PRTS - Earnings call transcript Q2 2020

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Operator

Welcome to the CarParts.com Second Quarter Conference Call.

On the call from the company are Lev Peker, Chief Executive Officer and David Meniane, Chief Operating Officer and Chief Financial Officer. By now, everyone should have access to the second quarter 2020 earnings release, which went out today at approximately 4:05 p.m. Eastern Time.

If you have not viewed the release, it is available in the Investor Relations section of the CarParts.com Web site at CarParts.com/investor. available via be at webcast will carparts.com/investor. call for the replay archieve This

form differ those assumes or statements, on the becomes the even release, forward update investor not not any the made statements. for the our to to the CarParts.com’d statements as any and non-GAAP GAAP discussing forward-looking forward be looking circumstances and could are discussed. and to today's those and today, results. no materially form for could use in can uncertainties non-GAAP supply and of SEC such is and company's company's We results several refer on cause performance note the reports in differ we operating remind results on can to questions. be actual limited update performance. are meaning metrics available like statements factors prepared measures does new of we measure factors call, looking in or and and CarParts.com G quarterly a in outlook nor are the information of issued statements may would Before measures, projected begin, Securities not the over the looking forward again release a CarParts.com reasons, current from to with events and call those looking securities regarding I it future financial financial growth are that to that non-GAAP involve needs or materially discussion operating based the coronavirus site. and the or expectations, required certainly statements do reconciliation any non-GAAP competitors, call, guarantees would operating measure release. chain the has Exchange annual in capital expectations, on statements current addition today's forward which With revise revise statements product in take results substitute section strategies, Peker. financial indicators, but of XX-Q information additional and impact federal projections actual key in The from forward subject CEO materially constitute Lev actual with may this detailed report liquidity, intend of to for to to obligation to EBITDA remarks and to The Web that derived such included efforts impact forward-looking everyone you filed offerings, and is press call forward within The which that, and contained limitations, measures changes statements. on CarParts.com’s the relations results financial explanation mitigation suppliers, regulation that any be to, looking if results cause the business looking the of your differ to expected deployment, now in in of from future non-GAAP and of response by laws, on tariffs An Please will risk management the financial The contain press like company, all future the and on anticipated accordance XX-K in in tariff in turn found the that GAAP potential our detailed information future. adjusted between GAAP Commission or customers, factors include, and

Lev Peker

quarter had another in profit, record sales period significant company. for We're breaking to proud we a everyone. operator growth marking of and our Thank you, and of good terms afternoon, announce gross

EBITDA. adjusted line bottom income year-over-year exceptional drove we in Additionally, and net improvements both

operational was momentum resilience system also continued have months. of ecommerce the accelerated our business, past success and countless over XX tailwinds strategy and we increasing the reflects the to points of demand improvements of our the made Our the

the effects our top team and of the continue health pandemic, we remains our of navigate safety As to the priority.

personal our in teams distribution for frontline corporate and incredibly centers productively hard standards. have these teams sanitation distancing few strict Our access social home. over to and grateful working Meanwhile, efficiently equipment protective work flexibility and team's our to from our contact past center and months. and We're still adhere are

of indicators from levels. in which leading were the driven, of miles June pre-COVID down is our XX% One business

as has show driven the down performed penetration remains well are However, right largely for grown comparable ecommerce QX, auto the digits. April pre-COVID online. to to now Despite margin single a exceptionally DIY XX% believe challenges, we're advantage mid of online total to to parts parts retail strategy. we experience for positioned quarter that levels, compared miles improved to and industry online. long-term execute online auto as while so especially these parts as the overall from We new penetrated the continue have well, this the their under direction. will increasingly consumers much XX% buying XX% to over QX in take XX% Industry believe We shift sales in continue as terms reports in in reached down on compared went our demand the moving auto

scalable began we modern last company. foundation ecommerce the XX-months, building and a the for Over

in we our and acquisitions, site and new We'll base, more will significant time. that that customer have offline While made to continued times, expanded investments clear in resilient that be continuing the delighting along this growth. customer believe for chain ability we distribution speed over in Between we’re will predicted relationships believe significant and QX, prove lead faster technology, with to and Starting larger couldn't loyal the our our QX have year to the supply marketing forward online. were were into from improved growth differentiators shift execute. our customer and creating look to pandemic, shipping and planned footprint, last we to sticky customers

for key onto quarter. moving the operational Now updates

our the we that the following decided and name have we inclusion in become. Index, we foremost, that company and that sales needed tech-forward XXXX growth new a Russell First reflected

you we have will of combination our us as market, and month, as we consolidate development to As marks perceived to rebounded marketing likely how many Web our efforts past CarParts.com. This in over sites of few optimize dollars. how saw we the quarters, our to the enable positioned last the announced and we're well allocate

positioning auto leading seller, being to name a change with as addition and best-in-class aligns technology ecommerce our company. In part a this

and As We're than so analogy we're and digital developed often users' building the an use parts optimizing we've company proprietary much previous made backend have operations now. on and now more experience, we our auto efficient catalog. calls, we more inherited blockbuster highlighted our we conference internally Netflix. software creating investments in that significant We so

be site site brand marketing to announce to consolidation and allows we're us now presence with the site, and efficient our side, that online with officially Being we're one one our one On improve offline. down happy to CarParts.com. more Web both brand

