Good morning. My name is David, and I'll be your conference operator today. At this time, I would like to welcome everyone to Motorcar Parts of America Fiscal 2022 3Q Conference Call. Today's conference is being recorded. . Gary Maier with Investor Relations, you may begin your conference..

Thank you, Dave, and thanks, everyone, for joining us today for our 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 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 control of the company and are subject to change based upon various factors. 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 Securities and Exchange Commission. With that, I'd like to begin our call and turn it over to Selwyn Joffe to begin..

Okay. Thank you, Gary. I appreciate everyone joining us today. I hope you're all safe and healthy. Let me begin by highlighting our very strong fiscal third quarter results and the drivers behind this exceptional growth despite the well-known industry supply chain challenges that were a modest drag on reaching our full potential.

We delivered record net sales of $161.8 million, a 32% year-over-year increase. It is also notable that net sales growth was 30.5% on a 9-month basis, also reaching another record for the company despite quarter-to-quarter variabilities in customer order patterns.

More exciting than this exceptional growth are the reasons behind it and the sustainable long-term momentum that we are building. I will share detail on several. First, we have new and existing customer expansion across all of our product lines. Second, we have growing opportunities in brake-related categories.

Third, there are emerging opportunities in the electric vehicle space. And finally, favorable underlying fundamentals in the aftermarket parts industry. Let's start with demand for our product lines, which continues to grow across the board.

Our strategic focus on multi growth platforms in our hard parts business contributed to our strong third quarter performance. It is also further establishing MPA as a valued partner to our customers from a quality and supplier standpoint. We expect this momentum to continue.

As a complement to our strong and growing position within the automotive aftermarket, our diagnostic business for alternators and starters continues to roll out at retail custom store locations. These benchtop testers enable retailers to offer accurate advice with the latest protocols to diagnose problems for consumers and reduce unnecessary returns.

This provides a value-added benefit for the retailer while strengthening their consumer relationships. The global automotive testing market is also very large at approximately $5.4 billion and we believe our efforts in this market will generate solid results.

Our strong growth in the quarter was unfortunately constrained by manufacturing challenges in Malaysia related to the shutdown of the country by the government due to COVID. This impacted our operations in the country and significantly reduced our capacity.

However, our team in Malaysia did an exceptional job outsourcing production to help meet customer demand. And fortunately, operations are now back up and running in Malaysia. David will have more to share on the impact of this important development momentarily. Turning to our brake-related products.

As I mentioned earlier, this is an area where we are seeing very strong success. To put our brake-related growth in perspective, products in this category as a percentage of overall sales increased to 15% for the 9-month period from 9% in the same period a year ago.

At the same time, rotating electrical sales and all other product lines also increased. Our state-of-the-art brake caliper remanufacturing operation continues to gain momentum notwithstanding supply chain challenges that constrained our robust growth.

Manufacturing efficiencies will improve as this operation matures, volumes increase, and we continue to mitigate supply chain issues. Moving to our emerging opportunities in the electric vehicle space.

Our presence in electric vehicle testing applications in the areas of development and production continues to gain traction as demand for test equipment related to performance, endurance and production of electric vehicle products continues to gain momentum.

We remain enthusiastic about the outlook and are encouraged by new strategic partnerships, engineering strength, industry-leading technology and the significant opportunities in front of us as electric mobility evolves.

While we are not providing details on this segment just yet, let me just make a few comments about this exciting business that complements our hard parts business and relationships with our customers.

Last quarter, we announced that our electric motor emulator were selected to support the development of the ROTOmotor controllers for Johns Hopkins Applied Physics Laboratory under a contract with NASA for its Dragonfly mission to Saturn's moon Titan.

In addition, our vision is to offer EV manufacturers, contract testing services via our newly established Detroit Technical Center. This also offers significant growth opportunities. Our initial customer will commence this quarter, and we plan to host a formal opening ceremony in the spring.

This is clearly a testament to our EV technology, its exciting applications and the potential from our acquisition of D&V Electronics. Now moving to the favorable industry environment in which we operate. Industry reports continue to show that people are keeping the vehicles longer and used car sales continue to climb to record levels.

