CarPartscom Inc

Previous wording

We believe by disintermediating the traditional auto parts supply chain and selling products directly to customers online allows us to efficiently deliver products to our customers. Our vision of “Empowering Drivers Along Their Journey” underscores our mission to create a trusted platform that simplifies the historically stressful experience of vehicle maintenance & repair.

Current wording

Driven by our commitment to providing unparalleled customer experience, we use world-class design principles and the latest technology to power our user-friendly website and app. Our vision of “Empowering Drivers Along Their Journey” underscores our mission to create a trusted platform that simplifies the historically stressful experience of vehicle maintenance & repair with “Quality Parts. Priced Right.”

Previous wording

We have a significant opportunity to become the go-to destination for all automotive repair and maintenance requirements by focusing on our evolved strategy around: optimizing supply chain management and upgrading logistics, investing in technology, expanding into new business lines, and driving year-over-year increases in new customers, as well as repeat business from our existing customer base, all while maintaining our financial discipline approach of evaluating investments based on their impact on profitability.

Current wording

We have a significant opportunity to become the go-to destination for all automotive repair and maintenance requirements by focusing on our evolved strategy. This includes optimizing supply chain management and upgrading logistics, investing in technology and expanding into new business lines. Throughout this process, we remain committed to maintaining our financial discipline, evaluating investments based on their potential to drive profitability.

Previous wording

To this end, we are continually working to transform our fulfillment center footprint. In June 2024, we began operations in our new semi-automated facility in Las Vegas, Nevada, which we expect to reduce last-mile transportation expenses to the West Coast and enhance customer service through expedited delivery. Furthermore, we continuously expand our technological capabilities, product offerings, and service portfolio to stay ahead of competitive pressures. By investing in new categories, brands, customer types and revenue streams across both premium and value segments, we seek to maximize gross profit and capture a larger market share.

Current wording

To this end, we are continually working to enhance our fulfillment center footprint, capacity and productivity. In June 2024, we openedour new state-of-the-art fulfillment center in Las Vegas, Nevada, expanding from 125,000 sq. ft. to over 200,000 sq. ft., which we expect to reduce last-mile transportation expenses to the West Coast and enhance customer service through expedited delivery. The semi-automated center is integrated with cutting-edge AI capabilities designed to optimize operations, improve safety, and expand product availability. Furthermore, we continuously expand our technological capabilities, product offerings, and service portfolio to stay ahead of competitive pressures. By investing in new categories, brands, customer types, and revenue streams across both premium and value segments, we seek to maximize gross profit and capture a larger market share.

Previous wording

In tandem, we have refined our eCommerce experience and marketing strategy, focusing on enhancing the mobile app experience, building brand awareness through innovative owned content channels, and fostering direct customer relationships. These efforts aim to position CarParts.com as the ultimate destination for vehicle maintenance knowledge

Current wording

In tandem, we have refined our eCommerce experience and marketing strategy, prioritizing direct customer relationships and strengthening our community through innovative owned content channels. These efforts aim to position CarParts.com as the ultimate destination for vehicle maintenance knowledge and product purchases, fostering

Previous wording

and product purchases, thereby reducing reliance on performance marketing channels and improving customer acquisition efficiency.

Current wording

long-term brand loyalty while reducing reliance on “pay-to-play” performance marketing channels and improving customer acquisition efficiency.

Previous wording

1.*Number of SKUs required to serve the market.*The number of automotive SKUs has grown dramatically over the last several years. In today’s market, unless the consumer is driving a high volume produced vehicle and needs a simple maintenance item, the part they need is not typically on the shelf at a brick-and-mortar store. We believe our user-friendly flagship website provides customers with a favorable alternative to the brick-and-mortar shopping experience by offering a comprehensive selection of approximately 1,429,000 SKUs with detailed product descriptions, attributes and photographs combined with the flexibility of fulfilling orders using both drop-ship and stock-and-ship methods.