We through upper have audience, brand both funnel strategy introduce our and increased with commercials. marketing NASCAR Michael TV our to designed to McDowell through partnership driver various in efforts recently our a broader

to welcome she call results was companies, Nanxi for promising to XX is used David that, XX and brings experience it She Before to of software company to financial Co-Founder Board, e-commerce David to one thrilled turn over carparts.com and quarter, our and our and Enplug, review operational Forbes technology Fortune’s want to a David? Nanxi I the With XX entrepreneurs. her leading to and I Under financials by most I'll Directors. Board walk Fortune and other the to named women highlights. the immense digital we're of CEO XXX welcome team. of a Liu the to our display pass through

David Meniane

focused ever discipline buying team as expand on operational is consumers online, continue our more more ecommerce With we than financial excellence parts Lev. Thanks, business. to our their and

up of net Lev consecutive compared expansion. well year, the with increase margin as in of versus in mix, partnerships mentioned, directly premium to basis strategic $XX.X last This QX products long-term year. chain. from to improvements much in supply XXXX. times of ever, net with the our driven company QX $XXX.X gross increased our from margin million QX million margin another The record is quarter million in supply by XX.X% Gross all $X.X record the XXXX. The increased to chain, million in a of steps to more. the past compared The and made was to buy QX including EBITDA XX% loss leveraging million product quarter revenues highest million income CarParts.com. to set from to growth profits doubled company versus service, X significantly branded $X.X compared of Adjusted and all last strong remove which to and primarily year. sales for a in the technology, to million $X.X XX-months marks As in operations, million net as triple-digit also points areas due $XX.X nearly partially sixth last gross the marks quarter improved XXX customer of increase $XX.X XX.X% $X.X increase marketing, Total manufacturers stems over business, from to investments our

over continue For with at strong year-over-year home the begun has to while net the our remain restrictions. of XX% the using July, country growth entire sales month stay even

insights. don't the caused providing by COVID-XX, While current we given uncertainty any these we typically guidance, are provide

final $XX.X XX, want of million fiscal shares. the XXXX, outstanding our A into when working back from we June was conversion stock quarter On the common convertible to driven just improvements. compared been securities have at to These operations on end capital. we $X.X needed and our XXXX June preferred X.XX of preferred capital for had Turning since a primarily thank shares. our automatically helping the The then The and XX, outstanding cash is our the sheet of it balance balance company balance founders At converted XXXX, higher million cash Series by strong the out to increase million sheet. XXXX. flow call end

the to of to proud very business, improvements the do. work the much have results still we're Although, we've we and made

in area continue to the our be Our inventories to optimize demand. most of will immediate with up focus keep increase consumer

were product quarter, high opening During stay inventory in supply. industries United it have orders, we longer of orders second or our due can Even one strong. to at with at don't. most our Demand the and even unlike is that to parts States And be our customers for time up home volume lead such other couldn't where replenish in the placing either substituted auto you times. demand simply you another, continues our outpacing be

to inventory Our already back disruptions have we minimal experienced started chain supply COVID-XX. coming have levels and up

continue our with we have diversify in Additionally, we to expand supply partnerships Mexico. product begun to new chain and geographically India, as our offering, Korea

to closer we our our customers in accelerate additional investments, timing decided business, also we With to growth our chain to our the supply the get increase as and continued footprints. strive of

As ability and of Texas to opening us back we new the announced, distribution center that, square we be the one Grand warehouse will in will opening to provide over turn year. in with add capacity the This a recently I'll With this feet Prairie, to country call day. Lev. deliver XX% of later XXX,XXX

Lev Peker

David momentum proud and As of second performance XXXX. have throughout quarter mentioned, we strong we're our sustained the very

technology in months work past contact off, XX the optimize supply the our including and center in abroad, improvements continuing and expanding paying capabilities our is we're at over actively business, and teams, the our we're areas. both Across to Philippines. drive further in these our Our U.S. chain, to marketing

be decisions. remain mindful capital disciplined we'll extremely and financially always, in As allocation our

as associates warehouse their well open our With questions. Operator? members thank for commitment their new for to call want as to CarParts.com. work, the all and team hard for up of we'll that, we the support always, our As

Operator

will question-and-answer conducting time, the we be session [Operator this At instructions].

