CarParts.com (PRTS) 7 Mar 242023 Q4 Earnings call transcript

Good afternoon. [Operator Instructions] Please note 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 Fourth Quarter and Fiscal Year End 2024 Conference Call. by meeting investors remotely. start are others to this attending like welcoming and the who I'd

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

have contained questions laws. over business it those under to materially or remarks to meeting, The turn I Actual certain by differ these some to forward-looking from to with disclosures. your Before important responses the securities the results contain implied start may the David statements risks in the federal I could to due and and related prepared statements associated business. uncertainties forward-looking the

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

is reconciliation press discussed. On to non-GAAP the will measures call, measures be in financial both and GAAP of issued non-GAAP today. provided the A GAAP financial release CarParts.com

that, with to to turn now I like over David. the call would And

to all was $XX.X financial XXXX XXX,XXX Thank detail. our will we the for year fourth a the of XX% XXXX joining quarter it and Tina, the year then the to at turn full sheet give to X-year and XXXX shares. you our a end year of revolver review million the $XXX on the XXXX, the another record-breaking and bringing from had the full an in X% some million Q&A. In more $X a for sales the prior on year. detailed discuss and million economic million, $XXX more thank and the the and begin up year $XX bringing repurchased X.X during quarter our then and We million, up on environment for us. million stack. for balance EBITDA quarter, update I sales cash full $XX outlook repurchases before untapped in call to million our Ryan total shares over performance were highlights year of to opening and Adjusted for in you, our will quarter I up

$XXX the continue industry, the Despite we unit price-sensitive volume to share as environment, strong and in the to rebounds, fourth we're taking are approximately quarter. due defer purchases. deliver consumer challenging price difficult choosing automotive growth, saw both long-term see macroeconomic billion in operating players Across the X% some and sustained as to believe we We from online well environment, the growth confidence are consumers we aftermarket support to other nonessential dollars. positioned of and deflation

records number five, two, fiscal volume generates approximately for with to XXX and year, number over in X% highest company XXXX, of of revenues our our reached generating e-commerce significant Over mobile team which and year and one, sales number e-commerce our three, XX% launching the achieving total several revenue; including, number history; company's the revenue app, achievements, surpassed total X% the of which the from over repeat highest increasing number from includes four, prior brakes website total our which revenue over the by recording category, million over and historical from volume. accounted friction visits CarParts.com rotors, traffic XX% year; customers; now

focus our strategic our talented consistent drivers, CarParts.com on a results. growth delivering These team the and the work of testament accomplishments hard our are value to of

$X to growth reach our propel table over car industry levers outlined, billion they parts previously revenues. stakes and we As to company in believe we from disruption, will range

Turning few to XXXX. highlights a for

X% on downloads In app August and it that we are of over than iOS we and has excited launched of With our promote First, mobile today, to of way incentivizing experience will our supercharging and mobile year, marketing time, using our our and confident more and products direct in-app XX% reliance and we're continue e-commerce automotive our purchases make engines brands commerce progress both XXX,XXX purchases. that while reduce repeat cost-effective strategy. over create to on revenue. on Android to accounts last for marketing a their purchase search phones parts, customers performance to

continue to received Garage and of YouTube we of to Additionally, In to expanding thousands prospective hundreds number featuring videos, of and direct podcast, relationships build with our proprietary and and new these instructional current channel date long-term CarParts.com thanks have an our which the views. customers, educational by

YouTube views a our year-over-year an of We time, basis. help acquisition a on own XXx our increase us is own advertising Google already lagged on are of new for new content in on revenue focused first investments customer up X we marketing customers, share XXXX, Historically, content months XXXX. over to can believe, drive focus video which and our channel, push but costs. than more acquire We will lower XX in our million, the creating

focus being expect we our removing some for year. this progress tech the to the accelerating stack, from to we slated prevented of some start have but prioritized our new on XXXX, the in during year, capabilities That resources of which completing said, us roadblocks rollout we

tackle links pleased we're to from our to that videos mobile maintenance to or easy app purchase repair vehicle's for Overall, consumers how-to and jobs. CarParts.com address needs see to destination website products the becoming them their empower and with directly

Second, product our we expanding and offerings. tech in invested

was the expanded in revenue marketplaces, now on the some profitable business. pressure sellers On parts. over we a offset million and offering product competitive $XXX low-cost which XX% premium to growing made of is the our part price brands replacement sell points online of from across side, business business year-over-year up investments noncompliant third-party This significant

sustained aims than market both for us have enhancing to Brands margin and shoppers, maximize our growth. does strategy lower gross CarParts.com dollars. capture our it on assortment and catering to is a our premium Expanding by and competitiveness business, a House While larger profile share gross for to price our profit positioning value product

upgrade we for and continue logistics optimize third, And to chain our supply management.

