Ladies and gentlemen, thank you for standing by, and welcome to the CarParts.com Fourth Quarter 2020 Earnings Release Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded.

[Operator Instructions]. I would now like to hand the conference over to your first speaker today to Lev Peker, CEO. Thank you. Please go ahead..

Thank you, operator. On behalf of the entire CarParts.com management team, we would like to start by thanking our 1,900-plus team members for their hard work, dedication and commitment to our mission of getting drivers back on the road.

As you can see in today’s release, in 2020, CarParts.com achieved record sales, gross profit and adjusted EBITDA in almost a decade. Before we turn to our quarterly results, I would like to take a moment to recap our journey over the last two years as well as introduce the vision and long-term goals for our company.

As many of know, almost the entire management team joined during 2019. Our company was facing numerous challenges, but what we had were amazing frontline team members, valuable trademarks, an extensive catalog, global vendor relationships and lots of historical customer data.

We laid out our strategy of right parts, right time, right place and a mission of getting drivers back on the road. Right part means ensuring our customers can find a complete solution that fit their vehicle on our website.

Our efforts to accomplish this included curating our proprietary catalog, creating a fast mobile-friendly user experience, building world-class data science and inventory forecasting teams and investing in our logistics and merchandising capabilities.

These efforts resulted in the highest sales the company ever recorded in Q1 2020, before the COVID lockdown started. More recently, our flagship website, CarParts.com, was named the fastest-growing website in the industry by SimilarWeb.

We also rolled out a dedicated electrical vehicle landing page to help customers find the parts they need for their EV or hybrid vehicle and highlight news and information about the EV market. As EVs and hybrid become a larger part of the market, we plan to be there for our customers every step of the way.

However, we still have more to do in helping our customers get the right parts. At the end of 2020, we began expanding our mechanical parts offering.

While global supply chain disruptions have slowed our rollout of these products, we are still excited by the initial customer reception and look forward to having these SKUs fully in stock in the second-half of the year. The total addressable market for mechanical parts are significantly larger than collision replacement parts.

However, it currently only represents about one quarter of our revenues. This is a huge opportunity for us. By leveraging our existing core competencies and two-step distribution model, we believe we can build a competitive offering of premium mechanical items across a wide spectrum of the value chain.

Like other industries, we can offer our customers premium products at value prices as well as the major brands they might be familiar with. Over time, we see CarParts.com becoming the number one trusted destination for customer thinking about repair and maintenance with the parts, tools and solutions they need to get back on the road.

Right time means getting the customers back on the road quickly. Obviously, quickly is a moving target and our goal is to shorten the click to delivery time, so that we can meet our customers' evolving expectations.

Over the last two years, we have doubled our warehouse footprint to close to 1 million square feet of space and our distribution and logistics operations are now led by a world-class team with experience from Walmart, Home Depot and Amazon.

Our average click-to-ship times have gone from around 36 hours to now under 12 hours and we will continue to push relentlessly for continuous improvement.

In order to better customer experience, we are heavily invested in optimizing last-mile delivery, vending logic and package selection by utilizing advanced data analytics and machine learning algorithms. Our inventory turns have also improved by over 40% while increasing inventory availability.

As we navigate the current global supply chain disruption, we are feeling the impact on both inbound and outbound freight. Constraints on containers on ocean vessels have increased the cost of importing and slowed down the flow of inventory. As of today, our new Texas distribution center is up and running and staffed, but only about 50% full.

On the outbound side, all carriers are running about full capacity, slowing down order fulfillment and adding costs. We expect this to get better over time as carriers add more capacity and our company adds regional partners.

Our goal is to continue getting closer to our customers to get them the parts they need to get back on the road as quickly as possible. Right place means empowering our customers to choose how they want to repair and maintain their vehicle.

Whether they are a do-it-yourself or do-it-for-me customer, we are committed to offering them the resources, tools and turnkey solutions and services to get them back on the road. The total automotive aftermarket is approximately $300 billion, however, still very under penetrated online compared to other verticals and industries.

As consumers become more comfortable buying online, we anticipate continued growth acceleration. With the right tools and solutions and by leveraging our core competencies, we see a great opportunity to disrupt an industry that hasn't really evolved in decades.

We understand that customers may or may not have a local mechanic they trust, but want a cost competitive solution in an industry with limited pricing transparency. We also know some customers would prefer a Netflix type experience where they can order their repairs or maintain their vehicle and never leave their house.