Sigdahl Craig-Hallum Ryan first Our from with comes Capital. question

open. is now line Your

Ryan Sigdahl

constraints. want break then on off, you supply First you cadence, just noted that to down the sales if you quarter chain monthly could if within the start would, and

kind on saw you within impact If you if greater month? could those, quarter in of the also a comment any

David Meniane

monthly as quarter, as breaking sales really don't the So, Ryan. we the far during that, do

Also really up we performance. for XX% year-over-year you total than look entire at quarter, about feel sales the good If are that's July, more top-line. your

any. face really didn't we disruption, chain supply as far As

Our really say Chinese Taiwan in China didn't New Year. and anything suppliers in past

than two. more or nothing week a So,

Ryan Sigdahl

on, operating guys expansion up ramped margin some just Then versus think going business? despite Good. about nice in forward the reinvestment marketing operating spend. in quarter, How leverage you we the should

David Meniane

that quarters. So, we we’re in of time. question long-term build and know us, we and really The understand all the it's a sustainable that profitable don't something the business about the definitely a think really business. manage is those shareholders first. Obviously, to objective And good operators they

So managing your that means OpEx.

fixed. them As variable, our grow, expenses revenues of are some are some operating of

going focused is We're my in is, opinion, sales to there give grow investments it So and a chain. the other that obviously, we'll most to are sense. anything be priority in some makes And have on marketing, trim but there supply the efficient. ROI to a make where that really to spending leverage technology, do less money positive continue we has as operating we some areas

Ryan Sigdahl

for last expansion? would going question it over to Thanks. How JC SKU then ther be just Whitney helpful? Just and you is I'll And detail more then the the also and then any rebranding others. turn

Lev Peker

So perspective, extension process from parts. of skew in a adding right we're the mechanical now

So that it's launched right We're about under should names. XX,XXX brand now. working those in be some on QX new of SKUs sometime land different will and that

as Whitney JC As go. far

of that and we end be to our going brand quarter first is have products QX. early set towards Whitney JC So landing our we accessories and the this performance ordered and of that or be should already for

have we other a with. few and out that some products thunder coming So we're

Whitney to for performance going accessories. reserved be the specifically So, is JC and

Ryan Sigdahl

a And plans or what's I just that the part currently under your have which then The business. those private there? have collision quick staying may. maybe the brands if is of they follow-up, that parts you Are today, label core

Lev Peker

but under change. now, that same staying the Right brands may

Ryan Sigdahl

good guys Good and Thanks luck. Okay. enough.

Lev Peker

Thanks.

Operator

you Instructions]. [Operator Thank

next comes Gary Our Research. Prestopino from question Barrington with

open. now is line Your

Gary Prestopino

questions you from private sales, of still to QX out? -- year that you Couple call the growth shift the here. are percentage last this out and willing was QX Could Usually year. to give information the what would you label

David Meniane

Yes.

way business in private now it our So, label this house brands. what the information is about is or of The think majority call is the we Q. included to

XX% was really So remarks last going out the private and label not call to XX% moving label of our in we're prepared to was forward, in it'll the queue. be and kind for XX% and private it XX% that’s but year But branded compared branded. QX,

Gary Prestopino

Okay.

believe. branded, So you I XX% guys were quarter the -- you last at about

So that in changed something is categorization there's the there? you

David Meniane

No.

the Obviously, So a growth were took so there's two variables inventory -- just the exponential, quarter. to mills positions the during at here. our look was hit

label your side. on lower, So make stock label, a we sales private so position the is up is, take branded the from private in it hit

The some brands. partnerships working with enter premium strategic did that lot other we on been into is long-term a thing we've of

So, sell CarParts.com, branded we very to to margins similar at on label. that able are now are premium product private our

that didn't we of have on lot the So, there are branded opportunities a side before. just

Gary Prestopino

branded good that's so Okay, side. the news on

here. I that million you're you good. very outstanding converted X.X shares. jumped Okay, your and A that couple shares other it’s questions shares and noticed converted really million but XX now showing

that here? is in that money come into So, all options play the just have

David Meniane

the Yes, diluted think you're close. I On I think are basis, is you correct. Yes, pretty slightly lower. number a fully

we all XX new you are company, to the team, have on business. most If the joined the the members year XX of out of exec team when we remember, just Last cash. didn't executive

the of company includes So vest a options. part And as will perform, the team compensation some our options of shares. continues performance these and based to

share in the of count. part increase that's So

Gary Prestopino

just I'll go. it then and then over can a And Okay. turn couple somebody else and more

capacity as of in basically Where maxed now, DCs. Are you your out almost of course your excess kind As are four sense? the far you?

