CarParts.com Reports First Quarter 2024 Results
CarParts.com, Inc. (NASDAQ: PRTS) reported first quarter 2024 results with net sales decreasing to $166.3 million, gross profit of $53.9 million, net loss of ($6.5) million, and adjusted EBITDA of $1.1 million. Despite facing challenges, the company is focusing on margin expansion, efficiency, and profitability to enhance shareholder value. The company aims to achieve adjusted EBITDA growth next year and increase free cash flow generation.
Successful launch of mobile app contributing over 8% of total eCommerce revenue.
38% of eCommerce revenue from loyal repeat customers.
Website attracted over 100 million visits, affirming strong online presence.
Efforts to realign cost structure for improved efficiency and agility.
Confidence in achieving adjusted EBITDA growth next year and increasing free cash flow generation.
Net sales decreased to $166.3 million, down 5% from the year-ago quarter.
Net loss of ($6.5) million compared to net income of $1.1 million in the year-ago quarter.
Adjusted EBITDA decreased to $1.1 million from $9.4 million in the year-ago quarter.
Gross margin decreased to 32.4% from the year-ago quarter.
Total operating expenses of $60.4 million in the first quarter.
Insights
Examining CarParts.com's Q1 2024 financial performance, it's evident the company has encountered some headwinds. A 5% decline in net sales and a substantial drop in gross profit are cause for concern. The reported net loss of $6.5 million is a significant downturn compared to the net income of the previous year. This could be attributed to various market conditions such as softening consumer demand and selling price compression, both indications of a highly competitive environment.
Furthermore, the shift in gross margin, down by 320 basis points to 32.4%, highlights increased burdens such as higher outbound transportation costs, a factor often outside of immediate control. However, the maintenance of a cash balance of $46.0 million and no revolver debt demonstrates sound financial management and provides some liquidity assurance.
Investors should note the revised outlook for 2024. The decrease in expected net sales, now ranging between
The aftermarket auto parts industry is both highly fragmented and expansive, offering ample opportunity for agile players. CarParts.com's CEO points to a strategic focus on pricing optimization, marketing, supply chain enhancements and technological advancements as drivers for future margin expansion. While these areas are indeed pivotal for competitive edge, the challenge lies in execution amid a backdrop of noted market pressures.
Drawing from the CEO's comments, the company's mobile app now contributing to over
The emphasis on technological investments, such as CarParts.com's mobile app development, is a telling sign of the company's commitment to digital transformation. In the current retail landscape, eCommerce platforms and digital tools play a defining role in customer acquisition and retention. With technology driving over
First Quarter 2024 Summary vs. Year-Ago Quarter
- Net sales decreased to
$166.3 million 5% from the year-ago quarter. - Gross profit of
$53.9 million $62.6 million 32.4% . - Net loss was
( , or ($6.5) million $0.11 $1.1 million $0.02 - Adjusted EBITDA of
$1.1 million $9.4 million - Cash of
$46.0 million
Management Commentary
"In the past year, we have marked significant milestones. The successful launch of our mobile app stands out as it now contributes over
"We are well positioned to capture the tremendous and growing opportunities within the highly fragmented and underserved four hundred-billion-dollar aftermarket auto parts industry.
Despite these great achievements, we faced acute pressures throughout the year. However, financial discipline is ingrained in our organizational DNA. Given the evolving market dynamics, we are doubling down on opportunities for margin expansion, particularly centered around pricing optimization, marketing, supply chain and technology. Our endeavors for the remainder of fiscal 2024 will be laser-focused on improving efficiency and profitability to significantly increase Adjusted EBITDA for the years 2025 and 2026, ultimately enhancing shareholder value.
Through our continued efforts around our three strategic pillars and an unwavering commitment to efficiency and profitability, we are confident in achieving Adjusted EBITDA growth next year. Looking ahead to the medium term, our aim is to attain a 6
First Quarter 2024 Financial Results
Net sales in the first quarter of 2024 were
Gross profit in the first quarter was
Total operating expenses in the first quarter were
Net loss in the first quarter was (
Adjusted EBITDA in the first quarter was
On March 30, 2024, the Company had a cash balance of
2024 Outlook
For the full year 2024, we are targeting gross profit to remain within the range we had previously forecasted but adjusting the net sales and gross margin ranges as follows:
- The Company expects net sales in a range of
$600 million $625 million $662 million $688 million - The Company expects gross margin in a range of
33% , plus or minus 100 basis points, which will partially offset the lower expected net sales. Our previous guidance was31% , plus or minus 100 basis points.
