CarParts.com Reports Highest Fiscal Year Sales in Company History
- Record fiscal year sales of $676 million with a 2% increase in net sales and a 16% increase over two years.
- Maintained a strong cash position of $51.0 million and no revolver debt.
- Fourth quarter net sales increased by 1% to $156.4 million with flat gross profit of $51.6 million.
- Company expects comparable net sales in 2024 with a gross margin of 30% to 32%.
- Net loss of ($8.2) million in fiscal year 2023 compared to a net loss of ($1.0) million in fiscal year 2022.
- Decrease in gross margin in fiscal year 2023 primarily due to higher outbound transportation costs and a shift in product mix.
- Reduction of 150 global roles due to a slow start in 2024 and a challenging macro environment.
Insights
Reviewing CarParts.com's fiscal year 2023 financial results, several key metrics stand out. The company achieved a modest sales growth of 2%, which indicates a stable demand for their products despite a challenging macroeconomic environment. However, the slight decrease in gross profit and a wider net loss compared to the previous year suggest margin pressures, primarily due to increased outbound transportation costs and a shift in product mix. This could be indicative of rising operational challenges or changes in consumer purchasing behavior, potentially impacting profitability.
Adjusted EBITDA, a measure of a company's operating performance, saw a decrease from $26.1 million to $19.7 million year-over-year. This decline is concerning as it reflects a drop in earnings quality and may signal underlying issues in cost management or operational efficiency. Investors might view this as a red flag, particularly if the trend continues.
The share repurchase activity demonstrates management's confidence in the intrinsic value of the company and the strong balance sheet with ample cash reserves and no long-term debt provides financial flexibility. However, the forecast for flat to minimal sales growth in 2024, alongside the expected decrease in gross margin, suggests that CarParts.com may face continued headwinds in the near term.
The automotive aftermarket is a $389 billion industry with significant growth potential, especially in the e-commerce segment. CarParts.com's reported unit growth and claim of taking market share from competitors is a positive sign, indicating effective strategies to capture consumer demand. However, the reduction of 150 global roles points to a strategic pivot towards cost optimization. This could be a response to the 'difficult macro environment' mentioned by the CEO, possibly alluding to economic downturns, supply chain issues, or increased competition.
Investors should consider the long-term implications of the company's cost-cutting measures. While they may lead to short-term financial stability, they could also impact the company's ability to innovate and scale, which are crucial for maintaining a competitive edge in the e-commerce space. The automotive parts industry is highly competitive and a balance between cost management and investment in growth is essential for sustainable success.
The automotive aftermarket sector is generally resilient to economic downturns as consumers opt to maintain and repair existing vehicles instead of purchasing new ones. However, the company's slow start to 2024 and the reference to a challenging macro environment may suggest broader economic factors at play, such as inflationary pressures or a potential economic slowdown, which could dampen consumer spending and affect sales.
Despite these challenges, CarParts.com's position with no revolver debt is a strong indicator of financial health, which can be particularly advantageous in a tightening credit market. The company's ability to maintain a strong cash position and an undrawn credit facility provides a buffer against unforeseen financial strains. This conservative financial posture can be reassuring to investors, especially during periods of economic uncertainty.
Record Fiscal Year Sales of
Fiscal Year 2023 Summary vs. Fiscal Year 2022
- Net sales increased to a record
$675.7 million 2% and up16% on a two-year stack. - Gross profit of
$229.4 million $230.9 million 33.9% . - Net loss was
( , or ($8.2) million $0.15 ( , or ($1.0) million $0.02 - Adjusted EBITDA of
$19.7 million $26.1 million - Cash of
$51.0 million - Repurchased approximately 1.2 million shares for
$4.3 million
Fourth Quarter 2023 Summary vs. Year-Ago Quarter
- Net sales increased to
$156.4 million 1% year-over-year and up13% on a two-year stack. - Gross profit remained flat at
$51.6 million 33.0% . - Net loss was
( , or ($6.1) million $0.11 ( , or ($6.2) million $0.11 - Adjusted EBITDA of
$1.0 million $2.1 million
Management Commentary
"We continued to see strong unit growth of approximately
In light of these challenges, we have made the tough decision to significantly reduce our cost structure including the elimination of 150 global roles. These decisions are not made lightly but we want to stay agile, protect shareholder value, and realign to the reality of the environment.
