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    PRTS
    Earnings call· Jul 2025(Q2 FY26)

    CarParts.com Q2 FY26 earnings call PRTS

    Aug 6, 2026 Source

    Executive summary

    CarParts.com Q2 FY26 — Strong Adjusted EBITDA Improvement and Strategic Partnership Growth

    CarParts.com achieved its highest adjusted EBITDA since Q3 2023, demonstrating six consecutive quarters of improvement driven by a strategic shift towards profitable growth, operational efficiency, and disciplined cost control. The company is leveraging its two-layer business model, combining digital execution with physical infrastructure, and scaling high-margin partnerships like A-Premium and JC Whitney to drive future free cash flow. Management views the intentional sales decline as a trade-off for protecting gross profit dollars and expanding margins.

    Highlights

    5

    • Adjusted EBITDA was $1.8 million, an improvement of $4.9 million from Q2 FY25, marking the sixth consecutive quarter of sequential improvement.

    • Gross margin expanded to 33.2%, up 70 basis points sequentially and 40 basis points year-over-year, driven by favorable product mix and freight optimization.

    • Total operating expenses were reduced by $13.9 million or 22% year-over-year, reflecting improved marketing efficiency and fixed cost reductions.

    • The A-Premium partnership's annualized gross revenue run rate is approaching $50 million, with a longer-term path to exceed $100 million at attractive contribution margins.

    • Fee income run rate is now closer to $5 million, up from over $4 million last quarter, contributing to capital-light platform growth.

    Concerns

    2

    • Net sales declined to $135.6 million compared to $151.9 million in Q2 FY25, a 10.7% decrease, attributed to deliberate optimization of advertising spend and real-time pricing actions.

    • Inflation, oil prices, and tariffs directly impacted product and freight costs during the quarter, necessitating pricing adjustments that affected demand.

    Guidance & targets

    4
    CategoryTargetConfidence
    Free Cash Flow
    positive
    high materiality
    High
    A-Premium Annualized Gross Revenue Run Rate
    exceed $100 million
    medium materiality
    Medium
    JC Whitney Annualized Revenue Run Rate
    roughly $7.5 million
    medium materiality
    High
    Next-Day Delivery Coverage
    all 4 distribution buildings
    low materiality
    High

    Operational metrics

    16
    Adjusted EBITDA
    $1.8 millionup $4.9 million YoY
    Q2 FY26

    Reflects the company's focus on profitability and operational execution.

    Total Operating Expenses
    $48.3 milliondown $13.9 million or 22% YoY
    Q2 FY26

    Driven by improved marketing efficiency, fixed cost reductions, and warehouse productivity.

    Cash and Equivalents
    $38 million
    End of Q2 FY26

    Balance sheet position at the end of the second quarter.

    Revolving Credit Facility
    $25 million
    Q2 FY26

    New credit facility entered into during the quarter, providing liquidity.

    Convertible Notes
    $25.4 million
    Q2 FY26

    Outstanding convertible debt with specified conversion terms.

    IEEPA Tariff Claims Recognized
    $2.2 million
    Q2 FY26

    Portion of tariff claims recognized in the quarter, used to reflect lower landing costs and stay competitive.

    Fee Income Run Rate
    approaching $5 millionup from over $4 million last quarter
    Q2 FY26

    Generated from CarParts.com Mastercard, CarParts Plus membership, and warranty products, contributing to customer engagement and lifetime value.

    A-Premium Annualized Revenue Run Rate
    approaching $50 millionup from approximately $45 million exiting Q1 FY26
    Q2 FY26

    Significant growth in strategic partnership, contributing to profitability and capital efficiency.

    JC Whitney Annualized Revenue Run Rate (Amazon)
    $2.5 million
    Q2 FY26

    Initial performance of JC Whitney SKUs on Amazon, with significant growth expected as more SKUs are added and launched on CarParts.com.

    Private Label % of Revenue
    76%down from 81% in Q1 FY26
    Q2 FY26

    Shift reflecting continued growth in strategic branded partnerships like A-Premium.

    Collision Replacement Parts % of Revenue
    63%down from 67% in Q1 FY26
    Q2 FY26

    Shift due to hard parts growth from A-Premium, not softness in core big and bulky nonconveyable category.

    Owned Channels % of Revenue
    70%up from 69% in Q1 FY26
    Q2 FY26

    Continued shift towards owned channels (e-commerce site, mobile app, commercial channels) reflecting higher net contribution margin and lower working capital intensity.

    Retention % of E-commerce Revenue
    10.5%up from 10% in Q1 FY26
    Q2 FY26

    Indicates a growing share of revenue from existing customers.

    Mobile App Revenue % of E-commerce Revenue
    14.2%up from 14% in Q1 FY26
    Q2 FY26

    Growing contribution from the mobile app channel.

    Last Mile Packages Delivered
    over 3,000more than double Q1 FY26
    Q2 FY26

    Expansion of internal last mile delivery capabilities, focused on big and bulky parts to reduce freight costs.

    Shares Outstanding
    8,065,000
    July 30, 2026

    Share count after the reverse stock split to regain Nasdaq compliance.

