CarParts.com, Inc.

Previous wording

The information contained in this section is not a complete description of our business or the risks associated with an investment in our common stock. We urge you to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the U.S. Securities and Exchange Commission (“SEC”), which are available on the SEC’s website athttp://www.sec.gov. The section entitled “Risk Factors” set forth inPart II, Item 1A of this report, and similar discussions in our other SEC filings, describe some of the important factors, risks and uncertainties that may affect our business, results of operations and financial condition and could cause actual results to differ materially from those expressed or implied by these or any other forward-looking statements made by us or on our behalf. You are cautioned not to place undue reliance on these forward-looking statements, which are based on current expectations and reflect management’s opinions only as of the date thereof. We do not assume any obligation to revise or update forward-looking statements. Finally, our historic results should not be viewed as indicative of future performance.

Current wording

The information contained in this section is not a complete description of our business or the risks associated with an investment in our common stock. We urge you to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the U.S. Securities and Exchange Commission (“SEC”), which are available on the SEC’s website athttp://www.sec.gov. The section entitled “Risk Factors” set forth inPart II, Item 1A of this report, and similar discussions in our other SEC filings, describe some of the important factors, risks and uncertainties that may affect our business, results of operations and financial condition and could cause actual results to differ materially from those expressed or implied by these or any other forward-looking statements made by us or on our behalf. You are cautioned not to place undue reliance on these forward-looking statements, which are based on current expectations and reflect management’s opinions only as of the date thereof. We do not assume any obligation to revise or update forward-looking statements, unless required by law. Finally, our historic results should not be viewed as indicative of future performance.

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 1,594,000 SKUs with detailed product descriptions, attributes and photographs combined with the flexibility of fulfilling orders using both drop-ship and stock-and-ship methods.

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 1,578,000 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

2.*U.S. vehicle fleet expanding and aging.*The average age of U.S. light vehicles, an indicator of auto parts demand, reached a new record-high of 12.6 years in 2024, according to the U.S. Auto Care Association. We believe an increasing vehicle base and rising average age of vehicles will have a positive impact on overall aftermarket parts demand because older vehicles generally require more repairs. In many cases we believe these older vehicles are driven by Do-It-Yourself (“DIY”) car owners who are more likely to handle any necessary repairs themselves rather than taking their car to the professional repair shop.

Current wording

2.*U.S. vehicle fleet expanding and aging.*The average age of U.S. light vehicles, an indicator of auto parts demand, reached a new record-high of 12.8 years in 2025, according to the U.S. Auto Care Association. We believe an increasing vehicle base and rising average age of vehicles will have a positive impact on overall aftermarket parts demand because older vehicles generally require more repairs. In many cases we believe these older vehicles are driven by Do-It-Yourself (“DIY”) car owners who are more likely to handle any necessary repairs themselves rather than taking their car to the professional repair shop.

Previous wording

3.*Growth of online sales.*The U.S. Auto Care Association estimated that overall revenue from online sales of auto parts and accessories would reach over $23 billion by 2026. Improved product availability, lower prices and consumers’ growing comfort with digital platforms are driving the shift to online sales. We believe that we are well positioned for the shift to online sales due to our history of being a leading source for aftermarket automotive parts through our flagship website, app, and online marketplaces.

Current wording

3.*Growth of online sales.*The U.S. Auto Care Association estimated that overall revenue from online sales of auto parts and accessories would reach over $27 billion by 2028. Improved product availability, lower prices and consumers’ growing comfort with digital platforms are driving the shift to online sales. We believe that we are well positioned for the shift to online sales due to our history of being a leading source for aftermarket automotive parts through our flagship website, app, and online marketplaces.

Previous wording

We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed inPart II, Item IA, of this Quarterly Report on Form 10-Q and in*Part I, Item IA,*in our Annual Report on Form 10-K for the fiscal year ended December 28, 2024.

Current wording

We believe that our performance and future success depend on a number of factors that present significant opportunities for us but also pose risks and challenges, including those discussed inPart II, Item IA, of this report, in*Part I, Item IA,in our Annual Report on Form 10-K for the fiscal year ended December 28, 2024 and inPart II, Item IA,*of our Quarterly Report on Form 10-Q for the period ended March 29, 2025.

Previous 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.

Current wording

For the second quarter of 2025, the Company generated net sales of $151,949, compared with $144,270 for the second quarter of 2024, representing an increase of 5.3%. The Company incurred a net loss of $12,711 for the second quarter of 2025 compared to a net loss of $8,687 for the second 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 $(3,116) in the second quarter of 2025 compared to $(118) the second 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 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.

Current wording

Net sales increased in the second quarter of 2025 compared to the second quarter of 2024. The increase in net sales was primarily driven by an increase in consumer demand through our primary ecommerce sales channel,carparts.com*,*partially offset by continued softness in our marketplaces sales channel. Gross profit increased by 2.9% to $49,779 and gross margin decreased 70 basis points to 32.8% compared to 33.5% in the second quarter of 2024. The decrease in gross margin was primarily driven by product mix and the impact of tariffs.

Previous 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.

Current wording

Total expenses, which primarily consisted of cost of sales and operating expense, increased in the second 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

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

Current wording

Thirteen and Twenty-Six Weeks Ended June 28,2025 Compared to the Thirteen and Twenty-Six Weeks Ended June 29, 2024

Previous 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.

