CarParts.com, Inc. (PRTS)·Q1 2021 Earnings Summary

Executive Summary

• Record first-quarter net sales of $144.8 million, up 65% year over year; gross margin expanded 10 bps to 34.0%; Adjusted EBITDA was $3.6 million (2.5% margin) as ramp costs and brand investments weighed on profitability .
• Sequentially, revenue rose from $119.7 million in Q4 2020 to $144.8 million in Q1 2021; net loss improved versus Q4 ($3.5 million) to ($2.7 million) while Adjusted EBITDA increased from $1.0 million to $3.6 million .
• Operations: Texas DC is at full outbound capacity and ~60% full; management is in discussions to expand by 156k sq ft, taking the network to >1 million sq ft; added capacity was a significant driver of YoY and sequential growth .
• Guidance: management reaffirmed long-term 20–25% compounded top-line growth and reiterated an 8–10% long-run EBITDA margin target; Q2 commentary was constructive given higher inventory and brand momentum .
• Consensus comparison: Wall Street EPS and revenue consensus from S&P Global was unavailable due to a temporary data limit; therefore, beats/misses vs estimates cannot be assessed this quarter.

What Went Well and What Went Wrong

What Went Well

• Robust demand drove record sales and gross profit; “we saw robust sales that reinforced our confidence in achieving our long-term goal of 20 to 25% compounded top line growth” .
• Capacity expansion and assortment optimization: Texas DC at full outbound capacity and ~60% full, enabling faster shipping and incremental revenue; “the added capacity was a significant driver of our year-over-year as well as sequential growth” .
• Strategic brand and technology investments: partnerships (NASCAR, PFL, Motor Trend, Donut Media) and improved site search to support conversion and repeat purchases (~30% revenue from repeat on a one-year look-back) .

What Went Wrong

• Profitability headwinds: Adjusted EBITDA fell YoY to $3.6 million (from $4.3 million) due to Texas DC ramp, adverse weather, and brand awareness campaigns; margin compressed to 2.5% .
• Higher logistics costs: inbound/outbound freight and seasonal surcharges offset mix benefits, limiting gross margin expansion to +10 bps YoY .
• Net loss widened YoY to ($2.7) million from ($1.0) million, primarily due to increased non-cash charges .

Financial Results

Balance Sheet and Liquidity Snapshot

KPIs (Q1 2021)

Guidance Changes

Note: No formal quarterly guidance ranges (revenue, margins, OpEx, OI&E, tax rate) were provided; management offered qualitative Q2 confidence and long-term targets .

Earnings Call Themes & Trends

Management Commentary

• CEO: “We saw robust sales that reinforced our confidence in achieving our long-term goal of 20 to 25% compounded top line growth… the expansion of our DC network into Grand Prairie Texas increased our revenue capacity” .
• CEO: “By optimizing the assortment in Texas, we were able to maximize our sales capabilities despite the facility still being in the ramp up stages” .
• CEO: “We also recently began discussions to expand our Texas facility by 156k square feet… bring our total warehouse footprint to more than 1 million total square feet” .
• CEO: “90% of our products are agnostic to the powertrain, gas, electric or hybrid” .
• CFO/COO: “We continue to believe in the long run, we can achieve 8% to 10% EBITDA margin… visibility into all the levers that will give us operating leverage” .
• CFO/COO: “Our credit facility remains undrawn with $30 million of potential availability with the option to flex up to $40 million… inventory grew $8.6 million to $97.9 million” .

Q&A Highlights

• Texas DC contribution: “Safe to assume… about $25 million of sales came from Texas in the quarter” .
• Capacity/ramp: “Texas facility is operating at full outbound capacity… about 60% full” .
• Mechanical parts mix: “About 23% of our sales for Q1… over time we’re trying to get that mix closer to 50/50” .
• Macro: Chip shortages and record new car prices push consumers to keep cars longer; management expects a durable tailwind beyond 12 months .
• Q2 outlook: “We feel really good about Q2… more inventory and capacity… brand awareness starting to build” .
• Mobile mechanic beta: Kept in beta through year-end before broader expansion .

Estimates Context

• S&P Global consensus EPS and revenue estimates for Q1 2021 were unavailable at the time of analysis due to a temporary data access limit; as a result, beats/misses vs consensus cannot be assessed this quarter.
• Given the lack of consensus figures, investors should focus on sequential and YoY trajectories and management’s qualitative Q2 outlook and long-term targets .

Key Takeaways for Investors

• Growth remains strong and capacity-driven: sequential revenue acceleration and Texas DC expansion underpin throughput and faster delivery; assortment optimization is a lever for conversion and repeat .
• Profitability path intact but paced by investments: near-term EBITDA pressured by ramp costs, weather, and brand spend; long-run 8–10% EBITDA margin target reaffirmed with operating leverage levers identified .
• Logistics cost inflation is a watch item: inbound/outbound freight and seasonal surcharges capped gross margin expansion; monitor freight trends and carrier surcharges for Q2 impact .
• Mix shift toward mechanical: 23% mechanical in Q1 with a goal of ~50/50 over time; expanding stock-ship and dropship assortments should support higher AOV and repeat .
• EV positioning is durable: 90% of products are powertrain-agnostic, reducing risk from EV adoption and broadening addressable market .
• Liquidity supports growth: $45.9m cash, undrawn revolver with $30m availability (flex to $40m), and inventory at company record levels provide capacity to scale .
• Near-term trading setup: narrative catalysts include DC expansion announcement, ongoing brand campaigns, and constructive Q2 outlook; absent consensus comparisons, stock reaction likely tied to operational updates and margin progression .