CarParts.com, Inc.

Good afternoon. At this time, all participants will be in a listen-only mode. Please note that this call is being recorded. I would like now to pass the conference over to our host, Mark DeSiana, Interim Chief Financial Officer. Please go ahead.

Hello, everyone, and thank you for joining us for the carparts.com first quarter 2026 conference call. Joining me today is David Vignon, Chief Executive Officer. Before I turn it over to David, has some important disclosures. Our remarks on this call could contain certain forward-looking statements related to our company and our strategic initiatives under the federal securities laws. Actual results may differ materially from those contained herein or applied by these forward-looking statements due to various risks and uncertainties. For discussion of the material risks and other important factors that could affect results, please refer to the carparts.com annual report on Form 10-K and the quarterly reports on Form 10-Q. Each has followed with the SEC, all of which can be found in our investor relations website. On the call, both GAAP and non-GAAP financial measures will be discussed. A reconciliation of GAAP and non-GAAP financial measures is provided in the press release that we shoot today. With that, I'd like to turn the call over to David.

In the first quarter of 2026, we reached a milestone. We have been building toward for five consecutive quarters. Our first positive adjusted EBITDA since Q1 2024. our adjusted EBITDA was positive $585,000, a swing of nearly $7 million from the same quarter last year. This is the result of deliberate action across every line in the P&L, advertising efficiency, customer acquisition quality, lifecycle monetization, warehouse operations, offshore savings, and a fixed cost base that is now materially lower and mostly embedded in our runways. Twelve months ago, Adjusted EBITDA was negative $6.2 million. We made a decision then to rebuild this business around profitability, and today we crossed the line. Before I walk through the quarter, I want to establish two frameworks that matter for how investors think about this business. The first is how we measure profitability. As our mix evolves, more dropship, more A premium, more J.C. Whitney, reported gross margin percentage will move, and our costs will reduce. We manage this business to contribution margin dollars. We're focused on long-term free cash flow, dollars that accrue to shareholders. Mark will walk through the mechanics, but focus on the dollars. The second framework is strategic. For the last several years, we have been thoughtfully building out two sides of our business. There is the digital layer, our website, our mobile app, our search, our catalog, our marketing, and there is the physical layer, Our global supply chain, distribution network, fulfillment infrastructure, inventory, and last mile capability. Most people see CarParts.com as an e-commerce company. We see ourselves as both. And over time, the advantage will not simply be having both layers, but how effectively we can connect them through data, AI, and customer ownership. I will come back to that later in the call. Turning to the trajectory of the business. Q1 2026 marks five consecutive quarters of sequential improvement in the metrics that matter most. Gross profit margin, fixed operating expenses, and adjusted EBITDA. Q4 2025 improved over Q3. Q3 improved over Q2. Q2 improved over Q1 2025. And Q1 2026 crosses into positive adjusted EBITDA territory. Each quarter we said the model was working. This quarter, the model proved it. This is an execution story. The restructuring is behind us. The cost actions are complete and mostly reflected in our run rate. What you are seeing now is the output of a leaner organization operating against a disciplined plan, and we still have more levers to pull. On our eight premium partnerships, the momentum is real and accelerating. The annualized revenue run rate is now approaching $45 million, up from $35 million at year end. and we believe that there is a path to $50 million in the near term, and eventually potentially exceeding $100 million. All of this is being generated at attractive contribution margins without requiring us to carry the inventory or the working capital. To put that in perspective, a premiums catalog is five times larger than our private label mechanical offering. In the world of fitment-specific parts, coverage is a durable competitive advantage. Every SKU we add compounds our ability to capture the customer before a competitor does. The partnership is capital efficient by design, and the results are reflecting that structure. And we believe we're still in the early stages of what this partnership can become. Moving to J.C. Whitney, this has gone from announcement to execution at a rapid pace. In March, we launched the J.C. Whitney branded product line in partnership with A-Premium. 