Q4 2023 Motorcar Parts of America Inc Earnings Call
Participants
David Lee; CFO; Motorcar Parts of America, Inc.
Gary S. Maier; VP of Corporate Communications and IR; Motorcar Parts of America, Inc.
Selwyn H. Joffe; Chairman, President & CEO; Motorcar Parts of America, Inc.
Jeffrey Bronchick; Principal & Portfolio Manager; Cove Street Capital, LLC
William J. Dezellem; President, CIO & Chief Compliance Officer; Tieton Capital Management, LLC
Presentation
Operator
Good morning, and welcome to the Motorcar Parts of America Fiscal 2023 and Fourth Quarter and Year-End Conference Call. (Operator Instructions)
As a reminder, this conference call is being recorded.
I would now like to turn the call over to Gary Maier, Vice President of Communications and Investor Relations. Thank you. Please go ahead.
Gary S. Maier
Thank you, Julian. Thanks, everyone, for joining us. Before we begin and I turn the call over to Selwyn Joffe, Chairman, President and Chief Executive Officer; and David Lee, our 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 Motorcar Parts of America and are subject to change based upon various factors.
In particular, expectations about future, anticipate or 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 company's various filings with the Securities and Exchange Commission.
With that said, I would like to begin the call and turn it over to Selwyn.
Selwyn H. Joffe
Thank you, Gary. I appreciate everyone joining us today. We achieved record sales levels for the fourth quarter and fiscal year, reflecting the resumption of more normalized ordering patterns by certain customers as well as continuing favorable industry demand for our nondiscretionary automotive aftermarket parts. The outlook for our product demand is positive as we enter our new fiscal year. Equally important, I must recognize the contributions of all of our team members who are focused every day on providing the highest level of service to our customers. With regard to gross margins, we expect improvement as fiscal 2024 evolves as sales and production volume increases, we expect incremental benefit from increased overhead absorption. Due to the increased demand for our products and the easing of our inventory reduction initiatives, we are starting to increase our production levels.
In addition, we will realize the full benefit of price increases that have already been approved, which will rollout throughout this fiscal year and enhance our gross margins. We anticipate benefits from order volume improvement. Operating efficiencies and cost reduction initiatives that we continue to implement across the entire organization.
These initiatives include an ongoing company-wide strategic analysis of opportunities to realign our resources and cost structure to enhance profitability and cash flow, both key areas of particular focus for our team and both in fiscal 2024. High interest rates continue to have a significant impact on profitability, primarily due to rates related to long-established customer supply chain finance programs. Fortunately, we have made progress in getting relief from our customers, and we expect to realize benefits as fiscal 2024 evolves.
We are a major supplier of critical nondiscretionary automotive aftermarket parts, and we are working with our customers to address the sharply high interest rate environment, which impacts both MPA and our customers as well as all companies doing business with the leading automotive retailers. It is an industry challenge that requires practical solutions and further action.
Now let me address our outlook. As stated in our news release this morning, we expect sales for fiscal 2024 to be between $720 million and $740 million, representing between 5.4% and 8.3% year-over-year growth, respectively. We expect to see margin accretion from efficiencies related to the higher volume and cost cutting initiative, as I noted earlier in my remarks.
With respect to cash flow, our expectation is to continue to make progress to generate cash. Operating income is expected to be between $60 million and $65 million, before the noncash foreign exchange impact of lease liabilities and forward contracts, the noncash impact of revaluation [cause] on customer shelves and supply chain disruptions. The company estimates other noncash items will be approximately $16 million, including core finished goods premium amortization and share-based compensation and cash expenses anticipated to be approximately $2 million for special EV-related research and development expenses impacting operating income. The company estimates depreciation and amortization will be approximately $12 million.
In summary, operating income before the impact of the noncash and cash items, and before depreciation and amortization, as previously mentioned, is expected to be between $90 million and $95 million. In short, it is a tough priority in fiscal 2024 to enhance our gross margins and cash flow. Our multiyear strategic initiatives and favorable industry dynamics bode well for the company. And we are extremely well positioned for sustainable top and bottom line growth in our hard parts businesses as well as testing solutions.
As you know, at the end of the fiscal year, we announced a $32 million strategic convertible note investment to enhance our liquidity and capital resources at a pivotal point in the company's evolution. This strategic investment complements management's ongoing goals and objectives, while enhancing the company's working capital to support building sustainable shareholder value. We not only value the investment, but also the participation of Bison's co-founder. We remain diligently focused on achieving our near and long-term financial targets.
