Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Motorcar Parts of America, Inc. Fiscal 2025 Fourth Quarter and Year-End Conference Call. [Operator Instructions] I would now like to turn the conference over to Gary Maier, Vice President of Communications and Investor Relations at Motorcar Parts of America. Please go ahead.

Thank you. Thank you, Regina, and thanks, everyone, for joining us for our call today. Before we begin and I turn the call 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 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 affecting the company will be those anticipated by Motorcar Parts of America. 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 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 risks and uncertainties of the business, I refer you to the various SEC filings. With that said, I'd like to turn the call over to Selwyn Joffe.

Great. Thank you, Gary. I appreciate everyone joining us today. Before we go over our strong results, and by the way, we're off to a strong start for this quarter, I'd like to first address tariffs. 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. We believe these tariffs will provide us strategic competitive advantages going forward with strong market share growth opportunities. We are certainly excited by our accomplishments for fiscal 2025, with net sales increasing 5.5% to a record $757 million and gross profit increasing 16.1% to a record $154 million, along with solid cash flow generation from operating activities of $45.5 million and net bank debt reduction of $32.6 million, all of which David will review shortly. In addition, we repurchased 542,134 shares for $4.8 million at an average of $8.91 in fiscal 2025, and we anticipate further opportunities to enhance shareholder value through strong cash generation. Our team focus continues to be focused on continuous improvements, and we are excited by the opportunities, notwithstanding the current challenges with regard to tariffs. The nondiscretionary nature of our product portfolio, coupled with a significant North American manufacturing footprint will continue to drive our long-term success. I should note that we have been focused on executing strategies designed to enhance our competitive edge long before the current events, including a focus on being less dependent on Chinese supply chain, whether components or parts and providing industry-leading product fill rates. As we noted in today's press release, Chinese suppliers today provide less than 25% of our products and components, and we continue to work to mitigate the impact of tariffs. I might add…

Thank you, Selwyn, and good morning, everyone. I encourage everyone to read the earnings press release issued this morning as well as the 10-K that we filed later today. Let me reiterate key financial performance metrics for the full fiscal 2025 that we highlighted in this morning's news release and Selwyn mentioned earlier. Net sales increased 5.5% to a record $757.4 million. Gross profit increased 16.1% to a record $153.8 million. Generated cash from operating activities of $45.5 million and reduced net bank debt by $32.6 million to $81.4 million. And we repurchased 542,134 shares for $4.8 million. Net sales for the fiscal '25 fourth quarter increased 1.9% to $193.1 million from $189.5 million in the prior year. Gross profit for the fiscal '25 fourth quarter increased 10.6% to a fourth quarter record $38.5 million from $34.8 million a year earlier, impacted by $4.6 million or 2.4% for certain tariff costs paid for products sold before price increases were effective as highlighted in our earnings press release this morning. I should mention that gross profit for the quarter was also impacted by noncash expenses. The noncash expenses 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 these noncash expenses in the quarter was approximately $3.2 million or a 1.7% impact to gross margin. Gross margin for the fiscal '25 fourth quarter was 19.9% compared with 18.4% a year earlier. Aside from higher sales volume, particularly from certain of our newer product offerings, which supports increased absorption of costs, we're also focused on other initiatives to enhance gross margins. Operating expenses were $22.2 million compared with $22.6 million last year, which benefited from a $3.1 million noncash mark-to- market foreign exchange…

[Operator Instructions] Our first question will come from the line of Derek Soderberg with Cantor Fitzgerald.

So Selwyn, you mentioned tariffs increasing strategic competitive advantage. Can you just expand on how you see tariffs potentially helping out on market share? Are you already having those conversations with customers? And what do you think specifically positions you guys better to gain share in the sort of global tariff environment? And then I've got a follow-up.

Yes. I think, Derek, I mean, great to hear from you. I mean that's just a question that we're going to delay answering for a period of time. But we have adjusted our footprint way in advance of the tariffs to be less dependent on China, and we continue to focus on that with lots more opportunity to come. I think I mentioned to you less than 25% of our imports -- of our product comes from imported from China. And so just inherently, we're ahead of the game. I think the other thing that's really important to understand is we ship direct from our factories. And so when it comes to tariffs and cash flow from tariffs, we only pay tariffs when we sell the product. And obviously, once the price increases and these initiatives kick in, that's cash neutral. I believe that the majority of our competitors house their inventory in the United States and are going to need to replenish inventory with tariff goods. So the cash requirement will be far greater than ours.

Got it. That makes sense. And then as my follow-up, David, just wondering around the customer price increases, wondering how that's going to impact gross margin. You guys have been expanding margin pretty nicely here. I think fiscal '25 adjusted gross margin was around 22.5%. With the addition of tariffs and those price increases, do you think you can grow off that for fiscal '26?

That's a good question. So if we just look at tariffs, if you increase the numerator and denominator, the gross margin will be slightly negatively impacted. However, other initiatives to expand gross margin and increase that margin percentage should offset that impact.

[Operator Instructions] Our next question will come from the line of Carolina Jolly with Gabelli.

So I was hoping for some clarification on the tariff. I guess, what we saw in the quarter a good representation of what we should be expecting? Or are the tariffs moving around so much that it's hard to really kind of project any certain impact at this point?

I think the timing impact is unpredictable. We will see a little more of it. And certainly, it will disappear soon. So as these price increases and initiatives kick in. It's a little uncertain right now as to the exact timing and what happens with tariffs. So we can't give you exact guidance on where that's going to go yet.

Great. And then also another clarification. The price increases that you talked about, are those price increases that you've already enacted or expected going forward?

We have accomplished almost 100% of our price increases have been accepted.

Perfect. And then last question. Just looking at the guidance, I do believe it looks like you're expecting some margin expansion next in the fiscal year. Can you just elaborate on some of the catalyst behind that?

So all the initiatives that we're focused on in lowering cost per unit and increasing sales per unit. So we're constantly focused on reducing our costs...

Our capacity absorption.

With more volume, yes.

So our momentum right now is quite strong. So I mean, the natural organic one is overhead absorption, but we've got a number of operating initiatives as well that continue.

And that will conclude our question-and-answer session. I will turn the call back over to Selwyn Joffe for any closing remarks.

Thank you so much. Well, in summary, as you can tell, we remain bullish about our outlook. We remain laser-focused on further efficiencies, as we just discussed, and fully benefiting from a not easily duplicated global platform to meet demand for our nondiscretionary products as well as from our diagnostic testing capabilities. We continue to leverage our expertise in solid customer and supplier partnerships. This includes our supply chain vendor finance program that benefits our suppliers. Our liquidity is very strong, and we have the resources, capacity and capability to further enhance shareholder value. In closing, I must recognize the contributions of all of our team members who are continuously focused on providing the highest level of service. We are all committed to being the industry leader for parts and solutions that move our world today and tomorrow. We also appreciate the continued support of our shareholders and thank everyone again for joining us for the call. We look forward to speaking with you when we host our fiscal 2026 first quarter call in August and at various investor conferences, including tomorrow and future meetings -- Wednesday, sorry, not tomorrow. I'm a day ahead of myself. Thank you.

Ladies and gentlemen, that will conclude our call. Thank you all for joining, and you may now disconnect.