Good morning. Thank you all for joining us. My name is Brian Nagel. I'm a Senior Equity Research Analyst here at Oppenheimer, coming consumer growth and e-commerce. This is day three of our 25th annual Oppenheimer consumer growth and e-commerce conference. Thank you all for joining us today. I'm very pleased to have with us our next presenting company, Motorcar Parts of America, and the company's Chairman, President, CEO, Selwyn Joffe. Selwyn, thank you for joining us. Hey, Brian, how are you? Doing well, thank you. It's an annual event for me to see you at a conference. Again, thank you. Thanks for including us. We appreciate it. We're going to structure this as a fireside chat with me asking Selwyn questions and him answering those questions. To the extent there are any questions from the audience, just work them or put them in the chat, and I'll be happy to work them into our conversation. Selwyn, I thought, just for the sake of those who may be a little less familiar with Motorcar Parts of America, maybe just a quick overview of the business. You recently reported quarterly results like this yesterday. Maybe some what you view as kind of the key highlights from that report. Right. Just a quick overview. I mean, I'm excited about our results and our momentum. Just a quick overview of the company. I mean, we're in the hard parts aftermarket. We fundamentally specialize in non-discretionary replacement parts, driven with rotating electrical and then a whole brake part, full brake line supplier. And we also have diagnostics in the rotating electrical space. We service North America markets right now, the U.S., Mexico, Canada. I'm excited about the momentum we have. We had very good results, in my opinion, for the last fiscal year. We generated $45 million in cash, paid down over $30 million of debt, a significant amount of EBITDA. Our net debt is down to around $80 million before the revolver, not including the convert. Debt to EBITDA is very low, very good liquidity right now. We bought back a number of shares. We're continuing to buy back shares. We're optimistic about where we are. I think we're off. We had a great year. We're off to a solid start for this year. Our outlook is favorable. We do have some tariff headwind short term, some transition tariffs, I would call them, and somewhat one time if you allow me to go there. This is really just the differential in the timing between when our price increases kick in compared to paying tariffs in the interim. We will have one-time expenses, but then we expect that we've mitigated 100% of the tariff impact. If we could, let's maybe dive a little bit more into that tariff. Tariffs are a key focus of investors at this point as we're talking to companies within the aerospace and really across consumer broadly. Maybe you can just discuss a little further that dynamic, what you're seeing, like you just mentioned, your ability to mitigate these tariffs over time. Yeah. I cannot comment on anybody else, but we are able to, through a combination of operational adjustments and supply chain efficiencies along with price increases, we are very confident we have mitigated 100% of that tariffs. I mean, again, I do not want to mislead anyone in that there is an interim cost. The interim cost, I believe, is very, very, very manageable for us. I mean, we have very high liquidity. We have no liquidity issues relating to our tariffs. We expect to come out of it in a much better position, to be honest with you. I think we are going to be more competitive. I think the opportunities that will open up for us will far exceed the cost of the interim tariffs over time. We are optimistic about that. It is a changing world. Even as we know this morning, I'm seeing tweets and posts about changing tariffs. I don't know the details of that yet, but certainly the Chinese agreement, I don't think it's been publicly announced yet. At least I'm not familiar. I've seen just some snippets of it, but I'm not sure where that goes. Our footprint, less than 25% of our product is subject to tariffs. We believe we can reduce that over time significantly. If you could, and I think it's an interesting topic at the moment, just maybe talk a little more just about that delay, if you will. I mean, why you as a company are absorbing those costs now, but then over time? It is good news and bad news on that. I mean, the good news is that we have such an efficient footprint that we only pay tariffs when we bring product into the United States when we sell it. We only bring product into the U.S. when we sell it. Our inventories are at our factory, we ship direct from our factory. From a cash perspective, the cash flow hit is mitigated right away for the tariffs that we pay once the price increases go through. The bad news is that we are the first ones paying tariff, and I think that was reflected in our fourth quarter. The good news is that once we get through the interim between the transition of the price increases, we will have no cash flow impact from the tariffs. In fact, because we get paid, we get paid on average 35 days or 34 days, and our tariffs are paid in a similar amount of time. We only pay when we sell. We do not have to pay for our inventory replenishment. Many of our competitors have U.S. inventory, are going to have to pay full-blown cash for their replenishment inventory. That is a big, big, big difference. They may have some safety stock in the U.S., so they are not paying immediate tariffs, but the long-term impact for them is far more significant from a liquidity standpoint than it is for us. I think that gives us a big competitive advantage. I also think that it just shows the efficiency in our model. As we