CarParts.com (PRTS) 30 Oct 232023 Q3 Earnings call transcript

Good afternoon. [Operator Instructions] Please note that this call is being recorded. I would now like to pass the conference over to our host, Tina Mirfarsi, Senior Vice President of Global Communications and Culture. Please go ahead.

Hello, everyone, and thank you for joining us for the CarParts.com Third Quarter 2023 Conference Call. by meeting investors remotely. start are others to this attending like welcoming and the who I'd

Officer; Chief Joining David Officer; Financial Meniane, today Chief Michael me from Executive Ryan the Lockwood, Officer. Operating company are and Huffaker, Chief

to Before I the have to meeting, disclosures. start I important over turn it David some

by your in and differ business. forward-looking securities certain laws. associated these results could may forward-looking or under statements the prepared remarks uncertainties questions business federal The related from the contained those materially implied responses to to and due contain to the statements Actual risks the with

For both risks to that the discussion which on found of filed XX-K Relations other refer could report annual important as on Form can be a factors of Investor material CarParts.com and our please SEC, affect website. the results, XX-Qs and with

call, discussed. be over would measures press On that, And measures and non-GAAP A to provided with reconciliation GAAP release in the financial financial turn GAAP it the like CarParts.com to to today. is non-GAAP will David. both issued now of I

balance environment. during up resilience the challenging the Adjusted at the shares year up million. $XX business, are joining quarter. given from the and and stack, with Tina, for our quarter $XXX on sheet XXX,XXX stakeholders EBITDA the XX%. year-over-year another The our our Today, in for quarter we to And quarter in reported million on revenue, we all a our the was $X you, thank XXth prior growth $XXX you the consecutive economic end Thank period revenues repurchased us. million, of demonstrates million of of X% of X-year cash

choosing consumer, nonessential unit even the quarter, to with strong a who softening generated in defer growth purchases. We is

experienced revenue a price which our most muted in net quarter, growth. deflation result, the recent we As

them the that need. believe confidence positioned and consumer well with resources parts we to be we as rebounds, will support they However,

stakes strategic from catalog, reach billion E-commerce to customer believe We experience, $X and our growth and supply that by earnings in industry our chain these and priorities and logistics. focusing profitably discussed table revenues last call, can we assortment on marketing beyond. range transformation, company X On disruption. we innovation, digital fundamentals, levers,

touch of me Let each these. on briefly

First, fundamentals. e-commerce

few made our impactful changes that Over give we including current accurate to months, search last website, the our have more to results customers. improvements

cross-sell the loyalty an incremental in improvements revenues. Within features changes, continuous and programs, generated we capabilities, allow our add results, include to implementing Currently, lookup will are of upsell first month and VIN platform, website that we and these modernizing which more. upgrading us search in $XXX,XXX

are enhancements digital auto experience These aimed to the counter an store. to simple make as up walking at the and seamless as parts

end platform the to completed QX follow. XXXX and to by of improvements modernization subsequent expect be We the

our date, downloads app. our engaging direct with brands the their also To launch reliance the mobile and and We believe successful will have promote the of while app, million have purchases. way cost-effective our completed customers of repeat mobile on XX,XXX a engine of we with and that $X will use building our search performance By marketing. through revenue. to relationship customers XX% a We reduce over products, incentivizing phones we that

transformation. digital Second,

and not also way and and legacy we in execute leverage the old migrating $X way system to scalable removing flow the These months. and proprietary management functionality upgrades, cash million more to access only by complete, that multibillion-dollar save new initiatives of we year. technology but our them systems, migration to infrastructures. have catalog. we off both are for an paving our cloud expect features to continue per upgrade ERP and These Once infrastructure. We change Consequently, substantial a XX retiring the will to critical free and fundamentally take cloud order by approximately we up kicked have upgrading roadblocks

our and assortment transformation catalog. ourselves will as to parts enable collision all us additional our a the establish This evolving our expand promise this, curated go-to and retailer achieve of from share inception automotive base. as repeat and customer We're our requirements. repair Third, market categories all are we brands, a maintenance upholding and To destination for assortment. grow to while carefully products, incorporating

