Benzinga's Luke Jacobi Hosts Special All Access, Talks With CEO Of This Thriving E-Comm Business
David Meniane, CEO of CarParts.com (NASDAQ: PRTS), was a guest recently on a special edition of All-Access hosted by Benzinga’s own, Luke Jacobi.
CarParts.com is an e-commerce company offering a factory-to-consumer online shopping experience for everyday drivers. The company has been in business for 20 years and has recently gone through a period of transformation under new leadership that has streamlined and refocused the company and led to consistent growth.
CarParts.com is an e-commerce company offering a factory-to-consumer online shopping experience for everyday drivers. The company has been in business for 20 years and has recently gone through a period of transformation under new leadership that has streamlined and refocused the company and led to consistent growth.
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NewsTranscript
00:00 (upbeat music)
00:02 - All righty.
00:06 I am about to be joined by David Mignon,
00:08 CEO of carparts.com.
00:11 It's a very interesting business.
00:14 Can we bring David on to the stream with us here, please?
00:18 I've been a shareholder of carparts.com
00:21 for a number of years now.
00:22 I've followed the story closely.
00:24 David, welcome back.
00:26 Repeat guest, how are you doing today, sir?
00:28 - I'm doing great.
00:29 Thanks for having me, Luke.
00:30 Good to see you, man.
00:31 You're looking good.
00:33 - Thank you.
00:33 I got a haircut.
00:35 You know, the sun is shining.
00:37 We are here in Detroit.
00:38 You got a wheel now above your, what would that be?
00:41 Your left shoulder.
00:42 - Yes.
00:43 - The background keeps improving.
00:44 - Yes, we're trying, man.
00:46 Trying to follow in your footsteps.
00:48 - There we go.
00:50 So you're coming off of a good quarter.
00:52 Saw the headline of the press release that came out.
00:54 It said record sales.
00:57 Why don't we start there?
00:58 Talk us through what exactly went right last quarter.
01:01 - You know, it's just continued execution.
01:03 You've been following the story for a long time.
01:05 Yes, it's 14 consecutive quarters of year over year growth.
01:09 You know, we have a solid business.
01:11 We have a great infrastructure.
01:12 We have a great team.
01:13 And we just keep focusing on the business.
01:16 You know, the stock market has been tough.
01:17 The economy has been tough.
01:19 There's a lot going on in Detroit.
01:21 You know that.
01:22 But we just keep executing.
01:23 So, you know, nothing sexy, just blocking and tackling.
01:28 - All right, so let me ask you this.
01:30 The question that comes to all of our investor minds
01:33 is last quarter, that was great.
01:35 We're happy to see it.
01:37 Is it here to stay?
01:39 What do we have to look forward to?
01:41 Is there something that happened in that quarter
01:42 that made it especially good?
01:43 Or is it more of a systemic change that says,
01:46 hey, this revenue is here to stay?
01:48 - You know, there's been a lot of systemic changes
01:50 over the last 18 months.
01:52 I think what we've done is really transitioned
01:54 from a transactional marketplace
01:57 to really a one-stop end-to-end destination
02:00 for auto parts buyers and drivers.
02:02 So we've made a huge, huge commitment
02:04 to customer experience.
02:06 We've invested heavily, and we continue to invest
02:09 in the user experience, in the user interface,
02:11 in the e-commerce.
02:12 We just launched an app.
02:14 We're branding our products.
02:15 We're investing in our supply chain.
02:17 So we're doing a lot of things right.
02:19 So there's a lot to look forward to, towards to.
02:22 - So I had the app on my list of questions here.
02:27 Tell me what the app does for you.
02:29 'Cause I think about a car part purchase
02:30 as more of like a one-off thing.
02:32 I think about my app utilization as something that I use,
02:35 you know, consistently, regularly.
02:37 You know, what does the app do for the business?
02:40 - So there's a couple of things.
02:41 Number one, yes, some customers buy once a year.
02:45 Some customers buy more often.
02:47 You know, a third of our revenues on carparts.com
02:49 come from repeat customers.
02:51 And over time, what we're doing is expanding the assortment
02:54 to incentivize our customers to come back
02:56 with more product.
02:58 You have tools, you have performance, you have accessories.
03:01 So we're giving them an opportunity
03:02 to come back to carparts.com
03:04 and find additional stuff
03:06 that they haven't found in the past.
03:07 So that's number one.
03:09 Number two, what it does is, is you're a shareholder
03:12 and obviously we have financial targets.
