CarParts.com(PRTS)2024-03-08 04:20Financial Data and Key Metrics - Q4 2023 sales were $156 million, bringing full-year 2023 sales to a record-breaking $676 million, up 2% YoY and 16% on a 2-year stack [13] - Adjusted EBITDA for Q4 was $1 million, and $19.7 million for the full year 2023, down from $26.1 million in 2022 [13][30] - Gross profit for Q4 was $51.6 million, flat YoY, while full-year gross profit was $229.4 million, down slightly from $230.9 million in 2022 [16] - GAAP net loss for Q4 was $6.1 million, compared to $6.2 million in the prior year, and full-year GAAP net loss was $8.2 million versus $1 million in 2022 [27] - The company repurchased 726,000 shares in Q4, bringing total repurchases in 2023 to 1.2 million shares [13][31] Business Line Data and Key Metrics - The mobile app now generates over 7% of total e-commerce revenue, with over 250,000 downloads [20][29] - Revenue from the friction category (brakes and rotors) increased by over 40% YoY, accounting for approximately 5% of total volume [20] - The third-party premium brands business grew over 25% YoY, now a profitable $100 million revenue business [21] - Website traffic reached over 100 million visits in 2023, with 38% of e-commerce revenue coming from repeat customers [20] Market Data and Key Metrics - The company saw sustained price deflation due to macroeconomic challenges, with unit growth of approximately 8% in Q4 2023 [13] - The automotive aftermarket is valued at $389 billion, and the company is well-positioned to capture market share as consumer confidence rebounds [13] - The company expects revenue growth in 2024 to range from -2% to +2%, driven by deflation and mid- to high single-digit unit growth [8] Company Strategy and Industry Competition - The company is focusing on expanding its tech and product offerings, including growing third-party premium brands and enhancing the e-commerce experience [21][64] - A new semi-automated facility in Las Vegas is expected to open in Q2 2024, driving operating leverage and reducing last-mile transportation costs [14][22] - The company is prioritizing marketing and branding efforts, including YouTube content, which saw a 10x increase in views YoY in early 2024 [7][64] - The company aims to reduce marketing spend from 12.3% to 10% of revenue, with a focus on app engagement and organic growth [45][49] Management Commentary on Operating Environment and Future Outlook - The company faced a challenging macroeconomic environment in 2023, with price compression and deflation impacting margins [8][9] - Management expects deflation to continue through the first three quarters of 2024, with gross profit margins projected to be around 31% ±100 basis points [8] - The company is focused on cost reduction initiatives, including the elimination of 150 global roles, expected to save $10 million annually [62] - Management remains confident in the company's long-term growth potential, citing a large TAM, an aging car fleet, and low online penetration in the automotive aftermarket [52][58] Other Important Information - The company ended 2023 with $51 million in cash and an untapped revolver of up to $75 million [13][24] - Inventory at the end of Q4 was $129 million, down from $136 million in the prior year [31] - The company renewed its share repurchase program through July 2026, with $25 million remaining [31] Q&A Session Summary Question: Focus areas for 2024 and cost reduction efforts [35] - Management highlighted three key priorities for 2024: e-commerce experience and app engagement, product offering expansion, and marketing/branding [41] - The company is deferring some initiatives, such as the do-it-for-me offering, to focus on immediate growth opportunities [53] Question: Impact of cost reductions and gross margin guidance [47][59] - The company reduced 15% of corporate roles and 10% of frontline roles, with annualized savings of $10 million [47] - Gross margin guidance for 2024 is 31% ±100 basis points, impacted by deflation and outbound freight costs [59] Question: Mobile app growth and marketing spend flexibility [49] - The mobile app has seen strong organic growth, with higher average selling prices and repeat purchase rates [49] - The company aims to reduce marketing spend by 100-200 basis points over the next few years [49] Question: Revenue guidance range and factors influencing it [51] - Revenue guidance for 2024 is -2% to +2%, with the range influenced by price compression, deflation, and macro factors [51] Question: Do-it-for-me offering and its contribution in 2024 [53] - The do-it-for-me initiative is a long-term bet, but the company is deferring it to focus on immediate growth opportunities in 2024 [53]