The result is an increase in miles driven by our kind of vehicles or OKVs, with approximately 287 million vehicles now on the road in the United States alone, and the average age of vehicles is now at 12.1 years and aging. The market for our current hard parts categories represent more than $6 billion at the retail level.

I would also note that car lease residuals relative to the value of the vehicle at lease end are now sharply lower than the value of the vehicle. As a result, consumers are buying out their leases rather than leasing new vehicles further contributing to an increased aging of the vehicle population.

All of this bodes well for the aftermarket parts replacement industry, and these favorable dynamics fuel our optimism. We are very well positioned with our significant channel relationships for aftermarket parts and our superior parts and solutions for our customers and consumers.

We are building on this through our strategic focus on moving into new product areas as we are doing with brake calipers and taking market share in the product categories where we have advantaged opportunities.

Certainly, there continue to be challenges facing the aftermarket industry in the near term, supply chain, freight, raw materials and other pandemic-related headwinds.

We are working hard every day to mitigate these challenges with our global team in collaboration with our suppliers and logistic providers, including through price increases and freight surcharges, for example. We are making very good progress, as David will share shortly. Let me summarize my comments.

Our multiyear strategic expansion initiatives are coming to fruition, putting us in a strong position to further benefit from our growth investments. Our footprint of this for the future is now the footprint of today, and we are encouraged by the favorable underlying demand fundamentals of the automotive replacement parts market.

In short, our company is well positioned for sustainable, long-term top line and bottom line growth for the nondiscretionary parts and solutions that move our world. I'll now turn the call over to David to review our results in greater detail..

Thank you, Selwyn, and good morning, everyone. I would like to encourage everyone to read the earnings press release filed as an 8-K earlier today. It contains more detailed explanations of our results, including our 9-month results. Here on this call, I will focus on our fiscal third quarter.

So let's begin with our record reported net sales, which increased 32% to $161.8 million from $122.6 million in the year ago period. Reported gross profit was $32.6 million, an increase of 34.4% from $24.2 million in the year ago period. Reported gross profit was impacted by noncash items as well as cash items.

Let me provide details for each, and then I will detail out the financial impacts on each line -- an additional line item so you can accurately understand and compare the underlying fundamentals between periods and appreciate the reasons for our optimism moving forward.

The noncash items reflect core and finished goods premium amortization, and revaluation of cores on customer shelves. The total for noncash items in the quarter was approximately $4 million. A more detailed explanation of core accounting is available on our website, and I would encourage anyone with questions about this topic to review the video.

In terms of the cash items, let's begin with Malaysia. The shutdown of the country by the government due to COVID, and then the slow reopening impacted our facility and our regional network of key suppliers, as Selwyn mentioned.

In response, we quickly moved to outsource certain products in China, but these products were unfortunately subject to 25% tariffs. These transitory disruptions in the supply chain as well as timing of shipments are being eliminated as we ramp back up in Malaysia, and our suppliers recover.

As a reminder, one of the benefits of production in Malaysia is low tariff. A return to production there results in a fairly immediate relief on tariffs. Next, we incurred higher freight costs that were in excess of the customer freight surcharges that we already implemented.

We have taken swift action to implement even higher freight surcharges and further price increases to mitigate this impact going forward. These are expected to be in effect in the fiscal first quarter ending June 30, 2022, and should offset the higher freight cost based on current rates.

Freight costs have stabilized for the time being, though we continue to monitor the situation closely. The total cash impact of these transitory cost pressures related to supply chain disruptions on gross profit was $4.3 million. A summary of each can be found in Exhibit 3 of this morning's earnings press release.

Before moving on, I should note that there were no ramp-up and transition expenses related to our Mexico expansion this quarter compared with $4.2 million in the prior year period and from approximately $1 million in the preceding quarter. We are pleased that brake caliper production is increasing nicely.

In addition to the noncash items and the impact of transitory cost pressures related to supply chain destruction, as you would expect, gross profit was further pressured by inflationary costs related to raw materials and supplies and offshore wage inflation.

