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CI

CarParts.com, Inc. (PRTS)·Q4 2021 Earnings Summary

Executive Summary

  • Record Q4 net sales of $138.3M, up 15% YoY (23% ex. the extra week in 2020), with gross margin at 34.3% and adjusted EBITDA of $2.6M; net loss widened to $(5.0)M (diluted EPS $(0.10)) amid higher non-cash charges .
  • Inventory reached a record $138.9M, positioning the company to sustain growth; cash was $18.1M with an undrawn $30M ABL (option to $40M), and 40k shares were repurchased for ~$0.5M during the quarter .
  • FY22 setup: management expects double-digit YoY revenue growth, correlated with the ramp of the Texas expansion (end of Q1) and the new Jacksonville DC (end of Q2); first 8 weeks of FY22 saw double-digit revenue growth and solid sequential and YoY margin improvement .
  • Long-term targets reiterated: 20–25% revenue CAGR and 8–10% adjusted EBITDA margins; capacity additions (Texas/Jacksonville) and improving fulfillment speed are key near-term catalysts, while freight/OpEx remain watchpoints .

What Went Well and What Went Wrong

  • What Went Well

    • Eighth consecutive quarter of YoY growth; record Q4 sales of $138.3M and record FY sales of $582.4M; adjusted EBITDA improved to $2.6M in Q4 from $1.0M in Q4’20 .
    • Gross margin held at 34.3% in Q4 and improved sequentially from 33.4% in Q3 as inventory depth and network positioning offset headwinds; “we have proven that we have the ability to maintain margins already” (SVP Finance) .
    • Capacity and operations: Texas expansion and Jacksonville DC “on time and on budget,” targeting 55% of customers within 1-day and 98% within 2 days when Jacksonville fully functional; majority of orders now ship in <18 hours, with a goal of 12 hours (CEO) .

  • What Went Wrong

    • Net loss widened to $(5.0)M vs $(3.5)M YoY (EPS $(0.10) vs $(0.07)), primarily due to higher non-cash charges; OpEx rose to $52.0M from $44.9M on growth investments .
    • Gross margin of 34.3% remains below Q4’20 (34.8%), reflecting ongoing freight cost pressures seen earlier in the year and mix dynamics; management discussed use of dynamic pricing and path to offset shipping costs .
    • EBITDA margin at 1.9% in Q4 (vs 0.9% in Q4’20) remains modest given continued investment in DC expansion and technology; management notes they do not back out DC startup costs from adjusted EBITDA .

Financial Results

MetricQ4 2020Q2 2021Q3 2021Q4 2021
Revenue ($USD Millions)$119.73 $157.54 $141.85 $138.26
Gross Profit ($USD Millions)$41.64 $53.35 $47.33 $47.43
Gross Margin %34.8% 33.9% 33.4% 34.3%
Operating Expenses ($USD Millions)$44.90 $51.01 $51.67 $52.01
Net Income (Loss) ($USD Millions)$(3.49) $2.07 $(4.66) $(5.00)
Diluted EPS ($)$(0.07) $0.04 $(0.09) $(0.10)
Adjusted EBITDA ($USD Millions)$1.03 $8.35 $2.29 $2.59
Adjusted EBITDA Margin %0.9% 5.3% 1.6% 1.9%

KPIs and Balance Sheet/Liquidity

  • Inventory: $138.9M at Q4’21 (record; includes ~$40M of safety stock) .
  • Cash: $18.1M at Q4’21; ABL undrawn with $30M available and option to $40M .
  • Share repurchase: 40,000 shares for ~$0.5M during Q4’21 (avg price $11.99) .
  • Network scale: 6 DCs, ~1.25M sq ft; majority of orders ship in <18 hours; 100M+ annual web visits .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Revenues (YoY growth)FY 2022Not previously quantifiedDouble-digit YoY growth; trajectory tied to Texas (end Q1) and Jacksonville (end Q2) DC ramps Initiated qualitative FY outlook
Long-term Revenue GrowthMulti-year20–25% CAGR20–25% CAGR reiterated Maintained
Long-term Adjusted EBITDA MarginMulti-year8–10%8–10% reiterated Maintained
Early-quarter tradingFirst 8 weeks FY22N/ADouble-digit revenue growth; solid sequential and YoY margin improvement New update (informational)
Distribution capacity timing2022Texas/JAX timing evolvingTexas expansion end Q1; Jacksonville DC end Q2; both on time/on budget Updated timing confirmation

