NASDAQ:PRTS CarParts.com Q2 2023 Earnings Report $0.90 +0.06 (+6.70%) Closing price 05/27/2025 04:00 PM EasternExtended Trading$0.89 -0.01 (-1.14%) As of 05/27/2025 07:02 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. ProfileEarnings HistoryForecast CarParts.com EPS ResultsActual EPS-$0.01Consensus EPS -$0.01Beat/MissMet ExpectationsOne Year Ago EPSN/ACarParts.com Revenue ResultsActual Revenue$176.98 millionExpected Revenue$176.00 millionBeat/MissBeat by +$980.00 thousandYoY Revenue GrowthN/ACarParts.com Announcement DetailsQuarterQ2 2023Date8/1/2023TimeN/AConference Call DateTuesday, August 1, 2023Conference Call Time5:00PM ETUpcoming EarningsCarParts.com's Q2 2025 earnings is scheduled for Monday, July 28, 2025, with a conference call scheduled on Tuesday, July 29, 2025 at 5:00 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Conference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfilePowered by CarParts.com Q2 2023 Earnings Call TranscriptProvided by QuartrAugust 1, 2023 ShareLink copied to clipboard.There are 9 speakers on the call. Operator00:00:08Please note this call is being recorded. I would now like to pass the conference over to our host, Tina Mihirfarzi, Senior Vice President of Global Communications and Culture, please go ahead. Hello, everyone, and thank you for joining us for the carparts.com Second Quarter 2023 Conference Call. I'd like to start by welcoming the investors and others who are attending this meeting remotely. Joining me today from the company are David Mignon, Chief Executive Officer Ryan Lockwood, Chief Financial Officer and Michael Huffaker, Chief Operating Officer. Operator00:00:48Before I turn it over to David to start the meeting, I have some important disclosures. The prepared remarks and responses to your questions could contain certain forward looking statements related to the business under the federal securities laws. Actual results may differ materially from those contained in or implied by these forward looking statements due to the risks and uncertainties associated with the business. For a discussion of the material risks and other important factors that could affect results, Please refer to the carparts.com annual report on Form 10 ks and 10 Qs as filed with the SEC, both of which can be found on the Investor Relations website. On the call, both GAAP and non GAAP financial measures will be discussed. Operator00:01:35A reconciliation of GAAP to non GAAP financial measures is provided in the carparts.com press release issued today. With that, I would now like to turn the call over to David. Speaker 100:01:53Thank you, Tina. Good afternoon, everyone, and thank you for joining us. Today, we reported $177,000,000 of sales, up slightly from the $176,000,000 we generated last year in the second quarter, marking our 14th consecutive quarter of year over year growth and the highest sales level for any quarter in our company's history. On a 2 year stack, revenues for the quarter are up 12%. Adjusted EBITDA was $6,300,000 We also repurchased 250,000 shares during the quarter. Speaker 100:02:27The $79,000,000 in cash on our balance sheet at the end of the quarter is a testament to the strong unit economics and cash generating capabilities of our business. And we're also happy to announce the launch of our new mobile app now available on both iOS and Android. When it comes to customer purchase patterns, we have seen a rise in the usage of our buy now, pay later offering. And while some customers are choosing to defer their less urgent repairs, We believe that their return to market is inevitable once consumer confidence rebounds. At that point, we will be ready to meet their needs, Thanks for our infrastructure, mobile first customer experience and diversified assortment. Speaker 100:03:08We remain steadfast in focusing on building a world class company dedicated to providing customers the best digital experience to help them with their auto repair and maintenance needs. On our last earnings call, we shared some of our accomplishments from the last 4 years, but we believe there are still opportunities for improvement and transformation. These fall into 6 strategic pillars that range from table stakes to industry disruption. We believe by putting focus on these areas, We will profitably grow to $1,000,000,000 company and beyond. Number 1, e commerce fundamentals number 2, digital transformation Number 3, assortment and catalog number 4, marketing and customer experience number 5, innovation And number 6, supply chain and logistics. Speaker 100:03:56Let me briefly touch on each of these. First, e commerce fundamentals. As a direct to consumer company, we want to ensure that our website provides a user friendly experience, making it easy for customers to navigate the site, find the products and or resources they need and complete purchases. In addition, with approximately 80% of our customers shopping on their phones, We have launched a mobile app on both iOS and Android. By offering another seamless shopping platform, We expect to reduce our customer acquisition costs and reliance on search engines and paid channels over time. Speaker 100:04:33Other initiatives in the pipeline include improved search results, adding cross sell and up sell capabilities, loyalty programs, VIN lookup and more. 2nd, digital transformation. We recently kicked off the modernization of some critical back end systems, which will allow us to grow our business more efficiently. Last year, we successfully completed our ERP migration and retired old systems with 0 business interruption. Looking ahead, we are focusing on fully migrating to the cloud and upgrading critical infrastructure. Speaker 100:05:08These are just a few of our digital transformation initiatives, addressing roadblocks, legacy technology debt and paving the way for a multi $1,000,000,000 scalable infrastructure. 3rd, assortment and catalog. With the goal of capturing a bigger share of wallet over time, we are constantly looking at ways to grow our assortment. As an example, We made a deliberate decision to expand our national brand assortment, which is now running at a $100,000,000 revenue run rate compared to under $50,000,000 in 2021. On the catalog side, we are investing in proven industry standards that will enhance our proprietary catalog to increase sales through product recommendations and improve our customer experience. Speaker 100:05:55In addition, we have continued to build strong relationships with our branded partners and with a segment of our customers willing to pay a higher average selling price, We have seen an incremental increase in revenues and gross profit dollars. 4th, marketing and customer experience. 