of with opening larger facility and track and Las semi-automated we're side, our move Nevada. the in Vegas, fulfillment new the On on

XX% As XX% pick between -- this our and as XX% will assortment. last and state-of-the-art building mile quarter, carry will significant reduce we and will that reduction of conveyance a to West It shared our allow costs feature flagship serve will Coast. to costs assortment transportation last a in also operating help newly the module to extensive for Coast will expanded the West

to in begin should efficiencies of time, expect building ramping lower our operating it of get customers half QX this in and expanding form second will and and in we once process fully region. building improved footprint to to the open, in conversion to We operating this continue for our faster XXXX. costs. transportation And start intend in savings drive growth delivery XXXX Those realized customers leverage closer the XXXX. slowly Over for is the and

the remain of will and and to the evaluate impact return investment financially each on on the the We node timing disciplined the in network P&L. based

I'll a Now Ryan to hand over financial it update. for

year-over-year revenues up Thank from In $XXX.X QX, consecutive last X.X% $XXX.X you, million, David. year. million we growth XXth of with reported of our quarter

year. the the company revenues, sales CarParts in ever For flat and compared the prior full the profit year, to Gross XXXX million, generated $XXX.X in marking was $XX.X quarter for from up history. million highest X.X%

prior full million was XXXX. Gross year, from sales the the the in quarter in $XXX.X margin in year. down $XXX.X of gross versus For million, profit the XX% slightly was XX.X%

period. experienced XX.X% year the in $X.X full compression, of transportation sales for in prior in XX.X% we the million shift higher year, versus a GAAP costs million margin to gross the prior price quarter was as product net For year $X.X was mix. loss outbound and the compared

We year reported the in the For loss million $X.X full million XXXX, in EBITDA was prior adjusted $X of $X million prior period. down the $X.X quarter, the GAAP versus year. year from net in million

from million. price adjusted This compression freight year, was million, $XX.X higher down costs. full EBITDA $XX.X and by mostly For of the outbound we reported driven

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

quarter the to full debt. no sheet. in the cash of the the generated and million for quarter of and balance $X We revolver Turning million income year. with $XX We interest $XXX,XXX fourth ended

have Our to revolver position no to we cash continues strength capital have balance our need and or intention sheet. untapped valuations. We raise current highlight and ample believe the at significant liquidity of

The program, disciplined maintaining prior quarter repurchase it in our at share when current versus was inventory million We're $XXX allocation continuing and a million is prudent. balance includes also if $XXX end which plan capital the year.

repurchased we in the indicated, XXX,XXX David shares and As quarter XXXX. throughout X.X shares million

program share also July XXXX, $XX remaining. repurchase million renewed through our have of We with

For modeling statement as purposes, our out. a call, to the through we have XXXX we previous flowing mentioned few call specifically we want in income items

and while which consist for we're we're expenses investments, the This upgrade overlapping our software the maintaining we systems upgrading. old expense impact implementing technology of XXXX are operating make fiscal that to paying that is because year also $XXX,XXX. by will maintenance approximately systems continuing new we're First,

our from expenses million. related and facility rent approximately Las overlapping have $X of we Second, new Vegas

quarter. and deflation XXXX, Lastly, which anniversary we we expect the X% since experienced to January fourth as we've approximately of enter

we year to For by X% XXXX, the primarily expect to growth, unit revenue of high mid- deflation X projected full single-digit masking quarters driven positive negative growth. X%

plus changing in headwinds on basis expect points. and discussed of minus range XX%, the also or profit We to reflects compression. gross previously due margins XXX This patterns price the consumer margin demand

impact long of a cycles. compound our through the priorities time growth, our runway value company over that and our believe We strategic for has multiple will

balancing the with look prudence we opportunistically shareholders. remainder of returning As the year, financial continue to we'll to capital

remarks. David now to like to would I turn final it over for

Ryan. you, Thank

the environment, our conclude, touch difficult off briefly are due to in we Before a me to on business impact by and exacerbated compression in how slow the these demand, continued current softness and consumer January. we economic price approaching weather inclement let challenges. XXXX started tackling and macro

to of gross significant revenue to quarter, by growth our currently under unit our has first low impact and for the expect digits. net masked down deflation a For year-over-year we margin been be mid-single pressure

some flow. sales are with initiatives primarily better strategy volume by discussed and marketing customer seen share we growing costs driven earlier. commerce have free experience and focused on investments and always more cash market We efficient mindful capturing acquisition We in profitability I remain and volume, and improvements of the February

challenges, including the our roles. we to significantly prudent global In reduce the of elimination structure, difficult made but have XXX decision light of these cost