gross Our both ongoing house-branded with and focus remains dollars profit products. our brands on national maximizing

is of a meeting platforms, our from is growing podcast In and launched moving and search X/X we are, paid In of I community we Garage channels. customer building inroads want a our do. relationship considerable everything away CarParts, With customers, dependency of customers e-commerce at at by we all experience. customer including emphasize continue and our first our revenues with center called, Fourth, to marketing make that to from at on direct which recently repeat spirit on now the over us the and they the coming and them have CarParts.com, YouTube. available where the Spotify

historically building that about Our for needs easy maintenance jobs. grow YouTube our empower with and stress them objective We and repair remove a hub learn from directly their with videos. or is and website educational purchase from channel instructional process. products app the aim vehicles The how-to to to burdensome links consumers a to videos tackle to do to both clear, to continues this by

heritage excited deeply Whitney. the XXX-year and the in the and of rooted announce industry a to with JC automotive staple, Next, garage return quintessential ethos we're

the iconic catalog, of new in ] [ website to find to with head the inaugural beginning. to you Omagh and the events you jcwhitney.com, collaborations. content, reengaging will new community through we lifestyle-driven edition is up free our that the just this is our are Feel and magazine where If sign for

the next with We crown year our have brand full trademark. updates over to around more expect strategy a jewel

we our accelerated Whitney, focus believe marketing At which growth. of number on allow This and our will the brands spend will resources and efforts result on JC more and building priorities, also a our will reducing intersection us we efficient be marketing of house assortment website. the to capital, in

Next, innovation.

is Do-It-For-Me in with pilot strong continued line customer expectations score. with NPS performing Our

integration. current and e-commerce next results, catalyst Our The priorities for will this of VIN to iteration with the lookup, enhancements upsell offering. this upgrades of perfectly cross-sell, search strategic to be align the including next set

In disrupt run industry. business. the cash of are operating increase we business, the to become and Blending competitive AI, other processing areas flow. a get lower moat will the of language data free operating in these around need fixed believe generative time, building to proprietary expense models a to us proprietary ratio our will ways us allow and we catalog technologies on leverage customer Over decades multiple we exploring central to language with natural our

norm, speed back with on There history. supply expectation getting of the in happy speed. any finally, delivery, With that customers improving logistics. their on a our becoming level that and their part of is paired delivery comes and parts click need our are announce And to certain journey, more shipping customer chain to when the we the I'm at customers our reality to faster it get of company have have to they very point been focused our fast than

supply to turn more would chain logistics, over Michael. on I and For like it to details our

the announce across in the Peru in that team return improvements and resulted the reduce satisfaction. improve there decentralized recently have This now returns you, other We customer improved David. returns to been and have costs efficiency, I'm Thank center that network. increase on has and to closed costs. has happy been processing working several our lower

the between our original Vegas our will Vegas as Coast to metro. PIK It our allow double efficiency due With assortment. to move new almost we larger West assortment. carry nonconveyable significant PIK Las flagship expiring, and in chosen XX% which our extensive have within a footprint module will Las in a lease operating reduction to will building Nevada that brand both will our serve This will to and feature a warehouse XX% state-of-the-art location, our of and costs conveyance conveyable for

allow reduce This last mile assortment our current us newly transportation to compared to shipment costs will topology. expanded

CapEx deploy lower ROI and with transportation we expect XX% We expect XXXX. $X sales. to costs of in a begin the higher QX approximately operating this standpoint, building to of million form From excess in an in

also on made and optimization, inventory investments. process have We placement considerable progress technology

on Let each me of you these. a brief update give

First, process optimization.

existing inefficiencies We streamlining on continue while reducing to make progress processes.

trend XX year-over-year costs is of in continue revenue down improvement as percent labor labor basis downward, year-to-date points. almost to and our Our now a costs

Second, inventory placement.

to While we have inventory always placement supply led the global suboptimal across network. optimized shock inventory chain placement, the

across Now abated, mile the network. that mitigate times issues current network. we and within supply have chain are optimizing our to fully This click-to-deliver transportation lower costs serve placement last will

