Q4 2021 Carparts.Com Inc Earnings Call

Good afternoon, and welcome to car parks Dotcom fourth quarter 2021 conference call at this time, all participants will be in a listen only mode on the call from the company are left Picker, Chief Executive Officer, David Mignon, Chief operating Officer, and Chief Financial Officer.

Ryan Lockwood senior Vice President of Finance.

After the speaker's presentation, there will be a question and answer session.

Please note this call is being recorded.

The prepared remarks and responses to your questions contain certain forward looking statements related to the business under the federal Securities Law.

Actual results may differ materially from the contained in or implied by these forward looking statements. Peter we're gonna start needs associated with the business.

We're discussing all of the material risks and other important factors that could affect results. Please refer to car Park Dotcom annual report on Form 10-K , and 10-Q as filed with the SEC.

Both of which can be found in Investor Relations website on today's call certain figure unless otherwise stated compare a bit.

52 week period in 2021 to a 53 week period in 2022 also both GAAP and non-GAAP financial measures will be discussed a reconciliation of GAAP to non-GAAP financial imagine if there's nobody in the car Park Dotcom will press release issued today.

That I'll I'll like to turn the call over to CEO laugh picker.

Sir you may begin.

Thank you operator, and good afternoon, everyone.

Today Carpenter Dr. Thomas Please to report another solid quarter and year, achieving our eighth consecutive quarter of double digit year over year growth.

This was also the third consecutive year of significant double digit growth with net sales up 34% compared to 2020, excluding the extra week.

For all of 2021 were generated 582 million in revenues and $16 8 million and adjusted EBITDA.

In just three years, thanks to the hard work of our entire team we have doubled the size of the business.

In addition, we're growing our capacity in 2022 as our expansion in Grand Prairie, Texas, and New distribution Center in Jacksonville, Florida fully come online.

Over the past three years, we have expanded our gross profit margin from 27% up to almost 34% despite the challenging global supply chain environment three.

Three years ago, we had 17 slow and does joins at websites and now have one flagship website that receives over 100 million visits a year.

Click to ship times used to be several days now the majority of water ship out in less than 18 hours with our goal to reducing the time to 12 hours.

Three years ago, we only have two disease totaling about 500000 square feet of space.

Now we have six distribution centers and 125 million square feet of warehouse space and I have over 2100 team members across the globe.

Most importantly over the past few years, we have significantly strengthened our foundation, which allows us to adapt to a rapidly changing external environment and are laying the groundwork to disrupt the 300 billion automotive aftermarket industry that remains highly fragmented and has not changed and nearly 100 years.

We would like to reiterate our long term target of <unk>.

Wanted to 25% CAGR top line was 8% to 10% adjusted EBITDA margins as we execute our operating strategy of right part right time right place.

Now let me briefly update you on our progress with.

What's the right parts, we're committed to ensuring our customers can find the complete solution that fits their vehicle.

We have over 2 million staff hours investor and our proprietary catalog, which includes parts settlements pictures and applications for both house brands as well as premium branded products are.

Our catalog represents a powerful competitive advantage and is a major barrier to entry for would be competitors.

Over the last year, we have reorganized our merchandising team and through our category management structure that is allowing us to grow our assortment and prioritize new obligations.

This approach incorporates a highly curated product offering strategic pricing owned brand expansion and optimize sourcing all implemented through our financially disciplined execution plan.

For a time over the last couple of years, we have focused on expanding our distribution footprint and getting closer to our customers. Our goal remains to be able to deliver to 80% to 90% of our customers and one day transit time.

Most recent additions to our network have been our Grand Prairie, Texas expansion as well as a brand new facility in Jacksonville, Florida, and I'm happy to report that both facilities are on time and on budget.

When Jacksonville is fully functional we expect to be able to service, 55% of our customers within one day and 98% within two days transit time.

Turning to right place.

Over the past several quarters, we have been testing various approaches to assist our customers in finding and mechanics to help with very Paris.

The early results have been encouraging and the pace of interest continues to grow.

