CarParts.com (PRTS) 29 Oct 242024 Q3 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 Brand. Please go ahead.

Hello, everyone, and thank you for joining us for the CarParts.com Third Quarter Conference Call.

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

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

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

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

you, for today. joining and everyone, Thank us thanks, Tina,

on with we three progress one, gross Over seeking the quarter, less reliance profile beyond. higher-value and free consumer flow. In improvement and by discounts. a unit began cash is This position value input margin strategy fiscal a promotions on XXXX higher economics parts net improvement as higher acquisition made a profitability; term. number third pricing against and We the XX.X% was third strategies updates margin; to strategy, to our customer efficiency prior year with pricing, line sustainable The our long-term quarter. XX.X% our driving strong refocusing product margin number CarParts customer provides key the with elements: two, for on to plan to better strong from long deliver and the in increase margins target value effectiveness focused improved well driving in costs pre-freight quickly driven we achieving and by quality to with accelerating lower and and and and base number year growth this quarter saw as three,

We share that confidence high road evidence will we have continue map in points today. several with to our

journey early are momentum. positive the in but showing Some

this We capture positioned expect difficult is front highly to and our emerge underserved in billion a to period, of replicate. growing business us our opportunity Customers offering auto fragmented market. to from scalable within parts transition $XXX the of and and value differentiated, model

generate XXX reminder, a in year. As we million of e-commerce on traffic visits per excess CarParts.com

network like X-day mechanical million that competitive the infrastructure creating Milton now our country. fulfillment private moat. I'd branded and a X.X our is we of includes both complete parts from feet and premium business parts the X is call Georgia, label Florida, a with collision now weeks by nationwide North and Carolina saw Virginia. and square that assortment Helene with of on proprietary Tennessee, at across South Our in our majority and impact out shipping to hurricanes backed catalog And capabilities of

undamaged is to now closed, briefly volume. and shipping was Florida Jacksonville, in at facility full Our back

impacts devastating these watch impacted anyone storms. to in the our to on go residual out and continue will We region, for by our thoughts business

Ryan each of around pillars, the for provide made to I'll Now progress some the we've call financial turning a details in over before our strategic update.

our of our optimize the maximize channel. product service and profitability First, we assortment e-commerce continue to to

to We of a experience. a now announce is making features months, full roll conversion new and to This meaningful commitment on CarParts.com prevented which legacy from last we've basket new cost can parallel I'm monolith expect us been lower our ever. Historically, initiative order to requires deliver our and to that our in cloud-based performance infrastructure will re-platforming quickly, and our shorten result infrastructure. faster we XX deliver than us new increasing out Over changes And infrastructure resources experience patterns, now a in at in shopping technical allows features development to the website best-in-class cycles. CarParts.com and working increase proud that size.

initiatives a We X have recently has took to uses product and X our us that in tires such new VIN shipping taken installation, would X out of lookup over partnership that roll that XX,XXX rolled with assortment just our historically about each X out SimpleTire, several strategic have weeks. to our with weeks months as protections, offering full

the initiatives early seeing these all higher usage Although anticipated. journey, in and than are take rates

product delivering revenue-generating X committed next AI-powered the loyalty enhancements dollars technology additional to quarters, make program as other marketing smarter. as features a marketing such Over recommendations, work to we're our well as

perform to incentivizing to over repeat on time over by date. in-app continues reducing purchases. while of performance shop our Today, we downloads savings expect organic drive XX% app mobile direct reliance to Our with and and mobile, XXX,XXX customer purchases engine market on search customers acquisition our

in our which side, invest categories margin three results. specific product customer profile early to showed more on target third the positive efforts all new attractive we assortment the quarter, an areas continue focused On In that we affluent a with base. of

are change continue approximately excluding premium our we XX% for are Vegas as quarter, move, mid-single and the overall profile the our margin. grow up up digits. These impact up expand brands year-over-year, customer in year-over-year, EBITDA OE our increase finally, and to to our commercial our and are rapidly wholesale Our sales is of assortment, of X% brands European expected XX% categories three channel, our business accounted helping

