CarParts.com Q1 2025 Earnings Report

CarParts.com EPS Results

• Actual EPS: -$2.70
• Consensus EPS: -$1.20
• Beat/Miss: Missed by -$1.50
• One Year Ago EPS: N/A

CarParts.com Revenue Results

• Actual Revenue: $147.38 million
• Expected Revenue: $146.14 million
• Beat/Miss: Beat by +$1.23 million
• YoY Revenue Growth: N/A

CarParts.com Announcement Details

• Quarter: Q1 2025
• Date: 5/13/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, May 13, 2025
• Conference Call Time: 5:00PM ET

CarParts.com (NASDAQ:PRTS) operates an e-commerce platform that sells automotive parts and accessories primarily to do-it-yourself consumers, professional installers and collision-repair businesses. The company’s product offerings include replacement parts for body, exterior, engine, brake, suspension, steering, drivetrain and electrical systems, as well as vehicle accessories and performance-related products.

The company serves customers across the United States through its CarParts.com website and related online channels. Its business model combines digital merchandising, product sourcing and fulfillment capabilities to provide parts for a broad range of domestic and imported cars, trucks and other vehicles.

CarParts.com traces its history to US Auto Parts Network, an online automotive-parts retailer founded in the 1990s. The company adopted the CarParts.com name as part of a rebranding effort and trades on the Nasdaq under the symbol PRTS. Its operations are focused on serving the North American replacement-auto-parts market through e-commerce.

CarParts.com Q1 2025 Earnings Call Transcript

Key Takeaways

• Q1 revenue fell 11% to $147.4 M, with a GAAP net loss of $15.3 M and an adjusted EBITDA loss of $6.2 M, pressured by bad weather, soft consumer demand, and rising advertising costs.
• In the first six weeks of Q2, revenue is up double digits year-over-year on sequentially lower marketing spend, driven by higher repeat purchases, mobile app traffic, and fee income.
• The wholesale business added over 700 commercial customers and launched same- and next-day delivery in key markets, achieving contribution margins up to three times higher than e-commerce.
• Management pre-bought roughly two extra weeks of inventory to mitigate tariff risks; the balance sheet remains strong with $38.5 M in cash, no revolver debt, and low obsolescence risk.
• Strategic investments in a vertically integrated supply chain (mid-50% product margins), a proprietary fitment catalog (83k private-label & 1.5 M branded SKUs), and a mobile-first platform approaching 1 M app users are laying the groundwork for improved profitability.

Presentation

[Operator]

Good afternoon. At this time, all participants will be in listen-only mode. Please note this call is being recorded. I would now like to pass the conference over to our host, Ryan Lockwood, Chief Financial Officer. Please go ahead.

[Ryan Lockwood, CFO at CarParts.com]

Hello, everyone, and thank you for joining us for the CarParts.com First Quarter 2025 conference call. Joining me today is David Meniane, Chief Executive Officer. Before I turn it over to David to start the call, I have some important disclosures. The prepared remarks 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 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-K and the Quarterly Reports on Form 10-Q, each as filed with the SEC, both of which can be found on our Investor Relations website. On the call, both GAAP and non-GAAP financial measures will be discussed.

[Ryan Lockwood, CFO at CarParts.com]

A 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.

[David Meniane, CEO at CarParts.com]

Thank you, Ryan, and thanks, everyone, for joining us today. At the outset, let me say that today we are not going to take questions related to our strategic alternatives process beyond what we announced on March 5th. That process is ongoing and being overseen by our Board of Directors with the assistance of financial and legal advisors. Now, turning to tariffs. While the current headlines are broadly known, the final rates and applications have not been finalized yet. Our internal team, including leaders from trade compliance, procurement, forecasting, merchandising, and pricing, are focused on navigating and helping us make decisions. Specific to our exposure, less than one quarter of our private label products are imported from China and approximately two-thirds from Taiwan. Over time, we believe tariffs will raise part prices in the market.

[David Meniane, CEO at CarParts.com]

Historically, tariff increases have benefited our industry, as used car values are expected to rise faster than the vehicle repair costs. Our team is working on mitigating tariff impacts through a variety of actions, including pre-buying extra inventory prior to the main tariff implementation, potential cost concessions from vendor partnerships, dynamic pricing adjustments, and identifying supply chain and operating expenses optimization. Over the last several weeks, our team conducted a comprehensive review of every product at the vendor level, assessing tariff exposure based on country of origin, material composition, and other relevant factors. For products sourced from Taiwan, the majority of our purchases are currently subject to tariffs of approximately 25%. For products from China, current tariff rates range from 55%-145%, but we are strongly encouraged by the joint announcement made yesterday between the U.S.

[David Meniane, CEO at CarParts.com]

and China governments, and look forward to reviewing the details as it relates to its impact on our products and supply chain. We will be monitoring in real time any changes in trade policy or regulations. Turning to 2025 performance, in the first two months, we saw soft consumer demand, very bad weather in many parts of the country on a relative basis, and our company was not immune. In addition, we experienced a significant increase in cost-per-click rates on search engines, which we believe is a response to the growth of AI models taking share from traditional search, while at the same time, selling prices for parts online fell as retailers tried to capture as much demand as possible.

[David Meniane, CEO at CarParts.com]

While our top line and operating expenses came in line with our expectations, the gross margin compression and advertising spend climate put significant pressure on our profitability in the first quarter. This reinforces how critical it is for us to continue upgrading our customer base with higher income and less price-sensitive customers to diversify our acquisition mix. Realigning our business around products to target higher margin sales, adding high-margin fee income, growing customer lifetime value with our mobile app, and increasing our focus on wholesale and other commercial opportunities. We continue to believe these are the right bets as we counteract these external pressures. Our first-quarter results were disappointing, especially as measured by our profitability. Behind the scenes, we made a lot of progress, and we're seeing momentum with our 2025 plan.