Current wording

1.*Number of SKUs required to serve the market.*The number of automotive SKUs has grown dramatically over the last several years. In today’s market, unless the consumer is driving a high volume produced vehicle and needs a simple maintenance item, the part they need is not typically on the shelf at a brick-and-mortar store. We believe our user-friendly flagship website provides customers with a favorable alternative to the brick-and-mortar shopping experience by offering a comprehensive selection of approximately 1,594,000 SKUs with detailed product descriptions, attributes and photographs combined with the flexibility of fulfilling orders using both drop-ship and stock-and-ship methods.

Previous wording

For the third quarter of 2024, the Company generated net sales of $144,751, compared with $166,864 for the third quarter of 2023, representing a decrease of 13.3%. The Company incurred a net loss of $10,018 for the third quarter of 2024 compared to a net loss of $2,517 for the third quarter of 2023. The Company’s net loss before interest (income) expense, net, income tax provision, depreciation and amortization expense, amortization of intangible assets, plus share-based compensation expense, workforce transition costs, and distribution center costs (“Adjusted EBITDA”) of $(1,162) in the third quarter of 2024 compared to $3,048 in the third quarter of 2023. Adjusted EBITDA is not a Generally Accepted Accounting Principle (“GAAP”) measure. See the section below titled “Non-GAAP measures” for information regarding our use of Adjusted EBTIDA and a reconciliation from net loss.

Current wording

For the first quarter of 2025, the Company generated net sales of $147,378, compared with $166,289 for the first quarter of 2024, representing a decrease of 11.4%. The Company incurred a net loss of $15,283 for the first quarter of 2025 compared to a net loss of $6,478 for the first quarter of 2024. The Company’s net loss before interest income, net, income tax provision, depreciation and amortization expense, amortization of intangible assets, plus share-based compensation expense, workforce transition costs, distribution center costs and strategic alternatives exploration costs (“Adjusted EBITDA”) of $(6,229) in the first quarter of 2025 compared to $1,052 in the first quarter of 2024. Adjusted EBITDA is not a Generally Accepted Accounting Principle (“GAAP”) measure. See the section below titled “Non-GAAP measures” for information regarding our use of Adjusted EBTIDA and a reconciliation from net loss.

Previous wording

Net sales decreased in the third quarter of 2024 compared to the third quarter of 2023. The decrease in net sales was primarily driven by deliberate price increases to focus on higher value customers, support gross margin expansion, a continued challenging consumer environment in the industry, and one-time impacts from the Crowd Strike issue and hurricanes Helene and Milton in the quarter. Gross profit decreased by 7.0% to $50,982 and gross margin increased 230 basis points to 35.2% compared to 32.9% in the third quarter of 2023. The increase in gross margin was primarily driven by our price increases and lower product costs resulting in expanded product margins, partially offset by unfavorable freight costs.

Current wording

Net sales decreased in the first quarter of 2025 compared to the first quarter of 2024. The decrease in net sales was primarily driven by the continued challenging consumer environment and inclement weather. Gross profit decreased by 12.2% to $47,347 and gross margin decreased 30 basis points to 32.1% compared to 32.4% in the first quarter of 2024. The decrease in gross margin was primarily driven by unfavorable freight costs.

Previous wording

Total expenses, which primarily consisted of cost of sales and operating expense, increased in the third quarter of 2024 compared to the same period in 2023. The changes in both cost of sales and operating expense are described in further detail under — “Results of Operations” below.

Current wording

Total expenses, which primarily consisted of cost of sales and operating expense, increased in the first quarter of 2025 compared to the same period in 2024. The changes in both cost of sales and operating expense are described in further detail under — “Results of Operations” below.

Previous wording

Regulation G,“Conditions for Use of Non-GAAP Financial Measures,” and other provisions of the Exchange Act, define and prescribe the conditions for use of certain non-GAAP financial information. We provide EBITDA and Adjusted EBITDA, which are non-GAAP financial measures. EBITDA consists of net loss before interest (income) expense, net; income tax provision; depreciation and amortization expense; amortization of intangible assets; while Adjusted EBITDA consists of EBITDA before share-based compensation expense, workforce transition costs, and distribution center costs.

