Good day, ladies and gentlemen. And welcome to the Motorcar Parts of America Fiscal 2019 Second Quarter Results. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today’s conference, Gary Maier, Investor Relations. You may begin.

Thank you. Thank you all for joining us for Motorcar Parts of America’s fiscal 2019 second quarter conference call. Before we begin and I turn the call over so Selwyn Joffe, Chairman, President and Chief Executive Officer; and David Lee, the company’s Chief Financial Officer, let me remind everyone of the Safe Harbor statement included in today’s press release. 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 these forward-looking statements. These forward-looking statements involve significant risks and uncertainties, some of which are beyond the 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, please refer to the various filings with the Securities and Exchange Commission. With that, I’d like to begin the call and turn it over to Selwyn Joffe.

All right. Thank you so much, Gary. I appreciate everyone joining us today. Firstly, we apologize for the delay in filing our financial statements and appreciate your patience. The delay in our filing related to a change in the way the company applies GAAP to the premium paid for -- paid or payable to customers for the core value in the finished good on the customers shelves related to new business. The company previously recorded the full amount of the core buyback premiums as a reduction to revenue at the inception of a new customer relationship. This historical policy was concluded to be a misapplication of GAAP. The company has now revised the application of GAAP, resulting in the amortization of the full amount of the premium costs over a period, typically ranging from six years to eight years. The company has revised its financial statements for each of the three years in the period ended March 31, 2018 and for the three months ended June 30, 2018. As of June 30, 2018, the cumulative error for all periods previously reported was an understatement of reported net income of $2.9 million. This will be reflected in the Form 10-Q for September 30, 2018, which will be filed later today. As of June 30, 2018, the cumulative impact to non-GAAP adjusted net income for all periods previously reported was again an understatement of $1.2 million. Our record sales for the quarter highlight the company’s success and growing position within the $100 billion automotive hard parts aftermarket and we continue to be busy. We are encouraged by exciting strategic and operational initiatives in many aspects of our business to drive significant growth for both the near and long-term in the following areas. We are ramping up production for new business wins. We…

Thank you, Selwyn. To begin I encourage everyone to read the 8-K filed this morning, with respect to our September 30, 2018 earnings press release for more detailed explanations of the result, including reconciliation of GAAP to non-GAAP financial measures and the 10-Q, which will be filed later today. Let me take a moment to review the financial highlights for the fiscal 2019 second quarter, reflecting record sales for both the quarter and six months on a reported and adjusted basis. The results for the quarter and gross margins were impacted by three items totaling $10.3 million as follows. Customer allowances related to new business of $2.2 million consisting of, up-front one-time costs of $1.2 million related to new business, core buyback premium amortization of $1 million, related to new business, core buyback premium amortization related to the refundable premium paid or payable to customers for the core value in finished goods on their shelves in connection with new business. As Selwyn noted earlier, the company previously recorded the full amount of the core buyback premiums as a reduction to revenue at the inception of a new customer relationship. This historical policy was concluded to be a misapplication of GAAP. The company has now revised the application of GAAP, resulting in the amortization of the full amount of the premium costs over a period, typically ranging from six years to eight years. The revaluation for cores on customer shelves resulted in a non-cash write-down of $6.2 million, which does not affect the reimbursable amount for the full value of cores on the customers’ shelves should business with the customer be discontinued and transition costs of $1.8 million associated with the expansion of manufacturing and distribution capacity to support increased demand for the company’s existing product lines and its recently announced…

Thanks, David. We are excited by our expanding low cost global footprint, including our impressive new facilities in Mexico and Malaysia to enhance operating efficiencies that will help support our growth. The foundation is being built to support a much larger company over the next five years. While the company still expects natural fluctuations in quarters as we grow, our record sales and adjusted results for the fiscal second quarter highlight our continued progress in the industry leadership position. We are reaffirming our annual adjusted sales guidance of between 6.5% and 8.5% growth year-over-year, with expectations reaching the higher end. Adjusted gross margin for fiscal 2019 is now estimated to be at the lower end of our guidance of 27% to 30%, primarily due to four factors, slow ramp up of higher margin new business, the effective period costs relating to higher Chinese tariffs, timing of the planned transition of certain operations to our extended Mexican facility and wage inflation in Mexico. Other than the Mexico wage inflation, these margin headwinds are expected to reverse in the next fiscal year, with respect to offshore wage inflation we are evaluating alternative operating efficiencies and pricing strategies. In addition to the company’s recent acquisition of E&M Power, we expect to close another strategic tuck-in acquisition this week, which enhances our existing product line offerings. Let me emphasize the company’s momentum continues to be strong, the new business commitments are continuing, our position in our base product lines and new product lines is robust and we anticipate double digit sales growth for fiscal 2020. We look forward to updating you on the significant opportunities as they evolve. We will now open the call for questions.