Combining long air of mile further investments. term completed will allow reduce more greater for third, dimensions optimize We to each cartonization assortment, which machine, to audit us we our package. proprietary a chain first will implementations this technology supply recently the Cubiscan with shipping our of in our network our These give control amount leverage costs. last box And will accurate recently tools. installed

Over time, current making we improvements the basis investments of levels points flow the from that line. we XXX will result should bottom in think a that are to minimum

fulfillment and As over incredible their commitment hard members safety, it team Ryan. to our to their now I thank year. center for want always, this I work to performance will turn

XXth revenues higher the for revenues cash our digits in profit was XX.X% growth in quarter. low million, $XX.X year-over-year We free we while from of million single product the quarter of to was million prior versus $XXX year prior Michael. sales down Gross the expect up remaining full to you, a Thank XX.X% as experience year. with sheet. quarter positive $XX.X be balance million, X% costs robust the of maintaining mix. and shift year in margin in from consecutive Gross and a still slightly the marked $XXX QX continue transportation outbound flow third the up year-over-year, in

million adjusted in and $X.X down prior driven a was outbound the patterns. the year million from performance increased spend loss $X.X by economic consumer higher of for costs, quarter the We prior freight net EBITDA net million the $X.X GAAP year. in This reported of period. to marketing of was $X impact spending compared loss million,

in partially was by this improvements costs. warehouse fulfillment However, offset

once months software to our also for while $X $X and are that the and the new operating of over because Digital clarify, maintenance implementing expense. To be XX maintaining XX million, systems we'll is expense we cash transformation this by the next approximately overlapping should we David consists allow believe paying will which efficiently impact to to million upgrading. and much in provide systems and our to up immediate we're can old the the upgrade which infrastructure once execute per ahead. mentioned, move save million we year ROI us cloud, we years to an But $X implemented believe more as we

the no Turning We the revolver $XX with debt, the of prior cash sheet. from of ended $XX.X up million quarter from balance million cash period. to and year

and model, In at of of quarter, to business continues economic current income. we need to dedication We $XXX,XXX we our intention financial highlight our proud environment, discipline. the interest have we are of no generated to the capital and valuations. liquidity raise relentless For have resilience position cash current significant believe or the our ample

end was carry inventory reduces at in behind of some $XXX The million. transit, less hand supply working balance With can requirements. quarter on inventory our which both we chain us, and pandemic-related disruptions capital

However, QX and continues you through remainder the can peak building for prepare of which we our the through inventory continue QX. to expect late selling as season, us year occurs

maintaining also repurchase prudent. program, a includes share continuing allocation are and our when disciplined if it plan We which is current capital

repurchased through the the cycles. believe repurchase We have remaining our With priorities through and company authorization third extends of is we $X.X time impact that we July incredibly multiple shares said, our million. XXX,XXX compound Under our the million $XX during will that over that program, approximately of strategic million valuable, for $XX.X quarter, XXXX. approximately share current value the

of financial David capital to returning opportunistically remarks. look final prudence would to we the I turn with As like to the balancing over to year, now will continue remainder it shareholders. for we

both. do. you, we of customer At center the we at everything CarParts.com, the Thank put

are Focusing more making our that believe stakeholders significantly on strategic valuable and our priorities will company that to benefit come. for years we

data to expansion powered journey AI. by Our growing science curated network harnessing and transformation is fulfillment advanced a best-in-class a create and digital assortment, mobile experience,

to And not it. Thank investment success. your entire tremendously our Working this at We're without We to the everyone CarParts.com, operator in makes you get proud questions. we open the alongside up of after could work as it is you today. our us it you say future. day over Thank what for to do you. joined company's now us turn hard for CarParts every your We'll and long-term excited to team. so who's

Craig-Hallum Our the of Instructions] [Operator Group. line from first comes from Capital Sigdahl question Ryan

Ryan, to with I want start guidance.

said said you revenue expecting So single-digit X%. Previously, still last year. growth you're I low this to quarter, X% guess, you

share? Or there? thing same change a the been talking has we are there So in

Yes.

low you said more we time, a to little to last mid, low color. think and kind guys narrowed give I we've just bit I to it of think

kind on talk up sales? sales then quarter? how about in within the that can also And of quarter, trends the the similarly spend then to was And quarter? did maybe trend you ad in much month-to-month And