Current wording

Regulation G,“Conditions for Use of Non-GAAP Financial Measures,” and other provisions of the Exchange Act, define and prescribe the conditions for use of certain non-GAAP financial information. We provide EBITDA and Adjusted EBITDA, which are non-GAAP financial measures. EBITDA consists of net loss before interest income, net; income tax provision; depreciation and amortization expense; amortization of intangible assets; while Adjusted EBITDA consists of EBITDA before share-based compensation expense, workforce transition costs, distribution center costs and strategic alternatives exploration costs.

Previous wording

Thirteen and Thirty-Nine Weeks Ended September 28, 2024 Compared to the Thirteen and Thirty-Nine Weeks Ended September 30, 2023

Current wording

Thirteen Weeks Ended March 29, 2025 Compared to the Thirteen Weeks Ended March 30, 2024

Previous wording

Gross profit decreased $3,835, or 7.0%, for the third quarter of 2024 compared to the same period in 2023, and decreased $24,516, or 13.8%, in YTD Q3 2024 compared to the same period of 2023. Gross margin increased 230 basis points to 35.2% in the third quarter of 2024 compared to 32.9% in the third quarter of 2023. The increase in gross margin was primarily driven by our price increases and lower product costs resulting in expanded product margins, partially offset by unfavorable freight costs. Gross margin decreased 50 basis points to 33.7% for YTD Q3 2024 compared to 34.2% in the same period in 2023. The decrease in gross margin was primarily driven by unfavorable freight costs, partially offset by our price increases.

Current wording

Gross profit decreased $6,572, or 12.2%, for the first quarter of 2025 compared to the same period in 2024. Gross margin decreased 30 basis points to 32.1% in the first quarter of 2025 compared to 32.4% in the first quarter of 2024. The decrease in gross margin was primarily driven by unfavorable freight costs.

Previous wording

Operating expense increased $3,166, or 5.5%, and decreased $2,478, or 1.4%, for the third quarter of 2024 and YTD Q3 2024, respectively, compared to the same periods in 2023. The increase in operating expense as a percent of net sales for the third quarter and YTD Q3 2024 was primarily related to an increase in marketing spend.

Current wording

Operating expense increased $2,057, or 3.4%, for the first quarter of 2025 compared to the same period in 2024. Operating expense as a percent of net sales increased 6.1% to 42.4% in the first quarter of 2025, primarily related to an unfavorable marketing spend.

Previous wording

Total other income, net, decreased $479, or 93.2%, for the third quarter of 2024 compared to the same period in 2023, primarily driven by a decrease in interest income due to a lower cash balance in the third quarter of 2024. Total other income, net, decreased $1,144, or 82.7%, for YTD Q3 2024, respectively, compared to the same period in 2023, primarily driven by the absence of other income attributable to an incentive for a new payment offering program that occurred in the first quarter of 2023.

Current wording

Total other income, net, decreased $134, or 97.8%, for the first quarter of 2025 compared to the same period in 2024, primarily driven by a decrease in interest income due to a lower cash balance in the first quarter of 2025.

Previous wording

For the thirteen and thirty-nine weeks ended September 28, 2024, the effective tax rate for the Company was (1.4)% and (1.0)%, respectively. The effective tax rate differed from the U.S. federal statutory rate primarily due to state income taxes, income of our Philippines subsidiary that is subject to different effective tax rates, share-based compensation that is either not deductible for tax purposes or for which the tax deductible amount is different than the financial reporting amount, and a change in the valuation allowance that offset the tax on the current period pre-tax loss.