Thank you. [Operator Instructions] And our first question comes from Matt Koranda with ROTH Capital. You may proceed.

Hey, guys. Good morning. Thanks for…

Good morning, Matt.

Just in terms of the revenue growth for the quarter, I mean, I understand that underlying industry growth rates have definitely picked up in the last couple of quarters. But roughly high-teens sort of year-over-year growth trends and your rotating electrical category is pretty impressive. I mean how much of that can you kind of disentangle what is new business versus replenishment versus stocking update, and maybe how did weather play into the growth rate that you saw during the quarter of the year, curious to get your thoughts there?

Yeah. I can’t give you the granular breakdown between all those categories. I mean I will say that we are just starting to ramp up some new business in the rotating electrical. We do think that the fundamentals of the market played a role, replenishment orders played a role and the revenue going up, most of the update orders that we received will come in the back-end of the year. So, overall, I would just say in general positive across the Board. We certainly don’t have the detail that I can give you, by each of those categories. Weather helps -- certainly helps, I mean, we will see how this winter ends up. But -- so the verdict is still out as to how strong the wind will be. But to me the most important metric is that the fundamental growth of the age car population is starting to hit the prime replacement categories and so just these statistics for the industry in general should be better as we go through the next few years.

Okay. And then just in terms of the margin outlook, I wanted to see if we could get a little bit more color on your commentary that you will be on the low end of the gross margin guidance range. I know you mentioned the four factors kind of the end of the prepared remarks there.

Yeah.

But in particular, I guess, I was interested in understanding a little bit more about the lower mix of high margin revenue in terms of timing. Could you talk a little bit about that are you referring to sort of rotating electrical ramping up a little bit further and we are holding off on some update orders that come into play maybe at the end of this year or next, would be helpful to get thoughts there?

Yeah. Look, I think, it’s that there’s a new -- and first of all, I will start with, what I think of the more permanent changes to the cost structure, which we need to figure out how to offset and I think this is affecting the wage inflation in Mexico, this new administration there, minimum wages have been statutory -- gone through statutory increases and so that basically leads to flowing wage increases through the different levels of compensation. So the Mexico wage rates are definitely up. I think you see in general third world labor markets, wage rates have generally gone up right now. So it’s -- I think, it’s not only Mexico, but certainly China is experiencing similar inflation. The other side of that is, is that has these Chinese tariffs are implemented the demand for relocating or focusing growth into the Mexican market with the new Mexican trade agreement just accelerates the demand for labor and so labors become more competitive in Mexico and certainly that doesn’t help with wage inflation. At the end of the day, again, I think, all of our competitors are affected by this and it just needs to be some adjustment in the marketplace on pricing and production efficiencies that we can eliminate as much waste as possible from the metric. In terms of the other factor is we are suffering from our success a little bit, to be honest with you. We have just significant new business coming at us from all sides. We are in the middle -- as that is happening, we are in the middle of transitioning our footprint from, which is more than doubling on a global basis and so we have had some acceleration of expenses as we ramp up our infrastructure, we manage through meeting…

Helpful color. Thanks, Selwyn. That -- maybe just in terms of the pricing commentary that you made there, I am curious that, are you taking pricing to offset wage inflation. You mentioned, you sort of alluded to that, but you also said that productivity improvements may also offset some of the wage inflation. Is it a combination of both, when do we see the pricing increases, if you are taking pricing, what’s the mechanism for that and timing?