No explicit numeric guidance was provided for gross margin, OpEx, OI&E, or tax rate in Q4 materials .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2021, Q3 2021)Current Period (Q4 2021)Trend
Supply chain & freight costsQ2: Gross margin down 40 bps YoY on inbound/outbound freight and mix ; Q3: EBITDA profitability maintained while investing; inventory to record levels Q4: Gross margin 34.3% (up seq. vs Q3); dynamic pricing and getting closer to customers to help margins post freight Improving sequentially; freight still a watchpoint
Distribution capacity & speedQ2: Announced Texas expansion (+156k sq ft) and Jacksonville DC (180k sq ft) Q4: Texas/JAX on time/on budget; goal 80–90% 1-day transit; expect to reach 55% 1-day and 98% 2-day with JAX; majority of orders ship <18 hours Accelerating capacity and speed
Inventory depthQ2/Q3: Inventory built to record to support demand Q4: Inventory at $138.9M incl. ~$40M safety stock to support growth Elevated to support growth
Pricing & margin managementQ2: Mix and freight impacted GM Q4: Using dynamic pricing; confidence in maintaining margins over several quarters/years (SVP Finance) Stabilizing
Capital returns & liquidityQ2: Authorized $30M buyback ; strong cash/undrawn ABL Q4: Repurchased 40k shares for ~$0.5M; ABL undrawn with $30M availability (option to $40M) Opportunistic buybacks; ample liquidity
New service initiatives (installation)Not highlightedTesting to help customers find mechanics; building automation to enable parts+installation checkout; revenue/EBITDA contribution likely next year (CEO) Early build-out

Management Commentary

  • “The last 3 years have been transformational… CarParts.com now has a strong foundation for continued rapid growth.” (CEO) .
  • “With over 300k square feet of warehouse coming online, a record amount of inventory, and an amazing team, I have never been more confident in our ability to aggressively capture share…” (CEO) .
  • “In Q4, we generated revenue of $138 million, up 23% year-over-year after excluding the extra week in 2020… Adjusted EBITDA in Q4 was $2.6 million…” (SVP Finance) .
  • “Our Texas expansion is on time and on budget… Jacksonville… also on schedule and on budget… we expect this facility to increase our capacity in the later part of Q2.” (COO/CFO) .
  • “For fiscal year 2022 net revenues, we expect double-digit year-over-year growth… our robust inventory position is helping us post double-digit revenue growth against prior year stimulus [first 8 weeks], and we are seeing solid margin improvement, both sequentially and year-over-year.” (SVP Finance) .

Q&A Highlights

  • Cadence and impact of DC ramps: Texas coming online over the next few weeks; Jacksonville toward end of Q2; larger goal remains 80–90% 1-day transit coverage and increased capacity (COO/CFO) .
  • Margin outlook and pricing power: As the network gets closer to customers, post-freight margins benefit; management emphasized multi-quarter/full-year lens and confidence in maintaining margins; dynamic pricing used to offset shipping cost pressures (SVP Finance) .
  • Installation initiative: Small team and some tech spend; not a drag on EBITDA; meaningful revenue/EBITDA contribution likely a next-year conversation (CEO) .

Estimates Context

  • We attempted to retrieve S&P Global (Capital IQ) Wall Street consensus for Q4 2021 EPS/Revenue/EBITDA to assess beat/miss, but the request was rate-limited at the time of analysis; therefore consensus comparisons are unavailable. As a result, we cannot quantify beats/misses versus consensus for Q4 2021 at this time (SPGI request limit exceeded).

Key Takeaways for Investors

  • Revenue growth durability: Eighth straight YoY growth quarter and record FY revenue underscore demand resilience; inventory depth and network expansion should support continued double-digit growth in 2022 .
  • Margin stabilization: Sequential GM improvement (33.4% → 34.3%) and dynamic pricing suggest stabilization despite freight; proximity benefits from DC ramps should support post-freight margins .
  • Capacity as a catalyst: On-time/on-budget Texas and Jacksonville ramps, with faster delivery and higher throughput, are key catalysts for share gains and potential operating leverage as volumes scale .
  • Liquidity and buybacks: Undrawn ABL with $30M availability (option to $40M), record inventory positioning, and opportunistic buybacks provide flexibility to pursue growth and support shares on weakness .
  • Investment phase continues: Elevated OpEx tied to tech, supply chain, and category management will pressure near-term earnings but aims to spring-load growth and margins over the medium term .
  • Watch items: Freight/last-mile costs, OpEx discipline, and pace of DC ramp/efficiency gains; track early FY22 trends (double-digit revenue, margin improvement) for confirmation of momentum .
  • Optionality: Installation initiative (parts+labor checkout) and continued assortment/pricing optimization offer incremental monetization levers over the next 12–18 months .