We continue to believe the strategic priorities and areas of the business we are focused on will lead to long-term shareholder value. We have proven in the past that we can grow and execute change management through difficult environments and now is no different. In addition, we are supported by the strength of our balance sheet with ample cash and inventory as well as an undrawn facility with no long-term debt."
Fiscal Year 2023 Financial Results
Net sales in fiscal year 2023 were
Gross profit decreased slightly to
Total operating expenses in fiscal year 2023 were
Net loss in fiscal year 2023 was (
Adjusted EBITDA in fiscal year 2023 was
On December 30, 2023, the Company had a cash balance of
Fourth Quarter 2023 Financial Results
Net sales in the fourth quarter of 2023 were
Gross profit in the fourth quarter remained flat at
Total operating expenses in the fourth quarter were
Net loss in the fourth quarter was (
Adjusted EBITDA in the fourth quarter was
2024 Outlook
For the full year, the Company expects comparable net sales in a range from negative two percent to positive two percent. With gross margin in the range of
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: Thursday, March 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 before (a) interest (income) expense, net; (b) income tax (benefit) provision; (c) depreciation and amortization expense; (d) amortization of intangible assets; and (e) share-based compensation expense. A reconciliation of Adjusted EBITDA to net loss 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 | Fifty-Two Weeks Ended | Fifty-Two Weeks Ended | ||||||||||
December 30, 2023 | December 31, 2022 | December 30, 2023 | December 31, 2022 | ||||||||||
Net sales | $ | 156.40 | $ | 154.52 | $ | 675.73 | $ | 661.60 | |||||
Gross profit | $ | 51.60 | $ | 51.65 | $ | 229.41 | $ | 230.89 | |||||
33.0 | % | 33.4 | % | 33.9 | % | 34.9 | % | ||||||
Operating expense | $ | 58.35 | $ | 57.10 | $ | 239.29 | $ | 230.24 | |||||
37.3 | % | 36.9 | % | 35.4 | % | 34.8 | % | ||||||
Net loss | $ | (6.09) | $ | (6.22) | $ | (8.22) | $ | (0.95) | |||||
(3.9) | % | (4.0) | % | (1.2) | % | (0.1) | % | ||||||
Adjusted EBITDA | $ | 0.97 | $ | 2.12 | $ | 19.69 | $ | 26.11 | |||||
0.6 | % | 1.4 | % | 2.9 | % | 3.9 | % | ||||||
The table below reconciles net loss to Adjusted EBITDA for the periods presented (in thousands): | ||||||||||||
Thirteen Weeks Ended | Thirteen Weeks Ended | Fifty-Two Weeks Ended | Fifty-Two Weeks Ended | |||||||||
December 30, 2023 | December 31, 2022 | December 30, 2023 | December 31, 2022 | |||||||||
Net loss | $ | (6,086) | $ | (6,224) | $ | (8,223) | $ | (951) | ||||
Depreciation & amortization | 4,094 | 3,936 | 16,690 | 13,607 | ||||||||
Amortization of intangible assets | 8 | 27 | 36 | 108 | ||||||||
Interest (income) expense, net | (313) | 355 | (636) | 1,421 | ||||||||
Income tax (benefit) provision | (251) | 514 | 145 | 632 | ||||||||
EBITDA | $ | (2,548) | $ | (1,392) | $ | 8,012 | $ | 14,817 | ||||
Stock compensation expense | $ | 3,517 | $ | 3,510 | $ | 11,675 | $ | 11,296 | ||||
Adjusted EBITDA | $ | 969 | $ | 2,118 | $ | 19,687 | $ | 26,113 | ||||
CARPARTS.COM, INC. AND SUBSIDIARIES | |||||||||
Fiscal Year Ended | |||||||||
December 30, | December 31, | January 1, | |||||||
2023 | 2022 | 2022 | |||||||
Net sales | $ | 675,729 | $ | 661,604 | $ | 582,440 | |||
Cost of sales (1) | 446,323 | 430,714 | 385,157 | ||||||