Yeah. That’s a good question. I mean we have not implemented any price increases for wage inflation that’s relatively new. I’d think we are waiting to see how our customer on competitive bases response to these statistics. I mean I think the new administration has just taken over in particular in Mexico, but there is, in my opinion there will be slight inflation, but I can’t give you any more color to say exactly when and I will also assure you that we are -- I don’t even know the word to describe it, but aggressively pursuing eliminating waste from all of our operating systems and that’s why you see this massive change in the way we are structuring the company for its future growth. And we are excited that we are ahead of the curve in our technology, our management information systems and our IT group is ahead and we have infrastructure that is scalable. We don’t need to change systems for the growth that we have in hand. We are just -- we are adding volume and we are adding the number of opportunities to grow our business. I mean, pricing, certainly, we want to protect our margins, and certainly, our customers will need to recognize as tough as it is to get price increases, we will need to realize that as infrastructure costs go up, it’s important for them to have strong suppliers to embrace their initiatives and their suppliers have to make money, and so this is not just an isolated issue for us as an entity, but it’s a global issue for the supply chain in the aftermarket in general. So, I think, we will see some inflation in pricing.

Okay. That’s helpful. The last one real quick and I will jump back in queue. But just in terms of the buyback, I noticed there is still north of $20 million available on the repurchase as of September 30th I think. Were you guys able to take advantage during that dislocation in the stock back in November, December and buy more, any additional color there would be appreciated?

Yeah. Unfortunately or I think the rules make sense is that suddenly we were blacked out. We understood the market reaction to the restatement of our financials which significant -- took a significant hit to our evaluation, but we were blacked out from buying any stock and now we are at the end of the quarter. We have not been able to buy additional stock. We are still committed to buying back our stock. We think that there’s a great value in our stock price still. We intentionally have not adopted a plan of buyback because we wanted to maintain flexibility in our allocation of capital and it’s not that we have a huge amount of excess capital, so we wanted to maintain our flexibility and so the blackout periods have affected the buyback. I mean, we certainly intend to continue buybacks as appropriate and believe that -- we are -- we believe we are good buy.

Got it. I will jump back in queue. Thanks everyone.

And our next question comes from Christopher Van Horn with B. Riley FBR. You may proceed.

Hi, everyone. This is Dan Drawbaugh on the line for Chris. Thanks for taking our questions. So just to start…

Yeah, Dan. Hi.

Hi, guys. Just to start, strong quarter, obviously, and looking ahead, can you talk a little bit about the kind of cadence you are looking at for the back half of the fiscal year? I know you have sort of reiterated the guidance range talking towards the high end. But just given the strength you saw in the second quarter, what’s the prospect for upside to the back half of the year?

Well, I mean, again, we believe we will see double-digit growth from the back-end over the front-end certainly for the last two quarters over the first two quarters. So we are optimistic on that. We have got some timing issues that are out there with some significant update orders that involve some significant returns before you ship those update orders. So, I think, the back six months in total is going to be very good. We may have some variations in the quarter between the third quarter and the fourth quarter. We were also during the third quarter and fourth quarter ramping up some fairly significant incremental new business that we are involved in. So, again, our guidance is at the upper end of the revenue. I think you will start seeing -- we -- I mentioned in the script in my prepared remarks that we suddenly expect double-digit growth for our next fiscal year and so we think there’s going to be more accelerated growth as we continue down the road. We do have commitments for new business and we have a lot of new products that are launching, and a lot of good things happening in the new fiscal year as we go down. I know they are happening now in the last six months. So I think I hope that answers your question.

Sure. Very helpful color. Thank you. On the subject of new product introductions, brake pads and rotors, you guys recently announced you are rolling those out. Those are obviously pretty large market opportunities, just according to what you have kind of put out there and what we have kind of modeled. How big could those become and kind of call it the fiscal ‘20, fiscal ‘21 timeframe, I mean how quickly can you ramp-up those kind of new products?

Well, that’s a question that, that’s hard to answer. I mean the markets are huge and it just depends on how successful we are in getting traction in our customer base and we think we have some great products. We think that there’s definitely going to be some nice upside in that for our products and we are seeing some positive -- some very positive responses to our products at this point. I can’t give you how big can that be. I mean these are certainly products that can be in the hundreds of millions of dollars. And so, but, that’s just -- right now that’s just a number, that’s not based on anything now. So we suddenly launched them, expecting to take our fair share of those categories and so we don’t go into category and expect to be below the top two in terms of market share. So we are going to be aggressive. We are going to be offering great products and great customer service, and we will see, again, the outlook overall is in general positive.