The freight surcharges and further price increases that I mentioned a moment ago will help offset these pressures. Even in this inflationary environment, reported gross profit as a percentage of net sales was 20.1% and up from 19.8% a year earlier.

Reported gross margin was impacted by 250 basis points from the previously mentioned noncash items as well as 270 basis points from the previously mentioned cash items from the transitory cost pressures related to supply chain disruptions. Moving on to reported operating expenses.

They were $23.9 million compared with $8.3 million for the prior year period. The increase is primarily due to a noncash gain of $12.5 million in the prior period for the mark-to-market foreign exchange impact of lease liabilities and forward contracts. I should note that the noncash foreign exchange impact was a $385,000 loss for the current quarter.

The remaining $2.7 million increase was primarily due to increased share-based compensation, commissions and marketing and advertising expenses. Reported net income was $3.1 million or $0.16 per diluted share.

I should emphasize that results were impacted items that totaled $8.5 million or $0.44 per diluted share, reflecting noncash items totaling $4.8 million or $0.25 per diluted share and transitory cost pressures related to supply chain disruptions totaling $3.7 million or $0.19 per diluted share.

I should note that reported net income reflects $3.9 million in interest expense compared with $4.1 million for last year. primarily due to lower interest rates on our accounts receivable discount programs as well as $1.6 million in income tax expense compared with $3.4 million in the prior year period.

Reported net income in the quarter compares with net income of $8.5 million or $0.44 per diluted share in the year ago period. Results for the prior period were favorably impacted by a total of $1.7 million or $0.09 per diluted share.

These include the favorable impact of noncash items totaling $6.1 million or $0.31 per diluted share and cash items totaling $4.3 million or $0.22 per diluted share related to breakout costs and other product relocation expenses related to the expansion in Mexico and COVID-related expenses. EBITDA was $11.9 million.

EBITDA was impacted by $6.4 million of noncash items as well as $4.9 million in cash items due to the transitory cost pressures related to supply chain disruptions.

EBITDA was $18.8 million in the prior year period, favorably impacted by $8.1 million of noncash items, primarily related to foreign exchange items and unfavorably impacted by $5.7 million of cash expenses which were primarily driven by the company's expansion of its new brake caliper product line.

As Selwyn highlighted earlier, we are driving significant growth in brake calipers and production is increasing. Now we'll move on to cash flow and key corporate items. Net cash provided by operating activities during the third quarter was $2.2 million versus $33.2 million in the prior year period.

This reflects working capital requirements to support record sales growth and inventory increases for anticipated business growth as well as a proactive strategy to address potential supply chain disruptions due to the Chinese New Year and corporate-related issues.

We believe that these investments in our business will not only mitigate risk, but we'll also spread further growth for the company on a year-over-year basis. Our return on invested capital on a pretax basis at the end of the calendar year was 23.1% compared with 18% a year earlier.

We are continuing to realize the benefits of expanding our Mexican operations and the launch of our new brake categories, with expectations of increased returns from both the new and existing product lines, as the benefits of our strategic expansion are more fully realized.

During the quarter, we repurchased approximately 106,000 shares of the company's common stock under our share repurchase program for approximately $1.9 million. As of the end of the quarter, we have utilized $18.7 million of the $37 million common stock authorization.

Lastly, our net debt at the end of the quarter was approximately $122.9 million, while total cash and availability on the revolving credit facility was approximately $108 million.

A further explanation of the reconciliation of items that impacted results and non-GAAP financial measures, please refer to Exhibits 1 to 5 in this morning's earnings press release. I would now like to open the line for questions..

. We'll take our first question from Matt Koranda with ROTH Capital..

Can we just start off with a breakdown -- we just start off with a breakdown of rotating electrical versus brake products, we'll have another from you, David, maybe? And then just maybe Selwyn, if you could touch on if there were any update orders or any inventory build in the quarter from your customers that you think was sort of short term in nature? Or does this feel sort of representative of the underlying demand in the industry at the moment?.

