PRTS - Earnings call transcript Q3 2020

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Operator

Welcome to the CarParts.com Third Quarter 2020 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 third quarter 2020 earnings release, which went out today at approximately 9:00 a.m. Eastern Time.

If you have not viewed the release, it is available in the Investor Relations section of the CarParts.com website at carparts.com/investor. in available also via November will via balance be at webcast XX, will telephone and release. carparts.com/investor, be provided call for the replay archived XXXX, This earnings the available through

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

Lev Peker

Thank you, operator, and everyone. morning, good

investments our top committed technology, level to achieved year-over-year line generate within not remain our possible success healthy made have team, robust and continuing to our and The across gross increases in drive safe. rapidly have evolving to we them momentum sales substantial as environment. business. from the record a we line. We The while without we to have continued of positioned our During be our quarter, today and exceptional margin, us operator and keeping maintained we bottom supply and best-in-class marketing a e-commerce would the chain a hard work growth

and our still corporate contact Our protocols recommended closely are sanitation remotely, center and are and teams we working centers. all safety for following distribution

high Currently, deeply we volumes, recently, public frontline our more grateful fleet address off-line propel demand to continue ever to shift DIY, of combined country from from a to the growth: the fulfillment personnel. a X from we're and consumer Do-It-For-Me are distribution away helping with behavior has car major a for seen. transportation, secular changes there customer online, shift As shift our and and to are levels oldest that center

First, their This maintaining uncertain the economic react online. parts Consumers rather we're than of DIY auto during conditions. segment, usually new numbers by purchased record shop is seeing by parts shift for strong existing with in to we choosing macroeconomic vehicles. factors consumers that observed their auto vehicles momentum driven

with instead Additionally, money the of ever it YouTube, the shop. to car by of easier save consumer taking demystify than is the help doing repair, like tools availability to that repair yourself

verticals by in The other industry still shift second online advantage compared right as shipping continue margin. to from a We consumer digits its we're focus to unique a our of the change single other through believe online. categories quickly penetration. that online are from goes to our the online fast parts XX% expanded We in low prices. The Customers acceleration experience wide across lags We're to believe shift the e-commerce customers will adopting industries shift the parts getting shopping. to closer our in penetration to consumer. selection, model factory many the behavior have lower the and best-positioned the company that with and to customers distribution off-line is been on category take auto

discovering is time. Blockbuster to customer over after gaining to also believe We a that Nobody sticky going we're store prove that will resilient relationships be Netflix.

levels. be Lastly, continue below pre-COVID miles driven to

right year, by the rebounded from to data down they According XX% latest available April. lows they're from the the of trending where U.S. have direction. this However, the pandemic stood the of they during but Department in time in Transportation, from XX% are last

As not they saw and improve. and these consumers when will the country trends stimulus discretionary delivered house and and that mobility public use business, indicators play results brands We other income out do our execute. the with believe macroeconomic XX% factors similar improved. to will We our ability for QX, shift package the as away strong pre-COVID, these in first China, from up we but metrics following immediately dictate transportation, shared as U.S. follow. continues reopening We expect we statistics in and

and benefits As to trends end the continue stimulus expired see the strong business. additional at we of our in July,

third the weekly demand quarter. Our was sales consistent throughout

saw significant sales no We placed geographically difference on and based children location orders. also in

revenue same Our at another triple-digit brick-and-mortar competitors were we quarter sales, record open of the time, in primary always drove CarParts.com. sales while and channel, our growth reported

excited kicked ramping we're off our the last has it house majority to we parts and to At have across proven mentioned quarter business we're we or the hard we continue strategy established over TrueDrive begin our look Our I'll strength. we make from the we parts financial the quarter, And driving operate XX both months, operational our for this the have to of which under operational SureStop our Whitney through a continue resilient the well higher-margin over performance several all and brand brand the capitalizing sales. positioned which industry to maintained focus parts. these With auto improvements our call now foundation we're continuing expanded expansion us in brands, up forward on changes label Overall, to introducing We that David that demonstrates to private our and buying recently of product which offerings next turn strong to behavior, and highlights. tells times. dynamic implemented the months a SKU have JC on to past level, over of that, our what from significant walk position e-commerce as navigate our Drive, large-scale to business. umbrellas. With