03:14 And over time, the way we maximize value for shareholders
03:17 is we grow the top line, but we also grow the bottom line.
03:21 And what it means is lowering our customer acquisition cost.
03:24 What we need is a direct access point
03:26 from us to our customers.
03:28 We give them value, we give them information,
03:30 we give them maintenance and recall through the app,
03:33 and we get them to come direct
03:35 as opposed to coming through paid search.
03:37 So if you think about it,
03:38 our customer acquisition cost is call it 12%
03:40 or 13% of revenue.
03:42 What happens to our financial metrics?
03:44 What happens to the entire business
03:45 when that goes to 11 or 10?
03:48 All of that flows through to the bottom line,
03:50 and that's how we deliver value for shareholders like you.
03:53 - And I would imagine with the app as well,
03:55 you've got engagement opportunities.
03:57 If you know what vehicle I have,
04:00 what I've purchased in the past,
04:02 you can then reach out to me as an app user and say,
04:04 "Hey, you need a new oil filter,"
04:07 or something along those lines.
04:09 - That's exactly it.
04:10 The ability to do customized, personalized,
04:13 push notification,
04:15 like ultimately we don't wanna just sell the parts.
04:17 We wanna be a destination for you to get the information.
04:20 We wanna be kind of that quote unquote smart friend.
04:23 So if you're willing to download the app,
04:26 we're gonna give you great products at competitive prices,
04:28 but we wanna give you a lot more.
04:30 Maintenance, recall, special promotions,
04:33 special events, subscriptions.
04:35 Like there's a lot of things that we can do with an app.
04:37 It's very, very powerful.
04:39 And remember, 80% of our traffic is mobile.
04:42 Most people already shop on their phone.
04:44 All we're giving them is just an additional tool.
04:47 - Okay, that's interesting.
04:49 80% mobile.
04:52 Share buyback.
04:53 This past quarter in that press release,
04:56 you told the world that you'd conducted a share buyback.
04:59 Is this the first time you've done that?
05:01 - This is the first time in recent history, yes.
05:03 Personal opinion,
05:05 I think our stock is significantly undervalued.
05:08 I think we've built a great business.
05:10 We went from under $300 million
05:13 to over $650 million in revenue.
05:16 We've done that with increasing margin.
05:18 We have a lot of cash.
05:19 Last quarter, we reported $79 million of cash.
05:22 That cash is earning interest and we have no debt.
05:25 So we have a solid balance sheet.
05:27 We have a business that's growing
05:29 and we have repeat customers
05:30 and we're free cashflow positive.
05:32 And so when we see an opportunity
05:33 to return capital to shareholders
05:35 and potentially reduce the share count,
05:37 we wanna take that opportunity.
05:38 So we've done that over the last couple of quarters
05:41 and over the next few quarters,
05:43 I think you can expect us,
05:44 assuming we get board approval,
05:46 assuming we still see the value as being attractive,
05:48 I think it's a good way to return
05:50 some capital to shareholders.
05:52 - And so you mentioned the $79 million of cash
05:54 on the balance sheet.
05:55 That seems like a big number to me.
05:57 Is there significant capital expenditures
05:59 we can look forward to?
06:01 I know in the past,
06:02 we've talked about distribution centers.
06:03 You just talked about the mobile app that's come out.
06:06 Are there other CapEx opportunities
06:08 you're thinking about for the business?
06:10 - You know, there's always some maintenance CapEx
06:12 and some additional capital expenditures that we're making.
06:15 The beauty about our business
06:16 is we can self-fund all these expenses.
06:19 So if we're gonna open a new warehouse,
06:22 we can finance this ourselves
06:23 out of the free cashflow from the business.
06:25 If we're gonna invest in an app,
06:27 we can do this with the current resources.
06:29 So we've become very good at opening warehouses.
06:32 Obviously, since you've been covering the stock,
06:33 we've opened three or four buildings.
06:36 And so we've been very good at opening that.
06:38 We're very financially disciplined.
06:40 We only do it when it makes sense
06:42 from a risk reward standpoint.
06:43 And we only do it if it's gonna service our customers
06:46 and help deliver a better experience.
06:48 - This is less of like a pure financial stock question,
06:53 more of like a business question for you.
06:54 So you've got several locations now,
06:56 and it has been fun being a part of the journey
06:58 and watching them develop over time.
07:00 You know, as CEO of the business,
07:03 how often do you make it out
07:04 to some of those various locations?
