CarParts.com, Inc. Q4 FY2025 earnings call

• In 2025, the company closed a $35.7 million strategic investment, completed a full cost structure reset, and built an operating model delivering results. - The A - Premium partnership has an annual revenue run rate of $35 million and a clear path to growth. - Q4 was stronger than Q3 and showed significant year - over - year improvement, with four consecutive quarters of improvement in contribution margin, fixed operating expenses, and adjusted EBITDA. - Historically, CarParts.com was collision - focused with two - thirds of revenue, while mechanical parts are different with slower turns, etc., and the A - Premium partnership addresses these issues by providing a world - class mechanical catalog through a capital - efficient model. - In 2025, the company took decisive operational action to change cost structure and margin profile, including adjusting advertising spend, right - sizing the organization, reducing fixed cost base, consolidating Virginia warehouse operations, transitioning Manila - based captive operations, improving marketing efficiency with 300 basis points improvement in marketing efficiency between Q1 and Q4, revenue from retention channels increasing, doubling down on mobile app adoption with it representing over 13% of e - commerce revenue in Q4 2025, and ads, services, and paid membership offerings generating nearly $4 million in annual high margin fee income.

Historically, CarParts.com has been a collision - focused business, accounting for roughly 68% of revenue in the fourth quarter and approximately 65% for the full year, with private label products representing approximately 83% of revenue in the fourth quarter and around 82% for the full year, and third - party branded products making up 17% in the fourth quarter and 18% for the full year. The A - Premium partnership already has a $35 million annual revenue run rate and has a clear path to reach $50 million in the short term, with the belief it will eventually exceed $100 million at attractive contribution margins, all without requiring to carry inventory or working capital.

• Targeting free cash flow positive results in 2026, driven by contribution margin expansion, partnership scale, and the full year benefit of cost actions. - The path to free cash flow is driven by higher contribution margins, a materially lower fixed OPEX base, and improved capital efficiency as scaling through partnerships.

• Tariffs environment is evolving; while the Supreme Court's recent decision invalidated tariffs imposed under IEPA, other auto parts tariffs remain in effect and the administration has introduced temporary measures under Section 122. Approximately 20% of sourcing is from China, and while there may be a path to recovering some previously paid duties under IEPA, the plan is not built around regulatory relief.