Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CarParts.com Inc (PRTS, Financial) achieved a sequential improvement in product margins, reaching 54%, up 210 basis points from Q1.
- The company's mobile app has gained significant traction, with over 450,000 downloads, doubling since the beginning of the year.
- CarParts.com Inc (PRTS) launched its first comprehensive brand campaign, aiming to enhance brand awareness and recognition.
- The new Las Vegas Fulfillment Center is operational, expected to handle 20% of the company's volume by year-end, contributing to cost reductions.
- The company is focusing on targeting more profitable customers, which has led to higher gross margins despite a decrease in sales volume.
Negative Points
- CarParts.com Inc (PRTS) reported a revenue decline of 18% year-over-year, from $177 million to $144 million, due to deliberate price increases and softer consumer demand.
- The company experienced a GAAP net loss of $8.7 million, compared to a net loss of $0.7 million in the prior year period.
- Gross profit decreased by approximately 20% compared to the prior year, with gross margin slightly down from 34.2% to 33.5%.
- The transition to the new Las Vegas Fulfillment Center incurred costs, contributing to an adjusted EBITDA loss of $0.1 million.
- CarParts.com Inc (PRTS) anticipates fiscal year 2024 to be a low watermark year, indicating ongoing challenges and a transition period.
Q & A Highlights
Q: Can you explain the confidence behind your revenue guidance, given the focus on margin over volume?
A: Ryan Lockwood, CFO, mentioned that despite the unconventional approach, they expect to maintain a flat revenue trend in the back half of the year, comparable to Q2. This confidence is driven by several backloaded projects expected to provide a revenue tailwind, including e-commerce and mobile app enhancements, marketing campaigns, and assortment expansion.
Q: Can you provide details on the efficiency gains from the new Las Vegas Distribution Center?
A: Michael Huffaker, COO, stated that the Las Vegas facility, operational for two weeks, is expected to yield $2 million in efficiency savings by 2025. The focus for the rest of the year is on ramping up and optimizing the building.
Q: How do you anticipate EBITDA and profitability to improve through the rest of the year?
A: Ryan Lockwood, CFO, highlighted that they expect continued gross margin expansion, with Q3 margins anticipated to be higher than Q2. The profitability ramp will depend on the successful launch of projects and balancing improvements with necessary investments.
Q: What are the expectations for cash levels by the end of the year?
A: Ryan Lockwood, CFO, projected ending the year with $25 million to $35 million in cash, contingent on inventory levels.
Q: Have there been any changes in demand for price-sensitive segments like lighting and mirrors?
A: David Meniane, CEO, noted that the demand environment remains challenging, with no significant changes from Q1 to Q2. The company is focusing on targeting more profitable customers and reducing reliance on discounts and promotions, which should benefit the bottom line in the long term.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