We provide call. detailed more will update on next our a

awareness customer and expanding of launch of We're in announce we leveraging We're top believe will signs driver. a capture and up, new parts. to to to mechanical the ramp capabilities marketplaces Next, best-in-class a with we catalog we it assortment while are full happy our could base. presence market. revenue global positive, Early our in continue Canada to eBay as and store growth that continue incremental this line and invest in become revenue recognition marketplace our brand additional opportunities increase

label leveraging next-day have offer we to badging same profile. pilot an our revenues Amazon products with attractive front, with label the to the Prime Amazon at delivery parts. completed top offers network financial fulfillment program selection Amazon incremental line and the private This a generate our private of shoppers recently On

Although on double-digit tested. is the products early in initiative a this seeing lift we we're its days,

Lastly, a we at of continue rising XX.X% by third manage and Freight address quarter and to in freight efficiencies continue logistics. costs be our the approximately upgrading sales. optimization to capturing costs headwind

around However, some last and efforts inventory optimization freight the absorb helped quarter, impact. as of we placement us discussed our

volume side, to we're our in old boost for with logistics margin costs our is realized in lower operational starting network paired facilities The conveyance increased as on leverage, our with in now through process and shipping new has XX% over decommissioned, extensive about respectively. been efficiencies assortment initial full a freight and state-of-the-art operating as XXXX. conversion AI-powered the gross region new excited On with improve reduction and facility, of allows fully Vegas track Las target. significant costs, the customer we a PIC expect our well facility enhance Module facility savings The which operating

to focus a financial cost we turn efficiencies call We on now and profitable margin into more driving our combined to improvement, results. with gross the lead business. I'll savings Ryan transition over as will continue through us our

year-over-year software outside by million. million and the of impacting $XXX.X revenues impacts the P&L move facility. On of support focus prior deliberate the loss our from up related other primarily million normal was sales profit to up of we for expansion, in lower as margin increased and period, overlapping consumer and last of $X driven QX, digital quarter. driven and slightly The to Milton margin to primarily period from XX.X%, and due net and adjusted improvement combination million quarter down prior offset in freight in the the was higher-value prior from spend to million outside operations In quarter. Gross and of price prices approximately up expenses and and Helene from by a by prior costs, hurricanes awareness a CrowdStrike down add $X.X the decline was our XX.X% the down expenses the Gross for the net from resulted our $XX marketing million, our to up from onetime increased continued in adjusted $X.X expenses in revenue the from costs million prior amount the transformation Gross gross Las XX.X% year. approximately issue partially was year. quarter, margins, increases year-to-date margin operations, year and of reported to million, industry expanded reported costs. GAAP We X% resulting on flow-through. $XX David. in a of as you, year $XXX.X well investments, our which product EBITDA period, basis, loss sequentially marketing lower Thank the net XX% EBITDA lower in include of total and challenging product compared customers, to quarter brand environment resulting onetime last year onetime related setup compared $X normal costs lower Vegas loss of higher

that these generate will a We next ROI the over investments are confident few significant years.

cash quarter. $XXX,XXX We Turning debt. million the We $XX of and third to the sheet. no quarter balance income the generated of with interest ended in

to to the previous our quarter has inventory position revolver work $XX season improve million. support get next rise end peak cash early at untapped slightly The and was significant years, we plan. efficiency. team with expect And to balance our as pleased inventory for to ready Our done we similar continues business We're year. inventory our

our revenue the million guidance our the million hurricanes, to to from continued $XXX to outlook impact by Due for unexpected year lowering million. $XXX narrowing Turning full $X we are XXXX. to and and

our XX% from to expected XX% range guidance XX%, high the to the up XX%. end However, narrowing to we're margin of to gross

We're we've in target to customers to to products app, better across well a year, assortment as leading the Las to entire new efficiencies, product market Thanks, as continue as continued improvements our the warehouse our and from and elevating customer position higher-value this to see experience XXXX mobile see unit in of results beyond website, Ryan. the We're and new investments services made higher-margin with expanded we Vegas focused operational in expect we including with we improvement excited the early and launched. newly on economics. business CarParts.com

the higher a significantly as expect we to year year-over-year EBITDA significantly result will as flow headcount enhanced anniversary adjusted expect reductions achieving in a large We'll Thank operator transformation. in to we addition, and from our we cash you, their in In adjusted We're generation to like X% the XXXX questions. projects margin hard watermark achieving today's call. CapEx sustainable towards medium team be EBITDA path up XXXX. global for the commitment to it thank everyone, term. I flow we emerge driving throughout turn X% would working cash for open from for free our low and positive and that to this XXXX, free in it and work now while over joining

