Q4 2023 CarParts.com Inc Earnings Call

March 7, 2024

Okay.

Good afternoon at this time, all participants will be in a listen only mode. After the presentation. There will be a question and answer session. Please note. This call is being recorded.

I would now like to pass the conference over to our host Tina near Farsi Senior Vice President of Global Communications and culture. Please go ahead.

Hello, everyone and thank you for joining us for the car parts Dot com fourth quarter and fiscal year end 'twenty 'twenty four conference call I'd like to start by welcoming the investors and others, who are attending this meeting remotely join.

Joining me today are David Mignon, Chief Executive Officer, Brian Lockwood, Chief Financial Officer, and Michael <unk>, Chief operating Officer.

Before I turn it over to David to start the meeting I have some important disclosures the prepared remarks and responses to your questions could contain certain forward looking statements related to the business under the federal Securities laws.

Actual results may differ materially from those contained in or implied by these forward looking statements due to the risks and uncertainties associated with the business.

For a discussion of the material risks and other important factors that could affect results. Please.

Please refer to the car Park Dotcom annual report on Form 10-K, and 10-Qs as filed with the SEC.

Both of which can be found on our Investor Relations website.

On the call, both GAAP and non-GAAP financial measures will be discussed.

Reconciliation of GAAP to non-GAAP financial measures is provided in the car Park Dot Com press release issued today.

And with that I would now like to turn the call over to David.

Thank you Tina and thank you all for joining us.

I will begin some highlights for the quarter and full year, and then turn it over to Ryan to review our financial performance in more detail I will then give a more detailed update on the economic environment and discuss our 2024 outlook before opening up the call for Q&A.

In the fourth quarter of 2023 sales were $156 million, bringing our full year 2023 sales to a record breaking $676 million up 2% from the prior year and 16% on a two year stack.

Adjusted EBITDA was $1 million for the quarter and $19 7 million for the full year 2023, and we repurchased another 726000 shares during the quarter, bringing our total repurchases in the year to $1 2 million shares.

We had $51 million in cash on our balance sheet and an untapped revolver of up to $75 million at the end of the year.

Across the industry due to the difficult macroeconomic environment, we saw sustained price deflation as some price sensitive consumers are choosing to defer nonessential purchases.

Despite the challenging operating environment, we continue to see strong unit growth of approximately 8% in the fourth quarter.

We believe we are taking share from other online players and as consumer confidence rebounds, we're well position to support the 389 billion automotive aftermarket and deliver long term growth both in volume and dollars.

Over fiscal year 2023, our team surpassed several company records and reached significant achievements, including number one generating the highest sales volume and revenues in the company's history number two launching our mobile app, which now generates over 7% of our total E Commerce revenue.

Number three achieving 38% of total e-commerce revenue from repeat customers number for recording our highest historical website traffic with over 100 million visits to <unk> dot com over the year and number five increasing revenue from the friction category which include.

<unk> breaks and rotors by over 40% from the prior year, which accounted for approximately 5% of total volume.

These accomplishments are a testament to the value of our strategic growth drivers the hard work of our talented carpark dot com team and our consistent focus on delivering results.

As we previously outlined our growth levers range from table Stakes to industry disruption and we believe they will propel car parts to reach over $1 billion in company revenues.

Turning to a few highlights for 2023.

First we continued to make progress on Supercharging, our commerce experience and marketing strategy.

In August of last year, we launched our mobile app on both iOS and Android and are excited that today. It has over 250000 downloads and accounts for more than 7% of E Commerce revenue.

With 80% of our customers using mobile phones to purchase their automotive parts, we're confident that overtime direct in app purchases will reduce our reliance on search engines and performance marketing to create a cost effective way to promote our brands and products, while incentivizing repeat purchases.

Additionally, we continue to build these direct and long term relationships with current and prospective customers. Thanks to our new podcasts in the garage by Carpark Dot Com and our Youtube channel featuring an expanding number of proprietary educational and instructional videos, which to date have received hundreds of thousands of views.

Historically, we focused our marketing investments on Google advertising, but lagged in creating new video content on our own channel, which is a focus for 2024, we can already share in the first two months of 2024, our Youtube views are up to $15 million, an increase of more than 10 times on a year over year basis. We.

Aleve overtime, our own content push will help us acquire new customers drive revenue and lower customer acquisition costs.

