Motorcar Parts of America (MPAA) Q2 2025 Earnings Report

- Revenue: $208.2 million (Q2 2025) vs. $196.6 million prior year; YoY +5.9% (YoY revenue metric = +5.87%). QoQ data available in four-quarter metrics: +22.54% QoQ.
- Gross Profit: $41.277 million, gross margin 19.8% (vs 20.9% prior year); notable one-time effects include onboarding expenses of $2.7 million and transition costs of $1.3 million; non-cash core amortization and revaluation expenses totaling approximately $3.8 million (1.8% impact).
- Operating Income: $12.52 million (6.01% margin); YoY decline of 10.17% in operating income; QoQ surge reflects offsetting items and higher absorption of costs due to volume.
- Net Income: -$2.954 million (-1.42% net margin); YoY decline of 50.87% with QoQ improvement of 83.67% driven by higher sales and operational efficiencies offset by non-cash FX and onboarding costs.
- EBITDA: $14.741 million; EBITDA margin ~7.08%. EBITDA before the impact of non-cash/cash expenses was $26.8 million for Q2, implying substantial non-cash headwinds.
- Cash flow: Operating cash flow of $22.867 million; net debt reduced by $22.0 million in the quarter; cash at period-end $10.413 million; total debt $235.722 million; net debt $225.309 million.
- Balance sheet: Total assets $986.242 million; total liabilities $722.279 million; stockholders’ equity $263.963 million; current ratio 1.39; quick ratio 0.43; cash ratio 0.026.
- Capital allocation: Net bank debt declined to $114.3 million; strong liquidity with approximately $105 million in total cash and availability (per call commentary).

- Strategy and growth focus: Selwyn Joffe emphasized that the company is achieving record sales and gross profit metrics in the face of a soft market, driven by non-discretionary parts and the accelerating break-related product category. He highlighted ongoing margin accretion from new product lines and the efficiency gains from global footprint relocation. Quote: “We are gratified by our continued record sales performance for the quarter and six months. ... the opportunities we see on the horizon and remain optimistic about the second half of fiscal 2025 and achieving our full-year targets.”
- Margin dynamics and non-cash items: David Lee detailed that gross margin was impacted by non-cash expenses (core amortization, revaluation of cores) totaling about 3.8 million and transition expenses of $1.3 million, in addition to onboarding costs of $2.7 million. FX-related non-cash effects from Mexican lease liabilities and peso forward contracts added about $5.4 million and $1.4 million, respectively, to non-cash expenses. Quote: “Gross margin for the fiscal ’25 second quarter was 19.8%, compared with 20.9% a year earlier.”
- Cash generation and leverage: Management highlighted operating cash flow generation of roughly $22.9 million and debt reduction of $22 million in the quarter, signaling improved cash generation despite GAAP net losses. Quote: “The positive cash flows enable us to reduce net debt by $22 million during the quarter.”
- Growth initiatives and product mix: The team cited the Brake/Non-Discretionary product expansion (break-related products now the second-largest category) and the expectation of new part-number introductions (at least 800 per year) and a strategic relocation program targeting annual savings of about $7.1 million. Quote: “Our emerging break-related products have grown to be our second-largest category… anticipated annual savings of approximately $7.1 million.”
- Diagnostic equipment and international expansion: Selwyn and David emphasized the potential upside from diagnostic equipment revenue (targetting more than $100 million in the next three years) and growth outside the United States, particularly in Mexico, supported by a strong footprint. Quote: “With respect to our diagnostic business, we expect to sell more than $100 million of diagnostic equipment within the next three years.”
- Guidance and outlook: The management team clarified how the increased guidance is a consolidation of non-cash items into the operating income target, and they expect continued margin improvement in the back half of fiscal 2025. Quote: “There is no change in the net operating income because previously we gave the guidance... but we also highlighted there would be $17 million of non-cash items.”

MPAA stands at a pivotal point where revenue growth is supported by a broadened product mix (break-related and diagnostic offerings) and an ongoing structural cost-reduction program, including the Mexico relocation. The company generated meaningful cash flow in Q2 FY2025 and reduced net debt, which provides financial flexibility to pursue growth initiatives and working-capital improvements. However, near-term profitability is pressured by non-cash FX charges and onboarding/transition costs, resulting in GAAP net losses in the quarter. The management’s guidance framing—adjusted via non-cash item consolidation—suggests a path to margin accretion as the mix shifts toward higher-margin, non-discretionary products and as absorption improves with higher volumes. Risks center on FX exposures and macro-market softness, while catalysts include the ramp of the brake and rotating electrical businesses, expansion of diagnostic equipment revenue, and continued efficiency gains from the global footprint. Overall, the investment thesis hinges on disciplined execution of the cost-out program, sustained demand in core aftermarket categories, and the successful monetization of diagnostic and breakout product lines. If management sustains the cost reductions and the topline growth in non-discretionary segments remains robust, MPAA could deliver improved EBITDA and free cash flow in the back half of FY2025 and into FY2026.