16 months ago, we decided to put the customer at the center of everything we do. And our intention is not just to sell more parts, But to be drivers go to resource for valuable information about their vehicle, such as recall and maintenance notifications, which recently hit customer inboxes. Now if you head to our YouTube page, you will see that we just launched our first series of professional installation videos. Speaker 100:06:37It kicked off with the most popular vehicle in America, The Ford F-one hundred and fifty with detailed videos explaining the top 50 repair and maintenance jobs with links to our website for parts and tools. This is the first step of expanding brand awareness as part of our new marketing strategy that will include podcasts, community events, sponsorships, social media campaigns and more. We believe that building a direct relationship with our customers align with our new effort to reduce our dependency on paid channels. Instead, it positions carparts.com as an authority in the industry, increasing customer loyalty and ultimately organic and direct traffic. As a reminder, currently over 1 third of our e commerce revenue come from repeat customers. Speaker 100:07:25Next, innovation and do it for me. In previous quarters, we gained a tremendous amount of data from the large number of our Get It Installed bookings. Now we're using that information to continue developing the program to create an even more refined customer journey. Over the last 6 months, we have virtually doubled our Net Promoter Score. And over the next year, our do it for me customers will see an even more personalized experience tailored to their specific needs. Speaker 100:07:54And finally, supply chain logistics. We have made dramatic improvements in service levels and are now shipping faster than ever before. There have been several other supply chain improvements as we work hard to increase efficiencies, And for more details, I'd like to turn it over to Michael. Speaker 200:08:14Thank you, David. I'm pleased to announce that in Q2, we set the record for highest number of units in a single quarter. We did this while operating at our best safety levels ever, Our fastest quick to ship ever, and we had a significantly lower cost profile quarter over quarter and year over year. Over time, we will continue to make self funded investments that have a high return with a direct impact to our bottom line from technology and process improvements to Development and Training. Last quarter, we discussed key areas of opportunity, and let me give you a brief update on them. Speaker 200:08:47Number 1, labor planning, demand wave management and process optimization. In order to increase pick efficiency, we rolled out a brand new labor planning process, order flow management process and stow logic process. These combined with various smaller projects allowed us to improve our labor costs in the warehouses by 50 bps. Number 2, warehouse topology and inventory placement. We have adjusted our inventory placement and service scope logic in order to decrease Click to deliver time and overall transportation costs while also lowering labor costs. Speaker 200:09:21Number 3, supply chain technology investments. We continue investing in supply chain technology that makes our associates safer and more efficient, while allowing our customers to get their parts faster. For example, our Jacksonville facility is only 15 months old, but already half of our PICs use this newer technology, resulting in The fulfillment center scaling faster to meet the carparts.comnetworkstandard. Before I turn it over to Ryan, I would like to thank our fulfillment center team members for their hard work. The success of these initiatives is only possible with their support. Speaker 200:09:54We appreciate their commitment to making our vision a reality and enhancing our customers' experience. Speaker 300:10:00Thank you, Michael. As David mentioned, Q2 was our highest sales quarter in company history. We generated revenue of 177,000,000 up slightly from the prior year period, making it our 14th consecutive quarter of year over year growth. This was also our toughest quarter to be on a nominal basis. Despite that, for the full year 2023, we still expect revenues to be up 3% to 5% year over year, while remaining free cash flow positive and maintaining a robust balance sheet. Speaker 300:10:30Gross profit for the quarter was $60,400,000 down slightly from the $61,900,000 in the prior year. Gross margin was 34.2 percent of sales, down from 35.1% in the prior year, primarily driven by higher outbound transportation costs and product mix. GAAP net loss for the quarter was $700,000 compared to $4,100,000 of net income in the prior year. As a reminder, Last year's Q2 had a significant one time pickup related to stock based compensation. We reported adjusted EBITDA of 6,300,000 down from $8,300,000 in the prior year period. Speaker 300:11:05This was driven by higher freight costs, increased performance marketing spend and the economic impact on consumer spending patterns. However, this was partially offset by improvements in warehouse fulfillment costs. Turning to the balance sheet. We ended the quarter with $79,000,000 of cash and no revolver debt, up from $15,000,000 of cash in the prior year period. For the quarter, we generated over $500,000 of interest income. Speaker 300:11:32Every capital allocation decision starts with balancing growth and profitability to maximize cash flow generation. Our significant cash position highlights the resilience of our business model and we are proud of our relentless dedication to financial discipline. We believe we have ample liquidity and have no intention or need to raise capital at current valuations. The inventory balance at quarter end was $114,000,000 As the supply chain issues continue to ease, We're becoming more efficient at having the parts our customers need. As lead times revert to normal, we can carry less inventory, both on hand And in transit, which reduces some of our working capital requirements. Speaker 300:12:15We have not seen any impact from the conflicts at the port with the transportation carriers. During the Q2, we repurchased 250,000 shares for approximately $1,050,000 Under the current share repurchase program, we have approximately $28,500,000 remaining of the $30,000,000 authorization that extends through July 2024. We believe that our company is incredibly valuable and our key strategic pillars will compound our value over time through multiple cycles. As we look to the remainder of the year, we will continue balancing financial prudence with opportunistically returning capital to shareholders. Speaker 100:12:55Thank you, both. Carparts.com has never been better positioned than it is today. As we continue to build a world class organization Focused on our strategic pillars, we believe we are creating a foundation that is making our company significantly more valuable and will benefit our stakeholders for years to come. Thank you to the entire CarParts team. We're proud of your hard work and your investment in our company's long term success. Speaker 100:13:20Working alongside you every day is what makes us so tremendously excited for our future. We could not do this without you. Thank you for everyone who's joined us today. And as we say at carparts.com, get after it. We'll now turn it over to the operator and open it up for questions. Speaker 400:13:56Our first question comes from the line of Ryan Myers from Lake Street Capital Markets. Speaker 500:14:03Hey, guys. Thanks for taking my questions. First one for me here. Just wondering if you can talk about what you're seeing so far here in Q3, and your kind of level of confidence in the improvement here in the second half. And maybe if you've seen some improvement in your core customer, I know last quarter, You guys were kind of impacted by them sort of trading down to lower quality products. Speaker 500:14:24Just kind of walk us through that dynamics and if you've seen any sort of improvement there? Speaker 600:14:30Hey, Ryan, it's David. Yes, I guess I can tell you a little more about what we're seeing on the competitive landscape. And I guess two parts. Number 1, I think we're seeing the brick and mortar players are they're growing their B2B business, but DIY do it yourself is definitely a drag. I think on the DIY side, also a portion of that growth is coming from batteries, fluids and wipers, which historically we've not played