That being said during 2023, we prioritized our resources to focus on removing some roadblocks and our tech stack, which prevented us from completing the rollout of some of the new capabilities. We have slated for the year, but we expect to start accelerating progress this year.

Overall, we're pleased to see car parts dot com, becoming the destination for consumers to address their vehicles maintenance and repair needs with links to purchase products directly from our website or mobile app and how to videos that empower them to tackle easy jobs.

Second we invested in expanding our tech and product offerings on the product offering side, we made significant investments in growing our third party premium brands business across expanded price points to offset the competitive pressure from low cost sellers on online marketplaces, some of which sell noncompliant re.

Placement parts.

This part of the business was up over 25% year over year and is now a profitable $100 million revenue business.

While it does have a lower gross margin profile than our house brands business. Our strategy is to maximize gross profit dollars expanding our product and price assortment on car parts Dot com aims to capture a larger market share by catering to both premium and value shoppers enhancing our competitiveness and positioning us for sustained growth.

<unk>.

And third we continue to upgrade our logistics and optimized for supply chain management.

On the fulfillment side, we're on track with the move and opening of our new and larger semi automated facility in Las Vegas, Nevada.

As we shared last quarter. This building will serve as our west coast flagship and will carry between 90%, 80% to 90% of our Assortments.

It will feature a state of the art Pic module and extensive convenience that will allow for a significant reduction in operating costs.

And the newly expanded assortment will also help to reduce last mile transportation costs to the west coast.

We expect this building to begin operating in Q2 2024 and once this building is open it should drive operating leverage and growth in the form of process efficiencies and improve conversion for customers in the region. Those savings will slowly start ramping in the second half of 2024 and fully realized in 2025.

Over time, we intend to continue expanding our footprint to get closer to our customers for faster delivery and lower transportation costs.

We will remain financially disciplined and evaluate each node in the network based on the return on investment and the timing of the impact to the P&L now I will hand, it over to Ryan for a financial update.

Thank you David in Q4, we reported our 16th consecutive quarter of year over year growth with revenues of $156 4 million up one 2% from $154 5 million last year for the full year carports generated $675 7 million in revenues up to.

1% from 2022, and marking the highest sales ever in company history.

Profit for the quarter was $51 6 million flat compared to the prior year for the full year gross profit was $229 4 million down slightly from the $230 9 million in 2022.

Gross margin in the quarter was 33% of sales versus 33, 4% in the prior year.

For the full year gross margin was 33, 9% of sales versus 34, 9% in the prior year as we experienced price compression higher outbound transportation costs and a shift in product mix.

GAAP net loss for the quarter was $6 1 million compared to $6 2 million in the prior year period for the full year 2023, GAAP net loss was $8 2 million versus 1 million in the prior year, we reported adjusted EBITDA of 1 million in the quarter down from $2 1 million in the prior year period.

For the full year, we reported adjusted EBITDA of $19 7 million down from $26 1 million. This was mostly driven by price compression and higher outbound freight costs. However, this was partially offset by improvements in warehouse fulfillment costs.

Turning to the balance sheet, we ended the quarter with $51 million of cash and no revolver debt, we generated $700000 of interest income in the fourth quarter and $2 million for the full year.

Our significant cash position and untapped revolver continues to highlight the strength of our balance sheet.

We believe we have ample liquidity and have no intention or need to raise capital at current evaluations.

Inventory balance at quarter end was $129 million versus $136 million in the prior year.

We're also maintaining a disciplined capital allocation program, which includes continuing our current share repurchase plan, if and when it is prudent as.

As David indicated, we repurchased 726000 shares in the quarter and $1 2 million shares throughout 2023.

We have also renewed our share repurchase program through July of 2026 with $25 million remaining.

For 2020 for modeling purposes, as we mentioned in our previous call. We have a few items flowing through the income statement, we want to specifically call out.

First we're continuing to make technology upgrade investments, which consist of overlapping software and maintenance expense that will impact our fiscal year 2020 for operating expenses by approximately $900000. This is because we are paying for the new systems that we're implementing while also maintaining the old systems, we're upgrading.

Second we have overlapping rent and related expenses from our new Las Vegas facility of approximately $2 million.

Lastly, since January 2024, we've experienced deflation of approximately 8%, which we expect to anniversary as we enter the fourth quarter.

