Executive Summary

Record Q4 net sales of $119.7M, up 90% YoY; gross margin rose 110 bps to 34.8%, but adjusted EBITDA fell to $1.0M as Texas DC start-up costs (~$1M) and higher freight weighed on profitability .
Sequentially, revenue held near Q2/Q3 levels ($118.9M/$117.4M), while EBITDA compressed (Q4: $1.0M vs Q3: $5.1M vs Q2: $5.6M) given seasonal receiving and DC ramp; management cautioned against over-reading Q4 seasonality .
No formal quarterly guidance; management reaffirmed long-term targets of 20–25% revenue CAGR and 8–10% EBITDA margins, with multi-year margin levers across gross margin, marketing mix, and operating leverage .
Near-term catalysts: mechanical parts expansion, do‑it‑for‑me services testing (broader rollout targeted for 2022), and distribution footprint enabling faster delivery; supply chain normalization expected to improve in 2H of the year per management .

What Went Well and What Went Wrong

What Went Well

Record Q4 sales ($119.7M) and FY sales ($443.9M), driven by strong growth in the flagship CarParts.com channel and house brands mix; “Right Part, Right Place, Right Time” strategy underpinned results .
Gross margin expansion to 34.8% in Q4 (+110 bps YoY), reflecting favorable channel/product mix and higher house-brand penetration; 89% of sales were house brands .
Strategic execution and long-term framework: “We believe that over the long run, we can achieve topline revenue growth at a CAGR of 20% to 25% with 8% to 10% EBITDA margins” (David Meniane) .

What Went Wrong

Profitability pressure from start-up costs at Texas DC (~$1M) and heavier receiving seasonality; adjusted EBITDA declined to $1.0M and net loss was ($3.5M) .
Inventory constraints and global supply chain disruptions (container shortages, port congestion) limited the ability to fully stock Texas DC (about 50% full), impacting SKU-level availability and sales .
Elevated inbound/outbound freight and carrier surcharges compressed margins despite mix tailwinds; management highlighted these cost headwinds directly .

Financial Results

Quarterly Comparison (Q2 2020 → Q3 2020 → Q4 2020)

Metric	Q2 2020	Q3 2020	Q4 2020
Revenue ($USD Millions)	$118.93	$117.41	$119.73
Gross Profit ($USD Millions)	$40.83	$43.12	$41.64
Gross Margin %	34.3%	36.7%	34.8%
Adjusted EBITDA ($USD Millions)	$5.56	$5.13	$1.03
Adjusted EBITDA Margin %	4.7%	4.4%	0.9%
Net Income (Loss) ($USD Millions)	$1.57	$1.38	($3.49)
Net Income Margin %	1.3%	1.2%	(2.9)%
Diluted EPS ($USD)	$0.03	$0.03	($0.07)

Notes: Q4 included one extra week (14 weeks) .

Q4 YoY Comparison (Q4 2019 → Q4 2020)

Metric	Q4 2019	Q4 2020
Revenue ($USD Millions)	$62.96	$119.73
Gross Profit ($USD Millions)	$21.19	$41.64
Gross Margin %	33.7%	34.8%
Adjusted EBITDA ($USD Millions)	$1.69	$1.03
Net Income (Loss) ($USD Millions)	($25.09)	($3.49)
Diluted EPS ($USD)	($0.70)	($0.07)

Actuals vs Consensus (Q4 2020)

Metric	Actual	Consensus
Revenue ($USD Millions)	$119.73	N/A – unavailable via S&P Global at time of request
Primary EPS ($USD)	($0.07)	N/A – unavailable via S&P Global at time of request

Estimates unavailable via S&P Global at time of request.

KPIs and Balance Sheet Snapshots

KPI	Value	Source
House Brand Mix (% of Sales)	89%
Distribution Centers	5
Click-to-Ship Time	Under 12 hours
Inventory (Year-End)	$89.316M
Cash (Year-End)	$35.802M
Cash + Inventory	$125.1M

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue Growth (CAGR)	Long-term	Not formally guided	20%–25% CAGR (framework)	Framework communicated/maintained
EBITDA Margin	Long-term	Not formally guided	8%–10% (framework)	Framework communicated/maintained
Gross Margin uplift	Multi-year	Not formally guided	+100–200 bps from mix/closer-to-customer	Framework detail
Marketing/Customer Service margin uplift	Multi-year	Not formally guided	+200–300 bps via awareness and free-to-paid mix	Framework detail
Operating leverage	Out-years	Not formally guided	+200–300 bps efficiency/supply chain	Framework detail