    Industry KPIs

    3
    MetricValueDetails
    Sg a OPEX ratio$48.3 millionUSD
    Gross margin drivers33.2%%
    Inventory position markdown risk$84 millionUSD

    Product announcements

    1
    ProductTypeDetails
    JC Whitney products on CarParts.comlaunch

    Deals & partnerships

    3
    A-PremiumStrategic partnership for drop ship model, expanding product catalog and improving profitability.

    The partnership allows CarParts.com to offer a significantly larger catalog (6x larger than private label mechanical) without the working capital burden of owned inventory, improving both profitability and working capital efficiency.

    JC WhitneyBrand partnership for product sales, initially on Amazon and expanding to CarParts.com.

    Leveraging the JC Whitney brand to expand product offerings and reach, initially through Amazon and soon on CarParts.com, providing incremental volume and direct customer engagement.

    First Business BankEntered into a $25 million revolving credit facility.$25 millionmaturing March 2028

    Secured a new revolving credit facility to enhance liquidity, which remains undrawn as of quarter-end.

    Risks & headwinds

    3
    Inflation, oil prices, and tariffs impacting product and freight costsQ2 FY26

    moved directly into product and freight costs during the quarter

    Mitigation: Responded with real-time pricing actions to protect gross profit dollars, accepting some impact on demand. A lowered fixed cost base and leaner operation helped absorb costs.

    Demand impact from pricing actionsQ2 FY26

    accepting some impact on demand as prices moved higher

    Mitigation: Intentional trade-off to protect gross profit dollars and expand margin, supported by a leaner operation.

    Overall health of customers and business environmentQ2 FY26

    meaningful headwinds in the overall health of our customers as well as business environment

    Mitigation: The company's improved operational execution and cost control allowed it to expand margin and grow adjusted EBITDA despite these headwinds.

    What to watch in Q3 FY26

    5

    A-Premium Annualized Run Rate

    next quarter
    Currentapproaching $50 million
    Targetexceeding $50 million

    Why it matters

    This partnership is a key driver of profitable growth and capital efficiency, with a longer-term target of over $100 million.

    A-Premium passed the $50 million annualized run rate

    2 min read6 chapters

    Detailed Narrative

    01

    Strategic Shift to Profitability

    CarParts.com initiated a strategic rebuild 18 months ago, prioritizing profitability over top-line growth at any cost. This shift has resulted in six consecutive quarters of sequential improvement in adjusted EBITDA, with Q2 FY26 reaching $1.8 million, the highest since Q3 2023. The company attributes this success to better merchandising, broader assortment, more effective marketing, and an increasingly efficient digital platform, rather than merely cost-cutting.

    02

    Two-Layer Business Model and AI Integration

    The company operates with a 'two-layer' framework, combining a digital layer (website, app, marketing) with a physical layer (global supply chain, distribution, fulfillment, last mile). AI is crucial in connecting these layers, leveraging 30 years of proprietary fitment data, purchase history, and supplier relationships. This AI-driven ecosystem enables more efficient advertising, accurate fitment, dynamic pricing, and optimized fulfillment, creating a durable competitive advantage that is hard for new entrants to replicate.

    03

    Scaling Strategic Partnerships

    The A-Premium partnership is a significant growth driver, with an annualized gross revenue run rate approaching $50 million in Q2 FY26, up from $45 million in Q1 FY26. This partnership offers more than twice the profitability of legacy owned mechanical revenue with virtually no inventory burden, and has a longer-term path to exceed $100 million. The JC Whitney brand, with 7,000 SKUs live on Amazon, achieved a $2.5 million annualized revenue run rate, expected to triple in the short term and reach $25 million in the medium term, also with attractive margins and low inventory commitments.

    04

    Last Mile Delivery Expansion

    CarParts.com is expanding its last mile delivery network, having delivered over 3,000 packages in Q2 FY26, more than double the prior quarter. The goal is to reach 300,000 packages annually, representing approximately 5% of outbound volume, concentrated in big and bulky nonconveyable parts. This initiative, currently operating out of two distribution centers, plans to expand to all four, aiming to reduce freight costs as a percentage of revenue and enhance delivery speed.

    05

    Tariff Claims and Reinvestment

    The company received $4.4 million from IEEPA tariff claims, with $2.2 million recognized in Q2 FY26. This recognized amount was reinvested into targeted pricing and marketing investments to reflect lower landing costs and maintain competitiveness. The remaining $2.2 million is expected to flow through cost of goods sold in future quarters and may also be used for similar investments.

    06

    Fee Income Growth and Capital Allocation

    Fee income, generated from offerings like the CarParts.com Mastercard, CarParts Plus membership, and warranty products, continues to grow, with a run rate now closer to $5 million. This capital-light platform deepens customer engagement and lifts lifetime value. The company's capital allocation strategy is deliberate, focusing on growing contribution margin dollars, maintaining a disciplined cost structure, and improving capital efficiency through partnerships.

    AI-generated summary of the company’s earnings call. Not investment advice.