David Meniane

operational, So, basically that steam. three if you the and DCs Virginia, so LaSalle, operating at we're look at full Vegas are

the we So growth. needed receiving capacity additional footprint, outbound up XX% will capacity Texas kind so at Grand Prairie, of same with and to an That definitely give plus that's keep us the time.

give what's should us going marketplace. keep boost on little with a to that the So in up

Gary Prestopino

And December, stream that right? will on come in

David Meniane

in targeting. be might It is what Early sooner. QX we’re

Gary Prestopino

And last one then question. Okay.

inventory, back had you terms do keep you discount? kind in of the you Dow some nature. them, do a had customer satisfied? I What some do things outs, regard? customer to said for problems stock treat order you them of So, give you’ve of In the you that you some do with customer that ordered? entice they you to stick the what mean, with when

Lev Peker

No.

And for it's -- on long a difficult inventory So, visibility times, back what to order is customer. like for the into it's of water. we have us because to lead difficult a pretty very get do

down what of inventory, all marketing starting low pulling on when from it channels. we usually our to we start So, do we're is run

So, there's that's of of very order placing little a customer of an out stock. a chance SKU

Gary Prestopino

All right.

just have a just So you they say then? there -- you part don’t that

Lev Peker

see they Yes, don't it.

Gary Prestopino

Okay. you. right. All Thank

Operator

Thank you.

with Our Branstetter Investments. Stephen next comes question ABL from

is line now open. Your

Stephen Branstetter

gentlemen. afternoon, Good

You the call. had today? mentioned that are with previous at maintenance parts Where on you

David Meniane

Yes.

part our that's mechanical of So well. offering as

So, other we have breaks some and things.

So, it's QX initiative. going to be QX, a

Stephen Branstetter

happened I Okay. And is I to bring inventory. China you in, already had or Has guess, mentioned in that guess, some works? partnerships, the areas, maybe other that in or more

David Meniane

our No. of A already it's lot of happened more of diversification a chain. that supply has and

now Taiwan India, came of we've business most little diversified from small now a and bit So our percentage historically Korea our from and Mexico. China parts of comes a and and

Stephen Branstetter

Thank Okay. good. gentlemen. Very you,

Operator

you. Thank

comes with Our next Research. from question Eric Beder SCC

check Prestopino line comes Eric, mute Please open. our question now with next button. And Research. is line your Your open. is Gary your from Barrington

is open. line Your

Gary Prestopino

want just up. ask I Yes. follow to a

were some that growth. maybe and Prairie, you're into You guys that that fulfillment doing? mentioned investments are in? you Grand some things other are -- things What is you go the you Could in just the investing Texas, DC making for

David Meniane

That's of of in DCs. up it kind we're higher making other SLA. holding the We're majority constantly but the ourselves to investments

want to to So in when out when ship an faster. we it a faster comes want order receive in and comes it container we

we organize off possible. quickly ship So small that the the make sure in we DCs investments includes as making as some orders flow the that that can and

Lev Peker

we're close and get over years, then that hours next in delivery, order goal, click call DCs to to we'll within the to click have will day the for ultimate means delivery have which add and the to customer day. several be to the XX to enough out to order just and get next, our goal us measure it, ultimate We going one go where the is to delivery And the that. to

Gary Prestopino

here So on Are SKUs? of, more gotta you obviously you've refined down as you want fine and your it's add you your a then just more Web where and and really to sites. distribution you matter processes cut then it you and got be to tune

Lev Peker

Yes.

Web terms in already of So, there. sites, we’re

that’s one CarParts.com. site Web we're So at

In to terms there. of still fulfillment do work a we have capabilities, lot of

Gary Prestopino

just on you execution? is like opening in I press new what to I and besides when don't And mean lot a work, But a up a that? you exactly is DC Is it that mean, of it's there better Okay. stay Lev, all this.

Lev Peker

quickly there's order mean, speed DC. I of can Yes. up how can out the gets automation into the that go DCs that

So, of at some we're looking that.

We we our model? do easy kind to of we capabilities with have and want up need multiple to our work four evaluate that’s pretty we just SKUs. fulfillment do and have of about how network about Do to lot a there's do fulfillment as DCs to touch we thinking to start as So, open more around continue DCs, But we order SKUs hub spoke to times? we grow. think

Gary Prestopino

helps. Okay, Thank that you.

Operator

Thank today's you. this call. Ladies conference and concludes gentlemen,

disconnect this Thank now for may at You you participation. time. your

CarParts.com (PRTS) 10 Aug 202020 Q2 Earnings call transcript