Current wording

Gross profit increased $1,386, or 2.9%, for the second quarter of 2025 compared to the same period in 2024, and decreased $5,186, or 5.1%, in YTD Q2 2025 compared to the same period of 2024. Gross margin decreased 70 basis points to 32.8% in the second quarter of 2025 compared to 33.5% in the second quarter of 2024 and gross margin decreased 50 basis points to 32.4% in YTD Q2 2025 compared to the same period of 2024. The decrease in gross margin was primarily driven by product mix and the impact of tariffs.

Previous 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.

Current wording

Operating expense increased $5,075, or 8.9%, and increased $7,132, or 6.1%, for the second quarter of 2025 and YTD Q2 2025, respectively, compared to the same periods in 2024. Operating expense as a percent of net sales increased 130 basis points to 40.9% and increased 380 basis points to 41.7% in the second quarter of 2025 and YTD Q2 2025, respectively, compared to the same periods in 2024. The increase was primarily related to an unfavorable marketing spend, in addition to the impact of one-time fees related to our ongoing exploration of strategic alternatives in 2025.

Previous 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.

Current wording

Total other income, net, decreased $272, or 400.0%, and decreased $406, or 198.1%, for the second quarter of 2025 and YTD Q2 2025, respectively, compared to the same periods in 2024, primarily driven by a decrease in interest income due to a lower cash balance throughout 2025.

Previous 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.

Current wording

For the thirteen and twenty-six weeks ended June 28, 2025, the effective tax rate for the Company was (0.7)% and (0.8)%, 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.

Previous 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.

Current wording

For the thirteen and twenty-six weeks ended June 29, 2024, the effective tax rate for the Company was (0.3)% and (0.8)%, 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.

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 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.

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 twenty-six weeks ended June 28, 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 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).

Current wording

During the twenty-six weeks ended June 28, 2025, we primarily funded our operations with cash and cash equivalents generated from operations and borrowings from our revolving loan. As of June 28, 2025, our outstanding revolving loan balance under our Credit Facility was $10,000. Subsequent to June 28, 2025, we borrowed an additional $10,000 from the revolving loan under the Credit Facility. We had cash and cash equivalents of $19,774 as of June 28, 2025, representing a $16,623 decrease 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 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.

Current wording

As of June 28, 2025 and December 28, 2024, our working capital was $40,266 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 thirteen weeks ended March 29, 2025 and March 30, 2024 (in thousands):

Current wording

The following table summarizes the key cash flow metrics from our consolidated statements of cash flows for the twenty-six weeks ended June 28, 2025 and June 29, 2024 (in thousands):

Previous 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.

Current wording

Net cash (used in) provided by operating activities for the twenty-six weeks ended June 28, 2025 and June 29, 2024 was ($20,060) and $18, respectively. The decrease was primarily driven by a higher net loss in YTD Q2 2025, in addition to the higher net cash outflow from the change in working capital, mainly attributable to the increase of our inventory position as a result of the continued uncertainty from tariffs.

Previous 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.

Current wording

For the twenty-six weeks ended June 28, 2025, net cash used in investing activities was primarily the result of additions to property and equipment of $4,408, which are mainly related to capitalized website and software development costs. For the twenty-six weeks ended June 29, 2024, net cash used in investing activities was primarily the result of additions to property and equipment of $14,567, which are mainly related to leasehold improvements, capitalized website and software development costs, and machinery and equipment.

Previous 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.

Current wording

Net cash provided by financing activities was $7,845 for the twenty-six weeks ended June 28, 2025, primarily due to $10,000 of net borrowings from our revolving loan, partially offset by $1,786 of payments on finance leases. Net cash used in financing activities was $2,384 for the twenty-six weeks ended June 29, 2024, primarily due to $2,157 of payments on finance leases.

Previous 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.

Current wording

Total debt was $20,514 as of June 28, 2025 compared to $12,313 as of December 28, 2024 and primarily consists of right-of-use obligations – finance and our outstanding revolving loan balance.

Previous wording

The Company maintains a Credit Facility that provides for, among other things, a revolving commitment, which is subject to a borrowing base derived from certain receivables, inventory and property and equipment. The Credit Facility provides for the revolving commitment in an aggregate principal amount of up to $75,000 and allows for an uncommitted ability to increase the aggregate principal amount by an additional $75,000 to $150,000, subject to certain terms and conditions. The Credit Facility matures on June 17, 2027. As of March 29, 2025 and December 30, 2023, our outstanding revolving loan balance was $0, respectively. As of March 29, 2025 and March 30, 2024, the outstanding standby letters of credit balance was $680, respectively, and we had $0 of our trade letters of credit outstanding in accounts payable in our consolidated balance sheets. We use the trade letters of credit in the ordinary course of business to satisfy certain vendor obligations.

Current wording

The Company maintains a Credit Facility that provides for, among other things, a revolving commitment, which is subject to a borrowing base derived from certain receivables, inventory and property and equipment. The Credit Facility provides for the revolving commitment in an aggregate principal amount of up to $75,000 and allows for an uncommitted ability to increase the aggregate principal amount by an additional $75,000 to $150,000, subject to certain terms and conditions. The Credit Facility matures on June 17, 2027. As of June 28, 2025 and December 28, 2024, our outstanding revolving loan balance was $10,000 and $0, respectively. As of June 28, 2025 and December 28, 2024, the outstanding standby letters of credit balance was $680, and we had $0 of our trade letters of credit outstanding in accounts payable in our consolidated balance sheets. We use the trade letters of credit in the ordinary course of business to satisfy certain vendor obligations.

Previous 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).

Current 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 June 28, 2025, the Company’s SOFR based interest rate was 6.43% 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 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.

Current wording

continued or worsened economic conditions, worsening operating performance by us, or other events, including those described in “Risk Factors” included in this report and any other reports we filed with the SEC 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

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 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.