CarParts.com (NASDAQ:PRTS) executives used the company’s fourth quarter fiscal 2025 earnings call to emphasize progress from a revamped operating model, highlighting cost reductions, improved marketing efficiency, and the growing contribution of an asset-light mechanical parts partnership.
Management says operating model is delivering quarterly progress
Chief Executive Officer David Meniane said 2025 included a “full cost structure reset” and the completion of a $35.7 million strategic investment. He described the company’s operating model as one that is now “delivering results every quarter,” citing four consecutive quarters of improvement in the metrics he said matter most: contribution margin, fixed operating expenses, and adjusted EBITDA.
A-Premium partnership highlighted as a key growth and capital-efficiency lever
Meniane pointed to the company’s partnership with A-Premium as a central element of its strategy, saying it is already at a $35 million annual revenue run rate with a “clear path” to $50 million in the short term. He added that management believes the partnership will eventually exceed $100 million at “attractive contribution margins,” while not requiring CarParts.com to carry the inventory or working capital associated with that business.
He contrasted the company’s historical focus on collision parts—where inventory turns have been roughly three times annually—with mechanical parts, which he described as having slower turns (typically 1 to 1.5 times annually), higher minimum order quantities, and greater working capital needs when owned directly. According to Meniane, the A-Premium partnership provides access to a significantly expanded mechanical catalog through a capital-efficient model, with lower minimum order quantities and without the same working capital burden. He said the A-Premium catalog is five times larger than the company’s prior mechanical offering and is growing.
Cost actions: warehouse consolidation and shift to third-party BPO
Meniane said the company made “decisive operational action” in 2025 to change its cost structure and margin profile, noting that prior costs and advertising levels had been built for revenue levels that no longer existed. He said the company chose to rebuild around profitability and cash generation rather than pursue “unprofitable volume.”
On the operational side, Meniane said CarParts.com consolidated operations and reduced fixed overhead, including completing the consolidation of its Virginia warehouse operations in the fourth quarter. The company centralized logistics into its four other warehouses and leveraged its partnership with ZongTeng Group, which he said eliminates redundant overhead and improves variable economics while maintaining service levels.
He also said the company completed the transition of its Manila-based captive operations to Lean Solutions Group, a third-party business process outsourcing provider, in January. Meniane said the move simplifies and reduces cost structure, shifts the model to a more flexible variable approach, and allows internal resources to focus on U.S. distribution, supply chain, technology, and customer experience.
Marketing efficiency, retention, and app usage cited as improving unit economics
Meniane said the company “significantly improved” advertising efficiency in 2025, stating that overall marketing efficiency improved by close to 300 basis points between the first and fourth quarters. He said CarParts.com reduced spending aimed at unprofitable, one-time transactions and refocused on high-intent customers.
Management highlighted a shift toward retention channels and mobile app usage:
- Retention channels: Revenue from email and SMS rose from 6.7% of e-commerce revenue in fourth quarter 2024 to over 10% in fourth quarter 2025.
- Mobile app: App-driven revenue represented over 13% of e-commerce revenue in fourth quarter 2025, up from 7.8% in the year-ago quarter and 0% at launch in third quarter 2023.
Meniane said app customers convert at higher rates, purchase more frequently, have larger basket sizes, and come with lower customer acquisition costs. He also said the company’s ads, services, and paid membership offerings now generate nearly $4 million in annual high-margin fee income with “virtually no capital required.”
Quarterly results: sales down, margins up, EBITDA loss narrowed
Interim Chief Financial Officer Mark DiSiena noted that the fourth quarter included 14 weeks and fiscal 2025 was a 53-week year, which he said had a modest impact on year-over-year comparisons.
For the fourth quarter, CarParts.com reported net sales of $120.4 million, down 10% from $133.5 million a year earlier. For the full year, net sales were $547.5 million, down 7% from $588.8 million in fiscal 2024. DiSiena attributed the decline primarily to the company’s efforts to improve returns by optimizing advertising spend.
Gross profit in the quarter was $39.9 million, down 8% year-over-year, while gross margin expanded 70 basis points to 33.2%. For the full year, gross profit was $179.3 million, down 9%, and gross margin was 32.8%, down 60 basis points from 2024. DiSiena said the full-year margin decline was driven primarily by product mix and the impact of tariffs, partially offset by pricing increases.
GAAP net loss for the quarter improved to $11.6 million from $15.4 million in the prior-year period. For the full year, GAAP net loss was $50.4 million versus $40.6 million in 2024, which DiSiena said was primarily driven by lower net sales and an impairment loss on long-lived assets, partially offset by lower operating costs including payroll and marketing.
Adjusted EBITDA loss narrowed to $2.2 million in the fourth quarter from $6.8 million in the prior-year quarter. DiSiena said the fourth-quarter adjusted EBITDA included about $200,000 of non-cash impact from the reversal of previously recorded severance expense. For the full year, adjusted EBITDA loss was $14 million, compared with a $7.1 million loss in 2024.
Total operating expenses were $51.2 million in the fourth quarter, down from $58.9 million a year earlier. Full-year operating expenses were $228.2 million, down from $237.4 million. The company also recorded a $3.7 million non-cash impairment charge to long-lived assets during the fourth quarter after an impairment test was triggered by market capitalization relative to book value; DiSiena said the charge had no impact on operations or cash flow. Excluding the impairment charge, he said underlying operating expenses decreased by about $12.8 million year-over-year, driven by lower warehouse spend, lower stock-based compensation, and reduced payroll and consulting costs from headcount actions.
On the balance sheet, DiSiena said the company ended the year with $25.8 million of cash and no revolver debt, and had $25.2 million in convertible notes payable. Inventory was $95.2 million at year-end, compared to $90.4 million at the end of 2024. He also said that as of February 28, 2026, the company had about 70.5 million shares outstanding, including 10.3 million shares issued in connection with the September 2025 strategic investment priced at $1.04 per share. The company’s convertible notes carry a conversion price of $1.20 per share.
DiSiena said the company is targeting free cash flow positive results in 2026, driven by contribution margin expansion, partnership scale, and the full-year benefit of cost actions.
He also discussed tariffs, noting that while a recent Supreme Court decision invalidated tariffs imposed under IEEPA, other tariffs around auto parts remain in effect, and the administration has introduced temporary measures under Section 122. DiSiena said the company is monitoring developments and evaluating litigation action, but is not building plans around regulatory relief. He added that about 20% of sourcing is from China, with the remainder from Taiwan and other countries, and that tariffs paid last year classified under IEEPA totaled about $3.6 million.
Finally, DiSiena provided mix trends: private label products represented about 83% of fourth-quarter revenue (17% third-party branded), and collision and replacement represented about 68% of fourth-quarter revenue. Owned channels (including e-commerce, mobile app, and commercial) represented about 68% of fourth-quarter revenue versus 32% from marketplaces; for the full year, owned channels were about 67% of revenue. Management said it expects mix to continue shifting toward higher contribution margin revenue streams with lower working capital requirements.
About CarParts.com (NASDAQ:PRTS)
CarParts.com, Inc operates as a leading online retailer of aftermarket automotive parts and accessories in the United States. Through its flagship website CarParts.com and affiliated e-commerce platforms, the company offers replacement components, performance upgrades, maintenance items and collision repair parts for a wide range of domestic and import vehicles. Its product catalog includes engine parts, exterior and interior accessories, lighting, braking systems and powertrain components, supported by an extensive inventory and proprietary order management system.
Founded in 1995 by George Chamoun and headquartered in Torrance, California, CarParts.com has grown from a regional auto parts supplier into a national e-commerce platform.
