PRTS - Earnings call transcript Q2 2024

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Operator

Good afternoon. [Operator Instructions] Please note this call is being recorded. I would now like to pass the conference over to our host, Tina Mirfarsi, Senior Vice President of Global Communications and Culture. Please go ahead.

Tina Mirfarsi

Hello, everyone, and thank you for joining us for the CarParts.com second quarter conference call.

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

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

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

call, CarParts.com the of reconciliation provided to On measures financial GAAP release non-GAAP press discussed. issued in both will measures A be non-GAAP is the financial GAAP and today.

would turn now And with like over that, the to to I David. call

David Meniane

Thank this detail. and with takeaways financial to in like our important I'd the turn most joining to from for you, review us thanks, before over to start I performance it Ryan Tina, quarter, today. everyone,

net by quickly with Last strong focusing and efficiency sustainable our growth profitable and free to financial and improved emphasis gross achieving and long-term quarter, flow. profitability we to on margins, deliver on discussed discipline accelerating driving effectiveness a cash path

gross progress and we're reinforces significant In efficiencies, made the confidence on margin on the quarter, track. second we that our operating right which

position our a fragmented beyond, our are $XXX fiscal highly have parts been in we road we a us watermark retailer a should as we on leading to confident map execute the be XXXX year in This strong and changes as auto and XXXX for billion a fiscal market. opportunity online low expect We and making. year

our to and target higher gross we marketing more of first pricing year, margins. generate updated the In customers profitable half and the acquisition strategies

second at the improvement basis margin with quarter, we saw QX. in product a margins XXX up from XX%, As result, sequential points

Combined cost moment, we anticipate higher. in sequentially be to with QX initiatives I'll discuss less reduction expect the economics volume. better on unit We a

actions $XXX were $XXX pricing the and from negatively to million the to prior which down impacted customers overall profile sales, million year However, in of beginning change period. our

highlights operational quarter we for continued of our optimize maximize follows: profitability price the product to assortment Our and as were the channel. e-commerce our to

continues year. from momentum over number the app mobile XXX,XXX more of the to Our downloads, drive strong than double beginning with the

our approximately search XX on direct as In advertising time, after and launching, of incentivizing purchases. XX% app as e-commerce revenue. engines our reducing addition, savings performance XX% our and reliance mobile on just With customers of accounted drive purchases to in marketing repeat we total months by shopping in-app well expect for sales spend over mobile,

continue in we Second, to channels. our marketing invest

on making awareness which are strategy, high-value recognition brand is customer leading critical base. strides target customer-centric We of capturing e-commerce and our automotive building digital-first our to and

first In ever brand launched our July, we campaign. comprehensive

and connected our and parts, across right YouTube at This hassle-free highlights e-commerce value quality million social "Now our TV. Our Speed" propositions, campaign, parts our tagline, solution. with competitive My price media of along customer is over extensive new campaign pricing our running top selection quality X platforms, That's

recognizable funnel We up to of brands to and most are the marketing moving trusted the committed in CarParts.com one the establish as industry.

the needs, lists. capitalizing become and customer repair our go-to for destination website infrastructure, maintenance Our goal traffic all on is automotive and to

including & Fortune years in extensive and who Twitter, want to Marketing of across XXX We Google, over campaigns Gamble. Christina Officer, and award-winning Visa building an XX with Chief brings background also in Procter marketing, new experience global our several welcome companies, Thelin, brands

customer engagement marketing expand our for As CarParts.com. market strategic continue we increase as CMO, our drive initiatives Christina will presence, to awareness lead and

and vision on marketing strategic forward. her help that team. have we the to record proven her our confident will are track are company thrilled propel We

of reduction the margins. made optimization And pick, on logistics that freight our we and reductions for and progress and in of costs will our We've significant drive pack improve third, shipping upgrade identified freight opportunities costs.

with our we the margin margin to Combined the profitability believe operational quarter. in product gross can improvement, percentage, third continue result in freight combined increased with after for we gross improve Higher should margin company. efficiencies

than new center our fulfillment now of more Las is Vegas shipping network XX% June, became and operational volume. our In

to this western expect building the of we we the country. volume exit of As close company the XX% to year, service we handle part as the

allows to state-of-the-art drive conveyance the for AI-powered the and a in and operating PIC facilities customers for This Module in paired investment efficiencies a and form reduction region. costs. process growth improved leverage of The significant extensive operating conversion with assortment, made was in

expect ramping We fully in the half and XXXX, start second to of those XXXX. in realized savings

us now lead to call I'll turn the our to through Ryan over financial results.