Okay. This is David. I'll start. So for the quarter, rotating electrical was 68% of sales. Wheel hub products were 13%, brake-related products were 15% and other products were 4%..

Excellent. And Selwyn....

Yes. So I think, first of all, update orders normally in the fourth quarter. So none of that, I think this is indicative of the sales trends we're seeing in the aftermarket, increase in used car population, increase in miles driven, in particular in our target market.

So -- and I think just historically, we're seeing more costs come into their prime replacement age. I think I've talked about that in the past. So I think the fundamentals of our business are strong. I do think that we've built significant inventory for Chinese New Year. Our customers have not really done that in my opinion.

I don't think they're -- I think they are experiencing strong revenue as well. I mean so we'll wait to see what the results show. But I just think it's the fundamentals. I mean, it's a strong time for us, Matt..

Okay. Good to hear. On the pricing front, can you guys just be super explicit about sort of the rounds of price increases that you put through. I think there were supposed to be 2 rounds as of the last quarter when you guys were kind of talking through the impacts and that second round was supposed to go into effect and fully impact the fourth quarter.

So have we fully priced for all of that and then the additional -- the price that you guys have discussed in the prepared remarks and in the release, we're referring to incremental pricing action over and above those 2 rounds? And then maybe just talk more explicitly about the sort of the timing and the magnitude of that, if that is the case, sort of how much is split out between surcharge versus sort of ongoing price take?.

Yes. Very difficult for us to give you exact price increases, Matt. But yes, there is a third round that we've implemented, and that will be fully captured in the first quarter of our next fiscal year. And at that point, I believe, assuming status quo, which who knows what status quo is anymore.

These adjustments will fall away, and that will neutralize the effect of the inflationary impacts and the numbers, both for freight and for some -- and for inflation.

And I think the second thing that's important to note is what we did, and this is not directly related to your question, but I thought I'd add it is we got very aggressive on an inventory build for 2 reasons. We want to -- we ourselves wanted to get ahead of the Chinese New Year. Chinese New Year came in later this year. It's just happening now.

And this is a big time where we expect in the first quarter as we come out into the spring, that there's going to be a significant amount of inventory build getting ready for the summer months. And so we believe we have excess inventory, and we believe we're in a good position to manage the demand.

So we're excited about our outlook as we come into the new fiscal year..

Okay. Great. Very helpful Selwyn. And I just wanted to cover the sort of the supply chain buckets, if you could, in more detail. I know you guys broke out $4.9 million in sort of headwinds from supply chain.

But maybe you could just put a finer point on how much of that is coming from elevated inbound freight versus sort of outsourcing anything in that bucket from elevated raw material costs that you've broken out as well -- it would be helpful just to get a sense for what all is going into that bucket and that....

So with the price increases we mentioned that those numbers will definitely be decreasing in subsequent quarters. The remaining balance, a big part of that is still going to be the wage and the bonuses that are paid to our frontline workers in our Mexican facilities. So that is also coming down.

So overall, in the subsequent quarters, that number will be coming down. That was $6 million at the September quarter, down to $4.9 million, and it will continue to come down..

And next, we'll go to Scott Stember with CL King..

The issues in Malaysia, which sounds like will not be a problem going forward. Were there any related disruption costs in that $4.9 million that you have listed in Exhibit 1..

Yes, a little over $1 million related to those tariffs. That's included in the $4.9 million. And those tariffs, as we mentioned in our prepared remarks, so we were outsourcing from with 25% tariffs.

So as Malaysia is now back up and running and our key suppliers in the region are recovering, we will no longer be reducing those higher tariffs from China..

Okay. So the first couple of rounds of price increases that went through, I'm just trying to match things up.

I mean, was that to cover raw materials to cover Malaysian tariffs and to cover freight and surcharges like an all-inclusive price increase? Or is this last price increase going through -- going to be for something else?.

Yes. The third round is going to cover those inflationary costs, as Selwyn mentioned, primarily. So the tariff -- they go away because we're no longer outsourcing from higher tariff countries.

