Hello, and thank you for standing by. My name is Lacey, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Motorcar Parts of America Inc. Fiscal 2026 First Quarter Conference Call and webcast. [Operator Instructions] Thank you. I would now like to turn the conference over to Gary Maier. You may begin.

Thank you, Lacey, and thanks, everyone, for joining us for our call today. Before 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 the company. Actual results may differ from those projected in these forward-looking statements. Forward-looking statements involve significant risks and uncertainties, some of which are beyond the control of the company and subject to change based on various factors, in particular, expectations about anticipated future growth and opportunities with customers that may not be achieved. 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 SEC. I would now like to begin the call and turn it over to Selwyn to begin.

Thank you, Gary. I appreciate everyone joining us today. We're off to a solid start for fiscal 2026. We are encouraged by our first quarter performance, reflecting record net sales and gross profits for our fiscal first quarter. Equally important, we generated solid cash flow from operating activities, reduced net debt -- net bank debt and continued to repurchase shares. All of this underscores our commitment to success as a leading supplier of nondiscretionary automotive aftermarket parts. Our team is focused on continuous improvement and success. We are excited by the opportunities for growth. We offer a well- respected portfolio of products and services and have the capacity and ability to further leverage our state-of-the-art North American operational and distribution footprint. Our hard parts business, led by our rotating electrical 50-plus year flagship category continues to generate solid performance. Nondiscretionary parts cannot be deferred. If parts fail, your car cannot be driven. According to industry reports, the average age of U.S. light vehicles has risen to 12.8 years from 12.6 years in 2024. In addition, the number of vehicles on the road climbed to 293.5 million from 289 million just a year ago. We expect increased replacement opportunities for the life of the vehicle, particularly with consumers holding on to their cars for longer. We are encouraged by the continued success of our second largest product category, brake offerings, which includes brake calipers manufactured at our state-of-the-art production operation in Mexico. Our team is doing an exceptional job to further enhance market share for the entire brake product line as well as all of our other nondiscretionary product offerings. We continue to leverage our strengths, offering our customers great products, industry-leading SKU coverage and order fill rates, supported by value-added merchandising and marketing support. In short, we are all committed…

Thank you, Selwyn, and good morning, everyone. Let me summarize key financial performance metrics for the fiscal 2026 first quarter that we highlighted in this morning's news release and additional information will be available in the 10-Q that will be filed later today. As Selwyn referenced earlier, net sales increased 10.9% to a first quarter record of $188.4 million, gross profit increased 16.3% to a first quarter record of $33.9 million. Operating income increased to $20.1 million from an operating loss of $6.5 million in the prior year. We generated $10 million of cash from operating activities and reduced net bank debt by $7 million to $74.4 million, repurchased 197,796 shares for $2 million at an average price of $9.94. Now let me discuss our results in more detail. Net sales for the fiscal 2026 first quarter increased 10.9% to a first quarter record of $188.4 million from $169.9 million in the prior year. Gross profit for the fiscal 2026 first quarter increased 16.3% to a first quarter record of $33.9 million from $29.2 million a year earlier. 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 $3.9 million or a 2.1% impact to gross margin. Gross margin for the fiscal 2026 first quarter was 18% compared with 17.2% a year earlier. In addition to the noncash expenses previously explained, gross margin for the fiscal 2026 first quarter was also impacted by cash expenses of $1.4 million or a 0.8% impact to gross margin as detailed in Exhibit 2 of this morning's earnings press…

[Operator Instructions] Your first question comes from the line of Derek Soderberg with Cantor Fitzgerald.

Really good results here. Wondering if you could sort of give a high-level description of what you faced this quarter as it relates to tariffs versus last quarter? It looks like there was a smaller impact from tariffs. What was sort of the difference there? And then just looking at guidance, it looks like you're assuming some additional pass-throughs than maybe you previously expected. What are some of your assumptions on that you're making on tariffs for this year? Can you just kind of take a high-level approach to explaining what you're seeing out there for tariffs?

Derek, that's a good question. So to recap, in our March quarter, we had approximately $4.6 million impact of those net tariff costs. As you pointed out in this June quarter, we had a much lower $1.4 million net impact of tariffs. For our September quarter, which is our second quarter, we do expect a little bit more impact, but it will sequentially continue to come down. So less impact.

Got it. And then for full year guidance, I mean, you cited some pass-throughs on tariffs. I guess what are some of the assumptions you made for the full year for tariffs? It looks like we had kind of that blanket tariff come off and there's a bit of a pause, but maybe that comes back on. What were some of the assumptions that you guys sort of made for the full year that led you to raise the revenue range?

So we did increase our sales guidance. We're not breaking out how much of that increase is related to tariff pass-throughs, it's confidential sensitive information regarding customer price increases. So it's all included in that higher guidance.

Yes. And I do want to point out that regardless of tariffs, we have record sales.

That's right.

Yes. The majority of our sales increase is not tariffs.

That's correct.

Got it. That's helpful. And then Selwyn, just sort of looking at the rotating electric and braking businesses, what's sort of the next major growth opportunity in either of those segments? I think you've sort of mentioned geographic expansion in Mexico, obviously, market share growth as you guys have seen that. Maybe it's going to be new products in those segments. What's sort of the next major growth opportunity in either of those segments?

I think, look, we're still very small in the professional installer market -- in the pure professional installer market. We sell customers who sell to both installers and DIY, and we have a large share there. But the pure professional markets we're still small, and there's a significant amount of upside growth in our branded product, and we're seeing that. And I'm just really optimistic about what the brand can do with quality build. And so I think that's -- and that's across the board for all of our categories. I think there's opportunity in all of our categories for that. On the brake-related product side, I mean, we're still fresh. I mean we've got a long way to go. We've got plenty of capacity. We get more efficient as we grow. And then that's just the North American market, I mean. So we have lots of opportunity throughout the world, quite frankly. I mean, I think the North American is planning for now, but we're starting definitely to look over our shoulder to see what else is out there in terms of bigger opportunities on a more global basis. So we're optimistic. I mean the brake pad business is an opportunity that's just beginning. And we're excited about that business. We think we have the premier product in the marketplace. And we're just beginning. I mean, I don't think you've seen the effect of that yet. And it's coming. It's not -- this year's story is a pretty conventional same as story and next year's story just picks up more momentum.

Got it. Well, congrats on the results, guys.

[Operator Instructions] There are no further questions at this time. I would like to turn the call back over to Selwyn Joffe for closing remarks.

Great. Well, I appreciate everybody listening today. In summary, I can just repeat, we're bullish about our outlook for fiscal '26 and forward. We remain laser-focused on further efficiencies and fully benefiting from a not easily duplicated global platform to meet demand and grow market share for our nondiscretionary products emphasize nondiscretionary as well as from our diagnostic testing capabilities. We continue to leverage our expertise in solid customer and supplier partnerships. Our liquidity is strong. Our leverage is very low, and we have the resources, capacity and capability to further enhance shareholder value. Let me reiterate our strategic focus, growing sales of our existing product lines, continuous operational efficiency improvements to further enhance margins, mitigating tariffs and increasing cash conversion by neutralizing working capital, and we are positive on all those fronts. In closing, we appreciate 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 we thank everyone again for joining us on the call. We look forward to speaking with you when we host our fiscal 2026 second quarter call in November and at various investor conferences and meetings in the interim. Thank you.

This concludes today's conference call. You may disconnect.