Gross profit | 229,406 | 230,890 | 197,283 | ||||||
Operating expense | 239,287 | 230,239 | 206,394 | ||||||
(Loss) income from operations | (9,881) | 651 | (9,111) | ||||||
Other income (expense): | |||||||||
Other income, net | 3,197 | 467 | 238 | ||||||
Interest expense | (1,394) | (1,437) | (1,115) | ||||||
Total other income (expense), net | 1,803 | (970) | (877) | ||||||
Loss before income taxes | (8,078) | (319) | (9,988) | ||||||
Income tax provision | 145 | 632 | 351 | ||||||
Net loss | (8,223) | (951) | (10,339) | ||||||
Other comprehensive (loss) gain: | |||||||||
Foreign currency translation adjustments | — | 127 | 93 | ||||||
Actuarial (loss) gain on defined benefit plan | (305) | 872 | 307 | ||||||
Unrealized (loss) gain on deferred compensation trust assets | (38) | (147) | 89 | ||||||
Total other comprehensive (loss) gain | (343) | 852 | 489 | ||||||
Comprehensive loss | $ | (8,566) | $ | (99) | $ | (9,850) | |||
Net loss per share: | |||||||||
Basic and diluted net loss per share | $ | (0.15) | $ | (0.02) | $ | (0.20) | |||
Weighted-average common shares outstanding: | |||||||||
Shares used in computation of basic net loss per share | 56,570 | 54,137 | 51,381 | ||||||
(1) | Excludes depreciation and amortization expense which is included in operating expense. | |||||||
CARPARTS.COM, INC. AND SUBSIDIARIES | ||||||
December 30, | December 31, | |||||
2023 | 2022 | |||||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 50,951 | $ | 18,767 | ||
Accounts receivable, net | 7,365 | 6,406 | ||||
Inventory, net | 128,901 | 136,026 | ||||
Other current assets | 6,121 | 6,672 | ||||
Total current assets | 193,338 | 167,871 | ||||
Property and equipment, net | 26,389 | 24,290 | ||||
Right-of-use - assets - operating leases, net | 19,542 | 23,951 | ||||
Right-of-use - assets - finance leases, net | 15,255 | 19,750 | ||||
Other non-current assets | 3,331 | 2,537 | ||||
Total assets | $ | 257,855 | $ | 238,399 | ||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable | $ | 77,851 | $ | 57,616 | ||
Accrued expenses | 20,770 | 16,466 | ||||
Right-of-use - obligation - operating, current | 4,749 | 4,571 | ||||
Right-of-use - obligation - finance, current | 4,308 | 4,753 | ||||
Other current liabilities | 5,308 | 4,622 | ||||
Total current liabilities | 112,986 | 88,028 | ||||
Right-of-use - obligation - operating, non-current | 16,742 | 21,412 | ||||
Right-of-use - obligation - finance, non-current | 12,327 | 15,916 | ||||
Other non-current liabilities | 2,969 | 2,971 | ||||
Total liabilities | 145,024 | 128,327 | ||||
Commitments and contingencies | ||||||
Stockholders' equity: | ||||||
Common stock, | 60 | 57 | ||||
Treasury stock | (11,912) | (7,625) | ||||
Additional paid-in capital | 312,874 | 297,265 | ||||
Accumulated other comprehensive income | 783 | 1,126 | ||||
Accumulated deficit | (188,974) | (180,751) | ||||
Total stockholders' equity | 112,831 | 110,072 | ||||
Total liabilities and stockholders' equity | $ | 257,855 | $ | 238,399 | ||
CARPARTS.COM, INC. AND SUBSIDIARIES | |||||||||
Fiscal Year Ended | |||||||||
December 30, | December 31, | January 1, | |||||||
2023 | 2022 | 2022 | |||||||
Operating activities | |||||||||
Net loss | $ | (8,223) | $ | (951) | $ | (10,339) | |||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||||
Depreciation and amortization expense | 16,690 | 13,607 | 9,895 | ||||||