To meet the anticipated demand over the next 12 to 18 months, we plan to build automation into the process with the goal of customers being able to pay for the parts and installation right on our website as well as book that appointment I will now turn it over to Ryan SVP of Finance to review our financials and then David will provide a supply chain operational.

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Thanks, Les as previously mentioned in Q4, we generated revenue of $138 million up 23% year over year. After excluding the extra week in 2020 for the full year, we generated revenue of $582 million up 34% from 2020, excluding the extra week and up 89% on a two year.

Gross profit for the quarter was up 14% to $47 million and gross profit was up 27% to 197 million for the full year gross profit margins were $34 three for the quarter and 33, 9% for the year net.

Net loss for the quarter was $5 million versus $3 5 million in Q4 2020 for the year. The net loss was $10 3 million, which reflects the impact of approximately $26 million of noncash items. Adjusted EBITDA in Q4 was $2 6 million compared to 1 million in the prior year period, Despite additional investments.

Into the supply chain for the year adjusted EBITDA reached $16 8 million. This represents a 62% improvement from where the company was three years ago. Despite heavy investments into the business to strengthen our foundation for growth as well as additional expenses related to expanding our DC network as a reminder.

We do not back out these one time startup costs from adjusted EBITDA.

Turning to our balance sheet at quarter end, our cash position was $18 million and inventory pursuant to our goal of supporting our double digit growth plan stood at a record $139 million, which includes approximately $40 million of safety stock, our ABL remains undrawn with $30 million available and the option to accordion to <unk>.

$40 million should the need arise.

To summarize our liquidity position, we strategically chose to carry additional inventory, which in a normal supply chain environment, we would not need to be carrying as we think about number one our inventory safety stock number two our currently Undrawn line of credit and number three our free cash flow, we feel comfortable with our current liquidity.

Additionally, we can also continue to drive existing DC efficiency with very minimal capital investment, which will help to achieve a revenue growth plans.

During the fourth quarter, we repurchased 40000 shares for approximately $480000. We believe our valuation is attractive and thought it prudent to return capital to our shareholders even in a very short trading window.

For the first eight weeks of the year, our robust inventory position is helping us post double digit revenue growth against prior year stimulus.

Additionally, we are seeing solid margin improvement both sequentially and year over year for.

For fiscal year 2022, net revenues, we expect double digit year over year growth with a strong correlation to the opening cadence of our two new distribution centers with our Texas expansion at the end of Q1, and our Florida warehouse at the end of Q2.

And with that I'd like to turn it over to David.

Thanks, Brian .

As we mentioned on previous calls we leverage our vertically integrated supply chain by optimizing for parts availability and delivery speed, which are at the core of our investment philosophy, we remain committed to our goal of covering 80% to 90% of the country in one day transit time.

Update our shareholders on our progress we're excited that our Texas expansion is on time and on budget. We're currently receiving the inventory we ordered last year and expect this facility to significantly increase our inventory and outbound shipping capacity over the coming weeks.

As far as brand New Jacksonville, Florida facility is also on schedule and on budget and we're slowly building up inventory. We expect this facility to increase our capacity in the later part of Q2, and we'll provide an update on our next call.

Want to thank our extraordinary supply chain operations team, which has been relentless in meeting aggressive deadlines tight budgets and in driving us to be more competitive.

On the technology side, we continue to invest in world class supply chain and data science tools over time, we expect these improvements to drive meaningful same store efficiencies further increasing our revenue and profitability even in an inflationary environment.

Finally for our long term shareholders listening today, we remain committed to our philosophy of financial discipline, we will only deploy capital, where we see opportunities to accelerate our growth while earning a significant return on investment. We would also like to thank our carpark dot com team were incredibly lucky to collaborate with such an exceptional group of individuals.

Each and every day your dedication to the mission of helping drivers get back on the road is inspirational.

Let me turn it back to life.

Thanks, David.

While the overall stock market has shown significant volatility our underlying business has improved year over year, maintaining profitable growth of the overall auto market, which continues to trend favorably.