Conference Call
CarParts.com CEO David Meniane, CFO Ryan Lockwood and COO Michael Huffaker will host a conference call today to discuss the results, followed by a question-and-answer period.
Date: Tuesday, May 7, 2024
Time: 5:00 p.m. Eastern time (2:00 p.m. Pacific time)
Webcast: www.carparts.com/investor/news-events
To listen to the live call, please click the link above to access the webcast. A replay of the audio webcast will be archived on the Company's website at www.carparts.com/investor.
About CarParts.com, Inc.
CarParts.com, Inc. is a technology-driven eCommerce company improving the way drivers shop for the parts they need. Operating over 25 years, CarParts.com has established itself as a premier destination for drivers seeking repair and maintenance solutions. Our commitment lies in placing the customer at the forefront of our operations, evident in our easy-to-use, mobile-friendly website and app. Offering a seamless shopping experience, we aim to eliminate the uncertainty and stress often associated with vehicle repair and maintenance. Backed by a robust company-operated fulfillment network, we ensure swift delivery of top-quality parts from leading brands to customers across the nation.
At CarParts.com, our global team is united by a shared vision: Empowering Drivers Along Their Journey.
CarParts.com is headquartered in
Non-GAAP Financial Measures
Regulation G, and other provisions of the Securities Exchange Act of 1934, as amended, define and prescribe the conditions for use of certain non-GAAP financial information. We provide "Adjusted EBITDA" in this earnings release and on today's scheduled conference call, which are non-GAAP financial measures. Adjusted EBITDA consist of net (loss) income before (a) interest (income) expense, net; (b) income tax provision; (c) depreciation and amortization expense; (d) amortization of intangible assets; (e) share-based compensation expense; (f) workforce transition costs; and (g) distribution center moving costs. A reconciliation of Adjusted EBITDA to net (loss) income is provided below.
The Company believes that these non-GAAP financial measures provide important supplemental information to management and investors. These non-GAAP financial measures reflect an additional way of viewing aspects of the Company's operations that, when viewed with the GAAP results and the accompanying reconciliations to corresponding GAAP financial measures, provides a more complete understanding of factors and trends affecting the Company's business and results of operations.
Management uses Adjusted EBITDA as measures of the Company's operating performance because it assists in comparing the Company's operating performance on a consistent basis by removing the impact of stock compensation expense as well as other items that we do not believe are representative of our ongoing operating performance. Internally, these non-GAAP measures are also used by management for planning purposes, including the preparation of internal budgets; for allocating resources to enhance financial performance; and for evaluating the effectiveness of operational strategies. The Company also believes that analysts and investors use these non-GAAP measures as supplemental measures to evaluate the ongoing operations of companies in our industry.
These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP and should not be relied upon to the exclusion of GAAP financial measures. Management strongly encourages investors to review the Company's consolidated financial statements in their entirety and to not rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. In addition, the Company expects to continue to incur expenses similar to the non-GAAP adjustments described above, and exclusion of these items from the Company's non-GAAP measures should not be construed as an inference that these costs are all unusual, infrequent or non-recurring.
Safe Harbor Statement
This press release contains statements which are based on management's current expectations, estimates and projections about the Company's business and its industry, as well as certain assumptions made by the Company. These statements are forward looking statements for the purposes of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended and Section 27A of the Securities Act of 1933, as amended. Words such as "anticipates," "could," "expects," "intends," "plans," "potential," "believes," "predicts," "projects," "seeks," "estimates," "may," "will," "would," "will likely continue" and variations of these words or similar expressions are intended to identify forward-looking statements. These statements include, but are not limited to, statements regarding our future operating results and financial condition, our potential growth, our ability to innovate, our ability to gain market share, and our ability to expand and improve our product offerings. We undertake no obligation to revise or update publicly any forward-looking statements for any reason. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors.
Important factors that may cause such a difference include, but are not limited to, competitive pressures, our dependence on search engines to attract customers, demand for the Company's products, the online market and channel mix for aftermarket auto parts, the economy in general, increases in commodity and component pricing that would increase the Company's product costs, the operating restrictions in its credit agreement, the weather and any other factors discussed in the Company's filings with the Securities and Exchange Commission (the "SEC"), including the Risk Factors contained in the Company's Annual Report on Form 10–K and Quarterly Reports on Form 10–Q, which are available at www.carparts.com/investor and the SEC's website at www.sec.gov. You are urged to consider these factors carefully in evaluating the forward-looking statements in this release and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. Unless otherwise required by law, the Company expressly disclaims any obligation to update publicly any forward-looking statements, whether as result of new information, future events or otherwise.