Ryan Lockwood

million you, revenues decline last year. combined to price down The XX% gross $XXX David. deliberate we by primarily was softer Thank drive margin million, expansion, QX, In driven with from increases demand. of reported consumer $XXX.X

from by XX% in million, XX.X% prior profit prior freight year brand last prices the XX.X% was down up down for our in year. quarter the and higher year. related compared of Gross expanded sequentially costs. offset the from the were Gross from sales, efforts year-over-year margin to margins Gross to margin approximately increased $XX.X was quarter period, XX.X% improvement and

and driving the in ahead. mentioned, to see and is part improvement quarters net strategy, our David continued central margin to strengthen the gross we discipline of expect As financial

from by with certain $X.X for primarily loss a lower in compared loss million quarter flow-throughs net year period, GAAP costs. the combined onetime million prior margin, $X.X of to was gross net driven the

expenses outside year new million, million move $X.X technology due the total The from expenses operations adjusted period, primarily our quarter. as related related loss costs our facility, down of to $X.X $X.X to in of opening reported Vegas the the and of We EBITDA prior as Las project to million normal strategy costs was our special transformation amount well of refocus. approximately in

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

finalize Our our significant support semi-automated improve. cash opening position as flow end quarter million free our at continues inventory cash plan center, was in the we million of prior the business versus revolver fulfillment year. new and The $XXX should untapped to Vegas $XXX balance our

for outlook XXXX. our to Turning

For previously our or the the margin remain revenues with year, We we focus full expect to guidance at for range end margin low guidance of gross million, million the of XX% $XXX improvement line minus basis points. profit year. of in our stated XXX our reflective plus of $XXX gross

David Meniane

Ryan. Thanks,

operating These expansion at for changes to work from our efficient are span we making CarParts future to and through entire business, group improvements improvements product our assortment are that outlined, revenue. the company. and across we've positioning enhance customer-facing As more the gross balance margin us every process

adjusted forging a working free expect will X% a X% that to achieving the towards are EBITDA cash margin generation path result term. and sustainable year, in while positive enhanced achieving We flow and we significantly next EBITDA adjusted medium in

this to transition expect in capture within to growing emerge aftermarket. We positioned underserved and fragmented billion opportunity the of strongly automotive front from $XXX and tremendous period us a highly of

all and by focused destination repair our and difficult remain more offering, excited scalable highly on are replicate. firmly and becoming maintenance for customers to We needs. automotive business differentiated, is the Our our becoming efficient, go-to

their for it to on execute we hard turn everyone, to and over continue work call. teams your for operator like every commitment each person today's to Thank would questions. the and We'll I open across it and thank joining you, as our transformation. our for now global up

Operator

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

Ryan Sigdahl

with guidance. start to want I

the So average, QX. low is from range QX volume normally a back strongest to and of Even end your guidance On in or the seasonally guess, revenue implies relative be standpoint sequentially, standpoint. I QX. quarter QX, at will a half revenue up

So it price volume seems I given you margin that gives what guys prioritizing are you guess and here? confidence over

Ryan Lockwood

Yes.

until a to prior whole period I to half we that up lot I are seasons, things a back on do give think can coming revenues. the a to little but to going through a it's we think we're us bit And confidence David bit tailwind I comparable we that little of projects those QX. mentioned, year. gives now think is have going essentially end the of trying out a from us the the flattish guess, lot that a back lot end And loaded month given think unconventional, what of we every run the are run, of

Ryan Sigdahl

Can give those you or what frame, us maybe elaborate a more on little specific are? time projects

David Meniane

Yes. Ryan, David. it's

things have road a map the We the app. mobile of number and on e-commerce

search. around stuff some have We

upsell, We cross-sell. have

which And of more the comprehensive fully We road expansion. at our of positive kind we have map. launched early same just it's At fee is a time, We income initiatives. have assortment with showing the combined time, several marketing signs progress. campaign, same

can road definitely aggressive I the -- very the hit have a numbers. that So confidence we have we have but we think we map,

Ryan Sigdahl

any switching can just versus you Vegas guess facility, over the Then in there? anything gains, can efficiency quantifiable I to metrics with transition, new of you that share share old technology DC, on more leveraging but on kind that

Michael Huffaker

is Michael. Yes, this

full days our weeks are entitlement. to We've building. to meeting and for of early take in thus we're building far, the open So X been the about weekly we plan ramp-up

expect of we over of the out Over year, savings $X get building would course in this to efficiency next previous. about comparably the million

XXXX. expect spend year and then savings optimizing in the we ramping $X building, this up the we So rest of for and will million

