CarParts.com Q1 Earnings Call Highlights

Key Points

• CarParts.com posted its first positive adjusted EBITDA since early 2024, reaching $585,000 in Q1 fiscal 2026 as cost cuts, tighter ad spending and operational improvements began to pay off.
• Revenue fell about 10% to $132 million, but management said the decline was intentional because the company reduced lower-return advertising; gross margin improved slightly and operating expenses dropped 26% year over year.
• The company highlighted growth initiatives including the A-Premium partnership, the new JC Whitney product line, and capital-efficient channels like its mobile app, last-mile delivery network and fee-income programs as it targets positive free cash flow in 2026.

CarParts.com NASDAQ: PRTS reported its first positive adjusted EBITDA since the first quarter of 2024, as executives said cost reductions, advertising discipline and operational changes helped offset lower revenue in the first quarter of fiscal 2026.

The online auto parts retailer posted adjusted EBITDA of $585,000 for the quarter, compared with an adjusted EBITDA loss of about $6.2 million in the same period last year. Chief Executive Officer David Meniane called the result “a milestone” after five consecutive quarters of sequential improvement in key profitability metrics.

“Twelve months ago, adjusted EBITDA was -$6.2 million. We made a decision then to rebuild this business around profitability, and today we crossed the line,” Meniane said on the company’s earnings call.

Net sales declined to $132.0 million from $147.4 million in the first quarter of 2025, a decrease of about 10%. Interim Chief Financial Officer Mark DiSiena said the decline was primarily driven by the company’s deliberate reduction and optimization of advertising spend toward higher-return customers. Growth in A-Premium and the company’s own channels partially offset the decline.

Gross profit was $42.9 million, while gross margin improved to 32.5% from 32.1% a year earlier. DiSiena said the improvement reflected pricing discipline, favorable product mix and freight costs, while the lower gross profit dollars were tied to lower volume rather than margin deterioration.

GAAP net loss narrowed to $1.9 million, compared with a net loss of $15.3 million in the prior-year quarter. Total operating expenses fell to $46.0 million from $62.5 million, a reduction of about $16.5 million, or 26%. The company said the decrease was driven by lower advertising spend, improved warehouse efficiency and headcount reductions. DiSiena noted that the quarter included a $2.3 million non-cash gain tied to the completion of the sale of the company’s Manila operations; excluding that item, underlying operating expenses still declined by about $14.2 million year over year.

Management Emphasizes Contribution Margin

Executives repeatedly emphasized that they are managing the business around contribution margin dollars rather than reported gross margin percentage. Meniane said reported gross margin could move as the company shifts its mix toward more drop ship sales, A-Premium products and JC Whitney products, but that fulfillment costs may also fall.

DiSiena said the company’s product and channel mix continued to evolve during the quarter. Private label represented about 81% of revenue, down from 83% in the prior-year period. Collision and replacement products accounted for about 67% of revenue, up from 65% a year earlier. Own channels, including the company’s e-commerce site, mobile app and commercial channels, represented about 69% of revenue, up from 64% in the prior-year quarter.

Retention channels also grew as a share of sales. Email, SMS and push notifications represented about 10% of e-commerce revenue, up from 7.5% a year earlier. Mobile app revenue was about 14% of e-commerce revenue, compared with 10% in the first quarter of 2025. DiSiena said app customers convert at higher rates, have larger basket sizes and come with lower acquisition costs.

A-Premium and JC Whitney Initiatives Advance

Meniane said the company’s A-Premium partnership is gaining momentum, with annualized revenue run rate approaching $45 million, up from about $35 million at year-end. Management said it sees a path to $50 million in the near term and potentially more than $100 million over the longer term. The company said the partnership is capital efficient because it does not require CarParts.com to carry the inventory or working capital.

The company also highlighted progress on JC Whitney. In March, CarParts.com launched a JC Whitney branded product line in partnership with A-Premium, with 30,000 SKUs planned. Meniane said the initial 7,000 JC Whitney SKUs are live on Amazon and generating sales, with the remaining catalog expected to scale during the year.

To support the JC Whitney inventory investment and strengthen the balance sheet, the company completed an $8 million private placement with strategic investors. DiSiena said the transaction included 10 million shares issued at $0.80 per share. As of April 30, the company had 80,570,054 shares of common stock outstanding and held 3,786,000 treasury shares.

Balance Sheet and Sourcing Updates

CarParts.com ended the quarter with $38 million in cash and no revolving debt outstanding. Inventory was approximately $91 million, down from $95 million at year-end, reflecting lower owned inventory needs as drop ship volume grows and the company shifts toward what management described as a more capital-efficient mix.

The company’s convertible notes stood at $25.3 million, with a conversion price of $1.20 per share. DiSiena also said the company estimates up to $4.3 million in outstanding EAPA tariff claims and is pursuing recovery through a formal U.S. Customs and Border Protection process, though he said the company is not building its forward plan around that outcome.

On sourcing, management said approximately 70% of purchases come from Taiwan, about 20% from China and the remainder from other countries. Meniane said the company recently opened a branch office in Taipei to deepen supplier relationships, improve lead times and support more efficient sourcing coordination.

Technology, Last Mile and Loyalty Programs

Management framed the company as having both a digital layer and a physical infrastructure layer. Meniane said CarParts.com is investing in warehouses, fulfillment, last mile delivery and supplier relationships that he believes cannot be easily replicated as artificial intelligence changes e-commerce.

The company said it has delivered more than 2,000 packages through its last mile network since the beginning of the year and is running next-day delivery for its own channels out of two of four warehouses within a defined radius. Its target is to deliver 300,000 packages through the last mile network over the next 12 to 24 months, focused on big and bulky, non-conveyable parts.

CarParts.com also has two AI systems in production. Spark is a customer-facing shopping assistant on CarParts.com that uses the company’s fitment catalog to help customers find parts. Zap is an internal tool automating returns, cancellations and warranty claims.

The company also launched the CarParts.com Mastercard, issued by the Bank of Missouri in partnership with Concora. Cardholders earn 3% cash back on CarParts.com purchases and 1% on other purchases. Meniane said more than 1,000 Mastercards have been activated. The card joins the CarParts+ membership program and warranty products as part of a fee-income platform that management said generates more than $4 million annually.

Looking ahead, Meniane said the company remains focused on reaching positive free cash flow in 2026 through contribution margin growth, fixed cost discipline and improved capital efficiency. He cautioned that positive adjusted EBITDA is “only one checkpoint, not the destination,” adding that the company still has more work to do to generate cash after all obligations.

About CarParts.com NASDAQ: PRTS

CarParts.com, Inc operates as a leading online retailer of aftermarket automotive parts and accessories in the United States. Through its flagship website CarParts.com and affiliated e-commerce platforms, the company offers replacement components, performance upgrades, maintenance items and collision repair parts for a wide range of domestic and import vehicles. Its product catalog includes engine parts, exterior and interior accessories, lighting, braking systems and powertrain components, supported by an extensive inventory and proprietary order management system.

Founded in 1995 by George Chamoun and headquartered in Torrance, California, CarParts.com has grown from a regional auto parts supplier into a national e-commerce platform.

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