David Meniane

Lev. Thanks,

we discipline. to we three committed our execution: service, outstanding our remain customer e-commerce continue expand of operational financial pillars and As business, to excellence

$X.X last higher improved compared of net our the XX% to by channel million XXX% income to primarily to in Gross million. stems channel to and mix year-over-year. Xx Gross to the chain, key QX logistics a net continued The year-over-year reaching more growth profit grew increase QX $XXX.X in loss expanded The nearly was strong sales margins expansion. compared a to of quarter As in flagship margin driven website, due to in increasing than the our sales from customer business. fastest-growing XX.X%, was marketing, Adjusted and technology, primarily The which million. consistent points to improvements carparts.com, year. our from supply operations, areas strong gross XXXX. million other mix, doubled mentioned, Lev year-over-year, million increase in revenue increased our $XX.X QX, service as $X.X and of as consecutive QX quarter increase record EBITDA be seventh momentum optimization. Total basis of making continues this in $X.X net well from XXX company product

we at Now cash XXXX, $X.X we end the XX, successfully compared oversubscribed. balance balance Xx offering million a closed many to August participating. on fiscal quarter XXXX, the want $XX turning a long-term of million but $XX welcome to had completed thank of existing shareholders sheet. was to million public and as for At September to also want The new offering we our shareholders, focused that XX, our of end

paid liabilities of side, outside all which credit of virtually we $XX liability to leases. the facility, debt of On represents our down million our tied

to As our us flex million JPMorgan facility to on up Chase allows levels. a inventory with depending ABL reminder, $XX

support clean now growth ample has a to liquidity capital initiatives. company long-term our and structure Our

to of part, demand Our place. operational parts perspective. buys strategy continued standpoint, inventory perspective, a inventory stronger our very was and operate hard to our right position, inventory key standpoint, from at an From longer to with the from strong capacity, our placed supply investments but chain outbound in inbound drivers time, continued lead lag long-term From a to both times. we QX an parts QX, right network an in be due and the and our full will replacement were right

next our We to improving X the inventory expect quarters. over position continue

footprint. on briefly Now our touching

and shipped out on build to Our center quarter happy over has a week new that We're and have ramp-up XX,XXX receiving now seven distribution we're days been announce date. schedule. to Texas packages right already

to We're in service. the warehouse for creating us look operations, amazing this grow Paris and We expect and inventory jobs forward community of volume outbound Grand received. is part customer city as and to being of welcoming Texas more technology thankful to

strong the the quarter and of validate on and even in resilience foundation focused uncertain our have turn Lev. long-lasting, teams With of this built, our we remain a We're over to results I'll call macroenvironment. building and exceptional the Our strength we'll company. strategy that, this back proud

Lev Peker

call, want our As make parting for few points that to today's highlight a thoughts business I unique.

of acquisition profitable terms transaction unit factoring we and costs. in fulfillment In when even our in nearly we're every economics, make, customer

increase continued condition, robust margins and stimulus We package sales unemployment our built believe have to business recessionary benefits. any have market the that extended can We a a without improve especially or in environment. we even in new thrive

was that and position online trends for outlined on. growing made three growth from The a shifts to operational trends marketing as pre-COVID plenty pandemic that broader chain. result the This have environment come. off-line to technology, above us of more of with personal across capitalize were I improvements as provides prime a years business Our emerged the mobility, heightened of and shifts already demand was capture we to DIY, to the supply result to we our from in

retain third overall e-commerce scalable prices here have Across habits has, as expect consumer from We'll exceptional shipping, tailwinds, While of CarParts.com we customers already benefits made subsequent and changes as consumers company. more stay. and we almost retailer. our that and modern establishing believe any wider fast auto a course, industry to auto grow parts in a and our the progress of in the this pandemic-related to a for the benefited shopping are than e-commerce of experience convenience organization, other low selection roughly

both to the end trajectory and look fourth customer our we'll we As optimize into quarter our back further facing to XXXX, and our work operations.

up financially while continue our that, deploying disciplined in business our will for inventory focus fulfillment questions. open strongest and the expanding when generate capabilities, the returns. areas to to order remaining to We of call With we'll capital on Operator?