Ryan Sigdahl

company, then remember I rest starting and the look help of If don't QX, year? take you that quarter-over-quarter, about mentioned Is doesn't Ryan, kind believe the million like in think $X.X relative and said the of in ramp nonrecurring guess profitability Ryan EBITDA I increased year-over-year, or the benchmark QX, guys the to did costs, I add improvement? back reconciliation. of in who profitability in the that EBITDA in Great. prepared through us what's remarks. David, your you I for just it the

Ryan Lockwood

Thanks, Ryan.

to is we'll we're that believe alluding gross we I think what expansion. really margin have

year. good of is QX, So saw sequentially remainder continue through really what through gross we some through and expansion margin pretty expect the sequential month to that the we every happens

gross be higher than So we that think margin should QX. QX

projects try it to working these balancing that, of through as the maximize that as get improvement contingent be full as launched. for mentioned, on that projects, obviously think well year, hard of with some the to certain David us and this profitability it's I investments but going and EBITDA capturing the takes these of then remainder we're launching, to

Ryan Sigdahl

for one million me. to update estimated. you that said Any $XX Last now? cash exiting the of previously year Ryan,

Ryan Lockwood

on million $XX exit million sounds say dependent right. the year to of about would cash That to I inventory. $XX

Operator

Our Ryan Lake of next Capital Street question the comes from Markets. line Peters from

Unknown Analyst

bucking a had QX how far so First kind and about asked the on that about for question sequential what initiatives, here sorry, that these guys of maybe played out? just the in here seen have so -- some what about some you of that if seen, past? what And that you've guidance, talk hitting first QX? you in follow-up talk me, can Just in fact, that the you've seen seasonal X far trend Ryan or you've they've of kind of in seen

Ryan Lockwood

Yes.

some a headwind far of expected. tricky. So it's a because a planned which we're in little bit was We -- and QX, actually Vegas, little had moving

move temporarily one So while inventory the gets the it's another, on when containers non-saleable from becomes to it in unloaded. we location until and it truck

so the And we X as a were read with, your probably I lot work as We vendors our current them. CrowdStrike tough. And makes FedEx, is you're that everyone in for believe, the well like on of example, impacted that other by talking of a calls. little to quarter

many how know really impacted. don't we were customers And

So track track. we is we just quarter. which on recent completed, feel clean that despite pretty week, -- that, which on most for is the The still

so bit So little read behind, the the But good on planned. we bit but of far about is feel little a a that PX was quarter.

David Meniane

add Yes. I to And Ryan. it's if David, can that,

of if you at take profile at with. profile with that think, a we year, that margin back margin step you beginning that's we and not comfortable the I like the were started look a the

control. is that And some so and but there's variables within are it -- some our related to base, macro of definitely our customer

structure, operations warehouse what pricing, is that so call. about overall around cost took And which the action on promotions last and we've happy we talked about and discounts, I'm significant

So progress. acted the we good made news quickly, and is we significant

margin me, than for gross evidence better that I'm the points looking is So at QX. QX was

be cost to of QX much we expect margin through better cycle QX. I will We move, to in think these onetime that once have There's Vegas confidence expenses, line be P&L better. is look the in the P&L next I noise than gross full significantly line QX both top And because but and the bottom and year, some cleaner. going

on for we better next a much have us, So X it's definitely visibility year but transition I it's months. think numbers -- in the

Unknown Analyst

seen more a it. guys Okay. past Got segments the some trading any those on the products? for And some about lighting there called all? out. have still you type I I like business the it mirrors, that in at have in changes is mean, think have down demand customers Or thinking more of the environment and you drag are been price-sensitive of then inferior

David Meniane

income, a that's customer the great our marketing higher part on a more kind lower the profitable, very is And price-sensitive, discount-seeking we're the that Yes, more of question. exercise for returning, base customer was Historically, propensity going to definitely segmentation spend. trying deep that has focus customer. of a through efficient

volume, but shooting on we're profitable so lower And more customers.

QX. still We haven't The tough. change from environment to is quite seen a QX

it's -- in base. it CarParts.com, more some if our not So to look you macro say line, I'd customer specific of that is at top

intentional prices, on is less reliance it and of discounts some raising And promotions.

you news around efficiency, bottom all the trickle with operational Now initiatives the that it if down the line. good should combine to is

Now take more but couple pay us going profitable obviously, of it's for quarters, off. that to is think customer like going on long I is that a focusing to term,

Operator

conference today's for Thank concludes participating. This you call. you. Thank

You may disconnect. now

CarParts.com (PRTS) 30 Jul 242024 Q2 Earnings call transcript