Investor Relations:
Ryan Lockwood, CFA
IR@carparts.com
Summarized information for the periods presented is as follows (in millions):
Thirteen Weeks Ended | Thirteen Weeks Ended | ||||||
March 30, 2024 | April 1, 2023 | ||||||
Net sales | $ | 166.29 | $ | 175.49 | |||
Gross profit | $ | 53.92 | $ | 62.55 | |||
32.4 | % | 35.6 | % | ||||
Operating expense | $ | 60.44 | $ | 61.92 | |||
36.3 | % | 35.3 | % | ||||
Net (loss) income | $ | (6.48) | $ | 1.05 | |||
(3.9) | % | 0.6 | % | ||||
Adjusted EBITDA | $ | 1.05 | $ | 9.37 | |||
0.6 | % | 5.3 | % | ||||
The table below reconciles net (loss) income to Adjusted EBITDA for the periods presented (in thousands):
Thirteen Weeks Ended | Thirteen Weeks Ended | |||||
March 30, 2024 | April 1, 2023 | |||||
Net (loss) income | $ | (6,478) | $ | 1,051 | ||
Depreciation & amortization | 4,025 | 3,919 | ||||
Amortization of intangible assets | 8 | 11 | ||||
Interest (income) expense, net | (137) | 347 | ||||
Income tax provision | 98 | 141 | ||||
EBITDA | $ | (2,484) | $ | 5,469 | ||
Stock compensation expense | $ | 2,582 | $ | 3,899 | ||
Workforce transition costs(1) | 483 | — | ||||
Distribution center moving costs(2) | 471 | — | ||||
Adjusted EBITDA | $ | 1,052 | $ | 9,368 | ||
(1) | We incurred workforce transition costs, primarily related to severance, as part of our recent workforce reductions. | |||||||||
(2) | We incurred moving costs, overlapping rent expense and other non-recurring costs attributable to moving to our new | |||||||||
CARPARTS.COM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE OPERATIONS (Unaudited, In Thousands, Except Per Share Data) | ||||||
Thirteen Weeks Ended | ||||||
March 30, | April 1, | |||||
2024 | 2023 | |||||
Net sales | $ | 166,289 | $ | 175,492 | ||
Cost of sales (1) | 112,370 | 112,941 | ||||
Gross profit | 53,919 | 62,551 | ||||
Operating expense | 60,436 | 61,915 | ||||
(Loss) income from operations | (6,517) | 636 | ||||
Other income (expense): | ||||||
Other income, net | 437 | 914 | ||||
Interest expense | (300) | (358) | ||||
Total other income, net | 137 | 556 | ||||
(Loss) income before income taxes | (6,380) | 1,192 | ||||
Income tax provision | 98 | 141 | ||||
Net (loss) income | (6,478) | 1,051 | ||||
Other comprehensive gain: | ||||||
Unrealized gain on deferred compensation trust assets | 87 | 24 | ||||
Total other comprehensive gain | 87 | 24 | ||||
Comprehensive (loss) income | $ | (6,391) | $ | 1,075 | ||
Net (loss) income per share: | ||||||
Basic net (loss) income per share | $ | (0.11) | $ | 0.02 | ||
Diluted net (loss) income per share | $ | (0.11) | $ | 0.02 | ||
Weighted-average common shares outstanding: | ||||||
Shares used in computation of basic net (loss) income per share | 56,503 | 55,047 | ||||
Shares used in computation of diluted net (loss) income per share | 56,503 | 58,037 | ||||
(1) | Excludes depreciation and amortization expense which is included in operating expense. | |||||||||
CARPARTS.COM, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited, In Thousands, Except Par Value Data) | ||||||
March 30, | December 30, | |||||
2024 | 2023 | |||||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 46,046 | $ | 50,951 | ||
Accounts receivable, net | 8,889 | 7,365 | ||||
Inventory, net | 120,015 | 128,901 | ||||
Other current assets | 8,028 | 6,121 | ||||
Total current assets | 182,978 | 193,338 | ||||
Property and equipment, net | 31,329 | 26,389 | ||||
Right-of-use - assets - operating leases, net | 31,020 | 19,542 | ||||
Right-of-use - assets - finance leases, net | 14,086 | 15,255 | ||||
Other non-current assets | 3,811 | 3,331 | ||||
Total assets | $ | 263,224 | $ | 257,855 | ||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable | $ | 74,796 | $ | 77,851 | ||
Accrued expenses | 22,158 | 20,770 | ||||