Current wording

For the thirteen weeks ended March 29, 2025, the effective tax rate for the Company was (0.9)%. The effective tax rate differed from the U.S. federal statutory rate primarily due to state income taxes, share-based compensation that is either not deductible for tax purposes or for which the tax deductible amount is different than the financial reporting amount, and a change in the valuation allowance that offset the tax on the current period pre-tax loss.

Previous wording

For the thirteen and thirty-nine weeks ended September 30, 2023, the effective tax rate for the Company was (4.7)% and (22.7)%, respectively. The effective tax rate differed from the U.S. federal statutory rate primarily due to state income taxes, income of our Philippines subsidiary that is subject to different effective tax rates, share-based compensation that is either not deductible for tax purposes or for which the tax deductible amount is different than the financial reporting amount, and a change in the valuation allowance that offset the tax of the current period pre-tax loss.

Current wording

For the thirteen weeks ended March 30, 2024, the effective tax rate for the Company was (1.5)%. The effective tax rate differed from the U.S. federal statutory rate primarily due to state income taxes, share-based compensation that is either not deductible for tax purposes or for which the tax deductible amount is different than the financial reporting amount, and a change in the valuation allowance that offset the tax of the current period pre-tax loss.

Previous wording

The Company accounts for income taxes in accordance with ASC Topic 740 –Income Taxes(“ASC 740”). Under the provisions of ASC 740, management is required to evaluate whether a valuation allowance should be established against its deferred tax assets. We currently have a full valuation allowance against our deferred tax assets. As of each reporting date, the Company’s management considers new evidence, both positive and negative, that could impact management’s view with regard to future realization of deferred tax assets. For the thirty-nine weeks ended September 28, 2024, there was no material change from fiscal year ended December 30, 2023 in the amount of the Company's deferred tax assets that are not considered to be more likely than not to be realized in future years.

Current wording

The Company accounts for income taxes in accordance with ASC Topic 740 –Income Taxes(“ASC 740”). Under the provisions of ASC 740, management is required to evaluate whether a valuation allowance should be established against its deferred tax assets. We currently have a full valuation allowance against our deferred tax assets. As of each reporting date, the Company’s management considers new evidence, both positive and negative, that could impact management’s view with regard to future realization of deferred tax assets. For the thirteen weeks ended March 29, 2025, there was no material change from fiscal year ended December 28, 2024 in the amount of the Company's deferred tax assets that are not considered to be more likely than not to be realized in future years.

Previous wording

During the thirty-nine weeks ended September 28, 2024, we primarily funded our operations with cash and cash equivalents generated from operations. As of September 28, 2024, our outstanding revolving loan balance under our Credit Facility was $0. We had cash and cash equivalents of $38,105 as of September 28, 2024, representing a $12,846 decrease from $50,951 of cash as of December 30, 2023. Based on our current operating plan, we believe that our existing cash and cash equivalents, investments, cash flows from operations and available funds under our Credit Facility will be sufficient to finance our operations through at least the next twelve months (see “Debt and Available Borrowing Resources” and “Funding Requirements” below).

Current wording

During the thirteen weeks ended March 29, 2025, we primarily funded our operations with cash and cash equivalents generated from operations. As of March 29, 2025, our outstanding revolving loan balance under our Credit Facility was $0. Subsequent to March 29, 2025, on April 28, 2025, we borrowed $10,000 from the revolving loan under the Credit Facility. The proceeds from this borrowing were placed into our money market account and could be used to fund operating costs. We had cash and cash equivalents of $38,532 as of March 29, 2025, representing a $2,135 increase from $36,397 of cash as of December 28, 2024. Based on our current operating plan, we believe that our existing cash and cash equivalents, investments, cash flows from operations and available funds under our Credit Facility will be sufficient to finance our operations through at least the next twelve months (see “Debt and Available Borrowing Resources” and “Funding Requirements” below).

Previous wording

As of September 28, 2024 and December 30, 2023, our working capital was $57,343 and $80,352, respectively. The historical seasonality in our business during the year can cause cash and cash equivalents, inventory and accounts payable to fluctuate, resulting in changes in our working capital.