in add approximately the $XXX,XXX as charges. the And On expect other impact with these for initiatives margin reductions onetime fiscal million. be compression. as $XX an XXXX, to We to million basis, well cost the to up changes should offset gross reduction expect $X flow-through we partially these annualized of

decisions protect of These want environment. likely, made to we the to but shareholder to agile, we realign stay value, not and are the reality want

who with for as executing map our immediate may more app; XXXX number as such three, serviced over new number marketing will of well and base, upsell, to expanding two, customers efforts drive to believe focus one, e-commerce focus adoption CarParts.com mobile new as and customer increasing compound pushing those markets main Our of our our be we capture road assortment for capture have before; wider will areas new not features awareness generate number cross-sell these to to product be, including a growth, We and sales brand. brand time.

we value. focusing continue believe conclusion, accelerated and strategic In on long-term revenue of maximizing growth shareholder to we're the while to will lead business the areas priorities

in we proven the change and and through different. now management have that is We past environments difficult grow can execute no

In as by well as sheet facility of the balance long-term inventory no ample addition, our strength we're with with an supported undrawn debt. cash and

on These confidence pressures overcome out we we market stronger and other the us factors side. the will give can the current that come that

We'll for it for up the and today's questions. call. now you, open over everyone, operator joining turn it to Thank

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

gross margin. start wanted been year. the all deflation ongoing I with guess, has I price to

that You substantially XX to the guidance holding like changing, I XX the years. gross the you calling for stuff out? margin XX-ish steady of for of in guys guess, of because that lot guess, really, I a feels past or range couple were year, the have what's it's the OpEx been last onetime weakening

Ryan. is for Thanks This question. Sure. that

look So gross of -- of half. beginning some price sequentially, had X quarter lapping to quarters, margins tough what comps see year. we expect we're pretty year, And a started call year-over-year what the trying it, the pretty happened margin decline. for to looking And articulate gross and margin, into going here was last if fourth I in back in comps gross strong first, you bit what average to we're we at you of a have little the better the kind and we was selling is

where basis, deflation, So overall, the goods what overall at freight gone competitors, compression. down inbound the prices, has look but which you market happened hasn't are XX%, down our costs a that's of cost seeing has outbound with average selling commensurate And about when you're our our a is carriers amount. on including lowered

like fight seemed QX do it offering of that volume. to continues side, some the I freight the any to you and guys a benefit little XXXX? and in on get FedEx for -- UPS freight from benefit guess Any see guess, et fighting presumption bit discounts, were I is cetera, in worse

question. the cost is for costs There we're Michael. get is The per the but and reduce shipment. profile FedEx gets time that competition to out we're going Thanks us. units to relationship happy over way with very is more This there, transportation our it

And you'll that's why us that along are by increase upsell, us. passed costs large so cross-sell. about to hear most those carriers their of signed getting talk contracts transportation were costs the The and did

to in transportation we're more the curve, get so going be working is right to we're now. And outbound fewer which things what boxes able change to meaningfully have to on

relaunch, remind of JC for kind I focus going what maybe are I the But cost deemphasize you on, of some whether key reduction Whitney it me. to for the these guess, here the cetera. and can what's things efforts? to areas XXXX? it's out the and have you focus do-it-for-me, one last you're et just guess, technology, working Then through branding, walk like with feels initiatives get some us pushed of

David. it's Ryan,

in if that in did we a that I of step X% difference From a take standpoint, the growth back, XXXX is accustomed we about did is only inflation. deflation. same delivering. had results definitely to the had XXXX, this in we of think in I X% not we The that XXXX. volume about XXXX, And we're

not of sales growth, execution definitely obviously, the X% of satisfied and responsible environment. road on I'm map, with for the me. XXX% we're the regardless that's So

So tougher. were I It's did raise, ago, capital quite that were can we we aware this we've discipline day, difficult preservation and things is XXX% for. one financial Four on cash also say you -- focused environment. a remember, get that and been years something ready that if a we've because we would

basically of cash. preserved capital working we changes, outside so And all that

we And we inventory. cash, so have have

no have debt. long-term We

cycle. the on the have we side, through So need balance sheet everything we to push

definitely income On statement better. the need side, we do to significantly

some have focused we're but we So growth. headwinds, on

pushing to it's I out X that's experience going make if were the to marketing the call specifically to top and the the number line, more e-commerce going engagement. so also one, really, And and grow app things, That's efficient. spend

current new offering. product brands, It's to adding selling and really also our in for customers new changes branding right and to a three, JC announced. expanding building stay marketing trying and it's more really all our just new number it's and after two, CarParts.com that especially And Number brand some customers. to and And categories, Whitney. now, this environment, the we agile, capture we're lean

year. we're X growth, And so those X tackling of that's it's not in categories to going unless specifically on it this focused be

of next Dillon Our comes the question line Capital Heslin ROTH from from Partners.