in. Speaker 600:14:55But obviously, we see an opportunity which would fall under our assortment strategic pillar. Right now, what we're seeing is the environment is putting a ton of pressure on some of our competition though and our And our partners, we're seeing 2 online players showing significant pressure. You have one of the large warehouse distributors that just went through Chapter 11. And on our side, we're we have unit growth, we have positive unit economics, we have free cash flow, we have close to $80,000,000 in cash And know that I think we're well positioned to kind of for the uptick. Now looking to the future, the backdrop that we're seeing is you still have an aging car fleet, You still have more cars. Speaker 600:15:35The number of miles driven is climbing. Online penetration is Speaker 300:15:38going to grow, and we have Speaker 600:15:39a whole strategy to capture additional market share. Short term, there's some pressure due to the macro, but long term, I think we're really well positioned. Speaker 500:15:50Great. That's helpful. And then how should we think about sort of the traditional seasonality, especially on the margin side, as Some of these new initiatives start to come through. I mean, should we expect sort of a normal seasonal pattern? Or how should we think about that? Speaker 300:16:07Yes, I think a normal seasonal pattern is reasonable. The one part that we don't have full visibility on yet is the holiday freight surcharge. Every year, it has started a month early. So I think when I started back in 2020, it was in November, then it became October, then it became September. So we could see a holiday surcharge as early as this month. Speaker 300:16:28So that we don't have visibility on, but once it starts, we expect it to run through the duration of the remainder of the year. Otherwise, as far as some of the investments we're going to make, some of that will actually go through CapEx and not run through OpEx. Speaker 500:16:43Okay, got it. Thanks for taking my questions. Speaker 700:16:45Thanks. Speaker 400:16:47Thank you. One moment for our next question. Our next question comes from the line of Ryan Sigdahl from Craig Hallum Capital Group. Speaker 800:17:01Hey, good afternoon guys. Speaker 300:17:03Hey, good afternoon. Speaker 700:17:06Curious, so you went through Speaker 800:17:07a lot of really positive Operational improvements, initiatives, a lot of things that have happened, a lot of things that are still to come. But curious how much of those you think are in the financials? Because as I look at Q2 numbers, gross margin, EBITDA margin down sequentially down year over year. I guess the freight pressure, I get that. But I guess, How much of that the good things are included in that versus still to come versus are those headwinds just, I guess, too much to overcome? Speaker 300:17:37I think that there's a big misconception given all the things we fixed that the improvement in the business that were the bottom of the 9th. I would really categorize This overall turnaround of the company really is closer to the bottom of the second. And I think that as David laid out with the strategic pillars, There's still a lot of things we can do. And in some cases, it's not even innovation. It's just table stakes. Speaker 300:18:00One example is e commerce. It's, I think, table stakes to have an app, which we only just launched a couple of weeks ago. I think it's table stakes to have upsellcross sell. So when you think about all the things we need to improve or fix, there's still just a lot going on. When we Take a step back and look at the business, obviously, 2Q had some pressure. Speaker 300:18:20But when we look at all of the strategic pillars over a multiyear period, we think that's where you'll see Value really getting driven. David, he'll operate. Speaker 600:18:27Yes. I think if there's one thing I can add is if you look at the future in terms of driving EBITDA margin or free cash flow, there's a number of areas where we have opportunities. Number 1, on transportation as we get closer to customers. Number 2, on marketing spend, our marketing spend runs in the low teens. And to Ryan's point, we didn't have an app Up until a few weeks ago, so there's definitely some opportunities there, at least, call it, 100 to 200 basis points. Speaker 600:18:57Michael has done an exceptional job On the fulfillment side, but we still have some opportunities there. And over time, as we grow sales with the strategic initiatives and growing the assortment, There's some opportunities to get some leverage on fixed OpEx, at least 100 basis points. So we're seeing the pressure from the macro, but if you look at it Over the next, call it, 3 to 5 years, there's plenty of opportunities for us to increase net margin and none of them are a moonshot. It just requires Blocking and tackling and just that execution that we've been focusing on. Speaker 800:19:33And then switching over to marketing, you guys mentioned an increase in performance marketing and overall ad spend in the quarter. Curious, I guess, the strategy there and if you're seeing the change in consumer of your ability to acquire direct consumers versus having to Effectively go through Google, I imagine. Speaker 600:19:51Yes. And historically, performance marketing and the Google It has been the pillar of the strategy. That's kind of what we're known for. I think over time, what you're going to see is a lot To drive organic traffic and direct traffic around branding and customer experience, we called out a number of things in the prepared remarks. But I think for us over the next 3 years, the marketing, branding and customer experience is probably one of the things I'm most excited about. Speaker 600:20:19There's a lot of things that most companies do that we don't do. In terms of what we spend on Google, it is what it is. But long term, We can drive content marketing, retention marketing, building a brand for our private label, a better customer experience. The app for us It's game changer to drive repeat purchase with push notifications, maintenance and recall. So there's a ton that we can do on the marketing side. Speaker 600:20:41And again, if you're spending low teens, like there's a big opportunity to shave off at least 200 basis points. Speaker 800:20:50Maybe on that last point, just curious how much you think the app, I guess, where you think it will drive the biggest benefit between retention marketing and Maybe just user experience overall, but where do you see the biggest benefit there? Speaker 600:21:04Well, if you think about it, our mobile traffic is about 80%. So that's kind of the mini total addressable market for us. If we can get 10%, 20% or 30% of our purchases to go through the app, That's a customer that we don't have to reacquire through paid channels. The other thing too is and we've talked about this in the past, we want to move away from just selling the parts And we want to deliver value and information for the customers. If we can do this in a direct manner, so think maintenance notifications or recall notifications or special pricing or special events. Speaker 600:21:37The app is our direct link between our company and the customer. So long term in terms of driving down marketing spend, I think the app is going to be one of the key drivers on top of improving branding and customer experience. Speaker 800:21:53Great. Thanks, David, Ryan, Michael. Appreciate it, guys. Speaker 700:21:55Thank you. Speaker 400:21:58Thank you. One moment for our next question. Our next question comes from the line of Thomas Forte from