Hello, everyone, and thank you for joining us for the CarParts.com First Quarter 2025 Conference Call. Joining me today is David Meniane, Chief Executive Officer. Before I turn it over to David to start the call, I have some important disclosures. The prepared remarks 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 risks and uncertainties associated with the business. For a discussion of the material risks and other important factors that could affect results, please refer to the CarParts.com Annual Report on Form 10-K and the quarterly reports on Form 10-Q, each 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. A reconciliation of GAAP to non-GAAP financial measures is provided in the CarParts.com press release issued today. With that, I would now like to turn the call over to David.
Thank you, Ryan, and thanks everyone for joining us today. At the outset, let me say that today, we are not going to take questions related to our strategic alternatives process beyond what we announced on March 5. That process is ongoing and being overseen by our Board of Directors with the assistance of financial and legal advisers. Now turning to tariffs. While the current headlines are broadly known, the final rates and applications have not been finalized yet. Our internal team, including leaders from trade compliance, procurement, forecasting, merchandising, and pricing are focused on navigating and helping us make decisions. Specific to our exposure, less than one-quarter of our private label products are imported from China and approximately two-thirds from Taiwan. Over time, we believe tariffs will raise part prices in the market. Historically, tariff increases have benefited our industry as used car values are expected to rise faster than the vehicle repair costs. Our team is working on mitigating tariff impacts through a variety of actions, including pre-buying extra inventory prior to the main tariff implementation, potential cost concessions from vendor partnerships, dynamic pricing adjustments and identifying supply chain and operating expenses optimization. Over the last several weeks, our team conducted a comprehensive review of every product at the vendor level, assessing tariff exposure based on country of origin, material composition and other relevant factors. For products sourced from Taiwan, the majority of our purchases are currently subject to tariffs of approximately 25%. For products from China, current tariff rates range from 55% to 145%, but we are strongly encouraged by the joint announcement made yesterday between the U.S. and China government and look forward to reviewing the details as it relates to its impact on our products and supply chain. We will be monitoring in real time any changes in trade policy or regulations. Turning to 2025 performance. In the first two months, we saw soft consumer demand, very bad weather in many parts of the country on a relative basis, and our company was not immune. In addition, we experienced a significant increase in cost per click rates on search engines, which we believe is a response to the growth of AI models taking share from traditional search, while at the same time, selling prices for parts online fell as retailers tried to capture as much demand as possible. While our top line and operating expenses came in line with our expectations, the gross margin compression and advertising spend climate put significant pressure on our profitability in the first quarter. This reinforces how critical it is for us to continue upgrading our customer base with higher income and less price-sensitive customers to diversify our acquisition mix, realigning our business around products to target higher margin sales, adding high margin fee income, growing customer lifetime value with our mobile app and increasing our focus on wholesale and other commercial opportunities. We continue to believe these are the right bets as we counteract these external pressures. Our first quarter results were disappointing, especially as measured by our profitability. But behind the scenes, we made a lot of progress, and we're seeing momentum with our 2025 plan. For the first six weeks of the second quarter, we are seeing revenues up double digits year-over-year on sequentially lower marketing spend. Our focus on repeat customers, mobile app traffic, and high margin fee income are all paying off and we are seeing record levels for all three. While early in the process, we're slowly changing our customer acquisition mix and margin profile to transform our company's profitability. As we continue to scale these initiatives and grow our assortment, we can leverage our supply chain and fulfillment network, increase operating leverage and return the business to strong profitable growth. On the wholesale side, we have onboarded over 700 new commercial customers and continue to leverage our catalog to target collision shops and mechanics in key markets. During the balance of this fiscal year, we will continue to focus on navigating a dynamic macroeconomic environment, including tariffs and volatile prices. Given the uncertain environment, we are redoubling our focus on growth and profitability, supported by a strong foundation already in place. We're confident that our current investments will help unlock future opportunities and drive stronger financial performance. While certain investments will yield results sooner