Operator

comes first Our Instructions] question Ryan with Sigdahl from Craig-Hallum [Operator Capital.

Ryan Sigdahl

could have the performed. basis and declined, on on comment Curious continued Congrats at if if improvements. margins accelerated? a growth in and post XX% trends on remained And You're results October in secondly, business revenue QX. business you year-over-year revenue then quarter how or has similar, end growth

helpful. would comments be any directionally, Just,

David Meniane

Ryan, it's David.

we minor there was indications know last provided of in because uncertainty sales the market. I a quarter, of So some intra-quarter lot

general a a in. as practice Now really rule, believe it's we not

executing So internal focus to trying we'll quarter, following every our our our we're really plan, we're And report on rules results. success. and of

taking So really is decades kind to we'll giving ultimately, what trying a wouldn't feel doing build now. comfortable to a that own and But out data I proud now. be long-term we're view business of right intra-quarter from

Ryan Sigdahl

then thinking near-term. kind about both And just the margins, of

and out main As next you of levers the in fulfillment; a et how side years, a near-term cetera, lot in you the scales? business et spend over And the you as model you where the mentioned the distribution; on main about several kind also then can generally? look through the on, of kind of tech; you are cetera, few think cost quarters, walk margins personnel; as the levers

David Meniane

question. great Yes,

our statement is expenses. So if our today, ballpark, variable X/X you look at income of about OpEx

fulfillment customer fees. So and card and acquisition costs credit

Now have level the into some at. that debt comfortable we on fixed before we still we have address the to that getting technology side, feel OpEx

we far But over than make an some new grow in up. term, as at technology pace have leverage long going opportunity to think faster our catalog we to some I expenses. OpEx. investments much do we a to But we term, make. see do and short that have Short sales catch investments time, again, fixed get to we to we have a and I think as are term, DC, have

Ryan Sigdahl

more just -- of can and now maybe Or Those you but kind to to today? a level some Or need need a then do think generally those generally accelerate there leverage? this operating follow-up. there's And from see that we where you investments, you hold are seasonality, then spend? accelerate think that hold is of do

David Meniane

to to disciplined. that keep do at keep obviously, to company, And I profitable stay we want we No, the we but think we're want to going, momentum to going and try a growing the rate. want

So investments a it's managing the a quarterly the or semiannual growing profitable being in on and basis. of balance business

the think and standpoint. out investments flow we're we stay just to trying a a disciplined handle can and So profitability cash standpoint roll on we cadence from that

Ryan Sigdahl

how percent compare quarter free? versus on e-commerce the Then detail traffic underlying or prior on just some is does one getting metrics, that more versus prior historical but year, what mix a little about paid of either And then comps?

Lev Peker

much about year, So diversified. last we were XX% paid, XX% We're more free.

as free and So targeting that. for be split exit pace maybe next the to on XX-XX this paid. year, then were it we expect versus year, slip we're about XX-XX year, and we for XX-XX, we And

Ryan Sigdahl

initial day then of the you give Did turn it Last of difference? day Any on pace can a one kind make out two and you I'll over the in for to sales me, shipping well, regions the on one of where one -- that growth then others. shipping now states, commentary Texas? and had

Lev Peker

makes we And we're think that. again, a in uniquely it difference. positioned So definitely

We selling product. need-based are a

to so can where is discretionary not customer kind selling wait. speed like accessories of and We're important. And that, things customers very