make the changes, I think we become even more competitive. As a key component of that, we haven't talked yet about your, and I always think it's worth mentioning who your key retail partners are. I mean, they're the major auto parts retailers in the United States, and I know you're one of their preferred suppliers. As we think about this tariff dynamic, is it really key to this that those retailers pass along to their consumers these higher costs? Yeah, I'm not going to speak for the retailer. I think it's an awkward position for me, but I think they've been rational with us, and we respect the decisions that they've made and are continuing to make. I think with the economic and operating deliverables that we offer, I mean, we were able to come to an agreement on what we're doing. Yeah, I think at the end of the day, the consumer prices are going up in the consumer market. I mean, all the players that I can see seem to have taken up prices. It's non-discretionary product. The demand for our product, in my opinion, will continue. I don't think these tariffs will price these products out of being replaced. I think a couple of things is the fundamentals of the market. There's more vehicles on the road. There's more vehicles getting old. Average age is now 12.8 something for a vehicle. There are 280 plus million vehicles on the road. And the value of the vehicle has actually gone up. I say that because the relative value of replacing a part relative to the value of the vehicle is the key thing. If it is cheaper to replace the part and keep the vehicle, you are going to make that replacement decision. Certainly an alternator, starter, brake pad, brake caliper, you are going to replace that before you replace your vehicle. As the tariffs pop in for new import vehicles, which you are already seeing price increases there, used car values are going up as well because there is more demand for used cars. The relative value proposition remains intact. It is non-discretionary. You may be able to defer a pad for a little bit, but pretty much everything else you've got to replace, otherwise you can't drive that vehicle of our parts. I am optimistic that we'll get through it. At the end of the day for us, again, while there is some transition pain, which I think people should look at in a longer-term perspective because I think it's actually an opportunity for us, I think we come out of it in a good space. On the topic of just demand, and you touched on this a bit, but I would love to drill down a little bit further. Look, like you said, your space and your company largely serve as non-discretionary type demand. There were some disruptions in the pandemic, came out of the pandemic. Overall, from a demand perspective, are we back to a normalized demand dynamic where it's being driven by, like you just said, the number of cars on the road, the age of those cars, etc.? Look, I think there's demand at the consumer level and there's demand at our level as a supplier. At the consumer level, I think that certainly we're not in categories where everyone's so excited to go and buy a new alternative vehicle. It's all about replacement and need. I think that the need quotient is stable and growing. I think that there's none of this. There has been a reduction in disposable income, but I think we threw that. I see a stabilization and potentially an uptick, quite frankly. I think some inflation in the market is probably not bad because there's been deflation for 20 years, 30 years in these parts. To have a viable supply chain, you need some inflation. I don't think that's the end of the world. I do think the consumer is still getting a great value, even with the price increases. I do not see that being abnormal right now. Now, for discretionary, I cannot even comment on that. I have no idea where that is going to go. On non-discretionary, I think the value quotient is still very fundamentally viable and exciting. Now you're more specific on motorcar parts business. For something we've been talking about for a while, it's really the diversification beyond that core or that, let's say, legacy rotating electrical. Maybe we could talk about that. How you view rotating that core legacy product and then some of the new products that you moved into and how that's resonating with your core partners on the distribution side. I think that's important. I mean, it took us 40 years before we decided to do more than alternators and starters. We have a 50+% share of the rotating electrical market and continues to grow and is fundamentally a very viable category. I mean, we're just in North America. I mean, the whole world, there's a significant number of combustion engine vehicles all over the world. We think the growth is a long, long time in rotating electrical. When we made a strategic decision to become a multi-product company, we looked at technology-agnostic parts, and we certainly felt that the brake category, as big as it is, and the fact that even for whether it be hydrogen, hybrid, or electric, the brakes were all needed. We went into the brake line. I mean, we're fast becoming close to the second largest and maybe the second largest suppliers of brake calipers in the United States right now. That category continues to grow for us. Our brake pad business and rotor business, but really the pads is really what we focused on, is new, but fast evolving into something that we think can be very significant. Overall, between brake masters, cylinders, brake boosters, brake pads, and even our wheel hub program, which houses the anti-lock braking system, and we have a full line brake shoes as well that go with the pads, we see fast evolving market share. As we get market