D. A. Davidson and Company. Speaker 700:22:12Great. Thanks. I'm going to ask both my questions at the same time. So you sort of touched on this in your prepared remarks, but can you talk about the Efforts you're undertaking to lower fulfillment costs beyond lowering ship miles by adding new fulfillment centers. And then the second question is, It's a hot topic, I guess, for 23, but can you talk about, to what extent you're leveraging And if you don't want to talk about artificial intelligence, can you talk about to what extent you're leveraging automation at car parts? Speaker 700:22:44Thanks. Speaker 200:22:47Hey, Thomas, thanks for the question. This is Michael. Our overall efforts within The fulfillment network to reduce overall costs are discontinued process path optimizations. We spent a lot of time right Sizing the flow of goods in and out of the building. We spent a lot of time getting rid of extraneous paths and extra Toughes within the network and we're going to continue to do that through the back half of the year. Speaker 200:23:15We've Done a full reconciliation of all our process passed in the building. And we were just spending too much time walking to work, Too many times doing redundant work within the building and so we've eliminated that to really get the team far more efficient and the associates responding well to it. As far as automation in buildings, we'll continue automation has many different facets, right? It's everything from more conveyance The more sophisticated systems we use in our Jacksonville warehouse, it will make intelligent investments in automation where it makes Associates under the roof safer or faster or both. And so that's what we're going to continue to focus on. Speaker 200:23:55As far as further AI, I'll hand that over to David to answer that. Speaker 600:24:01Yes, Tom, and not to give away the secret sauce on the AI, but I want to make it Because I think most companies fall into 2 camps, the people that are scared of AI and the people that embrace AI. And for us, we're in the 2nd camp. We think Artificial intelligence is a huge opportunity. We're very good at transformation. We're very good at embracing and leveraging new technology. Speaker 600:24:24So we have a lot of things that we're working on that involve not only generative AI, but language models, Proprietary language models, natural language processing, whether it's for catalog or marketing or assortments, We're big believers in AI and I think that over the next 3 to 5 years, it's going to be one of the biggest opportunities for companies of our size. Speaker 700:24:48Great. Thanks for taking my questions. I appreciate it. Speaker 400:24:52Thank you. One moment for our next question. Our next question comes from the line of Darren Aftahi from ROTH MKM. Speaker 700:25:06Hey guys, thanks for taking my questions. 2 if I may. First, can you just kind of characterize The health of the consumers on car parts maybe since the beginning of the year Until now and how that's changed, either good, bad and different? Speaker 300:25:24Yes. I think the consumer has been relatively pressured. Q1 early Wasn't as bad, and I think the consumer has been under increased pressure throughout the year. When you look at tax refunds, We all know that those came in a little bit lighter than expected this year, and we did experience some of that in the beginning of Q2. I think as we go through the remainder of the year, we're hopeful that consumers will get some relief, but obviously, it's a challenging time for everyone. Speaker 300:25:53We're seeing, as we mentioned in the last call, a bit of a trade down On, for example, lights or certain deferrable items like bumpers, where in some cases people completely defer Or they may go to marketplaces and buy non DOT approved lower quality item that is good enough to solve their problem. But I think that generally speaking, at least historically in this industry, people don't like having a car with hot air conditioning or a window that doesn't roll up. So it creates this pent up demand. I think that we are very well positioned to capture this demand coming out Of any kind of recession or challenging economic environment that we might be in because people, once they have money in their pocket, want to fix all these things. I generally don't want to keep them broken. Speaker 700:26:44Great. Thanks. And then in order to kind of hit that 3% to 5% Top line growth, is there anything in operating expenses that moves around, I. E, do you have to lean into that OpEx line in order to get to that 3% to 5% or you feel pretty confident based on Your spend patterns for the first half of the year. Speaker 300:27:11This is Ryan. I think that what you've seen for the 1st 6 months is going to be relatively similar to the back six Have 6 months from an OpEx perspective. A lot of the growth is going to be driven by those 6 pillars that David mentioned, which is things like increasing assortment, Utilizing all the marketing channels that are available to us, doing a better job of improving customer experience, And many of these are either just a reallocation of resources or in some cases, some might be a capital expenditure, but that wouldn't flow through OpEx. Speaker 700:27:43Got it. Thanks, guys. Thanks. Speaker 400:27:47Thank you. One moment for our next question. Our next question comes from the line of Ryan Sigdahl from Craig Hallum Capital Group. Speaker 800:28:01Hey, guys. Just one follow-up for me. Accounts payable was up pretty substantially sequentially here. I guess, is that timing related or is there something structural that you've improved from vendor terms or something else to be aware of there? Speaker 300:28:15Yes. So AP is actually flat on a year over year basis. There's always going to be a little bit of seasonality on a sequential basis. What really improved was our inventory efficiency. So AP relatively flat year over year, but inventory significantly down, and that's what drove the increase in AP leverage. Speaker 700:28:33Thank you. Thanks. Speaker 400:28:37Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.Read morePowered by Key Takeaways Record Q2 revenue of $177M marked the company’s highest-ever quarter and 14th consecutive quarter of year-over-year growth with a 2-year stack up 12%. Adjusted EBITDA was $6.3M (down from $8.3M) and GAAP net loss was $0.7M, weighed by higher freight costs and marketing spend, yet the business remains free cash flow positive. Balance sheet strength highlighted by $79M in cash, zero revolver debt and a $1.05M share repurchase of 250,000 shares under the existing buyback program. Management outlined six strategic pillars—e-commerce fundamentals, digital transformation, assortment, marketing & customer experience, innovation, and supply chain—to reach a profitable $1B+ revenue company. Operational improvements delivered record units shipped, fastest quick-to-ship times, 50bps lower warehouse labor costs, and the launch of a new mobile app to drive lower customer acquisition costs. AI Generated. May Contain Errors.Conference Call Audio Live Call not available Earnings Conference CallCarParts.com Q2 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsPress Release(8-K)Quarterly report(10-Q) CarParts.com Earnings HeadlinesCarParts.com’s SWOT analysis: navigating challenges in auto parts e-commerceMay 24, 2025 | uk.investing.comCarParts.com (NASDAQ:PRTS) Raised to Hold at Wall Street ZenMay 24, 2025 | americanbankingnews.com3..2..1.. AI 2.0 ignition (don’t sleep on this)I just put together an urgent new presentation that you need to see right