CarParts.com, Inc.

Good day, and thank you for standing by. Welcome to the Car Parts First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Les Peeker, CEO. Please go ahead.

Thank you, Operator, and good afternoon, everyone. During the quarter, we saw robust sales that reinforced our confidence in achieving our long-term goal of 20% to 25% compounded top-line growth. For new investors, we encourage you reviewing our investor deck available on our investor relations page at carparts.com. Revenues and gross profits for the quarter were up 65% compared to last year as we set another record in both. We're excited about our future as the fastest growing retailer in the sector and the best positioned company to disrupt the auto parts industry with our two-step direct-to-consumer model. Our focus remains on our mission of helping people get back on the road through our strategy of right part, right time, right place. Right part means ensuring our customers can find a complete solution that fit their vehicle. During the quarter, we made tremendous progress with new technology that improves the search capabilities on our website, and we continue to expand into the mechanical parts market with more products and more inventory. As we progress through the second and third quarter, we feel great about our hard parts inventory position and look forward to helping customers get back on the road during this peak mechanical repair season. Our proprietary catalog is constantly expanding, and we continue to add new products as well as new applications, sets, and kits. We think having the right parts to solve the customer's problem is the main reason more than 30% of our revenue comes from repeat purchases and a one-year look back. Right time means getting the customers back on the road quickly. We're happy to report that our Texas facility is now 60% full and we're expected to reach full inventory capacity this year. The added capacity was a significant driver of our year-over-year as well as sequential growth. The success we achieved is a testament to our data science, inventory forecasting, and global sourcing teams. By optimizing the assortment in Texas, we were able to increase our sales capabilities despite the facility still being in the ramp-up stages. Additionally, our warehouse operations team worked tirelessly to fulfill an unprecedented amount of customer orders across our entire network. Right Place means empowering our customers to choose how they want to repair and maintain their vehicle. Whether they're a do-it-yourself or do-it-for-me customer, we're committed to offering them the resources, tools, and turnkey solutions and services to get them back on the road. We continue to refine the experience our users are having with our mobile mechanic partners by carefully analyzing each interaction. Our goal is to have a seamless experience and ultimately expand our pool of potential customers. The analogy we use internally is that Netflix started by mailing you the DVDs but eventually evolved in delivering a complete turnkey solution straight to your TV and changing the way people consume content. Over the next few years, we also expect to evolve from a parts-only supplier to delivering turnkey solutions that disrupt the auto repair industry. We recently completed a survey of our existing customers and found that roughly one out of every seven buys parts from us and takes it to a repair shop to be fixed. Helping customers find that repair shop and their mobile mechanic option is a natural evolution of our business as we seek to disrupt the $300 billion do-it-for-me and do-it-yourself automotive aftermarket. I will now turn it over to David.

As Lev briefly touched on, Q1 was another record quarter for revenue, making it our fifth consecutive quarter of significant year-over-year growth. We generated revenues of $144.8 million, up 65% from prior year sales of $87.8 million. The increase was primarily driven by growth across all channels and supported by increased capacity from our Grand Prairie Distribution Center. Gross profit grew significantly from to 49.2 million, up 65% year-over-year. Gross margin was up 10 basis points year-over-year, to 34%, primarily driven by mix, offset by inbound and outbound freight. Total net loss for the quarter was 2.7 million, compared to a net loss of 1 million in Q1 2020, mostly driven by increased non-cash charges. Adjusted EBITDA in Q1 was 3.6 million, down from 4.3 million last year, with the decrease driven primarily by the continued ramp of our Texas D.C. adverse weather and targeted investments in brand awareness campaigns that did not exist in the prior year quarter. As we've mentioned before, we don't manage our business quarter to quarter, and we're working hard to create an infrastructure that can support a top-line CAGR of 20% to 25%, and we continue to believe in the long run we can achieve 8% to 10% EBITDA margin. As a reminder, we have visibility into all the levers, that will give us the operating leverage to achieve those margins and none of them are moonshots. Turning to our balance sheet, at the quarter end our cash position improved to $45.9 million from $35.8 million driven by working capital improvements. Our inventory also grew $8.6 million to $97.9 million at the end of the quarter. Our credit facility remains undrawn with $30 million of potential availability with the option to flex up to $40 million of capacity based on current inventory levels. On the supply chain side, our now expanded network is operating at full outbound capacity, and we're excited to announce we're in discussion to expand our Texas warehouse with the space next door. We'll be adding 156,000 square feet of space, making Grand Prairie one of our largest facilities. This expansion will allow us to continue to grow our assortment of parts as well as overall sales. We're committed to growing our footprint in a financially disciplined manner to get closer to our customers and increase inventory availability. This location will also include a world-class roll call and return center for customers in the region. On the marketing side, we continue to focus on building brand awareness for our flagship site, CarParts.com, with partnerships with NASCAR, Professional Fight League, Two Car Garage on Motor Trend, Donut Media on YouTube, and a new national TV campaign with Daytona 500 winner Michael McDowell and Front Row Motorsports. We will, of course, be disciplined in our investment philosophy, deploy capital only where we see opportunities to accelerate our growth, and where we believe we can earn a significant return on investment. Now, lastly, Lev and I would like to send a huge thank you to all our frontline teams that have worked relentlessly to continue serving our customers in such a difficult environment. Their hard work and commitment to carparts.com has been incredible, and we could not have had such an amazing quarter without each and every one of them.