Now let me expand a bit further and discuss the other drivers to support our ability to achieve our longer-term financial targets and why we are enthusiastic about our market position and the opportunities moving forward. We experienced meaningful traction in fiscal 2023 with customers and consumers since the launch of our brake related product lines, with operating efficiency improvements continuing as volume increases and with fixed cost absorption.
We are on track to exceed our previously stated goal of achieving $300 million in annual break related product sales over a several year period since their launch. We are continuing to expand sales in Mexico with multiple product lines as our customers experienced increased demand for aftermarket parts, which currently includes rotating electrical, wheel hubs, break boosters and master cylinders.
We are receiving increasing interest in orders for our test solutions and diagnostic equipment, which includes our benchtop testers for alternators and starters from major retailers and major global automotive, aerospace and research institutions for EV mobility product development and design and their related services. We are returning inventory levels to more normalized levels following a strategic buildup to meet demand during recent global supply chain challenges, notwithstanding certain brake related inventory product requirements. These efforts throughout fiscal 2024 will greatly enable us to enhance our cash flow targets.
In short, we continue to be well positioned to address both the internal combustion engine market, and the emerging electrical vehicle market with product functionality and applications across both markets. Industry data continues to support our view that strong demand for internal combustion engine applications and our broad line of nondiscretionary aftermarket parts will be here for decades, notwithstanding electric vehicle growth, which still represents a small percentage of the overall [car part].
Despite the global headwinds during the past few years, we in many respects have emerged stronger and better positioned to capitalize on our strengths.
I will now turn the call over to David to review our results in greater detail.
David Lee
Thank you, Selwyn, and good morning, everyone. I encourage everyone to read the earnings press release issued this morning as well as the 10-K that will be filed. Let me now provide a review of our fiscal fourth quarter and 12-month financial results. Net sales for the fiscal '23 fourth quarter increased 18.8% to a record $194.7 million from $163.9 million in the prior year.
Fiscal fourth quarter results benefited from increasing product demand for the spring and summer seasons and recently implemented price increases. Gross profit for the fiscal '23 fourth quarter increased by 40.3% to $36.2 million compared with $25.8 million a year earlier. Gross profit for the quarter was impacted by noncash items as well as cash items.
Let me provide detail to each, and then I'll provide further details on the impact on each additional line item, so that you can further understand the underlying fundamentals between periods and the opportunities to enhance profitability. The noncash items reflect core and finished good premium amortization and revaluation of cores on customer shelves, which are unique to certain of our products and required by GAAP.
The total for these noncash items in the quarter was approximately $3.6 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. We also incurred transitory supply chain disruption costs of $2.9 million as referenced in Exhibit 3 of this morning's earnings press release.
Fourth quarter gross profit as a percentage of net sales was 18.6% compared with 15.7% a year earlier. Gross margin was impacted by 1.9% from the previously mentioned noncash items as well as 0.5% from the previously mentioned cash items, partially offset by employee retention credit. While the global supply chain situation is improving, we are still experiencing challenges.
In summary, in addition to the noncash and cash items explained previously, gross margin for the fiscal '24 (sic) ['23] fourth quarter compared with the prior year was impacted by inflationary costs not yet covered by price increases, higher per unit costs resulting from less absorption of overhead costs as we manage our inventory levels, and changes in product mix.
Gross margin improvement is expected to be enhanced as the full benefit of certain price increases realized and with higher sales volumes in fiscal '24. Operating expenses were down $8.6 million for the quarter to $12.4 million from $21 million in the prior year period. This includes a noncash gain of $6.7 million for the foreign exchange impact of lease liabilities and forward contracts compared with the prior year noncash gain of $3.4 million.
The remaining $5.3 million of operating expense decreases included cost reduction initiatives and approximately $3.1 million benefit from the employee retention credit. Fiscal fourth quarter results benefited from a $5.1 million employee retention credit. The ERC was reimbursement for prior incurred expenses during the COVID-19 pandemic. Subsequent to the pandemic, cost reduction initiatives related to employee-related expenses were implemented, along with other ongoing strategic opportunities to reduce costs, resulting in approximately $5 million annual run rate expense reductions going forward.