But the third round is primarily focused on inflationary costs and a little bit of freight and all those will contribute to offsetting these items, we've identified that impacted the quarter due to supply chain disruptions. And by that first quarter, we'll definitely see significantly reduced items that impacted the results..

All right. And just last question. The first 2 rounds of price increases, I'm just trying to frame it out. Just -- I know you guys -- it's hard to take how much it actually was. But the last few quarters, there's been multiples of millions of dollars that have been on this Exhibit 1 when we try to come up with an adjusted number.

I'm just trying to get a sense of the level of price increases, offsetting price increases, which have been going through on the line being back down. Just trying to get a sense of how big these price increases are so far and just the magnitude of the third one..

Yes. I think the way just to summarize all 3 of them, if you look at what we called out as excess expenses, the price increases will cover all of those expenses. So starting in the first quarter of the new fiscal year, we don't expect to, again, assuming status quo, we don't expect to have to even call these out.

These numbers are -- it's a transitory expense that will disappear or be offset by these price increases. So if you look at those adjustments, that's a pretty good indicator of everything that's being passed through..

Next, we'll go to Brian Nagel with Oppenheimer..

So I guess I want to focus just a little bigger picture on with my questions, but -- Selwyn going back to your kind of your opening in your prepared comments in talking about the 2 issues. I mean 1 is what seems to be a very healthy demand environment. And then two, on the supply chain side.

So how -- with regard to demand and as you called out the dynamic of consumers now holding on to cars longer.

I guess, as you're watching your business and you're watching this dynamic take hold, is it getting better? Or is it just holding better? And how do you view the sustainability? I mean do you think this is really a structural shift that's happening within this space? Or is this more a function of just ongoing disruptions, whether it be chips or whatever.

And then a similar type question with regard -- I'm sorry, putting this all to one, but with supply chain, I mean are you starting to see any real significant easing in the supply chain constraints? And at what point with NPA network? Should we see that taking hold?.

Let me start with demand and then I'll move to supply chain, if that's okay. So on the demand side, we've been tracking the statistics for a long period of time, and forget about COVID for a second.

But as you look at the chart and you look at the aging of the vehicles, the amount of vehicles that are entering or have entered into the prime replacement age has gone up fairly significantly. And that was as a result of the very low new cost sales 7, 8, 9, 10 years ago.

And -- so as these cars accumulate in these greater than 11-year old range, which is what's happening, more and more cars are accumulating in an older age, which contributes to the high average age, replacement rates go up exponentially for those parts.

I think we're certainly benefiting in that new car sales are low, but we would actually prefer new car sales to be high as well and just expand the car population, enable, used car prices are pretty high. So people who have less economic means, have a more difficult time owning a vehicle.

And so as new car sales come back, which I'm sure they will, I don't anticipate these used cars are going to go off the road. I anticipate we'll have more opportunity for other drivers who have less disposable income right now that can afford it. And used car prices will come down, which means more people will buy them.

And the average age will continue to grow, and I think scrap rates will be lower than new cars coming on the road. So the car population will grow. So I believe demand is sustainable.

I think we've got many years of demand sustainability, whether we can continue to grow -- and again, I'm not sure what -- how you benchmark what the growth rates are in the industry. I'm certainly not one who believes in a perpetual 30% growth being sustainable.

We've had some very good organic growth, and we've also had some market share contributions where we've gained share. We expect organic growth to continue and to remain fairly stable, and we are very optimistic about our market share growth.

And so we laid out a plan a number of years ago to expand capacity and expand our low-cost footprint, and we've completed it now. And as you noticed probably in the numbers, there are no more adjustments for that. And now we focus on ramping into the production capacity that we have.

And -- so I think for NPA, I think we've got a combination of fundamental organic growth within the industry, and we have market share growth. And then the last, but not least is getting -- we have a lot of momentum in the electric vehicle space. And I wouldn't even call electric vehicles, I call it electric mobility.