Sure. Yes.

focus the in that that deflation running And slightly we variable but So similar were in prior maximizing on for net dollars contribution I month we mentioned. we've higher David of variable of actually costs. But going to for as than down October, we're to in said, units, the dollars, were up profit gross gross year. think respect, profit but margin always due dollars us,

we through single-digit We're and remainder year. marketing, to pretty slightly low I we confident rate think down believe look the still efforts a we the but marketing go overall, sequentially for were for growth marketing, the these that on of year I in year, up ago. hit from as full

versus the then year quarter? on the mix? outbound gross the mix else in or the in the what through something And years I if freight it's weakest just within can place went several guess on here talk last side? about exactly it's you And been can freight margin, And was FedEx the talk when here. versus you side, surcharges in there's on negative

Sure. Yes.

surcharges little end they year, kicked last a in freight bit than kicked month, later where in so the of at September. So this

mix. gross I Mix, the For shift predominantly the almost mix mean margin, amount. was was for a -- slight it in there whole freight.

branded branded. generally profile. we percentage XX% lower similar a And know, you branded margin So to margin but XX% a has gross went as profile, dollar gross from

as example, gross margins XX with XX% item an have dollars. So you'll branded $XXX that makes profit

for that XX% margins correlator, gross As with a for XX gross item sells label dollars. profit a you might have private profit $XX also

percentage the the But So it to margins. look can internally, way $XX basis, we from pretty it versus a at $XX. agnostic for margin us, compress we're gross

guess, of mostly deflation. And David. I'll we We give by Ryan, saw a can If you it's unit growth. I and QX, significant couple in, points. impacted got compression jump I just data price

So line, on of we small amount what we outbound have transportation. we're seeing on is top inflation have the a and deflation

cost per we're up to line. between X%, seeing X% then top but deflation was So package somewhere our the on

So as in percentage, getting That's decline the we're margin. a from what's two driving sides. gross hit the

driven. So It's not I'd driven. say is the it mix majority transportation of

the from Darren Aftahi Our from MKM. ROTH next question comes of line

benefits in talk plan kind the First kind kind of of search of one, how can you just of about context and marketing to of the longer-term the app you attack that?

David, Yes, of Darren. course. And it's

most for I the worked think us, we transformational years. that on our us So last one app on of the the find majority initiative customers probably over Google. Historically, of is of couple

search Google. And rely we and marketing on optimization heavily on engine so performance

marketing. much come what we're directly performance time, have get over so or to that we CarParts.com so customers trying do to spend to don't to this And is on our Google money

to want reacquire to make don't part having So purchase. connection, that's direct our line when that them game-changing have a direct we the customer, the where with they

mobile. already searching app. to is do to we're traffic trying mobile traffic on get on go So that about directly is XX% from of What Google the on today, our to

purchase, VIP the push subscription, like huge away we engine direct repeat marketing P&L. to maintenance, everything that search can So do on move has into from impact a notifications,

line. basis XXX marketing flow probably And down I is our the between somewhere you'll to XXX think points, what time, should over should that and spend come see and bottom

cash as just then facilities. that you The sheet helpful. And into then a in kind a about flow cost how I just of Mike, moving of result balance going new little that I And Vegas hit dive That's think the this is Can talked reduction you facility. to statement? guess, on bit million CapEx, $X more? one more and

I'll the Ryan. be to all is first question. This going the $X Sure. part take almost of That basically is million CapEx.

so and bit statement, little get You majority it a order going set may in but conveyance, to have hard OpEx we up, flow pickers the not that through racks, items, through that the as running of cash run see is OpEx. you'll facility

Vegas around PIK with us lower throughout the make the within building. we're term to the and lower process will year-over-year of long costs, to the our putting in with as have. profile other that improvement. over on module we're Darren, we our Yes. current the points we'll improvements XX allow so down And continue cost rest basis capabilities network

could guys the actually Great. Ryan, wins you $X balance or clarify that P&L the the hit hit million statement? the going in to capital sheet

took today invoices literally this we We some depends. for just actually the call. before this approved It of

think the QX. a I might the of So you small hit and this hit see amount remainder year majority