We customer are something quickly. selling pretty needs that a

in majority shipped already. we getting getting of the right closer the Texas a is packages to would And sales, that had Texas proving XX,XXX packages now. to So one theory that within increase out customer prove we're theory customers over to and out those day.

to this expect worth as And in it up trend. good continue to ramps, is has It only there. to pretty of because inventory But so take it to a see dollars' seeing few we we're million going results. time ramp

Operator

comes from Darren Capital Partners. next with ROTH Our Aftahi question

Darren Aftahi

DC Texas. and the Just following up on

for you when utilization? can color lit? is quarters? units, of some on that XX,XXX quickly full it ramp kind give where the then And your perhaps officially what just perspective? kind of us facility And coming the expectation two capacity over capacity was a more And you can of from how So are kind

David Meniane

Darren, it's David.

yes, start is it on way we So schedule. is really basically small. rollout do The we the

XX% couple the ship on XX% Right it's labor Most start at, then is we receive inventory scheduled now, to a the of it, to of containers So receiving turn out. capacity. more still than right call and sales. now the it

XX/X, but turning there yet. just isn't we're receiving the the really on inventory sales not we're all So because

to receiving it, the the schedule XX% have and footprint us, year the the For standpoint end call of is between keep until the really by XX% and from a year. end of it, capacity

Darren Aftahi

if may. couple A more, I

specific the of And you Could sharing in sales that bit investment? in kind in tech. And You little the would called technology channel indirect quarter, more for would the kind what's be exactly a of be invest if that time investment need out just you then to frame what mind in? you helpful.

Lev Peker

about tell investments little So in a you I'll tech. the bit

So homegrown a old. lot and really are systems of our back-end

is big a one ERP. So our

which So nobody we use really Great anymore. uses Plains,

first to and the with get need the times. kind that's So thing that we of upgrade

next big for And a So year. other upgrading us. we're few are that's that a systems then investment there for

forecasting We have system. system, have purchasing a a we

So we on the need let just that, answer And to question. David few second back I'll a systems the end, then upgrade.

David Meniane

think on a correct? your Darren, the Is was that question, of wholesale I So as revenue. percentage

Darren Aftahi

Correct.

David Meniane

we So sales were the wholesale. X.X% at for of were QX,

Darren Aftahi

more I in. if squeeze then And just could one

time stacking Is out? it So XX months I want kind see don't of is rolls about DCs you've to your that conversation? Like launched and you we about do the take new talk Texas of XXXX. of part with how given as the Texas from know we go probably that and think layering -- now? or out Or how

Lev Peker

day. one what the the to locations in customers of open hit to DCs study determine network completed order just optimal in we to So our are XX%

go and see start in, going about we in we're to thinking we roll of as we as sales out, come where let do QX, next. kind think I Texas

Operator

question with Davidson. from Elliot comes D.A. Alper Our next

Elliot Alper

the in margins quarter. gross impressive So

about spoke a guess, kind how channel margin product You mix part of could we on of gross the going and And the margins? December this. color about more share I quarter? you then the mix gross think any as forward specifically into should

David Meniane

Elliot, David. it's

you actually So I'm asked. glad

mix the look at we we when That's margin the do at we're business. channel about, think that the quarter really to on of buys based I did in looking that your said point, how a QX, We've the through we going down for how really over and make to course extra that couple which inventory, margin. or out year it talking I opportunistic is at internally. up us fluctuate and to manage that's the always some full like which mix. best quarters product call inventory, margin, it's sold to we because but of want we and it's look branded several of mid-XXs, least gave -- that

wouldn't that in recurring addition, that I quarter-over-quarter. a our And rate. we really I obviously, thing. will So think in decline then, consider saw slight fluctuate return But a

general, to a and I think, to again, from in a own looking at we'll proud view, a we of decade business have long-term we're more now. try that be creating

bit or channel So and product mix. mix it down little will fluctuate on based a up

Operator

comes next Eric [Operator Instructions] question Beder from Our with SCC Research.