away. In short: I believe we are mere days away from a critical announcement from a key tech leader… One that will officially ignite “AI 2.0” – and potentially send a whole new class of stocks soaring. May 28, 2025 | Timothy Sykes (Ad)CarParts.com Stock Short Interest Report | NASDAQ:PRTS | BenzingaMay 17, 2025 | benzinga.comAnalysts Offer Insights on Consumer Cyclical Companies: CarParts.com Inc (PRTS), Cannae Holdings (CNNE) and Home Depot (HD)May 16, 2025 | theglobeandmail.comUS$1.90 - That's What Analysts Think CarParts.com, Inc. (NASDAQ:PRTS) Is Worth After These ResultsMay 16, 2025 | finance.yahoo.comSee More CarParts.com Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like CarParts.com? Sign up for Earnings360's daily newsletter to receive timely earnings updates on CarParts.com and other key companies, straight to your email. Email Address About CarParts.comCarParts.com (NASDAQ:PRTS), together with its subsidiaries, operates as an online provider of aftermarket auto parts and accessories in the United States and the Philippines. It offers replacement parts, such as parts for the exterior of an automobile; mirror products; engine and chassis components, as well as other mechanical and electrical parts; and performance parts and accessories. The company sells its products to individual customers through its flagship website www.carparts.com and app; online marketplaces, including third-party auction sites and shopping portals; and auto parts wholesale distributors. The company was formerly known as U.S. Auto Parts Network, Inc. and changed its name to CarParts.com, Inc. in July 2020. CarParts.com, Inc. was incorporated in 1995 and is headquartered in Torrance, California.View CarParts.com ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Bullish NVIDIA Market Set to Surge 50% Ahead of Q1 EarningsBooz Allen Hamilton Earnings: 3 Bullish Signals for BAH StockAdvance Auto Parts Jumps on Surprise Earnings BeatAlibaba's Earnings Just Changed Everything for the StockCisco Stock Eyes New Highs in 2025 on AI, Earnings, UpgradesSymbotic Gets Big Earnings Lift: Is the Stock Investable Again?D-Wave Pushes Back on Short Seller Case With Strong Earnings Upcoming Earnings NVIDIA (5/28/2025)Synopsys (5/28/2025)Bank of Montreal (5/28/2025)Salesforce (5/28/2025)Haleon (5/28/2025)Costco Wholesale (5/29/2025)Marvell Technology (5/29/2025)Canadian Imperial Bank of Commerce (5/29/2025)Dell Technologies (5/29/2025)National Grid (5/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 9 speakers on the call. Operator00:00:08Please note this call is being recorded. I would now like to pass the conference over to our host, Tina Mihirfarzi, Senior Vice President of Global Communications and Culture, please go ahead. Hello, everyone, and thank you for joining us for the carparts.com Second Quarter 2023 Conference Call. I'd like to start by welcoming the investors and others who are attending this meeting remotely. Joining me today from the company are David Mignon, Chief Executive Officer Ryan Lockwood, Chief Financial Officer and Michael Huffaker, Chief Operating Officer. Operator00:00:48Before I turn it over to David to start the meeting, I have some important disclosures. The prepared remarks and responses to your questions could contain certain forward looking statements related to the business under the federal securities laws. Actual results may differ materially from those contained in or implied by these forward looking statements due to the risks and uncertainties associated with the business. For a discussion of the material risks and other important factors that could affect results, Please refer to the carparts.com annual report on Form 10 ks and 10 Qs as filed with the SEC, both of which can be found on the Investor Relations website. On the call, both GAAP and non GAAP financial measures will be discussed. Operator00:01:35A reconciliation of GAAP to non GAAP financial measures is provided in the carparts.com press release issued today. With that, I would now like to turn the call over to David. Speaker 100:01:53Thank you, Tina. Good afternoon, everyone, and thank you for joining us. Today, we reported $177,000,000 of sales, up slightly from the $176,000,000 we generated last year in the second quarter, marking our 14th consecutive quarter of year over year growth and the highest sales level for any quarter in our company's history. On a 2 year stack, revenues for the quarter are up 12%. Adjusted EBITDA was $6,300,000 We also repurchased 250,000 shares during the quarter. Speaker 100:02:27The $79,000,000 in cash on our balance sheet at the end of the quarter is a testament to the strong unit economics and cash generating capabilities of our business. And we're also happy to announce the launch of our new mobile app now available on both iOS and Android. When it comes to customer purchase patterns, we have seen a rise in the usage of our buy now, pay later offering. And while some customers are choosing to defer their less urgent repairs, We believe that their return to market is inevitable once consumer confidence rebounds. At that point, we will be ready to meet their needs, Thanks for our infrastructure, mobile first customer experience and diversified assortment. Speaker 100:03:08We remain steadfast in focusing on building a world class company dedicated to providing customers the best digital experience to help them with their auto repair and maintenance needs. On our last earnings call, we shared some of our accomplishments from the last 4 years, but we believe there are still opportunities for improvement and transformation. These fall into 6 strategic pillars that range from table stakes to industry disruption. We believe by putting focus on these areas, We will profitably grow to $1,000,000,000 company and beyond. Number 1, e commerce fundamentals number 2, digital transformation Number 3, assortment and catalog number 4, marketing and customer experience number 5, innovation And number 6, supply chain and logistics. Speaker 100:03:56Let me briefly touch on each of these. First, e commerce fundamentals. As a direct to consumer company, we want to ensure that our website provides a user friendly experience, making it easy for customers to navigate the site, find the products and or resources they need and complete purchases. In addition, with approximately 80% of our customers shopping on their phones, We have launched a mobile app on both iOS and Android. By offering another seamless shopping platform, We expect to reduce our customer acquisition costs and reliance on search engines and paid channels over time. Speaker 100:04:33Other initiatives in the pipeline include improved search results, adding cross sell and up sell capabilities, loyalty programs, VIN lookup and more. 2nd, digital transformation. We recently kicked off the modernization of some critical back end systems, which will allow us to grow our business more efficiently. Last year, we successfully completed our ERP migration and retired old systems with 0 business interruption. Looking ahead, we are focusing on fully migrating to the cloud and upgrading critical infrastructure. Speaker 100:05:08These are just a few of our digital transformation initiatives, addressing roadblocks, legacy technology debt and paving the way for a multi $1,000,000,000 scalable infrastructure. 