We're doing a lot of -- we've had a lot of wins. We can't mention customer names, it's grown technology. I mean NASA is an example of that, right? So -- and a lot of wins in -- new automotive wins and new truck wins and all across the board. So I think the fundamental aftermarket will remain solid.

I can't tell you the growth rates, but I think it will remain solid for years to come. I think exponential growth the way we have it is great, but I would caution to be optimistic, but conservative..

That's very helpful.

On the supply chain?.

Sorry, yes, sorry, the supply chain. I didn't interview with aftermarket news fairly recently a few weeks ago and or about a month ago. And in that interview, I said supply chain was getting better. And as you look at things change, I'm not so sure somewhat how wish it, I wouldn't have said it as much, but -- it's up and down.

It depends on the luck of the draw as to what you're getting out of the ports. But I think on a more macro basis, I think the delays are still there. Production constraints are still there from outside suppliers, component constraints continue.

We certainly think that update orders will be pushed out further and managed in a different way by the retailers, so they can manage their labor. So I think you see updates going in slower, but still going in. Development of new part numbers takes longer. So I can't predict it, but I would tell you, Brian, I don't think it's got much better.

I mean I said something different a little bit ago. But I -- as I review and see where -- how things are unfolding, I still think port issues are very real all over the world..

Next, we'll go to Bill Dezellem with Tieton Capital..

Congratulations on another really great top line quarter.

So relative to the sales and marketing expense growth that you experienced, how much of that is new people versus 1 year ago?.

Well, included in the line is commissioned. So with a very solid growth and our sales commissions have increased. We also attended the aftermarket trade show. So that's all part of the December increase. So it's more on trade show and sales versus headcount..

Yes. There's no real head count growth there. It's more just during the COVID times we weren't able obviously, sales growth in commissions is a big driver and AAPEX, which is a big international trade show, which happens on an annual basis in Las Vegas. The prior year, we never attended.

In fact, I have had -- and this year, we attended quite vigorously. So that's the string, really..

That's helpful. And then shifting to inventories. I'd actually like to continue down this path, but from a slightly different angle. So you've talked about increasing inventories aggressively and yet inventories were up more like 20% rather than the 30% that your sales were up.

Was there some degree of intention on this kind of behind the scenes there? Or is that really indicative of supply chain tightness. Maybe I could just ask you to try to reconcile might be a little bit strong, but put those pieces together for us..

I'll do -- I'll give you some insight into it without going through the numbers, and then you can follow up with David on the specific numbers. But -- we saw Chinese New Year coming at a very vulnerable time in the demand cycle for us. Coming into summer is really when our customers and the consumer really starts to make replacements.

We also have good visibility on some significant new business that we'll be adding over the next -- certainly over the next 12 months, but hopefully, on an ongoing basis, but in our planning. So when we came into the quarter, even though we have 32% growth, we were coming in with higher inventories.

And I think what bodes well for us now is twofold is, I think that a lot of the incremental expenditures that we've had because of the supply chain challenges will be mitigated by these surcharges and price increases and then we're in a fairly comfortable position growing into our next year's revenue, which we hope to give guidance at the end of next quarter.

And we think that will help we certainly believe we'll be generating positive cash from operations. And I think we've got some tailwinds in the inventory numbers as well.

So the quarter may be a little bit lower, but we've had a much longer-term outlook probably the last 1.5 years really getting ready for making sure that we were ready to fulfill demand for our customers during the COVID times and then we're also planning for new business that's rolling in..

And I'm actually going to take the bait. You mentioned as part of this answer that you're for new business that you are planning on for the next 12 months. And I believe last quarter on the call, you made reference to a line of sight on a significant amount of new business.

Would you please discuss in as much detail as you can, that new business that you're referring to there?.

Yes. And I think I've alluded in the past to $100 million of opportunity for us. And certainly, that hasn't changed. Although we're not -- at this point, I don't want to -- we're not giving guidance right now and the speed of the ramp-up for all of that will vary. But we hope to give you some good guidance in the next quarter.