Okay. Fair enough. Thank you. And then on the E&M Power acquisition, can you elaborate a little bit on what they look like in that $250 million market for active load emulator and DC emulator. I mean is that a fragmented marketplace, are they kind of one of many players, is there like a leading player there? Can you help us understand sort of how big they are within that space?

Yeah. They are still small in terms of their revenue, but in terms of their technology, I would have to say that if they are not the leader, they are certainly among a couple of leaders. They are technology on inverter, the inverter better testing capabilities, the emulation capabilities, I mean, they are at -- the investment there was really has an enhancement to our technology base and we think that combined technology with our current D&V platform will offer -- will enable us to offer full platforms to the original equipment or electric vehicle manufacturer. And that’s a very fast growing, in total, that’s a very fast growing segment and we think now we have an offering of technology, again I don’t know whether we are the leader on our own in that space, but we are certainly in the lead role with not a lot of players able to offer what we can offer. In addition to that, besides in our electric vehicle space, I would tell you that the interest in the aerospace industry for our technology is pretty significant as well. We are just beginning to look at that, but the whole electric vehicle is not only an electric motor and electric car opportunity, I mean, electric motors and electric emulation testing, and inverter testing is goes to many different OE spaces. So very, very exciting for us. The founders of E&M are exceptional people. There have been I think limited by capital base of two individuals that have invented something and I think having them as part of our new D&V organization and having their technology, I think, we are going to be a real powerhouse in that space. Again, very small now, but with a global positioning that I think is very, very significant for the future.

Okay. Got it. Well, that’s all for me. I will step back in queue. Thank you guys for the questions.

And our next question comes with Steve Dyer with Craig-Hallum. You may proceed.

Thanks. Good morning. Most of mine have been answered already. Just was wondering if we could dig in a little bit, rotating electrical was extremely strong in the quarter and I am wondering was that driven largely by replenishment orders with really low inventory or was there some significant new business that was -- that had or was pulled forward, any color around there, Selwyn?

Yeah. I think, replenishment was very strong. The markets for our products, again, we have always talked about the statistics, these remain for years, we have been talking about, I think, the statistics are starting to play in to just fundamental replenishment, so just our share helps significantly. We did have a new business that started to ramp-up and then we continue to have new business, that’s ramping up. So we should see more, more of it in that space. So I just think you have both. I mean, you have growth in new business, net new business and net replenishment is up and I think the update orders are going to be up. Unfortunately, we have seen a fairly significant amount of adjustments to inventory, which generally we trying to drive. So we make sure our customers have the right mix. So, I think, again to summarize rotating electrical all of the above, replenishment updates which haven’t come yet, I mean, they are still to come up, the updates has been pretty slow, but slow to come and new business is also is ramping up slower than we expected, so but it’s all coming. So the disappointment, I am just going to jump to another sector, Steve, which maybe just a sort of a natural add on is, we are disappointed in the wheel hub growth, masters has been more predictable we have been waiting for the wheel hub. We have great market share in the wheel hub category and so there’s been some softness in the wheel hub industry in general. And we believe it has to turn, we believe our capabilities and our product is industry leading and we think that is going to be a turn there. So, I mean, we saw great growth, just driven off a couple of product lines, but we didn’t see all of our product lines really grow as much as we would like to and we certainly hope that’s going to happen going forward and we expect it to.

Got it. And then, I mean, the December quarter is already effectively behind you. Anything you can comment on there, just about in terms of continued trends or did things continue, did you see any deviation? And then, again, maybe how we should think about the balance between Q3 and Q4 to kind of get to your year-end numbers?

Yeah. I think the -- again without just -- we all finished the quarter, so it’s a little tricky to talk about it. But I think the big news really for the back six months is that we certainly believe this double-digit growth there. A lot of update orders are gone out in the third quarter and fourth quarter. There is going to be an overlap between the third and fourth in terms of how revenue is recognized, because a lot of the shipments went out towards the end of the third quarter. So I think the fourth quarter is going to more, certainly, we believe more vibrant and we know we will be more vibrant than the third quarter. But the third quarter is -- the shipments already out the door in the third quarter and the revenue recognition will be in the fourth quarter. So but, overall, again, we expect a strong back six months with a little bit soft -- the third quarter being a little softer than the fourth quarter.

Yeah. Okay. And then, lastly, just the accounting issues, are they -- I mean is it safe to say they are in the past the E&Y services [ph] are on the same page or is there any more sort of potential for disagreement on anything going forward?

