Executive Summary
MPAA reported fiscal Q3 2025 (quarter ended 2024-12-31) with a record net sales level of $186.2 million, up 8.3% year over year, and a material gross-margin expansion to 24.1% from 17.5% a year ago. The quarter delivered $44.9 million in gross profit, a 49.4% year-over-year increase, underpinned by higher absorption from volume growth and mix shift toward higher-margin, non-discretionary replacement parts (notably brake-related products) as the company scales its newer lines. Operating income reached $17.6 million (9.4% of sales) and EBITDA was $20.4 million (11.0% of revenue), while net income was $2.3 million or $0.11–$0.12 per diluted share. Cash from operations totaled $34.4 million, and net debt declined by approximately $30 million to around $84 million per management commentary, aided by a stock repurchase of 268,130 shares for $2.1 million. Management emphasized margin expansion, working-capital neutralization, and continued leverage of a global footprint to sustain profitability and cash generation into fiscal 2025 and beyond. The company cautioned about non-cash, FX-related impacts from peso leases and forward contracts, and highlighted tariff-related headwinds as a near-term risk. Management guided toward positive annual cash flow and improving profitability driven by volume growth, production efficiencies, and a growing brake-category contribution, with ongoing expansion of diagnostic testing and international opportunities. The earnings call stressed that indicators from the quarter validate a constructive, mid-teens earnings multiple path, supported by strategic initiatives, a diversified product mix, and a disciplined capital-allocation program.
Key Performance Indicators
QoQ: 177.56% | YoY:104.85%
QoQ: 180.00% | YoY:105.00%
Key Insights
Revenue: Q3 2025 $186.176 million, +8.3% YoY; QoQ: -10.57% (Q2 2025 $208.186 million)
Gross Profit: Q3 2025 $44.882 million, +49.4% YoY; Gross Margin: 24.10% (vs 17.5% YoY)
Operating Income: $17.582 million, margin 9.44%
EBITDA: $20.373 million, margin 10.93%
Net Income: $2.291 million, EPS (diluted) $0.11
Cash Flow: Operating cash flow $34.356 million; Free cash flow ~$33.688 million
Balance Sheet: Total assets $949.508 million; Total liabilities $686.837 million; Total stockholders’ equity ...
Financial Highlights
Revenue: Q3 2025 $186.176 million, +8.3% YoY; QoQ: -10.57% (Q2 2025 $208.186 million)
Gross Profit: Q3 2025 $44.882 million, +49.4% YoY; Gross Margin: 24.10% (vs 17.5% YoY)
Operating Income: $17.582 million, margin 9.44%
EBITDA: $20.373 million, margin 10.93%
Net Income: $2.291 million, EPS (diluted) $0.11
Cash Flow: Operating cash flow $34.356 million; Free cash flow ~$33.688 million
Balance Sheet: Total assets $949.508 million; Total liabilities $686.837 million; Total stockholders’ equity $262.671 million; Cash $10.810 million; Total debt $206.169 million; Net debt (balance sheet) ≈ $195 million; Current ratio 1.447; Quick ratio 0.394; Inventory $367.028 million; Accounts receivable $104.253 million; Working capital change in Q3: +$16.166 million; Capex $(669k)
Capital Allocation: Repurchased 268,130 shares for $2.1 million; Net debt reduction ~ $30.3 million in Q3; Cash and availability approx. $138.8 million
Nine-Months: Net sales $564.2 million; Gross profit $115.3 million; Gross margin 20.4%; Net loss $18.7 million; EBITDA $34.0 million; Cash flow from operations $34.0 million
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
186.18M |
8.33% |
-10.57% |
| Gross Profit |
44.88M |
49.39% |
8.73% |
| Operating Income |
17.58M |
84.60% |
40.42% |
| Net Income |
2.29M |
104.85% |
177.56% |
| EPS |
0.12 |
105.00% |
180.00% |
Key Financial Ratios
operatingProfitMargin
9.44%
operatingCashFlowPerShare
$1.74
freeCashFlowPerShare
$1.7
Management Commentary
- Strategy and margins: Selwyn Joffe highlighted record sales, gross-margin improvement, and solid cash flow, noting margin-expansion and working-capital neutralization as key profit drivers. He emphasized non-cash FX headwinds from peso lease liabilities and forward contracts and described ongoing efforts to minimize these non-cash items. Quote: “We are certainly encouraged by our record sales, gross margin improvement, and solid cash flow generation for the fiscal 2025 third quarter… initiatives to enhance profitability are gaining traction.”
- Margin drivers and capacity: Joffe cited production efficiencies, scale benefits, and the relocation of Torrance operations to Mexico as factors underpinning gross-margin accretion. He also noted the brake-category ramp and capacity expansion as ongoing tailwinds for margin improvement.
- Cash use and shareholder value: Selwyn highlighted net debt reduction and a stock repurchase program (268,130 shares at $7.82) as part of capital-allocation focus to enhance shareholder value. Quote: “we repurchased 268,130 shares or $2.1 million at an average price of $7.82 under our current reauthorized repurchase authorization program.”
- Tariffs and FX risk: Management discussed tariff surcharges on Chinese goods and potential offsets via surcharges, as well as efforts to fund Mexican operations in pesos to reduce FX exposure. CFO David Lee explained the impact of non-cash items (e.g., $3.4 million gross margin impact from non-cash items) and forward-contract remeasurements totaling ~$3.5 million in Q3. He also noted that lower interest rates contributed to a decline in interest expense.
- Growth opportunities: Near-term initiatives include expanding diagnostic testing (JBT bench-top tests targeting $100 million milestone), strengthening brake-related product lines (calipers, pads, rotors), and expanding non-North American opportunities. Management reiterated a strategy to neutralize working capital and to scale across multiple platforms, including agriculture, class A trucks, refrigeration, construction, and transit/motor coach segments.
"We are certainly encouraged by our record sales, gross margin improvement, and solid cash flow generation for the fiscal 2025 third quarter."
— Selwyn Joffe, Chairman, President and Chief Executive Officer
"We repurchased 268,130 shares or $2.1 million at an average price of $7.82 under our current reauthorized repurchase authorization program."
— Selwyn Joffe, Chairman, President and Chief Executive Officer
Forward Guidance
- Outlook: Management projects continued improvement in operating profit and gross margin on a year-over-year basis with positive cash flow for fiscal 2025, supported by organic growth, efficiency initiatives, and a more efficient global footprint.
- Specific targets: $100 million milestone for the diagnostic equipment line remains a focal point, with additional service revenue expected as more testers are deployed (repairs, software, updates). The brake-category ramp is expected to contribute meaningfully to margin accretion as production scales and volumes grow.
- Tariffs and currency: Management plans to implement customer surcharges to offset tariffs, and to reduce exposure to peso lease remeasurements by funding Mexico operations with pesos from local sales. Investors should monitor tariff developments, FX headwinds, and the pace of brake-category expansion as primary drivers of profitability.
- Key factors to monitor: (1) progression toward the diagnostic equipment milestone and services revenue growth; (2) cadence of brake-caliper and brake-component rollout and margin absorption; (3) trajectory of gross margin expansion versus ongoing FX and non-cash items; (4) working-capital neutralization progress; (5) debt-reduction dynamics and resulting interest expense sensitivity; (6) revenue sustainability given seasonality and channel mix (retail, warehouse distributors, and OEM aftermarket programs).