For the full year 2024, we expect negative 2% to positive 2% revenue growth driven primarily by three quarters of projected deflation masking mid to high single digit unit growth.

We also expect gross profit margins in the range of 31% plus or minus 100 basis points.

This reflects the previously discussed headwinds on margin due to changing consumer demand patterns and price compression.

We believe that our company has a long runway for growth and the impact of our strategic priorities will compound our value over time through multiple cycles.

As we look to the remainder of the year, we will continue balancing financial prudence with Opportunistically, returning capital to shareholders I would like to now turn it over to David for final remarks.

Thank you Ryan.

Before we conclude let me briefly touch on the current economic environment, the impact to our business and how we are approaching in tackling these challenges.

2024 started off slow due to a difficult macro and continued softness in consumer demand price compression exacerbated by inclement weather in January for.

For the first quarter, our gross margin has been under significant pressure and we currently expect our year over year unit growth to be masked by deflation for a net revenue impact of down low to mid single digits. We.

We have seen some improvements in February with better volume and more efficient customer acquisition cost, primarily driven by the commerce experience investments and marketing strategy initiatives I discussed earlier.

We remain focused on growing volume sales and capturing market share and we're always mindful of profitability and free cash flow.

In light of these challenges we have made the difficult, but prudent decision to significantly reduce our cost structure, including the elimination of 150 global roles.

We expect the impact of these changes as well as other cost reduction initiatives to partially offset the gross margin compression.

On an annualized basis, we expect these reductions to add up to $10 million and.

And for fiscal 2024, the flow through should be approximately $8 million with 700000 in one time charges.

These decisions are not made lightly, but we want to stay agile, we want to protect shareholder value and realigned to the reality of the environment.

Our main focus for 2024 will be number one executing our e-commerce roadmap with new features to drive immediate sales growth such as upsell cross sell as well as pushing adoption of our mobile app number two expanding product assortment to capture new markets and customers, we have not serviced before and.

Number three increasing marketing efforts to generate more brand awareness for <unk> dot com and capture a wider customer base, including those who may be new to our brand.

We believe these areas of focus will compound over time.

In conclusion, we continue to believe the strategic priorities and areas of the business. We're focusing on will lead to accelerated revenue growth, while maximizing long term shareholder value. We have proven in the past that we can grow and execute change management through difficult environments and now is no different in addition.

We're supported by the strength of our balance sheet with ample cash and inventory as well as an undrawn facility with no long term debt. These factors give us the confidence that we can overcome the current market pressures and that we will come out stronger on the other side.

Thank you everyone for joining today's call I will now turn it over to the operator and open it up for questions.

Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again please.

Please stand by while we compile the Q&A roster.

Our first question comes from the line of Ryan Macdonald from Craig Hallum Capital Group.

Hey, good afternoon, guys, Hey, Ryan.

Good good good.

Gross margin I guess the price deflation has been ongoing all year you guys have been holding steady.

34 ish gross margin range for the past year really last couple of years, I guess, what's substantially changing I guess or weakening for the guidance of the 30% to 32, because a lot of the one time. So it feels like it's opex that you were calling out.

Sure. Thanks for that question this is Ryan.

So for gross margin if you kind of look sequentially fourth quarter last year. We started you started to see a little bit of a decline.

And what happened was we had pretty strong gross margins in the beginning of the year and what we're looking at it what I was trying to articulate is we're lapping some pretty tough average selling price comps here in the first call. It three quarters, and we expect to have better year over year gross margin comps going into the back.

So overall what has happened is.

When you look at the deflation inbound cost of goods are down about 10%, which overall on a market basis, including our competitors has lowered average selling prices, but our outbound freight cost with our carriers Hasnt gone down a commensurate amount and thats, where youre seeing the compression.

Any benefit from on the freight side.

It seemed like Fedex and EPS, we're fighting a little bit offering some discounts et cetera to fight for volume I guess do you guys see any of that benefit in Q4, and I guess the presumption is great continues to get worse in 2020 quarter.

Thanks for the question this is Michael.

There is competition out there, but we're very happy with our Fedex relationship and the cost profile of gets us.

The way that we're going to reduce transportation costs over time is to get more units per shipment and so that's why you'll hear us talk about upsell cross sell.