Current wording

As of March 29, 2025 and December 28, 2024, our working capital was $38,449 and $48,445, respectively. The historical seasonality in our business during the year can cause cash and cash equivalents, inventory and accounts payable to fluctuate, resulting in changes in our working capital.

Previous wording

The following table summarizes the key cash flow metrics from our consolidated statements of cash flows for the thirty-nine weeks ended September 28, 2024 and September 30, 2023 (in thousands):

Current wording

The following table summarizes the key cash flow metrics from our consolidated statements of cash flows for the thirteen weeks ended March 29, 2025 and March 30, 2024 (in thousands):

Previous wording

Net cash provided by operating activities for the thirty-nine weeks ended September 28, 2024 and September 30, 2023 was $8,542 and $57,865, respectively. The decrease was primarily driven by a lower net cash inflow from the change in working capital in addition to the higher net loss for YTD Q3 2024.

Current wording

Net cash provided by operating activities for the thirteen weeks ended March 29, 2025 and March 30, 2024 was $5,505 and $3,652, respectively. The increase was primarily driven by a higher net cash inflow from the change in working capital, partially offset by a higher net loss in the first quarter of 2025.

Previous wording

For the thirty-nine weeks ended September 28, 2024, net cash used in investing activities was primarily the result of additions to property and equipment of $18,146, which are mainly related to leasehold improvements, capitalized website and software development costs, and machinery and equipment. For the thirty-nine weeks ended September 30, 2023, net cash used in investing activities was primarily the result of additions to property and equipment of $7,380, which are mainly related to capitalized website and software development costs.

Current wording

For the thirteen weeks ended March 29, 2025 and March 30, 2024, net cash used in investing activities was primarily the result of additions to property and equipment of $2,116 and $7,431, which are mainly related to capitalized website and software development costs.

Previous wording

Net cash used in financing activities was $3,345 for the thirty-nine weeks ended September 28, 2024, primarily due to $3,243 of payments on finance leases. Net cash used in financing activities was $2,656 for the thirty-nine weeks

Current wording

Net cash used in financing activities was $1,254 for the thirteen weeks ended March 29, 2025, primarily due to $954 of payments on finance leases. Net cash used in financing activities was $1,214 for the thirteen weeks ended March 30, 2024, primarily due to $1,093 of payments on finance leases.

Previous wording

Total debt was $13,335 as of September 28, 2024 compared to $16,635 as of December 30, 2023 and primarily consists of right-of-use obligations – finance.

Current wording

Total debt was $11,352 as of March 29, 2025 compared to $12,313 as of December 28, 2024 and primarily consists of right-of-use obligations – finance.

Previous wording

Loans drawn under the Credit Facility bear interest at a per annum rate equal to either (a) SOFR plus an applicable margin of 1.50% to 2.00% per annum based on the Company’s fixed charge coverage ratio, or (b) an “alternate prime base rate” subject to an increase from 0.00% to 0.50% per annum based on the Company’s fixed charge coverage ratio. As of September 28, 2024, the Company’s SOFR based interest rate was 6.94% and the Company’s prime based rate was 8.50%. A commitment fee, based upon undrawn availability under the Credit Facility bearing interest at a rate of either 0.20% or 0.25% per annum based on the amount of undrawn availability, is payable monthly. Under the terms of the Credit Agreement, cash receipts are deposited into a lock-box, which are at the Company’s discretion unless the “cash dominion period” is in effect, during which cash receipts will be used to reduce amounts owing under the Credit Agreement. The cash dominion period is triggered in an event of default or if “excess availability,” as defined under the Credit Agreement, is less than $9,000 for three consecutive business days and will continue until, during the preceding 45 consecutive days, no event of default existed and excess availability has been greater than $9,000 at all times (with the trigger subject to adjustment based on the Company’s revolving commitment). In addition, in the event that the Company’s required excess availability related to the “Covenant Testing Trigger Period” (as defined under the Credit Agreement) is less than $7,500 for three consecutive business days, the Company shall be required to maintain a minimum fixed charge coverage ratio of 1.0 to 1.0, and continuing until excess availability has been greater than or equal to $7,500 at all times for 45 consecutive days (with the trigger subject to adjustment based on the Company’s revolving commitment).