Right-of-use - obligation - operating, current | 5,592 | 4,749 | ||||
Right-of-use - obligation - finance, current | 4,172 | 4,308 | ||||
Other current liabilities | 5,470 | 5,308 | ||||
Total current liabilities | 112,188 | 112,986 | ||||
Right-of-use - obligation - operating, non-current | 27,517 | 16,742 | ||||
Right-of-use - obligation - finance, non-current | 11,353 | 12,327 | ||||
Other non-current liabilities | 3,014 | 2,969 | ||||
Total liabilities | 154,072 | 145,024 | ||||
Commitments and contingencies | ||||||
Stockholders' equity: | ||||||
Common stock, | 61 | 60 | ||||
Treasury stock | (11,912) | (11,912) | ||||
Additional paid-in capital | 315,585 | 312,874 | ||||
Accumulated other comprehensive income | 870 | 783 | ||||
Accumulated deficit | (195,452) | (188,974) | ||||
Total stockholders' equity | 109,152 | 112,831 | ||||
Total liabilities and stockholders' equity | $ | 263,224 | $ | 257,855 | ||
CARPARTS.COM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, In Thousands) | ||||||
Thirteen Weeks Ended | ||||||
March 30, | April 1, | |||||
2024 | 2023 | |||||
Operating activities | ||||||
Net (loss) income | $ | (6,478) | $ | 1,051 | ||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||||
Depreciation and amortization expense | 4,025 | 3,919 | ||||
Amortization of intangible assets | 8 | 11 | ||||
Share-based compensation expense | 2,582 | 3,899 | ||||
Stock awards issued for non-employee director service | 8 | 6 | ||||
Stock awards related to officers and directors stock purchase plan from payroll deferral | 1 | — | ||||
Amortization of deferred financing costs | 16 | 16 | ||||
Changes in operating assets and liabilities: | ||||||
Accounts receivable | (1,524) | (3,362) | ||||
Inventory | 8,886 | 23,662 | ||||
Other current assets | (1,907) | (511) | ||||
Other non-current assets | (504) | (55) | ||||
Accounts payable and accrued expenses | (1,808) | 2,399 | ||||
Other current liabilities | 163 | 1,450 | ||||
Right-of-use obligation - operating leases - current | 957 | 181 | ||||
Right-of-use obligation - operating leases - long-term | (817) | (117) | ||||
Other non-current liabilities | 44 | 232 | ||||
Net cash provided by operating activities | 3,652 | 32,781 | ||||
Investing activities | ||||||
Additions to property and equipment | (7,431) | (2,745) | ||||
Net cash used in investing activities | (7,431) | (2,745) | ||||
Financing activities | ||||||
Borrowings from revolving loan payable | 61 | 76 | ||||
Payments made on revolving loan payable | (61) | (76) | ||||
Payments on finance leases | (1,093) | (1,242) | ||||
Net proceeds from issuance of common stock for ESPP | 202 | 221 | ||||
Statutory tax withholding payment for share-based compensation | (323) | — | ||||
Proceeds from exercise of stock options | — | 1,523 | ||||
Net cash (used in) provided by financing activities | (1,214) | 502 | ||||
Effect of exchange rate changes on cash | 88 | — | ||||
Net change in cash and cash equivalents | (4,905) | 30,538 | ||||
Cash and cash equivalents, beginning of period | 50,951 | 18,767 | ||||
Cash and cash equivalents, end of period | $ | 46,046 | $ | 49,305 | ||
Supplemental disclosure of non-cash investing and financing activities: | ||||||
Right-of-use operating asset acquired | $ | 12,857 | $ | — | ||
Accrued asset purchases | $ | 1,621 | $ | 312 | ||
Share-based compensation expense capitalized in property and equipment | $ | 242 | $ | 271 | ||
Supplemental disclosure of cash flow information: | ||||||
Cash received during the period for income taxes | $ | (8) | $ | (34) | ||
Cash paid during the period for interest | $ | 300 | $ | 358 | ||
Cash received during the period for interest | $ | 437 | $ | 11 | ||
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SOURCE CarParts.com, Inc.
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