Yeah. So the first thing I would say there’s no disagreement whatsoever between the auditors and MPA. So make that clear there, certainly, we picked up a very significant customer in the second quarter, which had a core buyback and that stimulated reevaluation of the policies related to the core buyback and while we over the last 11 years have been taken the position that we should expense the premium portion of the buyback for core up-front. This was a much less conservative approach that we are now taking. And I think it’s just influenced by more data that has come out in terms of interpretation -- interpreting revenue recognition and expense recognition. And so, I don’t believe I -- we were surprised to be honest with you that we did -- that we -- that we had to change the application of GAAP, but I believe that -- certainly we believe that we have no disagreements between us and our auditors at all and that is hiding behind us, yeah.

Thank you.

And our next question comes from Scott Stember with CL King. You may proceed.

Good morning.

Good morning, Scott.

Good morning.

Can you maybe talk about -- you talked about briefly about the wheel hubs and some industry weakness there. But intuitively I would have thought that that would have been doing better just given the winter that we had and vehicles hitting a lot of potholes and so forth. Maybe just give us your view of why you think that that market is as soft as it is and what it could take for that turnaround?

Okay. I just want to point out one thing. Unfortunately, I have to point this out. We are reporting very late for events that ended sort of before the winter began. So the results are reflected in the September quarter are not indicative of what we have seen and potentially may see for the winter. So I hope you are right. I mean we certainly again believe that the wheel hub business will accelerate. So, it’s -- a lot of it is weather generated on the wheel hub side, snow and salting of the roads and as we go through the winter on that and then we get through the winter, you generally see that in the January, February, March timeframe we will have a much better feel as to what this weather, how the weather has affected the market right now. So, I think, again, we anxiously await. I think the other side of that is, it’s the same as any other hot pot that’s out there that the car population for prime replacement edge applies to wheel hubs, as it applies to rotating electrical, as it applies to all these other parts. And that’s just the fundamental statistics will ultimately change that wheel hub phenomenon to be to -- back to its growth -- to having growth for us and for the entire industry. I don’t know if, Steve…

Scott.

…Scott, I am not sure there was a second part to the question?

No. That pretty much answers.

Yeah.

I will just trying to figure out what’s going on there.

Yeah. Yeah. And so we will see, I mean, it’s going to be fine. I mean, again, there’s no fundamental change to where the market is not going to have replaced, that I am positive off.

Got it. And maybe talking about some of the newer products like rotors and pads, and rotors in particular, how is that business going to -- is that going to be a re-man business or is that something you will be sourcing from China or other markets?

Yeah. The rotors are not re-manufacturable to best of my knowledge. They are sometimes re-owned. But we would be selling new units. There’d be no core value to the rotors whatsoever. At this point in time, we have a key supplier or two and we’d be working with them really with our own specifications their manufacturing capability to launch the products into the marketplace from them.

Got it. And just the last two questions. In the past you periodically sometimes given where you think the operating expenses for the full year will come in and interest expense, are you in a position to give it out for the full year at this point?

This is David. So the first two quarters we are averaging approximately $15 million in total operating expenses. With the sales growth we are anticipating the back two quarters are going to average closer to $16 million per quarter. So that will get us closer to low $60 million for the full year.

And a lot of that’s reflected in ramping up infrastructure…

Yeah. Yeah.

… for, again, for significant new business that’s coming on next year.

Correct.

And interest expense?

So we are looking at interest expense increasing, that’s kind of reflective also not only higher rates, but at -- with higher sales a lot of the customers offer vendor financing programs to the AR discount program. So, for the year, we are probably going to be closer to 4.8% of sales, I think, that’s the easiest way to look at it as a percentage of sales.

Okay. Got it. All right. That’s all I have. Thank you.

Thank you.

Thank you.

And our next question comes from Brian Nagel with Oppenheimer. You may proceed.

Hi. Good morning.

Good morning, Brian.

Good morning.

So, my question, yeah, my first question and maybe a little repetitive to some of the prior questions. But, again, in the second quarter which now is free for in the past, you had adjusted sales growth over 14%, much stronger than you had in the fiscal Q1 and above the rate which you are guiding for the year. How should we think about that 14 -- this 14.5 to be specific in terms of a run rate for the business, I guess the question I am asking is, within that is -- are there some oddities that we should not expect to continue or is that really reflective of where the business underlying trends were tracking?