3rd, assortment and catalog. With the goal of capturing a bigger share of wallet over time, we are constantly looking at ways to grow our assortment. As an example, We made a deliberate decision to expand our national brand assortment, which is now running at a $100,000,000 revenue run rate compared to under $50,000,000 in 2021. On the catalog side, we are investing in proven industry standards that will enhance our proprietary catalog to increase sales through product recommendations and improve our customer experience. Speaker 100:05:55In addition, we have continued to build strong relationships with our branded partners and with a segment of our customers willing to pay a higher average selling price, We have seen an incremental increase in revenues and gross profit dollars. 4th, marketing and customer experience. 16 months ago, we decided to put the customer at the center of everything we do. And our intention is not just to sell more parts, But to be drivers go to resource for valuable information about their vehicle, such as recall and maintenance notifications, which recently hit customer inboxes. Now if you head to our YouTube page, you will see that we just launched our first series of professional installation videos. Speaker 100:06:37It kicked off with the most popular vehicle in America, The Ford F-one hundred and fifty with detailed videos explaining the top 50 repair and maintenance jobs with links to our website for parts and tools. This is the first step of expanding brand awareness as part of our new marketing strategy that will include podcasts, community events, sponsorships, social media campaigns and more. We believe that building a direct relationship with our customers align with our new effort to reduce our dependency on paid channels. Instead, it positions carparts.com as an authority in the industry, increasing customer loyalty and ultimately organic and direct traffic. As a reminder, currently over 1 third of our e commerce revenue come from repeat customers. Speaker 100:07:25Next, innovation and do it for me. In previous quarters, we gained a tremendous amount of data from the large number of our Get It Installed bookings. Now we're using that information to continue developing the program to create an even more refined customer journey. Over the last 6 months, we have virtually doubled our Net Promoter Score. And over the next year, our do it for me customers will see an even more personalized experience tailored to their specific needs. Speaker 100:07:54And finally, supply chain logistics. We have made dramatic improvements in service levels and are now shipping faster than ever before. There have been several other supply chain improvements as we work hard to increase efficiencies, And for more details, I'd like to turn it over to Michael. Speaker 200:08:14Thank you, David. I'm pleased to announce that in Q2, we set the record for highest number of units in a single quarter. We did this while operating at our best safety levels ever, Our fastest quick to ship ever, and we had a significantly lower cost profile quarter over quarter and year over year. Over time, we will continue to make self funded investments that have a high return with a direct impact to our bottom line from technology and process improvements to Development and Training. Last quarter, we discussed key areas of opportunity, and let me give you a brief update on them. Speaker 200:08:47Number 1, labor planning, demand wave management and process optimization. In order to increase pick efficiency, we rolled out a brand new labor planning process, order flow management process and stow logic process. These combined with various smaller projects allowed us to improve our labor costs in the warehouses by 50 bps. Number 2, warehouse topology and inventory placement. We have adjusted our inventory placement and service scope logic in order to decrease Click to deliver time and overall transportation costs while also lowering labor costs. Speaker 200:09:21Number 3, supply chain technology investments. We continue investing in supply chain technology that makes our associates safer and more efficient, while allowing our customers to get their parts faster. For example, our Jacksonville facility is only 15 months old, but already half of our PICs use this newer technology, resulting in The fulfillment center scaling faster to meet the carparts.comnetworkstandard. Before I turn it over to Ryan, I would like to thank our fulfillment center team members for their hard work. The success of these initiatives is only possible with their support. Speaker 200:09:54We appreciate their commitment to making our vision a reality and enhancing our customers' experience. Speaker 300:10:00Thank you, Michael. As David mentioned, Q2 was our highest sales quarter in company history. We generated revenue of 177,000,000 up slightly from the prior year period, making it our 14th consecutive quarter of year over year growth. This was also our toughest quarter to be on a nominal basis. Despite that, for the full year 2023, we still expect revenues to be up 3% to 5% year over year, while remaining free cash flow positive and maintaining a robust balance sheet. Speaker 300:10:30Gross profit for the quarter was $60,400,000 down slightly from the $61,900,000 in the prior year. Gross margin was 34.2 percent of sales, down from 35.1% in the prior year, primarily driven by higher outbound transportation costs and product mix. GAAP net loss for the quarter was $700,000 compared to $4,100,000 of net income in the prior year. As a reminder, Last year's Q2 had a significant one time pickup related to stock based compensation. We reported adjusted EBITDA of 6,300,000 down from $8,300,000 in the prior year period. Speaker 300:11:05This was driven by higher freight costs, increased performance marketing spend and the economic impact on consumer spending patterns. However, this was partially offset by improvements in warehouse fulfillment costs. Turning to the balance sheet. We ended the quarter with $79,000,000 of cash and no revolver debt, up from $15,000,000 of cash in the prior year period. For the quarter, we generated over $500,000 of interest income. Speaker 300:11:32Every capital allocation decision starts with balancing growth and profitability to maximize cash flow generation. Our significant cash position highlights the resilience of our business model and we are proud of our relentless dedication to financial discipline. We believe we have ample liquidity and have no intention or need to raise capital at current valuations. The inventory balance at quarter end was $114,000,000 As the supply chain issues continue to ease, We're becoming more efficient at having the parts our customers need. As lead times revert to normal, we can carry less inventory, both on hand And in transit, which reduces some of our working capital requirements. Speaker 300:12:15We have not seen any impact from the conflicts at the port with the transportation carriers. During the Q2, we repurchased 250,000 shares for approximately $1,050,000 Under the current share repurchase program, we have approximately $28,500,000 remaining of the $30,000,000 authorization that extends through July 2024. We believe that our company is incredibly valuable and our key strategic pillars will compound our value over time through multiple cycles. As we look to the remainder of the year, we will continue balancing financial prudence with opportunistically returning capital to shareholders. Speaker 100:12:55Thank you, both. Carparts.com has never been better positioned than it is today. As we continue to build a world class organization Focused on our strategic pillars, we believe we are creating a foundation that is making our company significantly more valuable and will benefit our stakeholders for years to come. Thank you to the