Management did not provide formal quarterly revenue/EPS guidance for 2021 and emphasized a long-term orientation .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 2020)	Previous Mentions (Q3 2020)	Current Period (Q4 2020)	Trend
Supply chain & freight	Record sales; gross margin expansion; rebrand; industry e-comm penetration rising	DIY shift and secular offline→online; strong margin expansion	Inbound/outbound freight pressure; carriers at capacity; DC ~50% full; spot rates ~2x Q4; partial easing expected by 2H	Mixed: Improvement expected later
Distribution footprint & speed	Site consolidation to one flagship; operational optimization focus	Continued optimization and fulfillment network expansion	Goal to reach 80–90% of customers in one day; disciplined DC ramp; Texas DC half full	Up (expansion continuing)
Mechanical parts expansion	Not highlighted	Strategic focus mentioned mid-’20	Expansion underway; delayed by supply chain; seasonal demand expected in spring/summer	Up (building)
EV/hybrid strategy	Not highlighted	Not highlighted	EV/hybrid page launched; sales mix ~2–4% mirrors vehicle park; 90% revenue powertrain-agnostic	Stable/Strategic positioning
Do‑it‑for‑me services	Not highlighted	Not highlighted	Testing turnkey repair/mobile mechanics; broader rollout targeted for 2022	Up (testing)
Marketing/brand	Rebrand to CarParts.com; single site; Russell 2000 inclusion	Focused investments & unit economics	Renewed NASCAR partnership; new PFL partnership to build awareness	Up (brand building)

Management Commentary

CEO Lev Peker: “Our strategy of Right Part, Right Place, Right Time is helping us transform and disrupt an industry with a superior value proposition that keeps our customers at the center of everything we do.”
CFO/COO David Meniane: “We believe that over the long run, we can achieve topline revenue growth at a CAGR of 20% to 25% with 8% to 10% EBITDA margins… gain 100 to 200 bps of gross margin… 200 to 300 bps [from] marketing/customer service… and 200 to 300 bps of operating leverage.”
CEO on supply chain: Texas DC “is up and running… but only about 50% full. On the outbound side, all carriers are running about full capacity, slowing down order fulfillment and adding costs.”
CFO on seasonality: “We would caution with reading too much into fourth quarter operating profitability which seasonally is our slowest quarter… increased receiving expense prior to the first quarter.”
CEO on customer experience: “Our average click-to-ship times have gone from around 36 hours to now under 12 hours and we will continue to push relentlessly for continuous improvement.”

Q&A Highlights

Distribution centers/speed-to-customer: Goal to reach 80–90% of customers within one day; disciplined, sequential DC expansion with Dallas ramp before next site .
Inventory constraints and Texas capacity: Texas ~50% full at year-end; SKU-level constraints affecting sales; inventory ended at $89M, with room to grow by ~$10–15M across DCs .
Do‑it‑for‑me rollout: Testing in select markets; broader rollout targeted for 2022; management avoids pre-announcing until “fully baked” .
EV/hybrid exposure: Sales mix ~2–4%, mirroring vehicle fleet; 90% of revenue agnostic to powertrain; many chassis/collision parts common to EVs/ICE .
Estimates/guidance: No formal 2021 guidance; long-term targets reiterated; supply chain spot rates roughly double Q4 levels; normalization likely in 2H .

Estimates Context

S&P Global Wall Street consensus data for Q4 2020 (Revenue, EPS, EBITDA) was unavailable at the time of request; as a result, we cannot benchmark reported results against consensus in this recap. Management did not provide formal quarterly guidance for 2021, emphasizing long-term targets .

Key Takeaways for Investors

Mix-driven margin tailwinds are intact (house brands 89%, favorable channel/product mix), but elevated freight and DC ramp costs temporarily compress EBITDA; watch for margin normalization as supply chain eases in 2H .
Revenue trajectory is resilient and capacity‑limited rather than demand‑limited; full stocking of Texas DC and mechanical parts rollout are key to unlocking next leg of growth .
Long-term model (20–25% CAGR, 8–10% EBITDA margin) provides a durable thesis; execution on gross margin, marketing efficiency, and operating leverage are the multi‑year drivers .
Near-term trading setup: sensitivity to freight/receiving costs and inventory turns; seasonal lift in mechanical parts expected spring/summer; monitor Q1 update for Texas DC capacity progress .
Strategic moat: vertically integrated sourcing, curated catalog, under‑12‑hour click‑to‑ship, and five DCs support share gains versus brick‑and‑mortar and generalist e‑commerce .
Optionality: do‑it‑for‑me services testing adds service-layer TAM and potential LTV uplift; broader rollout targeted 2022 .
Brand investments (sports partnerships) aim to build awareness and improve free-to-paid mix over time, supporting marketing margin expansion .

CarParts.com, Inc. (PRTS)·Q4 2020 Earnings Summary