Eric Beder

deals you that up are you products I bigger getting could are the terms Eric, better from seeing -- in partners? you now follow last to question. a on little bit talk your branded of want What

Lev Peker

so not bigger. about sure us I'm it's getting

of distribute give consumer, the I put give looking competitors then it fulfillment, the brands and for, fact they're that that and our can awareness the that DCs inventory, it we really we our and think in to buy sort them. can't our have own also

it's that of going getting before. with that's get been not lot successful we deals. think the -- to big and the I'm in of have us bigger, a brands something what we done allows so but haven't us brands lot direct a sure about I

we'll better and our warehouses. to us continue also to And down extract so that better margin to allow get path of utilization

Eric Beder

margin? incorporate that label of that We've and should spent looking you your product in margin less own some margin it the of from forward be at overall operating years a this last gross we capture few Is and terms going your in private branded. that about branded comes becoming difference thinking as product versus warehouses

Lev Peker

still There's branded. between difference Yes. label private and a

can't label, as get the getting are still quiet we it we level same So to private but closer.

compare So before, label P&L in branded, private the X,XXX last and and was, year if at you margin it, you looked call bps. the our gap

closer probably to XXX XXX Now margin. it's difference in to bps

Eric Beder

has Whitney other has Whitney the the you ramping And up response for in amount I been branded out? what customer JC see out. to and of label you've JC the private been rolling guess, been been What that I rolled products SKUs to base that -- the two and the you've response the

Lev Peker

slow has a switched response kind So now. good for we tanks response so a good. we've been it far, brand. been we fuel to But when doing I of our mean, the saw different

to It's call years So right? really replacement product we the isn't a brand, what just ago. decided

awareness see to And so when of these branded way a buy uptick, but it actually we means translate switch to when products. consumer brand, we all to what these a have do go we it for to the an and build to long brands they

be offering things But we awareness have like warranty, product. our to and we'll we other brands. all build have for do to stand of behind the things So

Eric Beder

what you what working with to seeing bit on in NASCAR, the could I through that you've you run know mailings. Could last quarters of and that? tell forward kind some more some a of and doing been question, been and doing what give little terms us been going And a see about stuff two you've us what more with you you've little increasing build is you're doing, in bit last marketing?

Lev Peker

Yes.

NASCAR and partnership Motorsports. with McDowell So looks the very good, customers, closely their Row is what very NASCAR, is and tied The like. we're very our to our affinity customer Front customer happy customer with Michael

and working. it's a ago. our weeks partnership, last over, of The race that so season did couple been is So we we like

been TV. a looking We've season. of we're doing lot next so And the forward also to

CPMs. now. to measure travel TV. we opportunistic you get And know, a in And we low to the buys of in companies our very really pulled TV, for industry we're TV as able a way were terms have some of As out, lot

the cycle this we're we've so during end high. results back We coming the week, good election of is election were CPMs out getting that really from pulled over. of now But the seen because kind TV. at the And in

seeing continue we'll path. terms good driving of results down really So and there direct-to-site that in traffic,

David Meniane

to if And I that, add Eric. can

a I opportunity a to think for it's stuff us upper TV, for on build brand long great the funnel CarParts.com and the term.

if the they last were you brands So year-over-year. think up about business house QX XX% up And QX, pre-pandemic, in year, year-over-year. then were our XX%

we no So XX% stimulus extended or unemployment in QX, growth in benefits despite had August or September.

and So term, we number cars a empowering to shift of drivers similar to miles driven very in a shop industries. a very are way way new convenient with part is attractive dramatic really long that online, buy other to understand up there quality to number people from seeing, the a on in give And so upper at to funnel And fast, going marketing up, premium off-line can going of different brands efforts we're road consumers really message a is shop going and the of the auto for price. that to of way consumers parts. that

Operator

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

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

CarParts.com (PRTS) 9 Nov 202020 Q3 Earnings call transcript