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

I usually seasonality, sales likely surprised giving margins. caused just our of up to want to and way some combine took, that we'll the work start I with from with growth the price down. acceleration for that you there. But Historically, guess what sequentially? I'm QX, revenue, are down QX increases volume

where I So really seeing what that? you success? guess drove guys are And

definitely, first Ryan, is QX the Yes, than time it's David. that QX. higher

lot of relentless execution actions, new board. it it's across pricing the some marketing a just inventory initiatives, is website, of think driven, just the I the

and most but blocking obviously, liked more, think do would I of it is we have tackling. to

higher So but seems than kind than we we $X like several every consistent, gross guess, million then get something it more I hear us. that moving a execution, really was I OpEx of freight, margin, million higher and to expected, mean, heard nice down, moving quarter. which I dollars relentless

else systemic I And that OpEx increase? that actually guess control? causing get really can your curious and that what versus that ability is So how you under confidence big sequential is then

Yes.

on if So was higher at than so you than margin, was look QX, gross higher the QX. -- QX QX and

profitable. expenses you we of that are operations. $X.X those, of And have unpack got outside been without would about normal OpEx, million you If

the investments of new in the that majority marketing. transfer the extra we brand the generated. some margin was into the awareness, the money, as to and setup of took we well top of it marketing of So as We performance some that, Vegas. On reinvested building

fighting soft performance some of increased we're quarter, to also competition to the of retailers seeing marketing, year. on during of an dollars So just consumers. And it but a the and same top due saw on from is consumer demand, lot that, obviously it's capture the election we

took dollars So XXX margin. it's that of from gross we points we spent additional about basis marketing that

OpEx seeing the number. that performance to lot of definitely take that walks But then because we're XXX $X.X the of is I election you So points think, extra and marketing. competition of basis you million on a component, take you an a kind

good in offset trade-off, offset to guess, And while do price a you on marketing, leaning I in think that's it? on or leaning hopefully performance partially

mean it's increase or marketing term to a price of cutting the I terms investments. Yes. short always balance conversion in making in additional

We have good repeat purchase pretty rates.

to So to is a going look it if customer think come it acquire call a we of probably mobile to you making back. of revenue. up numbers at. the it, the is We're an X% last And app app, one of mobile We the lot year. to of you best organic points launched evidence investment is now The unpack downloads. XXX,XXX have, that

higher, The is order through is higher. the going is So higher, the rate value, about purchase repeat it's AOV revenue million average $XX app. the of conversion

about the we in short bit to that a feel season. that I can them peak pretty So capture in during especially good so remarket the little to future, increasing term customer marketing

One Canada, more and for to Amazon. me. Tires, of kind Good the with adjacencies see with

talked opportunities we are upsell the with where at protection of about to adjacent memberships. kind customers? also plans, You've I guess, subscriptions, of kind

you marketing, glad into up, this ties it also the performance for freight. bring and I'm Yes, pressures but

if So freight. profitability drivers are: main to at always being business an challenges. two e-commerce our and be company, look marketing of And performance are just these obviously, going the you

you're get talking traffic big CarParts.com million mobile what to users. the and the so is that XXX we And app, we leverage is about think and opportunity the on

You're talking that generate CarParts.com. revenue to year And about how place every on do a very customers these incremental X X customers margin. million orders we million from at high

these spaces, protection, through high-margin all product And flows so potentially very card, That's and membership, wheels credit loyalty line. program, protection, in shipping it's that income the adjacent a whether income fee bottom tires. eventually a

had historically. some with our challenges unfortunately, So website we

we features Now we're completely start couple can out website weeks. our We've rolling done. re-platformed new and every completely, of now almost

there's because launched shipping protection, much we And fee So it's for to over just to a you get the as tires. profitability with be transactions going need income. think pure incremental don't that I product And and wheels protection, big opportunity us time, margin.

time, this Thank today's I'm further no call. [Operator questions. This Instructions] At showing for you concludes participating. conference

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