So business continues to be strong on an organic basis for us. Business continues to be strong on a market share gain perspective, and the business continues to be strong on an evolving technology basis. So I'm cautiously optimistic, very optimistic actually. It is probably more accurate than cautiously..

All right. I'm going to continue to push on this just a bit more.

So is that $100 million business that you feel has a high probability of becoming revenue? Or is that business that you have won? And now with all the supply chain questions and typical customer ramp process, the unknown factor is really more of the timing of when that $100 million rolls in rather than if you get it..

Well, I think when you look at new business, the only way you can judge or gauge what you're getting is what the historical volumes have been. Of course, you don't know exactly what the demand is going to be in the next 12 months, but that's an indication of a business that we're very confident of, yes.

And I really -- Bill, I know you want to hear everything in much more detail, but it's just very difficult to talk about new business wins at this point..

No worries. I was just giving you the opportunity to say as much as you were comfortable..

Yes. I think the message is -- hopefully it's clear that we're optimistic about our growth, and that will continue on more importantly. And as importantly, we're optimistic about our expense structure coming into being and generating positive cash. And so we're very excited about those developments..

And actually, on that note, I have 2 additional questions.

Number 1 is, when did Malaysia the manufacturing restart up there again, and I'm just trying to gauge the reduction in tariffs and the timing for that? And then secondarily, when would you anticipate the brake caliber efficiencies in Mexico to reach a level of maturity?.

I'll start with the second question, and then I'm going to hand the first question to David. But the brake caliper -- as we get through August, I think you'll see a complete transitional change in the brake caliper business, both from a real efficiency perspective -- and that factory, I mean, it's a state-of-the-art lean manufacturing facility.

We're very excited about the opportunities and capabilities of that facility. But I think every day, we work to make it better and -- and I think in the next 6 to 8 months, it will really -- when you say maximize, I mean there's never -- we never accept maximum. There's always -- we have a philosophy of continuous improvement.

And so hopefully, we'll never stop reaching for more margin. But I think it's 6 to 8 months where you'll see material effects on the numbers..

And this is David. On Malaysia, at the beginning of the quarter, definitely much lower utilization, but the team out there did a great job of ramping back up. So towards the latter part of the quarter, there was recovery in much better utilization. So we're very excited about that..

So you would have been -- you would have started manufacturing early in the December quarter. So would that be the month of October, but December is when you were really ramped up to more full production.

Is that kind of the correct interpretation?.

Yes..

And it takes time because there lot of constraints on labor and movement around the country, but they're doing great. And obviously, it takes time to get the inventory from Malaysia to the U.S., and in particular, with some of the port delays. So you may see some lingering tariffs because we only expense what we sell on the tariffs.

So you may see some of that linger, but that's as far as an ongoing cash cost as the Malaysia goods come in, you don't have that tariff expense..

There are no further questions at this time. I'll now turn the call back over to Selwyn Joffe for any additional or closing remarks..

Great. Thanks, David. Just our record performance for the quarter and 9 months highlights our continued success. Moving forward, we remain intently focused on realizing the potential of our core hard parts aftermarket business and proactively managing and mitigating the supply chain challenges.

We expect each of our product lines, including our electric vehicle subsidiary to be solid platforms for long-term growth and we see complementary growth opportunities, particularly within brake-related categories. Also, as our new production facilities mature, we will realize increased productivity and efficiencies.

While there are many variables and costs today, we expect this to stabilize. We expect our margins to improve through a combination of more appropriate pricing and the enhanced efficiencies discussed earlier. Overall, we anticipate having far fewer items impacting results.

This, in conjunction with our accelerated revenue growth bodes well for increased earnings and shareholder returns. In closing, I want to thank all our team members for their ongoing commitment and customer-centric focus on service. During these challenging times, we are focused on the safety and well-being of our employees.

And it is a testament of our employees' commitment that more than 93% globally have been vaccinated, helping us mitigate operational risk. I'm extremely proud of our team members and company. And we appreciate your continued support, and thank you again for joining us for the call.

We look forward to speaking with you when we host our fiscal 2022 year-end conference call in June and at investor conferences. Thank you..

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