share, we see margin accretion. That's really important. I think you can see that in our numbers. The margin accretion is there. I think we'll experience further margin accretion as we continue to grow our business, assuming we'll continue to be as strong as it looks right now. There's always risk, but we're very confident that we sell a great product and that we do a great job servicing our customers. Should we think about, as investors look at the business and the longer-term growth trajectory of the business, will there be expansion to other product categories from here? You know, our focus right now is really growing. We have so much opportunity in our existing categories, Brian, that I mean, if there was something that was so opportunistic, maybe we would look at that, but we're really heavily focused inward right now. Growing the categories we have, we have a lot of growth opportunity in every category that we've got. We are heavily inwardly focused. We think our growth rates can sustain for multiple years without looking at other categories, which does not mean that one day we will not get into other categories. We are very well positioned to be in even more categories, but we do not need them right now. Our focus is positive cash flow. We think there is good equity value in buying back our stock. We have very little debt. I mean, so we're going to look at how to deploy capital to enhance shareholder value in the most effective way. But there's no compelling reason to look for something new to go into. I mean, we're very strong in the categories we have. On those categories, and I think an interesting point, just discuss the competitive dynamic. How do you talk about the substantial market share you have in the legacy rotating electrical, already growing market share within the broader brake category? I mean, what makes your products better than others and helps to drive that market share? Yeah. You know, I always answer that with one answer. There's no one thing that makes you better than another. It's a thousand little things that makes us better. And I come from the discipline of worrying about everything. And we really put ourselves in our customer's shoes to see what do they need that makes them more competitive than our competitors' customers. We have a full street-smart suite of services. We would do everything from developing business plans to helping the salespeople sell on the street, I mean, state-of-the-art cataloging. Of course, the efficiency on getting them the right product at the right time at the right place. I mean, that's critical. The fill rates, making sure that you have new product introductions. These are all basics, and they're all blocking and tackling, but not everybody does all of them. Some people do some of them, but not many people. I shouldn't say we have very good competitors, but I shouldn't say, but we generally, and I'm probably quite biased, I mean, generally at the top of the pile in terms of our service levels and the quality of our products. I mean, we're serious about what we do. We're Tier Certified in every facility. We have state-of-the-art facilities, the most efficient remanufacturing facilities in the world. I would challenge anyone on that. We make sure that our parts work and that the consumer is getting the right value for their money. Let's talk a bit about, and this may go back to the tariff conversation, but just the unique nature of your manufacturing capacity. I mean, the big emphasis you put on Mexico and how you've shifted manufacturing capacity in other parts of the world and kind of where we stand now and where we're going forward. Yeah, I think that, again, 75+% plus of our business is out of Mexico and Malaysia. The vast majority of that 75% is coming out of Mexico. We do have some of our brake products that come out of China. We have strategic relationships there that, I mean, when it's the right time, we'll make the appropriate moves on those. I would say that, again, the vast majority of our product is USMCA Certified and is tariff-free. We think we can enhance that pretty significantly, pretty quickly. When I say quickly, nothing's overnight. I mean, when you move product and factories, it takes probably, we're looking at anywhere from three to six months where you can relocate. With the footprint and the efficiencies and opportunity and infrastructure that we have within our own facilities, we're very flexible as to where we can produce what. And so we're excited about the opportunity. The move from China, maybe give us some idea of how much, to what extent have you moved out of China historically, and where could that go from here? Yeah, we had moved, I mean, essentially completely out of China until we got into the brake pad and rotor business, I mean, which is predominantly coming out of China. We have a unique formulation from a specific factory in China that we have a joint venture with that caused us to go into China. We always have intermittent sourcing of specialized items from China. I mean, so that continues, and that in some ways is sort of a necessary evil as part of our business. And it's not an evil. I mean, it plays a great role in making us a very efficient supplier. We supply all makes and all models. So that whatever vehicle you have on the road, we have an application for you. You need some of that fill in. But we'll become less dependent on China. I mean, most of those Chinese suppliers are moving out of China themselves. We made the decision a number of years ago to be less dependent on China. We are, and that will continue. You're studying back over some of the recent quarterly reports when at least a couple of quarters ago, you and your team