The large contracts that were signed by most of the transportation carriers did increase their costs and those costs are getting passed along to us and so we're going to have to get more things, we're going to have to get more things into your boxes to be able to meaningfully change the outbound transportation curve, which is what we're working on right now.

Got it.

And then just last one for me I guess what initiatives are the focus areas for 2024, I guess it feels like you have to deemphasize some of the things you're working on whether it's technology to do it for me JC Whitney relaunch, brandy and et cetera, but can you walk through and kind of remind us the key focus on maybe what's going to get pushed out here with some of these cost reduction efforts.

Yeah, Hey, Ryan, it's David I think.

If I take a step back this is definitely not the results that we're accustomed to delivering.

From a volume standpoint, we did about the same growth in 2023 that we did in 2022.

The only difference is that in 2022, we had about 8% of inflation and in 2023, we had 3% of deflation. So we're definitely not satisfied with 2% sales growth and obviously, that's 100% on me I'm responsible for the execution of their roadmap regardless of the environment. So.

I can also say that.

This is a difficult environment is something that we were 100% ready for four years ago. If you remember we did a capital raise and we've been focused on financial discipline and cash preservation, because we were quite aware that one day things would get tougher and so outside of working capital changes, we basically preserved all that cash and so.

We have cash we have inventory we have no long term debt. So on the balance sheet side, we have everything we need to push through the cycle.

On the income statement side, we definitely need to do significantly better.

So we have some headwinds, but we're focused on growth and so if I were to specifically call out three things, it's really number one the e-commerce experience and.

And pushing the App engagement, that's going to grow the topline and that's also going to make marketing spend more efficient number two it's expanding our product offering it's selling more to our current customers and also adding new categories, new brands to capture some new customers and number three it's marketing and branding and really building a brand for Carpark stock.

Calm and JC Whitney and right now in this environment, we're really trying to stay lean and agile, especially after all the changes that we just announced and so unless it's in one of those three categories. That's focused specifically on growth, we're not going to be tackling it this year.

Helpful. Thanks, guys. Good luck.

Thanks.

Thank you one moment far next question.

Our next question comes from the line of Dillon Heslin from Roth Capital Partners.

Hey, Thanks for taking my question.

First wanted to just clarify.

You mentioned, David about the cost reductions on the head force reduction so a 150 rules.

How what percentage of that.

Is sort of spread like Where's that spreads in your distribution centers is it sort of back office and corporate and then when you talked about the offset a $10 million.

Your annual expected cost savings.

So I'll, let Brian take the second part I'll take the first part.

We're definitely seeing some headwinds on the gross margin due to the deflation in it.

We had to make the very difficult decision to realign our cost structure. So the reduction the reductions were substantial and across the board. So it impacted both corporate roles.

Line workers in the warehouse also back office in Manila.

Park Youre looking at about 15% of corporate roles and about 10% of the frontline and then I'll, let Brian take the second part sure just to reiterate so it's going to be $10 million on an annualized basis a lot of the cuts happened just recently, so youre looking at more of a $8 million flow through for this 2024.

Fiscal year.

Okay perfect helpful.

And then is it fair.

Follow up can you talk a little about what worked with the mobile app and helping that grow as a percentage of e-commerce.

Or some of the channels that helps you.

With that customer acquisition and then.

Is there how flexible is your spend on that.

To add to it or pullback based on sort of what you see with both your sales and also just the marketplace.

Yeah, Great question. So obviously, we're very happy with the App, it's probably one of our biggest accomplishment for 2023.

So right now it's about 7% of E com revenues and growing.

What we're seeing is that so all of the downloads and we have over 250000 downloads were non paid organic so it's people that come through our web site.

We get a pop up and they talk about the benefits of the App and they downloaded so.

And it's still growing.

So what we're seeing right now is on the App, we have a higher average selling price and we have a higher purchase repeat purchase rate. So over time, what I think youre going to see is our non pay traffic is going to continue to grow and we should start seeing some efficiencies in marketing so.

If I look at it like taking a step back over the next couple of years, our objective is to get our marketing spend.

Lower by about 100 to 200 basis points and this should flow through to the bottom line. So.

The Q and the K that youre going to see released later today I think we called out that our marketing spend was about 12, 3% for the year. The goal is to get closer to 10% and all of that to flow to flow through the bottom line. So we're going to keep pushing the app and over time, we want to get this to double digits.