Whether we send a mobile mechanic to you or refer you to a trusted shop, CarParts.com will be there to solve the customers’ needs and we are working hard behind the scenes to bring this vision to reality. Today, CarParts.com is the fastest-growing website in the industry.

And tomorrow, as we empower drivers with more tools around diagnostics, maintenance and repair options, we believe we will continue to enhance our competitive moat and disrupt the industry. I’d now like to turn it over to David..

Thanks, Lev. And I too would like to thank the more than 1,900 team members at CarParts.com who worked through these challenging times to help get our customers back on the road. Revenues were a record $119.7 million in the fourth quarter and $443.9 million for the full-year 2020. That is up 90% and 58% year-over-year, respectively.

89% of our sales were house brand products. And on a year-over-year basis, our e-commerce channel, CarParts.com, grew at twice the rate of online marketplaces. Gross margin was 34.8% for the quarter and 35% for the full-year. That's up from 33.7% in Q4 of 2019 and 30% for the full-year 2019.

The higher gross margin reflects the shift to more house brands and favorable channel and product mix, partially offset by higher inbound and outbound freight costs as well as seasonal surcharges from our carriers. Net loss was $3.5 million in the fourth quarter, compared to a loss of $25.1 million in the prior year period.

For the full-year 2020, the net loss was $1.5 million, compared to a net loss of $31.5 million in 2019. Now, if you recall, our prior year loss included a non-cash tax valuation allowance of $23 million. Adjusted EBITDA for the quarter was $1 million, down $700,000 from last year.

The decline was partially due to approximately $1 million in start-up expenses associated with the opening of our Texas distribution center as well as increased receiving across the network.

We would caution with reading too much into fourth quarter operating profitability, which seasonally is our slowest quarter of the year due to the increased receiving expense prior to the first quarter. When combined with the investments we made in our new distribution center and the global supply chain disruption, it can create the noise.

For the year, adjusted EBITDA grew from $4.5 million in 2019 to $16 million in 2020. As indicated in the past, we don't manage our business in quarters and instead we will continue to focus on our company mission, which ultimately should generate superior returns for our shareholders.

On the balance sheet side, at year-end, cash and inventory combined was $125.1 million with net current assets at $67.4 million. We also ended the year with no outstanding debt or trade LCs on our line of credit which, as a reminder, can be flexed up to $40 million thereby giving us access to additional liquidity we can use to fund our operation.

On the CapEx side our total spend for 2020 was $9.7 million, including $1.6 million for our new Texas distribution center and $6.4 million of software development, of which a substantial portion was used to develop new customer-centric features such as our completely revamped CarParts.com front-end, our new search technology, self service returns, product options and much more.

I would like to now take a moment to elaborate on our financial long term goals. We believe that over the long run, we can achieve topline revenue growth at a CAGR of 20% to 25% with 8% to 10% EBITDA margins.

Now going from the top of the P&L to the bottom, we believe we can gain 100 to 200 basis points of gross margin through improving product and channel mix as well as getting closer to the customers.

On the marketing and customer service side, we believe we can achieve 200 to 300 basis points of margin improvement by increasing our brand awareness and continuously improving our mix of free to paid traffic.

Finally, we believe that in the out years of the plan, we can drive 200 to 300 basis points of operating leverage through efficiencies as well as improvements to our supply chain. Now, we are not interested in moon shot targets, rather we are looking to drive incremental improvements that we have a long term visibility on.

Our plan is to continue building our company, optimizing whenever possible but most importantly investing in the business to drive growth to improve customer experience and a world-class supply chain. The last two years have been incredible for our team and long term shareholders.

Our balance sheet is at its strongest point in over a decade and with five distribution centers as well as our ongoing expansion in new product categories such as mechanical parts and EV parts, we are excited about the long term prospects.

We remain committed to our core principles of operational excellence, financial discipline and outstanding customer service.

We will continue to leverage our positive unit economics offered by our house brands as well as make additional investments in supply chain, technology, data science and machine learning which we believe will, over time, solidify our competitive advantage.

While the last two years we were focused on building a foundation for the future, we are now entering the next chapter of our company story. We are excited to continue leveraging our core competencies to offer the customers the tools, resources and solutions they need.

As the only public pure play ecommerce auto parts retailer with global sourcing and domestic logistics, we are uniquely positioned to disrupt the way people have both shopped and repaired their car for the last 100 years.

We are excited to continue our investments in the business and look to widen our technological moat to leverage our first-mover advantage. Now, we will of course continue to be disciplined in our investment philosophy and deploy capital only where we see opportunities to accelerate our growth and earn a significant return on investment.