were talking pretty openly about your efforts to manage better currency fluctuations and those fluctuations upon your business. I don't recall. Yeah, that's a big question with us, Brian, and I appreciate you bringing that. We have two major non-cash items that keep affecting, superficially affecting our numbers. The biggest one, and I just want to address that, and it's completely non-economic, is the mark-to-market on the Mexican leases. We're a maquiladora in Mexico. We're required to have a lease on the books of a Mexico subsidiary. The lease is a 100% dollar lease, but the Mexico subsidiary has to mark-to-market, and the dollar's being accretive against the peso. The Mexican subsidiary is required to mark-to-market the peso full value of the liability of that lease on their books. They never pay it. It's all paid by dollars by the U.S. entity. When we consolidate, we have to take that mark-to-market hit in the consolidation. It's completely non-cash. It doesn't affect any payments. There's no hedging. There's nothing other than a book entry that has no economic impact on us, zero whatsoever. It's purely a GAAP accounting. I think that's the biggest headwind that we run into as a company. People get through that. You can see the underlying fundamentals are really strong. The other is we've been buying pesos forward. We buy 75%—this is our formula, the whole world can know it, I'm not too afraid—75% of our needs forward on a 12-month basis so that we just know what our cash requirement is on funding that. We're going to need far less than that right now because our business in Mexico is growing beautifully. We think it's going to continue to grow, and we think we can fund all of the Mexican operations out of our Mexico sales. There will be no more need over the next probably nine months to 12 months. We do not believe we will have a need to actually buy forward peso contracts. That will all disappear. The headwind of these non-cash items is very frustrating for both the investor base and for the management team and the board and all sorts of things. It is what it is. The only reason it is there is because there is a Mexico rule that requires if you are going to be licensed as a maquiladora, which has a lot of advantages for us in terms of being tariff-free across the Mexico border, that you have to have the lease on the books of the Mexico entity. So it's. I don't know if I explained it clear enough, but yeah. I'll ask, I mean, just a follow-up question because this is a question we get a lot. I think it is an interesting topic. Is there something you could do to sort of say limit this noise within your financials? Yeah. The only thing we could do is we could make it a cash impact, and then we'd really be subject to the fluctuations. That way, we wouldn't have a mark-to-market. It makes no sense to have any economic impact, just as window dressing. This GAAP. We've looked at all alternative ways of how the GAAP rules, generally accepted accounting rules, apply to it. That mark-to-market on the lease, for now, we don't see an alternative. Again, I assure you, and I don't think there's anyone who would disagree with me when they understand it, that it is 100% non-economic. Got it. I know our time's starting to wind down. There are a couple more topics I want to discuss. Just from an M&A standpoint, particularly now with your balance sheet, your cash flow, your balance sheet in better shape, are you looking more towards M&A opportunities? It's not that we're looking more to M&A opportunities. I wouldn't say that, but I do think that the supply chain is in a consolidation mode. There are opportunities on both sides of the equation. I think that there's been a lot of consolidation on the distribution side and the retail side. Efficiencies are critical in a market where that's cost-sensitive. We're always open to deploying. We have very low leverage. We're always open to deploy capital. We would not be taking any high-risk or risky ventures. That's really not. Again, as I said earlier, we don't need acquisitions of new products to continue our growth rates. We're pretty solid in the product lines that we've got. I guess maybe just a final question for me is, as we think about how the business continues to evolve and grow, can you give us some frameworks to how we should think about the kind of longer-term financial profile of the business, kind of almost like what we're playing for here? Yeah, I think, look, I think mid to high single-digit growth is a continuing opportunity. We're giving guidance for this next year, but I think we'll have accelerated growth as we go forward. I think margin accretion, I think in the mid to high 20% is certainly very doable in the future. Potentially, well, depending on how many new products we launch, I think if you stay stable, focus on the existing products, and get more share, you'll see more margin accretion in the business. Selwyn, is there anything we do not discuss that we should have discussed? You tell me. I think now I think we've had everything. I don't know whether any questions that are opening up, but I think we've hit the main points. I mean, continued growth, margin expansion, headwind from interim tariff, but that's going to be very short-lived. Lots of opportunity post that and mitigating the tariff as we transition through the wait period before the price increases go forward. Once again, we appreciate your participation in our conference. It's always great to catch up on the business. Congrats on the ongoing success here. Thank you so much. We always appreciate being part of your conference and all the many discussions that we have together. I appreciate that very much. Thank you.