30,000 SKUs with a premium supporting the operational build-out. The initial 7,000 J.C. Whitney SKUs are now live on Amazon and generating sales, with revenue growing week over week. The remainder of the 30,000 SKU catalog will scale over the balance of the year. To fund the J.C. Whitney inventory investment and strengthen our balance sheet, we completed an $8 million private placement with strategic investors who bring operational experience in e-commerce and the automotive aftermarket. We're buying inventory at known margins, selling through a channel that is already generating revenue, and turning that capital back into cash. The investment is expected to be accretive to earnings as inventory moves through the sales cycle. I want to come back to the two companies in one framework. What I'm about to describe is early. The numbers are small, and there is significant work ahead. but the direction matters, and I want investors to understand how we're thinking about it. Since the beginning of the year, we have delivered over 2,000 packages to our last mile network, and we're running next day delivery for our own channels out of two out of four warehouses within a defined radius. This is proof of concept, intentionally constrained while we validate the model, but our target is to deliver 300,000 packages to our last mile network over the next 12 to 24 months, with a focus on big and bulky, non-conveyable parts. The heavy, oversized items where we have the most scale, the deepest operational expertise, and historically the highest outbound carrier cost. Getting to 300,000 packages will require significant execution. We know that. But the savings per package are real, and the infrastructure is already ours. Here's the strategic logic behind this investment. As AI continues to reshape e-commerce, we're paying very close attention to where durable competitive advantages actually exist. Some assets are becoming easier and cheaper to replicate every year. Digital execution, content generation, catalog enrichment. What is not easily commoditized is physical infrastructure, warehouses, fulfillment networks, last mile reach, and the scale and purchasing power that comes from three decades of supplier relationships. AI will optimize infrastructure, it will not replace it. At 300,000 packages annually, the economics become meaningful. At scale, they become structural and could significantly reduce our freight costs as a percentage of revenue. Our strategy is to lead in both layers, owning the demand layer and building a durable competitive advantage in the physical layer. Stepping back, the investments we're making are part of our strategic, and practical roadmap. Our distribution network, our last mile initiative, three decades of sourcing relationships in Taiwan, the J.C. Whitney brand. They reflect a coherent view of where the real advantages in this industry will live over the next five years. We have more proof points to build and more to share in future quarters, but the direction of our capital allocation is deliberate, and we're executing against it today. On the technology side, we have two AI systems in production. Spark is our customer-facing shopping assistant, live on carparts.com, helping customers find the right part using our proprietary Fitment catalog. Zap is our internal system, automating returns, cancellations, and warranty claims, reducing manual work and improving response time. Both are in early stages of rollout. The advantage is the data underneath them, our customer history and catalog that a new entrant cannot replicate. That is what we are building upon. We have recently opened a branch office in Taipei, Taiwan. Approximately 70% of our purchases come from Taiwan, the product of decades of supplier relationships built and deepened over time. Having a permanent presence in Taipei puts us closer to those partners, strengthens those relationships, improves lead time, and supports our ability to consolidate and coordinate sourcing more efficiently. This is a long-term strategic investment in the supply chain infrastructure that underpins our business, and one we have been planning for some time. Q1 also included several headwinds facing our industry. Oil prices increased approximately 50% during the quarter, driving a direct increase in freight costs and fuel surcharges. We responded with real-time pricing actions to protect gross profit dollars. Weather across multiple regions in January and February also reduced order volume. The pricing response covered both. Gross profit came in at $42.9 million on $132 million in net sales, with gross margin percentage up approximately 40 basis points year over year. I also want to reinforce the contribution margin framework. As we mix more toward drop shift for certain categories, reported gross margin percentage may decrease. However, contribution margin will increase. As in a dropship transaction, there are no associated fulfillment expenses. Mark will give you the details. On the customer loyalty front, at the end of Q1, we officially launched the CarParts.com MasterCard issued by the Bank of Missouri in partnership with Concora. Cardholders earn 3% cash back on CarParts.com purchases and 1% on all other purchases. This is very early, and we have a lot to build, but the infrastructure is now in place, and we have already activated over 1,000 MasterCards. The CarParts.com MasterCard is the latest addition to our Capital Life fee income platform, which includes our CarParts Plus membership program and various warranty products. Combined, these programs now generate in excess of $4 million in annual free income and are aimed at increasing customer lifetime value, frequency, and retention. Over time, the goal is more revenue coming from customers we already have and less from customers we have to pay to acquire. Looking ahead, our path to sustainable free cash flow runs through the same controllable levers that produce this quarter's results. growing contribution margin dollars, a fixed cost base that is already materially lower, and improving capital efficiency as J.C. Whitney and A. Freeman scale. We're deliberately building a more resilient model. We're also clear-eyed that the path from here requires continued execution. There's no shortcut and no single quarter that gets us there. We're doing this the right way. The foundation is strong. The initiatives are executing. We're not simply improving performance. We're building a model we believe is right, is the right one for how automotive commerce will operate in an AI-driven world. With that, I will turn it over to Mark to walk through the financial results in detail.