For example data from experience shows that the number of vehicles age six to 12 years has grown to account for almost a third of all vehicles in operation. These vehicles are too old for their original warranties and acquire more replacement parts, which we expect to be a strong tailwind driving our success for the foreseeable future.

With over 300000 square feet of warehouse space coming online a record amount of inventory and then amazing team I have never been more confidence in our ability to serve our customers and get them back on the road.

New vehicles are in short supply, which is driving robust used vehicle market that bodes well for additional maintenance and repairs as the vehicles are a condition for yourself.

<unk> prices in the new and used vehicle markets are likely to push more consumers into holding onto their vehicles longer.

With 300 million cars on the road and the total addressable automotive aftermarket being over 300 billion. We remain firm in our belief that it will be a strong and enduring demand for companies that can help the average driver with our car repair and maintenance.

Lastly, given our current capital position, our Undrawn line of credit and the amount of safety stock of inventory. We believe that we have enough liquidity to continue delivering on our mission of right part right time right place without tapping the capital markets in the near future.

I'd now like to turn it over to the operator for questions.

Thank you again, ladies and gentlemen, if you like to ask a question. Please press Star then one on your Touchstone telephone again to ask a question. Please press Star then one.

Our first question comes from Darren <unk> of Roth Capital Partners. Your line is open.

Hey, guys. Thanks for taking my questions.

Just kind of expand on the.

I wanted to kind of commentary you gave so given last year. You know there was some stimulus money around in the first quarter and kind of beginning of.

The second quarter.

With your comments about Texas coming online in the Q1 in Jacksonville QQ can you just kind of help us understand maybe the cadence of the year and how that might look a little different than normal.

Question, One and then second one on great.

How do we think about kind of gross margins and I know you guys have been tapping into dynamic pricing will we see more of that going forward and do you have the pricing power to offset any kind of incremental shipping costs.

Hi, Darren it's David So I'll take the first question on the cadence of the new Dcs and then I'll, let Brian chime in on the margin piece.

So, yes, youre absolutely right.

We're in the process of expanding our footprint so.

For the next few weeks, we are launching basically the Texas expansion Thats coming online.

Towards the end of Q2, we're going to have our Florida warehouse going online and then in Q3, we have a couple of holidays, but overall, we feel pretty good about the additional inventory and end the capacity. There. So I think the key takeaway is that long term. The goal is still the same it's to get closer to the customers is to be able to cover 80% to 90% of the country within.

One day transit time and at the same time increase our capacity and I think that leads into the second part of your question around right sure. So Darren obviously as we get close to the customers margins or post freight so that's going to be helpful.

And when we think about margin it is over the long term over several quarters, the full year and towards our long term targets. So and as you mentioned, Ken we continue to push price I think if you look at 2020 margins, excluding Q3, where we had onetime favorable uplift really margin only comprise 50 base.

Points. It is a great Testament to our team's on supply chain data science inventory planning. So we've proven that we have the ability to maintain margins already and we're very happy with where they are turning out this year.

Okay.

Thank you.

Our next question comes from Victoria gains of D. A Davidson your line is open.

Thank you for taking my question.

So just one for me can you provide an update on the do it for them.

When that Glen can meaningfully impact your P&L.

This is Lev Victoria I think right now we have a small team dedicated to the effort.

There's a little bit of technology spend that is going into building out their automated solution, but.

But it's not a drag on our EBITDA and it's part of our overall budget.

And I think in terms of what it is going to be meaningfully adding to our revenue as well as to why EBITDA I think that's probably a conversation for next year.

We're not there yet and we're kind of looking at that says we want to offer our customers the choice.

And that's what's going to drive us into the shops. So that's kind of how we're looking at it so not a drag and not an add definitely for this year and then we'll see next year.

Thank you.

Thank you again, ladies and gentlemen, if you like to ask a question. Please press star one on your Touchstone telephone.

To ask a question please press star one.

Thank you.

I'm showing no further questions at this time, ladies and gentlemen. This does conclude today's conference. Thank you all for participating you may all disconnect have a great day.

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