And so I think we're going to make it a point to announce the numbers at every earnings call moving forward, how many users we have.

What percentage of E com revenue and any other metrics that we think are relevant to financial modeling.

Great. Thank you I appreciate you taking my questions.

Thanks Todd.

Thank you.

One moment for our next question.

Yes.

Our next question comes from the line of Ryan Meyers from Lake Street.

Hey, guys. Thanks for taking my question.

First one for me I'm, just curious as we think about the revenue guidance range.

To come in at the high end of that range is most of that just due to the price deflation or is there anything else there that we should be aware of.

I can take the first part I guess I'm not worried about volume growth and unit growth. The business is growing in units, who we're shipping out more units than ever before.

I think the difference would be the price compression the deflation based on the competitive landscape I don't know if you want to add anything sure. This is Brian I think when we look at the business. What we've always tried to do was manage it from a dollars contribution ratio basis. So as we can push price to try and maintain margin.

There is a possibility you could see sales start to hit the lower end of the range or on the other side.

As we some of our great investments that we're working on such as upsell and cross sell improved search increase assortment at various price points. As these things all hit I think you see us go towards the higher end of the range and then of course, there is the macro portion which is outside of our control and in some ways.

That makes it an uncertainty.

I think for me.

If I take a step back and obviously this year is.

Challenging from a macro standpoint, but the backdrop is still <unk>.

300 million cars on the road, it's an aging car fleet, there's more cars on the road more miles being driven the online penetration is still low and we're one of the strongest one of the biggest players in a huge tam.

So over the next couple of years, we're going to take market share sales are going to grow we're going to do it profitably and we're just going to push through and execute.

Got it Thats helpful.

And then if we think about the do it for me offering do you expect to see any sort of contribution.

From that initiative here in 2024.

Yes, Im glad you asked I think do it for me to get it installed is it's a big opportunity and it aligns with our vision to remove the friction from from auto auto repair that was always a long term bet and so right now we have some headwinds in the economy, we are much leaner.

We're much more agile, but over the next few quarters, what we're going to do is solely focus on the few things that we think will generate incremental revenue. This year. So we have three big priorities right now it's the E com experience in the App, it's the product offering expansion and its marketing and branding and so we're going to try to push the top line first right now and.

We will revisit do it for me later this year, but we want to be laser focused on immediate growth and anything thats going to generate incremental topline revenue now.

Got it thank you for taking my questions.

Yes.

Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.

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Good afternoon at this time, all participants will be in a listen only mode.

After the presentation there will be a question and answer session. Please note. This call is being recorded I would now like to pass the conference over to our host Tina Mirror Farsi Senior Vice President of Global Communications and culture. Please go ahead.

Hello, everyone and thank you for joining us for the car parks Dot com fourth quarter and fiscal year end 2024 conference call.

I'd like to start by welcoming the investors and others, who are attending this meeting remotely.

Joining me today are David Mignon, Chief Executive Officer, Brian Lockwood, Chief Financial Officer, and Michael Halfacre, Chief operating Officer.

Actual results may differ materially from those contained in or implied by these forward looking statements due to the risks and uncertainties associated with the business.

For a discussion of the material risks and other important factors that could affect results. Please.

These refer to the car Park Dotcom annual report on Form 10-K, and 10-Qs as filed with the SEC.

Both of which can be found on our Investor Relations website.

On the call, both GAAP and non-GAAP financial measures will be discussed.

Conciliation of GAAP to non-GAAP financial measures is provided in the car Park Dot Com press release issued today.

And with that I would now like to turn the call over to David.

Thank you Tina and thank you all for joining us.

In the fourth quarter of 2023 sales were $156 million, bringing our full year 2023 sales to a record breaking $676 million up 2% from the prior year and 16% on a two year stack.

We had $51 million in cash on our balance sheet and an untapped revolver of up to $75 million at the end of the year.

Across the industry due to the difficult macroeconomic environment, we saw sustained price deflation at some price sensitive consumers are choosing to defer nonessential purchases.

Despite the challenging operating environment, we continued to see strong unit growth of approximately 8% in the fourth quarter.

We believe we are taking share from other online players and as consumer confidence rebounds, we're well position to support the 389 billion.

Automotive aftermarket and deliver long term growth both in volume and dollars.

Revenue.

Number three achieving 38% of total e-commerce revenue from repeat customers.

