CarParts.com, Inc. Q2 FY2025 earnings call

• Earlier this year, CarParts.com announced a process to explore strategic alternatives to maximize shareholder value and remains engaged in this process, evaluating several transaction structures including potential sale and strategic investments. • Tariffs: Approximately 20% of private label products are imported from China, rest from Taiwan and others. Team is mitigating tariff impact through actions like cost concessions, pricing adjustments, and supply chain optimization. • Second quarter performance: Measurable sequential progress with adjusted EBITDA positive in June. Drivers include record mobile app and retention-driven e-commerce revenue, growth in high-margin fee income, improved conversion rates, units per order, and average order value. Investments in machine learning-based search algorithms are paying off. Marketing efficiency improved. • Marketplaces segment pressures: Noncompliant products from China distorting landscape; CarParts.com is doubling down on its own channel. Tariffs and inflation weighing on consumer demand; exploring domestic sourcing. Need for new growth categories; expanding assortment into adjacent segments. • Cost structure: Closing Virginia facility due to excess capacity in distribution network; streamlining corporate headcount and cutting underperforming software, expecting $10 million annualized cost savings through AI and automation.

In the second quarter, revenue was $151.9 million, up 5% from $144.3 million last year. Gross profit was $49.8 million, up 3% compared to the prior year. Gross margin was 32.8%, down from 33.5% in the prior year period. Adjusted EBITDA loss was $3.1 million, down from adjusted EBITDA of $0.1 million in the prior year period. Cash at the end of the quarter was $19.8 million. Inventory balance was $94 million at year-end versus $90 million at the end of 2024.

• Priorities for rest of the year: Continue expanding product offering to attract new customers and increase average basket size. • Monetize $100 million annual website visits and customer list with high-margin fee income. • Scale B2B offering with last mile transportation and higher touch sales in key markets. • Continue growing mobile app business to diversify marketing mix and deliver greater customer life value. • Protect balance sheet by managing cash flow and inventory levels while navigating tariff uncertainty.

• Tariffs: Current situation fluid with rates, applications, and effective dates changing; 20% of private label products imported from China face high tariffs. • Marketplaces segment: Continued influx of noncompliant products from China distorting competition. • Macroeconomic pressures: Tariffs and inflation weighing on consumer demand, particularly in discretionary categories. • Distribution network: Excess capacity leading to closure of Virginia facility.