than others, we remain flexible, continuously refining our approach to achieve sustainable profitability. We have important work ahead and we will be laser-focused on execution. Before covering our financial results, I want to reiterate some of the strategic initiatives that are starting to pay off. Number one, we have scaled and optimized our vertically integrated supply chain with tightly controlled in-house and often proprietary capabilities, leading to an attractive product margin in the mid-50s percent. We have extra capacity in our network, which we can leverage as the business grows and drive more operating leverage. Number two, we continued investing in our fitment-based proprietary catalog. This catalog, built and refined over the last 20 years, serves a full assortment across collision, mechanical, private label, and branded products with the ability to build custom sets and kits. Today, our catalog contains 83,000 private label SKUs, 1.5 million premium branded SKUs and continues to grow each year. Number three, we continue to be the second largest importer of aftermarket collision parts in the U.S. and the world's number one seller on eBay Motors. As a reminder, our collision parts account for approximately two-thirds of our purchases and are primarily sourced from Taiwan, which is not currently subject to the same high tariffs imposed on products made in China. Number four, we fully replatformed our CarParts.com website with a best-in-class mobile-first fit-specific user experience, which generates 100 million annual visits and served 10 million customers with a new search, product recommendations, and fee income capabilities. Our best-in-class mobile app is well on the way to 1 million users and now accounts for over 10% of our e-commerce revenue, and is growing while allowing for a long-term reduction in our paid versus non-paid traffic mix and associated customer acquisition costs. And five, our highly profitable wholesale business recently launched same and next-day last mile delivery in both the Texas and North Florida market with a contribution margin up to 3x higher than e-commerce. We are leveraging real-time integrations with shop management and estimating systems to drive profitable volume to this business. While the first months of the year presented their share of challenges, we made significant progress in key areas that position us well for future growth. I'll now turn it over to Ryan to review our financial results.
Thank you, David. In the first quarter, we reported revenues of 147.4 million, down 11% from 166.3 million last year. The decline was primarily driven by inclement weather, softer consumer demand, and continued pressures in lighting and mirrors. Gross profit for the quarter was 47.3 million, down 12% compared to the prior year. Gross profit margin was 32.1%, down slightly from 32.4% in the prior year period. The decline in gross margin was primarily driven by increased outbound transportation costs. GAAP net loss for the quarter was 15.3 million compared to a loss of 6.5 million in the prior year period, primarily driven by lower gross margins and higher marketing costs. For the first quarter, adjusted EBITDA loss was 6.2 million, down from adjusted EBITDA of 1.1 million in the prior year period, primarily due to soft consumer demand and increased competitive pressure in performance marketing. Turning to the balance sheet. We ended the quarter with 38.5 million of cash and no revolver debt, and we generated 0.3 million of interest income. Earlier this year, in the face of uncertainty, we started proactively investing in inventory ahead of the tariffs to improve the continuity of our supply chain. This works out to about two extra weeks of stock to cost of goods sold. As a reminder, our inventory has very low obsolescence risk and no risk of spoilage, and our pre-freight margins are over 50%. Our inventory balance was 94 million at quarter end versus 90 million at the end of 2024. As of the end of the quarter, our cash position and untapped revolver continue to provide the necessary liquidity to support our business plan. I'll now turn it back over to David for final remarks.
Thank you, Ryan. Looking ahead, we are confident that the foundation and improvements across our business secured in the last 18 months have set us on a path to achieve long-term sustainable positive net income and adjusted EBITDA. Our priorities in 2025 include one, continue to expand our product offering to attract new customers and increase average basket size; two, monetize our 100 million annual visits and customer list with high-margin fee income; three, scale our B2B offering with last-mile transportation and higher touch sales in key markets; four, grow our mobile app business to diversify our marketing mix and deliver greater customer lifetime value; five, maintain a strong balance sheet with a focus on managing cash flow and inventory levels while navigating the uncertainty of the tariff environment. We are committed to maximizing long-term shareholder value as we focus on capturing the growing opportunity in front of us within the highly fragmented and underserved $400 billion auto parts market. I would like to thank our global team for their resilience, hard work, and commitment as we continue to transform our business. Thank you, everyone, for joining today's call. We'll now turn it back over to the operator.