We reported net income of $1.5 million or $0.07 per diluted share. As detailed in Exhibit 1 of this morning's earnings press release, results reflect the favorable impact of noncash items totaling $1.5 million or $0.07 per diluted share. Cash items that benefited results, including an employee retention credit, partially offset by transitory costs related to supply chain disruptions, totaled $922,000 or $0.05 per diluted share.
In addition to the above cash, noncash and cash items, as previously mentioned in the gross margin discussion, results for the quarter were impacted by inflationary costs, not yet covered by price increases, higher per unit costs resulting from less absorption of overhead costs as we manage our inventory levels and changes in product mix. Results are expected to be enhanced moving forward as the full benefit of certain price increases is realized and with higher sales volumes in fiscal '24.
I should note that we have implemented cost reduction initiatives throughout the company, including travel, outside services, labor costs and overall cost-saving opportunities, which are expected to further enhance profitability. Additionally, results for the fiscal fourth quarter was impacted by $7.8 million or $0.30 per diluted share of higher interest expenses, primarily due to higher market interest rates, mostly related to customer vendor financing programs representing $4.9 million of the increase.
Interest expense was $11.9 million compared with $4 million for last year. Of this rise in interest expense, approximately 80% resulted from higher market interest rates. I should further emphasize that the large interest expense incurred in the fourth quarter was primarily driven by a sharp rise in interest rates of 4.2 percentage points compared with the prior year for the accounts receivable discount program offered by our customers.
This increased almost triple the discount rate the company paid in interest expense in the prior period. As a critical supplier of nondiscretionary automotive parts, our customers appreciate the challenges. The company expects to realize meaningful annualized price increases, which will contribute to net income enhancement. We expect that we will more than cover the fiscal '23 increase in AR discount interest expense of $17 million. Fiscal '23 total interest expense was approximately 5.8% of net sales. We expect fiscal '24 total expense to be approximately 7% of net sales including approximately $3.2 million noncash PIK interest, assuming interest rates remain relatively stable.
Income tax expense was $10.4 million compared with $1 million for the period a year ago. I should mention that the effective tax rate for fiscal '23 was affected in part due to the inability to recognize the benefit of losses at specific foreign jurisdictions. However, we expect these losses will be utilized against future profits, which will benefit future tax rates. Net loss was $322,000 or $0.02 per share in the year ago period.
Results a year earlier were impacted by noncash items totaling $1.9 million or $0.10 per share and cash items totaling $3.2 million or $0.17 per share, primarily transitory costs related to supply chain disruptions. EBITDA for the fourth quarter was $26.9 million. EBITDA was favorably impacted by $1.9 million of noncash items and $1.2 million in cash items. An employee retention credit, partially offset by transitory costs related to supply chain disruptions.
EBITDA before the impact of noncash and cash items mentioned above, was $23.7 million for the fourth quarter. In addition to the above noncash and cash items, EBITDA for the quarter was hindered by inflationary costs not yet covered by price increases, higher per unit costs resulting from less absorption of overhead costs as we manage our inventory levels and changes in product mix, as previously mentioned.
In summary, further EBITDA improvement in fiscal '24 is expected as the full benefit of certain price increases realized and with higher sales volume in addition to cost reduction initiatives. EBITDA for the prior year fourth quarter was $8 million. EBITDA year ago was impacted by $2.5 million in noncash items as well as $4.3 million of cash expenses, primarily transitory costs related to supply chain disruptions, EBITDA before the impact of noncash and cash items mentioned above, was $14.8 million for the prior year fourth quarter.
Now let me discuss the 12-month results. Net sales for fiscal '23 increased 5% to a record $683.1 million from $650.3 million in the prior year. Prior year net sales was positively impacted by $13.3 million in core revenue due to a realignment of inventory at customer distribution centers with sales benefits evolving as product mix changes. Gross profit for fiscal '23 was $114 million compared with $117.9 million a year earlier. Gross profit as a percentage of net sales for fiscal '23 was 16.7% compared with 18.1% a year earlier. Gross margin for fiscal '23 was impacted by 2.3% of noncash items and 1.4% primarily by transitory supply chain disruptions as detailed in Exhibit 4 in this morning's earnings press release.
In addition to the noncash and cash items just mentioned, gross margin for fiscal '23 was impacted by various items discussed previously for the quarter. We expect gross margin improvement to be enhanced with the full benefit of certain price increases and with higher sales volumes, as I noted in my previous comments for the quarter. Net loss for fiscal '23 was $4.2 million or $0.22 per share compared with net income of $7.4 million or $0.38 per diluted share a year ago.