07:07 - I make it out pretty often.
07:09 I spend a lot of time in the field.
07:11 You know, I like to say
07:12 that nothing good happens behind a desk.
07:14 So, you know, this year alone,
07:15 I visited our team in Manila.
07:17 I visited our manufacturing partners in Taiwan.
07:20 I visited some of our partners up in the Bay Area.
07:24 I've been to our Jacksonville facility,
07:25 our LaSalle facility, our Vegas facility,
07:28 our Texas facility.
07:29 So I try to spend as much time as I can in the frontline.
07:33 You know, I like to think of our business as,
07:35 you know, it's focused on three pillars.
07:37 It's our people, it's our product, and it's our customers.
07:40 So if I think about how I spend my time,
07:42 I wanna be talking to customers.
07:44 I wanna be listening to customer calls
07:46 and reading customer reviews.
07:47 I wanna be talking to our people here and in the warehouses.
07:51 And I wanna think about our product.
07:52 How do we create better product at more competitive prices?
07:56 So that's how I think about my job.
07:58 - Awesome.
07:59 I have two more questions for you.
08:01 The last one is always the same question,
08:03 what you're most excited about.
08:04 But before that, what about B2B application?
08:07 You know, is there a B2B business to be had here?
08:11 You know, you've talked about in the past
08:13 how 90 plus percent of car parts
08:17 are purchased brick and mortar.
08:19 A lot of them I'm imagining are at service centers
08:21 where people are actually getting work done.
08:24 Do you ever think about a B2B business?
08:27 - Yeah, definitely thinking about it.
08:28 As we think about leveraging the capabilities
08:31 that we've built, you know, supply chain, e-commerce,
08:34 an app, all the assortment,
08:36 there's an opportunity for us to expand that business.
08:38 I think over the next couple of years, it's gonna grow.
08:41 But what I'm most excited about
08:42 is really the direct to consumer,
08:44 the carparts.com business, and really the app.
08:47 Financially, it makes sense
08:48 because it reduces our reliance on marketing spend,
08:51 but really externally facing, it's better for the customer.
08:54 It's a faster, it's a better experience,
08:56 and it's more value-based.
08:58 We're not just trying to sell you the parts.
09:00 We're here to serve you.
09:01 We're here to deliver value.
09:03 So the app is what I'm most excited about for sure.
09:06 - There you go.
09:06 And David, I said I was out of questions,
09:09 but I did have one more.
09:10 UAW Strike.
09:12 Driving into the office here in Detroit, Michigan,
09:16 I drove past the picket line today.
09:18 I saw the Strikers out there.
09:20 You know, while it's a sad situation,
09:24 especially for our, you know,
09:26 tight Detroit geographic area that has significant impacts,
09:30 I would imagine for your business,
09:32 it's a little bit of a catalyst
09:34 in that fewer new vehicles are rolling off
09:36 of the production lines.
09:38 And that means that existing vehicles
09:39 are on the road for longer.
09:41 Is that the right way to think about it?
09:43 - Yeah, you know, definitely.
09:44 Listen, everyone is watching the situation very carefully.
09:47 You too.
09:48 It's definitely sad to see what's happening,
09:50 but yes, I think it is an opportunity.
09:52 If there are less new cars on the road,
09:55 less new cars being manufactured,
09:57 there is an incentive for customers
09:58 to keep their car longer.
10:00 And there are opportunities,
10:01 and it is easy to maintain your car for much longer.
10:04 Cars today, on average, are 12.5 years old.
10:07 Over time, you're gonna see cars on the road
10:10 for 15, 20, 25 years.
10:12 And what that means is they need parts.
10:14 They need quality parts at competitive prices.
10:17 Ideally, they buy them from us,
10:18 but over time, I think it's gonna be
10:20 an opportunity for sure.
10:22 - Awesome.
10:23 David, I appreciate you joining us.
10:25 I appreciate you joining us just about every quarter.
10:28 Like we both mentioned, it's very, very exciting
10:31 to watch the business evolve.
10:34 You've led a full digital revolution here
10:37 from a business that's existed
10:39 for a very long period of time,
10:41 bringing it into the 21st century.
10:43 So thank you for what you're doing for us as consumers.
10:47 Thank you for joining us,
10:49 and I wish you a wonderful day ahead.
10:51 - Thanks for having me, Luke.
10:53 PRTS to the moon.
10:54 Talk soon. - There we go.
10:55 (upbeat music)
10:58 (upbeat music)