D.A. from comes Tom question next the Davidson. line of from Forte Our

two on questions. for had is Tom. I This

For are in used the should result strikes? would holding impacted which automotive one, for think all, at a be we for would by labor disruption example, guys into the Like, production first how, their cars, positive if you you? the consumers

mean little term, in I yes, very agree with impact. I Yes. you. short term, probably But long

not think go cost I if car to I get -- you're going raise to prices to labor, new up. political, of and expect but the

if new to up being to as for of for them hold an new well as they the cost to combine to capital and more So are a their difficult rates you it's be incentive make to car, to high there's it going interest vehicle longer. buy going as with car go prices consumers I American today, on as think

both car, where CarParts.com is a company a this also but upgrades, And keep destination good it to replacement. like becomes running longer, maintain for your

customers. be us an more opportunity term, long to for So it I think capture should

question my second marketplace. for about your And

example, eBay? Amazon it calendar sales help that this marketplace in X your performing are how you sales mega So year X and Amazon had does on For year?

growth. whole down. as The platform in reported earnings growth are a performing line Amazon just marketplaces slowed their and on with has Our relatively Amazon

CarParts.com. one And capture biggest is it customers the to is the fastest-growing of QX, which for us, was opportunity channels. on For e-com,

significant, overall e-com, higher the our unit on So CarParts.com, growth was that. even was growth than and

us, to CarParts.com So to marketplace and we time, higher over be the need mix for the of to mix lower. get revenue be

will Now as rate it that slower It than mean has the decline. a e-com to e-com just accelerate to marketplaces means well at they doesn't app. grow need that and as

I So to Michael anything. don't wants know add if

do longer traffic percent overall we very, site. high e-com business a mean towards I our to to very, want business. We mobile of the very continue as Yes. term, drive have

ours. is And But of going an and get driving and grow to So the we'll partner, we're grow drive e-com. outsized them. app continue to where to with continue to them. e-commerce important focus we're partner to going Amazon is an going But eBay with important to it growth. to to continue We're

Our next Lake question of Street. comes from Ryan from the line Meyers

what First to of is you demand waiting feel beginning the deflation. me. strong, sounds by environment one that overall for sort see improve? unit growth of signs still price just the it's are It offset is but curious, I'm you where like to being kind

things guys you at of where improving? sort looking are demand what curious feel like Just you're what you paying to that attention is and environment

it's conflicting point them at, out up I David. and signals point of Ryan, I'm And of the All lot looking really there. down. think some of them happening. some tell hard to a indicators Yes, what's there's it's

goes kind changes some or for I environment think, the the Fed changes trickle or interest touches companies me, and rates, when overreact. I of macro the think

us, keep just I try we to view. a long-term think, for

very resource of have We plan. good built and vision, a strategic solid strategy, priorities. have capabilities, have we some we allocation have our We've our our kind we

with right So I the right and adequate map team road we're that on resources. the have executing no doubt

for raising just and and do We do blocking we without capital. in revenue profitably, tackling, continue and and we can think it additional beyond. billion get $X So to can we I it me, could executing if

that impact that other pull helpful. question, to Got can there offset are negative seeing? deflation my price That's any guys levers of you're it. the the And you help then

them of of There's can levers a that pull, lot are kind connected. we of all and all

to And launched the can We podcast. have have of the things Whitney that's they to a do. deliver we we ship That's There's have JC why a lot to customers the we we are. why that we great customer have experience, reach initiative. where faster,

played to can lot that but more we levers Historically, biggest of expanding narrow some the pull is you're of that one set going now a a extent, our of think year. done assortment. very categories. we right we've see next just year, this to And I of

private terms, brands, drive simple can build time, for these in label. so growth. can of I should over we more And more a we all sell categories, products, think And more brand our

mean deflation, balance clear, are a now, be is we units. business just no and solid have I And we super but profitable. sheet right debt. growth to in seeing the we're growing. It's and Again, by just significant impacted being

we're spot. good in So a I think

think economy is of business the kind the is doing the I some But muting that and growth. deflation of good. overall,

conference today's This participating. you call. for concludes Thank

You disconnect. may now