Results were impacted by noncash items totaling $8.2 million or $0.42 per share and cash items totaling $8.5 million or $0.44 per share, primarily transitory costs related to supply chain disruptions as detailed in Exhibit 2. In addition to the above items, results for fiscal '23 were impacted by various items discussed previously. Results are expected to be enhanced as various initiatives are realized, as I discussed earlier, concerning price increases and higher sales volume. EBITDA for fiscal '23 was $48.9 million, EBITDA was impacted by $10.9 million of noncash items as well as -- as well as $11.4 million in cash items. EBITDA before the impact of noncash and cash items mentioned above, was $71.2 million for the current period.
In addition to the above items, EBITDA for fiscal '23 was impacted by various items as referenced previously for the quarter.
In summary, as I discussed earlier for the quarter, we expect EBITDA improvement as the full benefit of certain price increases and higher sales volumes are realized along with cost reduction initiatives. EBITDA for the prior fiscal year '22 was $41.6 million. EBITDA was impacted by $22.3 million of noncash items as well as $18.5 million in cash items. EBITDA before the impact of noncash and cash items mentioned above was $82.5 million.
Now we will move on to cash flow and key corporate items. Net cash used in operating activities during the fiscal fourth quarter was $326,000 versus $22.7 million cash used in operating activities in the prior year. I should mention the employee retention credit was cash neutral for the fourth quarter. We expect to generate an increase in operating profit on a year-over-year basis for fiscal '24, supported by organic growth from customer demand, price increases and operating efficiencies from our now completed footprint expansion and generate positive cash flow for fiscal '24.
In addition to our goal of generating increased operating profit, we are diligently focused on opportunities to neutralize working capital growth, including customer product demand planning, enhanced inventory management and improving vendor payment terms. Our return on invested capital on a pretax basis at March 31, '23, was 15.7% compared with 19% a year earlier. Our investments will bear fruit, and we are gratified by the ongoing success of our expanded operations in Mexico and the growth momentum of our emerging brake categories along with expectations of increasing financial performance for both new and existing product lines.
Our net debt at the end of the quarter was approximately $177.5 million, while total cash and availability on the revolving credit facility was approximately $98.6 million after certain contractual adjustments. Lastly, as Selwyn mentioned, we entered into a note purchase investment and the sale of $32 million in aggregate principal amount of convertible notes due in 2029 at a conversion price of $15 per share. The company is able to redeem the notes after 3 years. Additional information regarding the terms and condition of the investment is available in the related Form 8-K filed on March 31, '23 and in the press release.
For further explanation on the reconciliation of items that impact results and non-GAAP financial measures, please refer to Exhibits 1 through 5 in this morning's earnings press release.
I would now like to open the line for questions.
Question and Answer Session
Operator
(Operator Instructions) Our first question comes from Bill Dezellem from Tieton Capital.
William J. Dezellem
A couple of questions to begin with here. Relative to your commentary about the cost reductions that have taken place since the pandemic ended presumably that is -- those are cost reductions that have been implemented since early May. And if that is correct, would you talk in more detail about those and how they came about and if there's any more color surrounding the $5 million annualized benefit, please?
David Lee
Yes, this is David. So the largest part of that reduction is going to be reduced labor and related costs. So as part of efficiencies and including expanding gross margins, we reduced payroll and related expenses as well as other costs as well as I mentioned in my prepared remarks, outside services, travel and et cetera, throughout the organization.
Selwyn H. Joffe
Yes. I think also the second part of the question is, is this $5 million run rate. I mean we have an additional $5 million that has not been reflected yet in the numbers for the future. So while we adjusted out the employee retention credit, we do expect that $5 million reflects -- that $5 million gain reflects the annualized run rate going forward.
David Lee
That's right.
William J. Dezellem
Do you see additional cost reduction opportunities similar to what you have implemented here in May and June?
Selwyn H. Joffe
Well, I think that's what I'm referring to when I say there's an additional $5 million of cost reductions on an annualized basis going forward. So yes, I mean, we do see some of that opportunity.
William J. Dezellem
And then let's talk a little bit about the supply chain if you will, please. What product lines are still impacted by the supply chain issues? And we've heard a number of companies reference that the supply chain is largely back to normal. And so what are you experiencing that is different than those companies that are feeling like it's more normal again?