I think at the end of this fiscal year, we should be at a run rate of around $500 million plus and fast ramping from there. So, that’s -- I mean, I think, that’s where we are headed.

Okay. Then maybe, I guess, a follow-up to that. So now with fiscal Q3 done and recognized you haven’t reported that yet. But from a bigger picture and so when you talk a bit about the -- just the overall improvement environment in Q2, with the factors you have driving the improving environment whether they be weather or the car park, did anything change significantly one way or the others from Q2 to Q3?

I am digesting that question. I mean, I don’t think so. I think that the fundamentals are all there. I mean, obviously, the weather changes every day and so we don’t know what this winter will end up being. And the rain patterns or whatever, but, I mean, I think, long -- if you just eliminate that which quite frankly we have to, because it’s not a controllable, but the fundamentals of our industry, the fundamentals of our customers, the fundamentals of the car park and replacement rates, and I don’t see any real change in any of that. I think it’s all -- and again I would listen to all other people in the industry. I am not the only one I would rely on, but, certainly, when I listen and I read, and certainly, look at the statistics that they all seem to favor a very positive outlook over the next three years to five years.

Okay. And my final question, just and I guess this is more from the expense standpoint. You discuss the build out if you will. They are now the, I guess, the build out towards potential for higher capacity within your model. So two questions there, one, what type of sales now could be supported by your infrastructure? And then, second…

Yeah. That’s a -- yeah. Go ahead.

Okay. And then second, how should -- when we think -- when we look at the expense structure right now? What type of -- how should we think about the weight if you will or the drags, probably, a better word of having this excess capacity with not having the commensurate sales at this point?

Okay. So let me start with the first one. I mean I believe the new footprint as we complete it will enable us to move closer to the $1billion revenue mark and we may not get all the way there depending on how mix and how much is outsourced versus produced. But certainly our immediate internal target is a $1 billion in revenue. When I say immediate, that doesn’t mean that’s going to happen next year. I mean that’s sort of a three-year to five-year outlook for us. I think that as we complete the new footprint, that the fundamentals of overhead absorption or the amount of revenue that’s committed to us will keep us to have on par with existing overhead absorption. So we have a lot of new revenue that’s going to fill up that space very quickly. And then it’s leveraging volume out of that space with multiple shifts and growth, and things should get better from there. In the meantime, I think, we have probably got a 2 point or 3 point margin drag until we get through that and that’s sort of indicated in our guidance on gross margins and we try and separate as much as possible. But we are just -- we are expanding, I mean, we are -- there’s not a department in our organization that is not expanding and so as you go through that inflection before that revenue comes on there’s going to be a little bit of a drag on gross. But as we start supplying that incremental volume that we have -- that’s been committed to us, I think, we get back to where we were in the sort of the higher -- to the higher ranges above margin guidance, that 27% to 30% will be closer back to the 30% margins and we go from there. So we see -- I don’t know if that answer that Brian. Does that answer your question?

Yeah. That’s…

Yeah.

That’s very helpful. I appreciate it.

Yeah.

Thank you.

And our next question comes from Karl Egan [ph]. You may proceed.

Hi, guys. Thanks for taking my question. I have been a long-term shareholder in the company and appreciate you guys providing the color and the guidance on the $1 billion in revenues in five years. And for me, I think, that implies that you guys are going to do something like over 15% compounded annually from today’s standpoint and the stock trades somewhere a 4.5 times to 5 times EBITDA. So, my question is, kind of what value do you see in being a public company especially compared to going private, especially when I look at some of your competitors, especially like BVV, which is taken private 3 times most recently in August? And I look at their Moodys.com debt profile, it looks like they were taken out at 2 times sales, 10 times EBITDA and leveraged 7.7 times EBITDA and you guys are trading at 4.5 times. So, just curious what value you have seen in remaining a public company as opposed to evaluating some strategic alternatives to drive shareholder value?