entire CarParts team. We're proud of your hard work and your investment in our company's long term success. Speaker 100:13:20Working alongside you every day is what makes us so tremendously excited for our future. We could not do this without you. Thank you for everyone who's joined us today. And as we say at carparts.com, get after it. We'll now turn it over to the operator and open it up for questions. Speaker 400:13:56Our first question comes from the line of Ryan Myers from Lake Street Capital Markets. Speaker 500:14:03Hey, guys. Thanks for taking my questions. First one for me here. Just wondering if you can talk about what you're seeing so far here in Q3, and your kind of level of confidence in the improvement here in the second half. And maybe if you've seen some improvement in your core customer, I know last quarter, You guys were kind of impacted by them sort of trading down to lower quality products. Speaker 500:14:24Just kind of walk us through that dynamics and if you've seen any sort of improvement there? Speaker 600:14:30Hey, Ryan, it's David. Yes, I guess I can tell you a little more about what we're seeing on the competitive landscape. And I guess two parts. Number 1, I think we're seeing the brick and mortar players are they're growing their B2B business, but DIY do it yourself is definitely a drag. I think on the DIY side, also a portion of that growth is coming from batteries, fluids and wipers, which historically we've not played in. Speaker 600:14:55But obviously, we see an opportunity which would fall under our assortment strategic pillar. Right now, what we're seeing is the environment is putting a ton of pressure on some of our competition though and our And our partners, we're seeing 2 online players showing significant pressure. You have one of the large warehouse distributors that just went through Chapter 11. And on our side, we're we have unit growth, we have positive unit economics, we have free cash flow, we have close to $80,000,000 in cash And know that I think we're well positioned to kind of for the uptick. Now looking to the future, the backdrop that we're seeing is you still have an aging car fleet, You still have more cars. Speaker 600:15:35The number of miles driven is climbing. Online penetration is Speaker 300:15:38going to grow, and we have Speaker 600:15:39a whole strategy to capture additional market share. Short term, there's some pressure due to the macro, but long term, I think we're really well positioned. Speaker 500:15:50Great. That's helpful. And then how should we think about sort of the traditional seasonality, especially on the margin side, as Some of these new initiatives start to come through. I mean, should we expect sort of a normal seasonal pattern? Or how should we think about that? Speaker 300:16:07Yes, I think a normal seasonal pattern is reasonable. The one part that we don't have full visibility on yet is the holiday freight surcharge. Every year, it has started a month early. So I think when I started back in 2020, it was in November, then it became October, then it became September. So we could see a holiday surcharge as early as this month. Speaker 300:16:28So that we don't have visibility on, but once it starts, we expect it to run through the duration of the remainder of the year. Otherwise, as far as some of the investments we're going to make, some of that will actually go through CapEx and not run through OpEx. Speaker 500:16:43Okay, got it. Thanks for taking my questions. Speaker 700:16:45Thanks. Speaker 400:16:47Thank you. One moment for our next question. Our next question comes from the line of Ryan Sigdahl from Craig Hallum Capital Group. Speaker 800:17:01Hey, good afternoon guys. Speaker 300:17:03Hey, good afternoon. Speaker 700:17:06Curious, so you went through Speaker 800:17:07a lot of really positive Operational improvements, initiatives, a lot of things that have happened, a lot of things that are still to come. But curious how much of those you think are in the financials? Because as I look at Q2 numbers, gross margin, EBITDA margin down sequentially down year over year. I guess the freight pressure, I get that. But I guess, How much of that the good things are included in that versus still to come versus are those headwinds just, I guess, too much to overcome? Speaker 300:17:37I think that there's a big misconception given all the things we fixed that the improvement in the business that were the bottom of the 9th. I would really categorize This overall turnaround of the company really is closer to the bottom of the second. And I think that as David laid out with the strategic pillars, There's still a lot of things we can do. And in some cases, it's not even innovation. It's just table stakes. Speaker 300:18:00One example is e commerce. It's, I think, table stakes to have an app, which we only just launched a couple of weeks ago. I think it's table stakes to have upsellcross sell. So when you think about all the things we need to improve or fix, there's still just a lot going on. When we Take a step back and look at the business, obviously, 2Q had some pressure. Speaker 300:18:20But when we look at all of the strategic pillars over a multiyear period, we think that's where you'll see Value really getting driven. David, he'll operate. Speaker 600:18:27Yes. I think if there's one thing I can add is if you look at the future in terms of driving EBITDA margin or free cash flow, there's a number of areas where we have opportunities. Number 1, on transportation as we get closer to customers. Number 2, on marketing spend, our marketing spend runs in the low teens. And to Ryan's point, we didn't have an app Up until a few weeks ago, so there's definitely some opportunities there, at least, call it, 100 to 200 basis points. Speaker 600:18:57Michael has done an exceptional job On the fulfillment side, but we still have some opportunities there. And over time, as we grow sales with the strategic initiatives and growing the assortment, There's some opportunities to get some leverage on fixed OpEx, at least 100 basis points. So we're seeing the pressure from the macro, but if you look at it Over the next, call it, 3 to 5 years, there's plenty of opportunities for us to increase net margin and none of them are a moonshot. It just requires Blocking and tackling and just that execution that we've been focusing on. Speaker 800:19:33And then switching over to marketing, you guys mentioned an increase in performance marketing and overall ad spend in the quarter. Curious, I guess, the strategy there and if you're seeing the change in consumer of your ability to acquire direct consumers versus having to Effectively go through Google, I imagine. Speaker 600:19:51Yes. And historically, performance marketing and the Google It has been the pillar of the strategy. That's kind of what we're known for. I think over time, what you're going to see is a lot To drive organic traffic and direct traffic around branding and customer experience, we called out a number of things in the prepared remarks. But I think for us over the next 3 years, the marketing, branding and customer experience is probably one of the things I'm most excited about. Speaker 600:20:19There's a lot of things that most companies do that we don't do. In terms of what we spend on Google, it is what it is. But long term, We can drive content marketing, retention marketing, building a brand for our private label, a better customer experience. The app for us It's game changer to drive repeat purchase with push notifications, maintenance and recall. So there's a ton that we can do