Selwyn H. Joffe
Yes. So I would say that I echo that, that I think that supply chain is coming back to normal. We've had a -- we still have a few headwinds. I mean we've still got the leftover of distributing Chinese tariff wheel hubs that we had to win when Malaysia got shut down. I mean there's delays in shipping. We're seeing an interesting phenomenon where freight is actually no longer in excess demand. In fact, there's overcapacity, and we're seeing delays in shipments coming in because of carriers making unplanned stops to fill up their capacity. So that's affecting our ability to get to the sales levels that we normally would have been able to do we see that significant reduction included in supply chain expenses though. I mean, so we do see an end to this. the semiconductors on the electric vehicle side has been a challenge, power supplies and the electric vehicle and diagnostics side has been a challenge, but appears to be getting better as we -- day by day.
William J. Dezellem
And so my interpretation with your comments relative to the Chinese tariffs, is it you still have product in inventory that has the Chinese tariffs on it, but you will soon be working your way or finished working your way through that, and we'll be back to the Malaysian product that will then be lower cost. And at that point, the supply chain cost, which I think were roughly $3 million this quarter will be significantly reduced, if not essentially eliminated.
Selwyn H. Joffe
Correct.
William J. Dezellem
And what quarter are you currently anticipating that you will finish working your way through that inventory?
Selwyn H. Joffe
I think we're substantially through it now in this quarter.
William J. Dezellem
Great. Congratulations on that. And then would you please talk through the price increases that were implemented in the fiscal fourth quarter and then what you have planned here in fiscal '24, and maybe dissect that, whether it's by customer or product line or whether it's across the board increases?
Selwyn H. Joffe
Yes. So all the increases across the board and very difficult, Bill, to get into too much granular detail on that for a number of different reasons, including proprietary information by customer and competitive reasons. But overall, we expect to have over $20 million of price increases recognized in this fiscal year, plus more that will, on an annualized basis, come into effect the following year.
I think for now, as David said, I think it more than covers the interest rate increase in the discount rate. So we expect to start seeing that through this year. And clearly, I think the other side that gross margin story there is that assuming supply demand continues the way it looks right now. we can get our plants back up and running and get back to more regular overhead absorption numbers.
William J. Dezellem
And so maybe that's a great segue into the vendor finance programs and what progress have you made on that front? Or is it really just being addressed through price increases?
Selwyn H. Joffe
Yes. I think all of that is addressed in the price increases between interest and costs and inflationary costs. The price increases get so complicated because we've had so many rounds of them. It's hard to now start breaking down which is for which anymore. But -- but as I said, we're north of $20 million of incremental price increases that will be recognized in this fiscal year and then additional going forward. I think that answers your question. I'm not sure. I'm sorry, -- did I hit everything you asked?
William J. Dezellem
That was and that covers it.
Operator
Our next question comes from Jeff Bronchick from CSC.
Jeffrey Bronchick
Just about new shareholders. A quick question. I don't think you really have to spend 25 minutes reading the press release, which was excellent and detailed, and you can go right to questions, my two cents for next time. But Selwyn, maybe -- you talked about a couple of times bigger changes for the company or I don't know if you used the word historic, but inflection point. What sorts of things are you referring to as far as maybe how the company might be run in the next 5 to 7 years vis-a-vis the past and then you made a reference to in addition to the gentleman with the convertible at the company, like what other -- what help is he doing on the Board to help changes you're referencing.
Selwyn H. Joffe
Okay. So let's break that up, and let's talk about inflection. I think we pre-COVID embarked on pretty significant initiatives to launch a brake category, freight products category. And I think now we're pretty much almost a full line brake supplier. In conjunction with that, we expanded our facilities from 300,000 square feet to 1 million square feet. Added thousands of new employees, added the opportunity to reach what we believe is another $300 million of brake related revenue.
And so as we go through the next couple of years, it's not a matter of searching for new product lines. It's a matter of maturing the existing product lines, leveraging our new facilities into greater operating efficiencies, generating the significant cash flow that we believe that it will come with us enhancing margins in some of the newer product lines as we get more mature and volume increases through these facilities and really just leveraging that opportunity for capacity. I mean, that should enable us we haven't given a finite term, but to move us to over $1 billion in revenue.