Current wording

As of March 29, 2025, the Company’s SOFR based interest rate was 6.42% and the Company’s prime based rate was 8.00%. A commitment fee, based upon undrawn availability under the Credit Facility bearing interest at a rate of either 0.20% or 0.25% per annum based on the amount of undrawn availability, is payable monthly. Under the terms of the Credit Agreement, cash receipts are deposited into a lock-box, which are at the Company’s discretion unless the “cash dominion period” is in effect, during which cash receipts will be used to reduce amounts owing under the Credit Agreement. The cash dominion period is triggered in an event of default or if “excess availability,” as defined under the Credit Agreement, is less than $9,000 for three consecutive business days and will continue until, during the preceding 45 consecutive days, no event of default existed and excess availability has been greater than $9,000 at all times (with the trigger subject to adjustment based on the Company’s revolving commitment). In addition, in the event that the Company’s required excess availability related to the “Covenant Testing Trigger Period” (as defined under the Credit Agreement) is less than $7,500 for three consecutive business days, the Company shall be required to maintain a minimum fixed charge coverage ratio of 1.0 to 1.0, and continuing until excess availability has been greater than or equal to $7,500 at all times for 45 consecutive days (with the trigger subject to adjustment based on the Company’s revolving commitment).

Previous wording

Based on our current operating plan, we believe that our existing cash, cash equivalents, investments, cash flows from operations and available debt financing will be sufficient to finance our operational cash needs through at least the next twelve months. Our future capital requirements may, however, vary materially from those now planned or anticipated. Changes in our operating plans, lower than anticipated net sales or gross margins, increased expenses, continued or worsened economic conditions, worsening operating performance by us, or other events, including those described in “Risk Factors” included inPart II, Item 1A may force us to sell assets or seek additional debt or equity financings in the future, including the issuance of additional common stock under a registration statement. As such, there can be no assurance that we would be able to raise such additional financing or engage in asset sales on acceptable

Current wording

Based on our current operating plan, we believe that our existing cash, cash equivalents, investments, cash flows from operations and available debt financing will be sufficient to finance our operational cash needs through at least the next twelve months. Our future capital requirements may, however, vary materially from those now planned or anticipated. Changes in our operating plans, lower than anticipated net sales or gross margins, increased expenses, continued or worsened economic conditions, worsening operating performance by us, or other events, including those described in “Risk Factors” included inPart II, Item 1A may force us to sell assets or seek additional debt or equity financings in the future, including the issuance of additional common stock under a registration statement. As such, there can be no assurance that we would be able to raise such additional financing or engage in asset sales on acceptable terms, or at all. If we are not able to raise adequate additional financing or proceeds from asset sales, we will need to defer, reduce or eliminate significant planned expenditures, restructure or significantly curtail our operations.

Previous wording

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, net sales, costs and expenses, as well as the disclosure of contingent assets and liabilities and other related disclosures. On an ongoing basis, we evaluate our estimates, including, but not limited to, those related to revenue recognition, uncollectible receivables, inventory, valuation of deferred tax assets and liabilities, intangible and other long-lived assets and contingencies. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of our assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates, and we include any revisions to our estimates in our results for the period in which the actual amounts become known.

Current wording

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, net sales, costs and expenses, as well as the disclosure of contingent assets and liabilities and other related disclosures. On an ongoing basis, we evaluate our estimates, including, but not limited to, those related to revenue recognition, uncollectible receivables, inventory, valuation of deferred tax assets and liabilities, intangible and other long-lived assets and contingencies. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of our assets and liabilities that are not readily apparent from other