For recording our highest historical website traffic with over 100 million visits to car parks dotcom over the year and number five increasing revenue from the friction category, which includes breaks and rotors by over 40% from the prior year, which accounted for approximately 5% of total volume.

These accomplishments are a testament to the value of our strategic growth drivers the hard work of our talented carpark dot com team and our consistent focus on delivering results as we previously outlined our growth levers range from table Stakes the industry disruption and we believe they will propel car parts to reach over.

$1 billion in company revenues.

Turning to a few highlights for 2023.

First we continued to make progress on Supercharging, our commerce experience and marketing strategy.

In August of last year, we launched our mobile app on both iOS and Android and are excited that today. It has over 250000 downloads and accounts for more than 7% of E Commerce revenue.

With 80% of our customers using mobile phones to purchase their automotive parts, we're confident that overtime direct in app purchases will reduce our reliance on search engine and performance marketing to create a cost effective way to promote our brands and products, while incentivizing repeat purchases.

Additionally, we continue to build these direct and long term relationships with current and prospective customers. Thanks to our new podcasts in the garage by car parts Dot Com and our Youtube channel featuring an expanding number of proprietary educational and instructional videos, which to date have received hundreds of thousands of views.

Aleve overtime, our own content push will help us acquire new customers drive revenue and lower customer acquisition costs.

That being said during 2023, we prioritized our resources to focus on removing some roadblocks in our tech stack, which prevented us from completing the rollout of some of the new capabilities. We have slated for the year, but we expect to start accelerating progress this year.

Overall, we are pleased to CCAR parts dot com, becoming the destination for consumers to address their vehicles maintenance and repair needs with links to purchase products directly from our website or mobile app and how to videos that empower them to tackle easy jobs.

Placement parts.

This part of the business was up over 25% year over year and is now a profitable $100 million revenue business.

While it does have a lower gross margin profile than our house brands business. Our strategy is to maximize gross profit dollars expanding our product and price assortment on <unk> dot com aims to capture a larger market share by catering to both premium and value shoppers enhancing our competitiveness and positioning us for sustained growth.

And third we continue to upgrade our logistics and optimized for supply chain management.

On the fulfillment side, we're on track with the move and opening of our new and larger semi automated facility in Las Vegas, Nevada.

As we shared last quarter. This building will serve as our west coast flagship and will carry between 90%, 80% to 90% of our assortment.

It will feature a state of the art Pic module and extensive conveyance that will allow for a significant reduction in operating costs.

And the newly expanded assortment will also help to reduce last mile transportation costs to the west coast.

Over time, we intend to continue expanding our footprint to get closer to our customers for faster delivery and lower transportation costs.

We will remain financially disciplined and evaluate each node in our network based on the return on investment and the timing of the impact to the P&L now I'll hand, it over to Ryan for a financial update.

Thank you David in Q4, we reported our 16th consecutive quarter of year over year growth with revenues of $156 4 million up one 2% from $154 5 million last year for the full year carpets generated $675 7 million in revenues up $2.

1% from 2022, and marking the highest sales ever in company history.

Profit for the quarter was $51 6 million flat compared to the prior year for the full year gross profit was $229 4 million down slightly from the $230 9 million in 2022 gross margin in the quarter was 33% of sales versus 33, 4% in the prior year.

For the full year gross margin was 33, 9% of sales versus 34, 9% in the prior year as we experienced price compression higher outbound transportation costs and a shift in product mix.

GAAP net loss for the quarter was $6 1 million compared to $6 2 million in the prior year period for the full year 2023, GAAP net loss was $8 2 million versus 1 million in the prior year.

We reported adjusted EBITDA of 1 million in the quarter down from $2 1 million in the prior year period.

For the full year, we reported adjusted EBITDA of $19 7 million down from $26 1 million.

This was mostly driven by price compression and higher outbound freight costs. However, this was partially offset by improvements in warehouse fulfillment costs.

Turning to the balance sheet, we ended the quarter with $51 million of cash and no revolver debt, we generated $700000 of interest income in the fourth quarter and $2 million for the full year, our significant cash position and untapped revolver continues to highlight the strength of our balance sheet. We believe we have ample liquidity.

<unk> and have no intention or need to raise capital at current valuations.

Our inventory balance at quarter end was $129 million versus $136 million in the prior year.