Well, without getting into the pros and cons of public versus private, which I think most of us know the answers to that. But we are always looking at that the ways to maximize value. Our timeframe is not one moment in time. Our timeframe is, how do we get to the maximum value we can in executing our five-year plan. And we constantly evaluate whether we should be private, public and what’s the best alternatives are to maximize shareholder value. So, at this point in time, we believe with all the initiatives that we have got going on that we will get credit for it once we and if we execute appropriately, and we will get that credit whether we be public or private. And so, I don’t…

I was curious, because looking at the stock over the last five years, the stock has gone from $25 a share five years ago to $21 today. So it’s down by 20%, while the market is up over 50% and you have a competitor, a direct competitor that does exactly the same thing that you guys do and that’s been successfully taken private 3 times in a row. It just seems like value can be created by evaluating those options.

Well, your comments, well, certainly, are noted and nothing new to our understanding of the opportunities, but we appreciate your comments.

Okay. Thank you.

And our next question comes from Bill Desellum with Titan Capital. You may proceed.

Thank you. A couple of questions, first of all, relative to the new break product line, what’s required to build that out?

The product lines that we have announced is mostly distribution space. Those are contract, they are contracted out. So it’s just distribution and engineering our own specs, our customer service programs that relate to it, engineering. Mostly, again, distribution along with all the infrastructure that we support all of our product lines with, which is market intelligence, engineering and all of the sort of EDI and IT infrastructure that you’d normally apply to any product.

Okay. And as you look at that business is the value that you are bringing to your customer, the engineering capability that you just referenced or the ability to provide them with more products from a smaller number of suppliers?

I think, it’s both, I mean, I think, certainly, the engineering capability and the market intelligence that we bring to the support quotient of our offering is valued by the customer. And so, I think, that’s a big part of it. It’s a value add for them and certainly something that we need to get paid for. And then the second thing is, our fundamental footprints and logistical, logistics capability that matches the needs of the customers in the marketplace, it can make them more efficient is also valued and so both of those add value. So it’s the product as well as just how we go to market.

Great. Thank you. And then last question is that you have referenced new business that you have won for next fiscal year at one point in the call? And secondarily, I think, there was even a phrase something similar to a new business coming at you from all sides. Would you talk about those two comments and try to put additional color around that for us?

Yeah. Again, all of our categories, there’s a lot of interest in new business and a lot of new business being evaluated and ramped up in all of our categories. In terms of where and what it’s going to be at this point in time, we are not willing to talk about where and what. I’d give further color as we get down the road a little closer to launching that new business. But I would say that, again, every part of our hard parts business we expect to get new share and we expect share in our new product lines, and we expect share in our diagnostic businesses, both the EV and the internal combustion side of that business. And we expect, as I mentioned earlier, to open up some new technology available to some of our existing product lines by an acquisition that we expect to announce later this week. And so, when I look down the road over the next three years, the number of opportunities for us to grow in has definitely grown and the problems in terms of being able to grow any of those opportunities has not diminished anywhere. So multiple opportunities for growth in all the categories that we are in.

Yeah. Thanks, Selwyn. And you just referenced the acquisition that you anticipate closing later in this week. I will jump the gun and ask you to share whatever you can about that transaction.

Yeah. I mean there’s very a little we can share at this point, because it’s still private to the selling group and their employee base. So we have to respect that. But in general it’s going to add a piece of business opportunity to our existing product lines that we haven’t really had in the past and so while it’s not a huge revenue, again, it’s small, it is very significant and strategic for us in terms of opening up channels for us.

Great. Thank you.

Thank you.

Thank you. Ladies and gentlemen, that concludes our Q&A portion of today’s call. I would now like to turn the call back over to your host, Gary Maier.

Great. I will take this one.

Yeah.

Yeah. This is Selwyn. Yeah. Again, we are happy to have the delay in our reporting behind us. And as always I just want to thank our team members for their incredible commitment and again customer-centric focus on their service for their exceptional pride and all the products we sell and the great customer services that we provide, which only they can make a reality for our customers and we continuously get compliments about people that we have dealing with our customers and really I would say almost on a daily basis. Their commitment to the quality of our products and their service levels is also reflected in what we believe is important. The wonderful contributions they make to their communities and our society, and we appreciate their continued support, our investor base has continued support. And we thank you again for joining us for the call and we look forward to speaking with you soon when we host our fiscal 2019 third quarter conference call in February. And we look forward to meeting you face-to-face at the various conferences in the future. And so thank you. That will end the call for now. Thank you very much.

Ladies and gentlemen, thank you for attending today’s conference. This does conclude the program and you may all disconnect. Everyone have a great day.