on the marketing side. Speaker 600:20:41And again, if you're spending low teens, like there's a big opportunity to shave off at least 200 basis points. Speaker 800:20:50Maybe on that last point, just curious how much you think the app, I guess, where you think it will drive the biggest benefit between retention marketing and Maybe just user experience overall, but where do you see the biggest benefit there? Speaker 600:21:04Well, if you think about it, our mobile traffic is about 80%. So that's kind of the mini total addressable market for us. If we can get 10%, 20% or 30% of our purchases to go through the app, That's a customer that we don't have to reacquire through paid channels. The other thing too is and we've talked about this in the past, we want to move away from just selling the parts And we want to deliver value and information for the customers. If we can do this in a direct manner, so think maintenance notifications or recall notifications or special pricing or special events. Speaker 600:21:37The app is our direct link between our company and the customer. So long term in terms of driving down marketing spend, I think the app is going to be one of the key drivers on top of improving branding and customer experience. Speaker 800:21:53Great. Thanks, David, Ryan, Michael. Appreciate it, guys. Speaker 700:21:55Thank you. Speaker 400:21:58Thank you. One moment for our next question. Our next question comes from the line of Thomas Forte from D. A. Davidson and Company. Speaker 700:22:12Great. Thanks. I'm going to ask both my questions at the same time. So you sort of touched on this in your prepared remarks, but can you talk about the Efforts you're undertaking to lower fulfillment costs beyond lowering ship miles by adding new fulfillment centers. And then the second question is, It's a hot topic, I guess, for 23, but can you talk about, to what extent you're leveraging And if you don't want to talk about artificial intelligence, can you talk about to what extent you're leveraging automation at car parts? Speaker 700:22:44Thanks. Speaker 200:22:47Hey, Thomas, thanks for the question. This is Michael. Our overall efforts within The fulfillment network to reduce overall costs are discontinued process path optimizations. We spent a lot of time right Sizing the flow of goods in and out of the building. We spent a lot of time getting rid of extraneous paths and extra Toughes within the network and we're going to continue to do that through the back half of the year. Speaker 200:23:15We've Done a full reconciliation of all our process passed in the building. And we were just spending too much time walking to work, Too many times doing redundant work within the building and so we've eliminated that to really get the team far more efficient and the associates responding well to it. As far as automation in buildings, we'll continue automation has many different facets, right? It's everything from more conveyance The more sophisticated systems we use in our Jacksonville warehouse, it will make intelligent investments in automation where it makes Associates under the roof safer or faster or both. And so that's what we're going to continue to focus on. Speaker 200:23:55As far as further AI, I'll hand that over to David to answer that. Speaker 600:24:01Yes, Tom, and not to give away the secret sauce on the AI, but I want to make it Because I think most companies fall into 2 camps, the people that are scared of AI and the people that embrace AI. And for us, we're in the 2nd camp. We think Artificial intelligence is a huge opportunity. We're very good at transformation. We're very good at embracing and leveraging new technology. Speaker 600:24:24So we have a lot of things that we're working on that involve not only generative AI, but language models, Proprietary language models, natural language processing, whether it's for catalog or marketing or assortments, We're big believers in AI and I think that over the next 3 to 5 years, it's going to be one of the biggest opportunities for companies of our size. Speaker 700:24:48Great. Thanks for taking my questions. I appreciate it. Speaker 400:24:52Thank you. One moment for our next question. Our next question comes from the line of Darren Aftahi from ROTH MKM. Speaker 700:25:06Hey guys, thanks for taking my questions. 2 if I may. First, can you just kind of characterize The health of the consumers on car parts maybe since the beginning of the year Until now and how that's changed, either good, bad and different? Speaker 300:25:24Yes. I think the consumer has been relatively pressured. Q1 early Wasn't as bad, and I think the consumer has been under increased pressure throughout the year. When you look at tax refunds, We all know that those came in a little bit lighter than expected this year, and we did experience some of that in the beginning of Q2. I think as we go through the remainder of the year, we're hopeful that consumers will get some relief, but obviously, it's a challenging time for everyone. Speaker 300:25:53We're seeing, as we mentioned in the last call, a bit of a trade down On, for example, lights or certain deferrable items like bumpers, where in some cases people completely defer Or they may go to marketplaces and buy non DOT approved lower quality item that is good enough to solve their problem. But I think that generally speaking, at least historically in this industry, people don't like having a car with hot air conditioning or a window that doesn't roll up. So it creates this pent up demand. I think that we are very well positioned to capture this demand coming out Of any kind of recession or challenging economic environment that we might be in because people, once they have money in their pocket, want to fix all these things. I generally don't want to keep them broken. Speaker 700:26:44Great. Thanks. And then in order to kind of hit that 3% to 5% Top line growth, is there anything in operating expenses that moves around, I. E, do you have to lean into that OpEx line in order to get to that 3% to 5% or you feel pretty confident based on Your spend patterns for the first half of the year. Speaker 300:27:11This is Ryan. I think that what you've seen for the 1st 6 months is going to be relatively similar to the back six Have 6 months from an OpEx perspective. A lot of the growth is going to be driven by those 6 pillars that David mentioned, which is things like increasing assortment, Utilizing all the marketing channels that are available to us, doing a better job of improving customer experience, And many of these are either just a reallocation of resources or in some cases, some might be a capital expenditure, but that wouldn't flow through OpEx. Speaker 700:27:43Got it. Thanks, guys. Thanks. Speaker 400:27:47Thank you. One moment for our next question. Our next question comes from the line of Ryan Sigdahl from Craig Hallum Capital Group. Speaker 800:28:01Hey, guys. Just one follow-up for me. Accounts payable was up pretty substantially sequentially here. I guess, is that timing related or is there something structural that you've improved from vendor terms or something else to be aware of there? Speaker 300:28:15Yes. So AP is actually flat on a year over year basis. There's always going to be a little bit of seasonality on a sequential basis. What really improved was our inventory efficiency. So AP relatively flat year over year, but inventory significantly down, and that's what drove the increase in AP leverage. Speaker 700:28:33Thank you. Thanks. Speaker 400:28:37Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.Read morePowered by