Amortization of intangible assets | 36 | 108 | 110 | ||||||
Share-based compensation expense | 11,675 | 11,296 | 15,685 | ||||||
Stock awards issued for non-employee director service | 23 | 22 | 23 | ||||||
Stock awards related to officers and directors stock purchase plan from payroll deferral | — | 26 | — | ||||||
(Gain) loss from disposition of assets | (78) | (41) | 52 | ||||||
Amortization of deferred financing costs | 65 | 53 | 18 | ||||||
Changes in operating assets and liabilities: | |||||||||
Accounts receivable | (1,101) | (1,424) | 1,303 | ||||||
Inventory | 6,681 | 2,825 | (49,535) | ||||||
Other current assets | 549 | (141) | 1,340 | ||||||
Other non-current assets | (248) | (636) | 551 | ||||||
Accounts payable and accrued expenses | 23,696 | (9,629) | 22,436 | ||||||
Other current liabilities | 686 | (129) | 374 | ||||||
Right-of-use obligation - operating leases - current | 631 | 402 | 1,696 | ||||||
Right-of-use obligation - operating leases - long-term | (714) | (200) | (836) | ||||||
Other non-current liabilities | (367) | 180 | 239 | ||||||
Net cash provided by (used in) operating activities | 50,001 | 15,368 | (6,988) | ||||||
Investing activities | |||||||||
Additions to property and equipment | (11,879) | (12,585) | (11,578) | ||||||
Cash paid for intangible assets | (108) | — | — | ||||||
Proceeds from sale of property and equipment | 86 | 68 | 27 | ||||||
Net cash used in investing activities | (11,901) | (12,517) | (11,551) | ||||||
Financing activities | |||||||||
Borrowings from revolving loan payable | 244 | 10,417 | 131 | ||||||
Payments made on revolving loan payable | (244) | (10,417) | (131) | ||||||
Repurchase of treasury stock | (4,311) | — | (524) | ||||||
Payments on finance leases | (4,738) | (4,232) | (2,164) | ||||||
Net proceeds from issuance of common stock for ESPP | 483 | 795 | — | ||||||
Statutory tax withholding payment for share-based compensation | — | — | (3) | ||||||
Proceeds from exercise of stock options | 2,650 | 1,284 | 3,661 | ||||||
Payment of registration costs of common stock | — | — | (68) | ||||||
Net cash (used in) provided by financing activities | (5,916) | (2,153) | 902 | ||||||
Effect of exchange rate changes on cash | — | (75) | (21) | ||||||
Net change in cash and cash equivalents | 32,184 | 623 | (17,658) | ||||||
Cash and cash equivalents, beginning of period | 18,767 | 18,144 | 35,802 | ||||||
Cash and cash equivalents, end of period | $ | 50,951 | $ | 18,767 | $ | 18,144 | |||
Supplemental disclosure of non-cash investing and financing activities: | |||||||||
Right-of-use operating asset acquired | $ | — | $ | — | $ | 15,000 | |||
Right-of-use finance asset acquired | $ | 784 | $ | 9,206 | $ | 4,975 | |||
Accrued asset purchases | $ | 1,499 | $ | 624 | $ | 1,764 | |||
Share-based compensation expense capitalized in property and equipment | $ | 804 | $ | 1,180 | $ | 2,159 | |||
Stock issued for services | $ | — | $ | 81 | $ | 778 | |||
Supplemental disclosure of cash flow information: | |||||||||
Cash paid during the period for income taxes | $ | 210 | $ | 649 | $ | 88 | |||
Cash paid during the period for interest | $ | 1,394 | $ | 1,437 | $ | 1,115 | |||
Cash received during the period for interest | $ | 2,030 | $ | 16 | $ | 26 | |||
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SOURCE CarParts.com, Inc.
FAQ
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