I think the other side of it is that the industry is interesting right now on the supply side. I think we're in a great position to take advantage of opportunities that may exist in the inventory in the industry as the supply chain has generally gone through some hardships, and that leverages -- my answer to the second part of your question is is we've had Doug Trussle to the Board. And I think Doug brings with him significant industry knowledge and a group behind him that is able to continuously stay focused on that industry knowledge and keep us abreast from a different perspective, more of a sort of a private equity perspective of market opportunities and pros and cons of different things.
So while I think we've had a very strong and continue to have a very strong diverse forward. I think this strong private equity and industry-related knowledge enables us to really hunker down on really building value. We've, I think, done a good job in a lot of areas but we certainly have not done a good job of building value in our share price. And we want to be focused on delivering results that shareholders can relate to and that will drive our value in the marketplace.
And so I think all of that sort of bodes well for our future. I mean we have spreads now to tackle what we need to tackle. And I believe we've got a very exciting opportunity ahead of us.
Jeffrey Bronchick
What -- so with what is the proper inventory number that you think you can comfortably run to balance the desires of the customer base with your interest in reducing interest expense and creating value for shareholders. Like what do you think that number is it's an indeterminate period going forward?
Selwyn H. Joffe
Yes. So I'm not going to talk about a number, but I will say that I'll give you an inventory turn ratio that I think is much more indicative because we're growing and -- and I think if you look back historically -- well, first of all, before I start talking about that, the number of SKUs that we have to deliver is very significant. We offer over 30,000 SKUs and our fill rate expectations are significant, mostly in the mid-90s and up. And the lead times from our customers are pretty short.
So having said that and being an all makes or model supplier, we think that the historic turn rate of 4 times a year for finished goods inventory is a level that we should be at. And we've been there and that -- when we were there, we had very significant fill rates, industry-leading fill rates for that matter and as a result, had incredible support from our customer base. I think we've dropped that down to 3 and change, and now we're heading back up to these 4 turns. And I think for a near-term goal for us that 4 turns is a realistic one. I mean that doesn't mean it stops there. But I think that's the next level for inventory.
Jeffrey Bronchick
And have you seen -- I mean, what has been -- my last question. Just in general, because in some ways, one could argue the shareholders have supported the desires and needs of your customers for quite some time. What sort of feedback or -- I mean, from either a competitive stance as you raise prices and try to extract inventory back up the customer. What sort of -- what things are different, let's say, today, than maybe 6 or 9 months ago when you were sort of in the opposite mode. How has the industry changed or the reaction to your moves different than maybe your thought.
Selwyn H. Joffe
I don't know if they're different to what I thought I can't really -- my thoughts evolve quickly on us. I think, look, anytime you're looking for price increases with large retailers, and I mean, there's always pushback I think the opportunity to get fairer prices is better today than it was a year ago or 2 years ago. I think that in part depends on really the rationality of our competitors, which I think will have similar challenges with financing, financing the inventory and the payables of our main customers. A lot of it will depend on alternatives. I mean they're driven, obviously, to drive the working -- negative working capital. And a lot of it will depend on their ability to get fair pricing in the marketplace for their products. And and rational competitors, including Chinese -- including the Chinese, which have always been a wild-caught. But look, I think the industry realizes that that the amount of financing being supplied by the supply chain is significant, and that at some point, the consumer has to pay for that. I mean, our customers are not going to pay for it, but they should pass it on. And so hopefully, we get back to a rational equilibrium, which I think we're getting close to.
Operator
We have no further questions in queue. I'd like to turn the call back over to Selwyn Joffe for closing remarks.
Selwyn H. Joffe
Great. And thanks for the great questions. And in summary, notwithstanding the headwinds I discussed this morning, we're excited about our future as I just had mentioned. We've built a solid foundation both to -- both top and bottom line growth from our existing product lines, supported by strong demand for replacement parts and clearly an aging car park in the sort of recessionary environment we're in. We are committed to enhancing cash flow and profitability as our strategic initiatives evolve.
In closing, 1 more time. We have a great -- we have great team members, and I appreciate their dedication to the company and our customers. We appreciate all your continued support, and thank you again for joining us for the call, and we look forward to speaking with you when we host our fiscal 2024 first quarter call in August and at upcoming investor conferences. Thank you.
Operator
This concludes today's conference call. Thank you for your participation. You may now disconnect.