[David Meniane, CEO at CarParts.com]

For the first six weeks of the second quarter, we are seeing revenues up double digits year over year on sequentially lower marketing spend. Our focus on repeat customers, mobile app traffic, and high-margin fee income are all paying off, and we are seeing record levels for all three. While early in the process, we're slowly changing our customer acquisition mix and margin profile to transform our company's profitability. As we continue to scale these initiatives and grow our assortment, we can leverage our supply chain and fulfillment network, increase operating leverage, and return the business to strong, profitable growth. On the wholesale side, we have onboarded over 700 new commercial customers and continue to leverage our catalog to target collision shops and mechanics in key markets. During the balance of this fiscal year, we will continue to focus on navigating a dynamic macroeconomic environment, including tariffs and volatile prices.

[David Meniane, CEO at CarParts.com]

Given the uncertain environment, we are redoubling our focus on growth and profitability, supported by a strong foundation already in place. We're confident that our current investments will help unlock future opportunities and drive stronger financial performance. While certain investments will yield results sooner than others, we remain flexible, continuously refining our approach to achieve sustainable profitability. We have important work ahead, and we will be laser-focused on execution. Before covering our financial results, I want to reiterate some of the strategic initiatives that are starting to pay off. Number one, we have scaled and optimized our vertically integrated supply chain with tightly controlled in-house and often proprietary capabilities, leading to an attractive product margin in the mid-50% range. We have extra capacity in our network, which we can leverage as the business grows and drive more operating leverage. Number two, we continued investing in our Fitment-based proprietary catalog.

[David Meniane, CEO at CarParts.com]

This catalog, which was built and refined over the last 20 years, serves a full assortment across collision, mechanical, private label, and branded products, with the ability to build custom sets and kits. Today, our catalog contains 83,000 private label SKUs, 1.5 million premium branded SKUs, and continues to grow each year. Number three, we continue to be the second-largest importer of aftermarket collision parts in the U.S. and the world's number one seller on eBay Motors. As a reminder, our collision parts account for approximately two-thirds of our purchases and are primarily sourced from Taiwan, which is not currently subject to the same high tariffs imposed on products made in China. Number four, we fully replatformed our CarParts.com website with a best-in-class, mobile-first, fit-specific user experience, which generates 100 million annual visits and serves 10 million customers with a new search, product recommendations, and fee income capabilities.

[David Meniane, CEO at CarParts.com]

Our best-in-class mobile app is well on the way to 1 million users and now accounts for over 10% of our e-commerce revenue, and growing while allowing for a long-term reduction in our paid versus non-paid traffic mix and associated customer acquisition costs. Five, our highly profitable wholesale business recently launched same and next-day last-mile delivery in both the Texas and North Florida market, with a contribution margin up to three times higher than e-commerce. We are leveraging real-time integrations with shop management and estimating systems to drive profitable volume to this business. While the first months of the year presented their share of challenges, we made significant progress in key areas that position us well for future growth. I'll now turn it over to Ryan to review our financial results.

[Ryan Lockwood, CFO at CarParts.com]

Thank you, David. In the first quarter, we reported revenues of $147.4 million, down 11% from $166.3 million last year. The decline was primarily driven by inclement weather, softer consumer demand, and continued pressures in lighting and mirrors. Gross profit for the quarter was $47.3 million, down 12% compared to the prior year. Gross profit margin was 32.1%, down slightly from 32.4% in the prior year period. The decline in gross margin was primarily driven by increased outbound transportation costs. GAAP net loss for the quarter was $15.3 million compared to a loss of $6.5 million in the prior year period, primarily driven by lower gross margins and higher marketing costs. For the first quarter, adjusted EBITDA loss was $6.2 million, down from adjusted EBITDA of $1.1 million in the prior year period, primarily due to soft consumer demand and increased competitive pressure in performance marketing.

[Ryan Lockwood, CFO at CarParts.com]

Turning to the balance sheet, we ended the quarter with $38.5 million of cash and no revolver debt, and we generated $0.3 million of interest income. Earlier this year, in the face of uncertainty, we started proactively investing in inventory ahead of the tariffs to improve the continuity of our supply chain. This works out to about two extra weeks of stock ship cost of goods sold. As a reminder, our inventory has very low obsolescence risk and no risk of spoilage, and our pre-freight margins are over 50%. Our inventory balance was $94 million at quarter end versus $90 million at the end of 2024. As of the end of the quarter, our cash position and untapped revolver continue to provide the necessary liquidity to support our business plan. I'll now turn it back over to David for final remarks.

[David Meniane, CEO at CarParts.com]

Thank you, Ryan. Looking ahead, we are confident that the foundation and improvements across our business secured in the last 18 months have set us on a path to achieve long-term, sustainable, positive net income and adjusted EBITDA. Our priorities in 2025 include: one, continue to expand our product offering to attract new customers and increase average basket size; two, monetize our 100 million annual visits and customer list with high margin fee income; three, scale our B2B offering with last-mile transportation and higher touch sales in key markets; four, grow our mobile app business to diversify our marketing mix and deliver greater customer lifetime value; five, maintain a strong balance sheet with a focus on managing cash flow and inventory levels while navigating the uncertainty of the tariff environment.

[David Meniane, CEO at CarParts.com]

We are committed to maximizing long-term shareholder value as we focus on capturing the growing opportunity in front of us within the highly fragmented and underserved $400 billion auto parts market. I would like to thank our global team for their resilience, hard work, and commitment as we continue to transform our business. Thank you, everyone, for joining today's call. We'll now turn it back over to the operator.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect.

Participants

Executives

• David Meniane, CEO
• Ryan Lockwood, CFO