the what reductions you force about on I to head cost First, wanted clarify just mentioned, reduction. the David,

that office your cost talked of distribution Like then spread? is annual And your savings? Is of sort sort is where back it So roles, and percentage it you million, -- when corporate? spread? offset centers? Is of XXX about is the that how what that $XX of expected in

take So the I'll let the second part. I'll first part. Ryan take

I think on make had deflation. the to definitely to seeing we're gross structure. due cost very And our some margin difficult realign the we decision headwinds the to

across So the and the substantial reductions board. were

second the office roles XX% in Manila. about the the about corporate it you're I'll Ryan roles, in and looking front at Ballpark, then both let And workers warehouse, corporate part. of frontline So impacted also line. XX% back take of

Sure.

million recently, flow-through so it's happened million this an lot for the an reiterate, of just more on to looking of fiscal be you're so A $XX $X at year. XXXX cuts Just going basis. to annualized

a about mobile e-commerce? some a a then customer you with of follow-up, helped can as [ And that as little what grow in worked bit with the that talk What app the that channels of helping ] you acquisition? were print

Are your see just or sort And to of what you back with sales on on then spend flexible there is marketplace? based how also that? to add your -- both able the pull and is you it

Yes. Great question.

app. very one our probably happy the It's we're with for of biggest So accomplishments XXXX. obviously,

growing. What of so all get our organic, So people through revenues the have it's a the and over nonpaid they right we is downloads, so of and app pop up that about it's and website. it. seeing and we're now, X% e-com the XXX,XXX downloads that of come They they about talk were benefits download

So -- and it's still growing.

price, higher the a and selling have seeing now what So app, on higher we're we a average rate. repeat is right purchase have purchase -- we

to efficiencies So should you're continue our over we some is time, and think see is I marketing. nonpaid start to grow, traffic going to going what in seeing

So next the to to our objective this taking like XXX a couple it about is points, should basis through bottom by XXX our of get marketing flow at the look over lower if step I and back to spend line. years,

in the -- is was today, for of out XX% I goal XX.X% our all release flow see think the you're that spend called in to to through later that year. about to going Q marketing K So bottom to we closer the the that and line. get The

So double get time, the we're And going we keep to to over this app. to digits. pushing want

revenue, going make moving call to users we numbers we're forward. every How metrics relevant so percentage that a to we financial the at I are many And and it what have, earnings think any announce of point e-comm modeling. other think to

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

else of to about Or come of? aware revenue range? to see? do the for the to most expect would just anything be at low me. high that range, the see we what that price of end guidance should what curious, one Is you one, that there of we in to I'm in as is Or to think that expect to, First see end at Or due need range? deflation? what come you just there would the you

about guess. and I can unit ever take in growth. We're The part, business out more shipping growing I'm worried I units. growth than mean, I units before. not volume the first is

competitive I anything? difference the think the don't want would based the price landscape. be if I on add compression, the deflation know you to

Sure. Ryan. This is

from when I contribution manage basis. was tried at to think do business, we've dollar the it ratio what look we always a

as on that So range margin, improved could as price start to sales various maintain such and at increased of great the some we're as other possibility -- the try side, on, see you of and end our or investments push working there's to assortment upsell hit we lower a search, price the we points. cross-sell,

all I think range. ways, us As our the towards And outside then, uncertainty. macro that these things see go higher hit, control. there's it some of you of end makes is course, portion, which the the In an of

million I think cars step more on is if more cars the there's fleet, backdrop this obviously, miles on the challenging me, take driven. car road. an aging but being back, It's like I still for macro the a XXX a is and standpoint, year road, from

low, online the TAM. we're biggest strongest the one a one in -- players huge penetration is still of and The of

the to we're going next and going of market take grow. push going years, we're just couple it to over and profitably, So We're share. execute. going to Sales do through to are

see do-it-for-me expect from any And offering, initiative we in do about then of think sort to here that contribution if XXXX? the you

Yes, you I'm asked. glad

to bet. the it auto I aligns repair, friction with opportunity, and a to vision think it's long-term it big our from remove always that is and a do-it-for-me was get installed

some the we're that will to this the on year. we But now, more is in We're things over what solely think few going right focus leaner. We're generate we much much do few headwinds quarters, have economy. revenue the so next And incremental agile.

offering marketing the So e-com It's and we app. big the branding. and experience priorities it's product expansion, right the and X the It's have now.

to the me generate And going from top now, focused so that's year. we revenue top and first later to try laser we're this growth now. incremental immediate revisit, right to But to going push line and be we'll line on anything it do want

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

now disconnect. may You