Thank you for standing by. My name is Eric, 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 2026 Second Quarter Conference Call. [Operator Instructions] And I'd now like to turn the call over to Gary Maier, Vice President, Corporate Communications and Investor Relations. Please go ahead.

Thank you, Eric, and thanks, everyone, for joining us for our fiscal second quarter call. 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 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 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. With that, I'd like to begin the call and turn the call over to Selwyn.

Thank you, Gary. I appreciate everyone joining us today. We have experienced strong consecutive quarters, and I want to highlight our first half performance, and David will discuss both the quarter and 6-month period in more detail as well as trailing 12-month metrics. For the first half, we reported continued sales growth of $31.8 million or 8.4%, gross profit improvement of $6.2 million or 8.8%, strong operating cash flow of $31.9 million and net bank debt reduction of $24.6 million as well as share repurchases of 287,910 shares for $3.4 million at an average share price of $11.65. This reflects well on our annual guidance and the future. We continue to focus on opportunities to further enhance shareholder value. We remain focused and committed to being the leading supplier of nondiscretionary automotive aftermarket parts. Our team is focused on continuous improvement and success. We are excited by the opportunities for growth moving forward, particularly given the rapidly changing industry environment. Equally important, we believe our financial strength and flexibility provide a distinct competitive advantage. As you know, we offer a well-respected portfolio of products and services and have the capacity and ability to benefit from our state-of-the-art North American operational footprint. In short, we are well positioned to be the industry leader. As I've highlighted before, 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 a year ago. We expect increased replacement opportunities for the life of vehicles, particularly with consumers holding on to their cars for longer and new car prices recently reaching all-time highs. We are encouraged by the continued success of our second largest product category, brake offerings, which includes brake calipers manufactured…

Thank you, Selwyn, and good morning, everyone. Let me summarize key financial performance metrics for the fiscal '26 second 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. Net sales increased 6.4% to $221.5 million. Gross profit increased 3.5% to a second quarter record of $42.7 million, generated $21.9 million of cash from operating activities and reduced net bank debt by $17.7 million to $56.7 million, repurchased 90,114 shares for $1.4 million at an average price of $15.41. Now let me discuss our results in more detail. Net sales for the fiscal '26 second quarter increased $13.3 million or 6.4% to $221.5 million from $208.2 million in the prior year. Net sales for the quarter reflect $14.8 million of core revenue in connection with the realignment of inventory at certain customer distribution centers, offset by the timing of purchases by one of our largest customers, as Selwyn mentioned previously. Gross profit for the fiscal '26 second quarter increased 3.5% to a second quarter record of $42.7 million from $41.3 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 goods premium amortization and revaluation of cores on customer shelves, which are unique to certain of our products and required by GAAP. The total for all noncash expenses in the quarter was approximately $3.6 million or a 3% impact to gross margin as detailed in Exhibit 3 in this morning's press release. Gross margin for the fiscal '26 second quarter was 19.3% compared with 19.8% a year earlier. In addition to the noncash expenses previously explained, gross margin for the fiscal '26 second quarter was also impacted by onetime cash…

[Operator Instructions] Your first question comes from the line of Brian Nagel with Oppenheimer.

So a couple of questions. First off, Selwyn, you mentioned in your comments just on the effects of deferral. This has been a topic that we've heard from a number of companies within your space later. So I guess the question I have is if you could expand a little bit. I mean recognizing like you said in your comments, I mean, this is a break-fix type industry. So any type of deferral will be short-lived. But I guess the question I have is, what are you seeing? Is there -- was there a measurable impact on the quarter from the deferral.

Yes. There's some -- okay, great. Yes. So the questions are regarding the deferral. I think it's -- there's a customer that has gone through some operational changes, in particular, relating to their warehousing and as a result of that, we've had some purchases deferred for the quarter. We believe that customer is committed to continuing inventory levels and don't believe that there is any fundamental difference to that. And so the -- we mentioned the $14 million of core revenue was offset by a reduction of about the same amount by that deferral. And we expect that we'll pick up that deferral in the back 6 months of that year. So I think the net wash -- I mean, all in all, the numbers would have been better had we not had the deferral. But excluding the revenue that -- from the core revenue, I mean, it still meets all of our annual guidance expectations. And quite frankly, we're excited about the performance of the company right now with significant cash flow generation, debt payback, cash flows basically coming from profitability and working capital, excluding the calls. And the fundamental outlook for our business, while there are some changes in the revenue, that's not abnormal for us, we expect that we will continue to maintain our momentum.

That's helpful. And then I guess the second question -- so that was -- the second question I have is just on consumer behavior. And I think you mentioned -- maybe we're probably -- I think we're using the term deferral twice. I mean that's in terms of specific customer of yours. But then also, if I heard you correctly, you were talking about at the consumer lever -- I'm sorry, at the consumer level, you're seeing some type of maybe demand deferral as consumers are pushing off projects longer. I just want to make sure I heard that correctly because that's something I think we've heard elsewhere.

Yes, yes. I think anywhere with this discretion, Brian, there seems to be some deferral and some uncertainty. But for the majority of our products, for all of our products, they're nondiscretionary. The vehicle will not operate without replacing them. It is -- you are capable of deferring -- replacing your brakes for a little bit, but not too long. I mean you've got to get the job done. So I think with our product lineup, the deferral -- that deferral is different than the onetime deferral on some restructuring of warehousing. But that deferral, I think, is more nominal on us than others.

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

Can you talk about just market share trending? Any trends in market share for your core as well as braking business? And then additionally, there's been some news flow regarding the First Brands situation. Wondering if you could talk about whether or not there are any sort of knock-on effects from what's going on there? And then I've got a follow-up.

Yes. I think market share for us, I mean, it fluctuates a little bit, but I don't see any major material changes in market share right now. I think if we look at the momentum of our business, our brake-related products are certainly the ones that are picking up momentum faster than others. Relative to First Brands, difficult for me to comment. I mean it's sad that something like that is cast a veil over our industry. Having said that, I think for customers that are reliable, have integrity, have great -- good products and I mean, I think there's going to be lots of opportunities. So I mean -- but really much more than that, I couldn't comment.

Got it. And then as my follow-up, I wanted to touch on cash flow. Really good generation here. It looks like trailing 12 months free cash flow is around $70 million, something like that. And you guys have been buying back shares. Can you talk about how you plan on utilizing further cash flow? Wondering if the repurchases will continue? And then just looking at debt levels, how comfortable are you with where it's at? Do you plan on continuing to reduce debt as well?

Yes. I think, look, in light of what's happened to the stock today, I mean, certainly, I think really to the extent we have liquidity to the extent that we think that there's an undervaluation. I mean, I think that we'll continue to buy back stock. I mean we do have an authorization out there to repurchase stock. So we'll have to look at that and continue, as far as the debt levels, I mean, our debt levels are very low. I think it continue -- will continue to get lower. Right now, we think that having liquidity is going to leave us in a good stead to be able to take advantage of numerous opportunities that will be unfolding in the marketplace. And so we're excited about that. I think we're sitting in a good position and having lots of liquidity will be helpful.

There are no further questions at this time. I would now like to turn the call over to Selwyn Joffe for closing remarks. Please go ahead.

Thank you. In summary, I mean, we continue to be bullish about our outlook. 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 as well as for our diagnostic testing business. We continue to leverage our expertise and solid customer and supply partnerships. Our liquidity is strong. Our leverage is 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, and we are making great progress there, mitigating tariffs and increasing cash conversion by increased profitability and neutralization of working capital. In closing, we appreciate the contributions of all 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 third quarter conference call in February and at various investor conferences and meetings. Thank you.

Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect.