes, for the fourth quarter ended March 31, '22, our rotating electrical products were 68% of sales. Wheel hub products 14% of sales, brake-related products were 13% and other products were 5% of sales.

Got it. Helpful. Thank you guys. So in the quarter, certain cash items related to supply chain costs seem to have gotten incrementally better. Can you just elaborate on where specifically we're seeing improvement there?

So overall, as you mentioned, those supply chain disruption costs have decreased. So as further price increases go into effect, we are seeing a smaller impact as you mentioned, sequentially over the prior quarter and we do expect as the further price increases go into effect that those supply chain disruptions, the cost that we identify will continue to come down.

Okay, got it. That's helpful. And so in terms of the revenue guide, it looks really strong and the press release we highlight and expected ramp and growth throughout the year, could you guys just provide some color on what guidance is factoring into product category growth in fiscal '23? Are we assuming kind of similar growth across all products or is the guide giving credit to stronger growth in specific categories?

Look, the newer categories so, as a percentage are going to have much higher growth, the brake related categories are going to have higher growth. We expect growth across the board. I think our guidance is reflecting sales commitments that we have now. So, that we think there's still plenty of opportunity as we go down the road, but I think overall brake-related products will continue to grow significantly as well as all of our other product lines on a more stable basis.

Got it. Okay. That makes sense. Last one for me, any implied EBITDA guide, could you just speak to how and to what degree we're factoring in headwinds into the guide? So headwinds such as higher gas prices, potentially lower vehicle miles traveled in the year and supply chain pressures.

I think we've looked at that and I think that certainly is mitigating what we think could be even incremental growth. We've got high gas prices. Miles driven though is continuing to be fairly strong, but we're going to have to wait and see how that unfolds, but I think the fundamentals of the market with the aging population of cars and the lack of new car availability, people are going to be required to repair their cars and I think regardless of miles driven, we should see some positive growth.

Got it. That's all for me, guys. Thanks.

Your next question comes from the line of Bill Dezellem with Tieton Capital. Your line is open.

Thank you. If you'll allow, I have a number of questions. First of all, I would like to get your commentary around the softness that you saw in January and February and what you believe was the cause of that? And conversely discuss the strength that you saw in March, what led to that and to what degree that strength has continued in April, May and year into June?

That's a pretty comprehensive question, Bill. Yeah and we’re so focused on the future. I'll try and sort of recount those months, but we had a soft start certainly to the quarter in that there's been a new sync to update orders and so the first thing is that just because of supply chain challenges and not always related to us, but to be related to other suppliers. So sequencing update orders by our customers changes. So we see some pushback out of the fourth quarter into later months in this current year of some update orders. The other thing is there was some pretty reported by our customers some extreme rain in some high volume areas and that affected sales, but I can tell you March, I think was the, I think probably the biggest month we've ever had in the history of the company. So you're right, March did come back strong and things started to normalize more and demand is –while it is choppy, is continues to be strong. So, our outlook as we go through this next year, we think is strong, although we are cautious because there's a high degree of uncertainty, just in the world in general, quite frankly. I think recessionary times for us generally could be, I don't want to say good, but we certainly don't suffer like others because of recessionary times. And in some ways it's helpful because these cars stay on the road longer and people have got to perform repairs and the repairs they perform for us and, we have non-discretionary parts. So you need your brakes to drive your car. You need an alternator, you need a starter and etcetera. So, we are very positive about the future. I think as you know, we think on an…

No, that is helpful, and how about the strength that you saw in March? Maybe not continuing with record month levels as you said, March was a record March. Have you seen that strength then continue in April, May and here into June, since weather was better and maybe the supply chain is a little less challenging?

Yes. I'm not going to say because the March was an extraordinary March coming off of a very soft January. So they sort of offset each other. All I would say is that the fundamentals are strong right now, and we expect to be in the high end of our guidance. So perhaps even beat it. But we want to be conservative and we want to be -- we want to take into account considerations of where we are.

And actually, let's jump to supply chain. I made a presumption that the supply chain was improving. Maybe I should just ask flat out. Is it improving? Is it worsening? Or is it just really very similar over the last few months?

Well, you saw Shanghai have these enormous shutdowns over the last 2 months, 3 months. And so that really put a hold on the improvement in supply chain. And once Shanghai shuts down, you can't move trucks around, and I mean, quite frankly, I'm not sure what happened. I got to check the outcome. But over the weekend, Shanghai went through mass testing, and another shutdown over the weekend looking out to see what infection rates were. And it's hard to predict. There are days I would tell you it's improving, and then you have an unexpected Chinese event mostly that affect us pretty dramatically. The good news for us is that our Malaysian operations are up and running and producing and our dependence on China continues to diminish, and our brake caliper facilities are absorbing more and more production and our dependence gets less and less. Freight is -- for a while seemed to be getting better in terms of availability. And then -- it's very choppy. So I would say, in general, just lots of caution around it right now. Prices are up dramatically on components, and we're pushing them through, and we have no choice.

And speaking of price increases, would you please update us in terms of the timing of when price increases will flow through the P&L, and when your last price increase is expected to be flowing through the P&L?

Yes. We expect more price increases in May. We got pushed back a little bit. They should have been earlier in the quarter. And to be honest with you, there are perpetual price increases going on as we react to the marketplace. And so we'll have price increases going through all the way through August at this point in time. So we don't expect that to stop unfortunately or fortunately. I mean, there is inflation, and there are just costs that have to be passed through to ultimately to the consumer.

And then -- so just for clarity on that. So the -- through August, is that price increases that you will be announcing with your customers or the price increases will be flowing through the P&L starting or ending in August as of what you know today?

As of today, true, we have price increases that have already been notified all the way through August.

And then lastly for now, benchtop testers, is there an opportunity to reduce the return levels as a result of having the benchtop testers? So here's the theory or the spirit of the question, if you will, that your -- these 15,000 retail locations are buying these testers from you, but the advantage is that when a consumer comes into the store, they actually know whether they need a new component or not. And if they do, then that's installed in the vehicle and not brought back to the store and returned because there was a mistake, and that ultimately would lower your costs. Is this a correct line of thinking? And if so, what's the magnitude? How significant is it?

First of all, that's absolutely correct. The magnitude is going to be interesting as we roll them out. I mean, right now, they are testers and they're not the testers that are in place and not capable of testing all the new applications that are out there. The most important thing though for the store -- for the retailer is that they are able to give accurate and trustworthy advice. And so instead of disappointing a customer without solving the problem that the customer is trying to solve, they'll be able to guide that customer more effectively through making the right choice. I do think that costs will come down. It's going to be very hard to quantify, and it's going to take some time before we see that.

There are no further questions at this time. I will now turn the call back over to Mr. Selwyn Joffe.

Okay. Thank you, everybody. And I just want to say, in summary, we are excited about our future. We have reached a strategic inflection point in our transition, and we expect a strong year with opportunities to build on both our top line and our bottom line with our existing product lines. In closing, I want to thank all our team members for their ongoing commitment and as usual, customer-centric focus on service. During these challenging times, we remain particularly focused on the safety and well-being of our employees, and I'm extremely proud of our team members and our company. And I look forward, and we appreciate your continued support, and I thank you again for joining us on the call, and we look forward to speaking with you when we host our fiscal 2023 first quarter conference call in August, and at future investor conferences. Thanks.

Ladies and gentlemen, thank you for participating. This concludes today's conference call. You may now disconnect.