And with that, I would like to turn the call back over to Lev..

Thank you David. We are very proud of what our team has accomplished over the last two years. Before I end the call, I would like to congratulate Michael McDowell on his first Daytona 500 win. In 2020, we had a very successful partnership with his team Front Row Motorsports and we are happy to announce that we are renewing this partnership for 2021.

Also, we recently announced a partnership with the Professional Fighters League, the fastest growing mixed martial arts league and a partner whose audience aligns closely with our current customer demographic. We believe these partnerships will continue to build consumer awareness of the CarParts.com brand.

Lastly, we continue to improve our overall customer experience by increasing site speed, providing more accurate shipping times, improving our service levels by getting the product out of our distribution centers faster, introducing no-hassle returns online and providing customers the ability to choose how to best repair or maintain their car.

We believe our investments in delighting the customer will allow us to become the number one trusted destination for auto maintenance and repair. Thank you for joining us today. And with that, I would like to hand it over to the operator to open it up for questions..

Thank you, sir. [Operator Instructions]. I show our first question comes from the line of Thomas Forte from D. A. Davidson. Please go ahead..

Great. Thanks. So Lev and David, congrats on a wonderful fourth quarter and fantastic 2020.

So at a high level, I wanted to hear your thoughts on adding future distribution centers and the potential over time as you build out your fulfillment center network to shorten ship miles for the consumer, so the benefit on a near-term basis as you add more distribution centers to having more square footage and just having more inventory and then on a long-term basis on your ability to potentially shorten ship miles and save some money on shipping costs? Thank you..

Hi Tom. It's David. A great question. So I think from a supply chain standpoint, you hit it on the head. Inventory availability and speed to customer is how we win.

So inventory availability is having the right inventory close to the customer and speak to customers ultimately how we are going to win is the faster we can ship the part or the faster the customer can receive those parts, the more chances we have to compete with the brick-and-mortar players.

So over time, we are definitely going to try to get closer to the customer. Two years ago, we had two distribution centers. Today, we have five. The goal is for us to get to, call it, 80% to 90% of our customers within one day. And that's the ultimate goal.

Now from a capital deployment standpoint, we want to be disciplined and we don't want to jump the gun. So, we want to see the sales come in as we open one distribution center before we open the next one. So, Dallas right now is half full. It's fully operational, but it's not fully stocked. So that's the way we did it with Vegas. We opened it.

We got to full capacity, then we decided to open the next one. And in Dallas, we want to do the same thing before deciding on the next one. So we have a good sense of where they are going to be. But right now, we want to see the sales come in once Dallas is at full capacity..

Great. And then one quick follow-up. You made some tremendous comments on the do-it-for-me opportunity for CarParts.

Were those intended to be 2021 comments, long-term? How should we think about the potential for you to rollout some of the services you talked about on the do-it-for-me side?.

Yes. So we’re testing - and this is Lev. We are testing a few things now on the site, but we don't like kind of announcing things before they are fully baked. And so we are testing some things, but we should think about it more longer-term. I think we will continue testing through 2021 and then really hit it hard in 2022..

Great. Thanks, Lev. Thanks, David. Thanks for taking my questions..

Thanks..

Thank you. Our next question comes from the line of Darren Aftahi from ROTH Capital Partners. Please go ahead..

Yes. Hey, guys, thanks for taking my questions. Congrats on the quarter.

I am kind of curious, did you guys come up against inventory constraints in the quarter?.

Hey, Darren, it's David. Yes, we were inventory constrained. We manage the business at SKU level. So I can't give you kind of a $1 amount because that's not the way we manage it. We have 65,000 individual SKUs. And for sure, the global supply chain disruption has impacted the business.

We thought that by now the Texas facility would be full of inventory, call it, 85% to 90% full and right now we are closer to 50%. So there's definitely some room for improvement in terms of inventory position and assortment..

Great. So great segue into my next question. So as we think about Texas and I know you don't like to manage quarters and years and whatnot, but how do we think about the right sort of marginal gross for Texas? I appreciate there's some supply chain constraint, et cetera.

But is this something we should sort of assume, is that 100% capacity by the second-half of this year? Or is that being too aggressive in terms of mindset?.

Yes. It's hard to say exactly when it's going to be at full capacity because right now we are receiving as much as we can, but we are also shipping out of there and our inventory levels are just not going up. Now the good news is, we are going to be announcing Q1 in, call it, seven to eight weeks. So we will have a much more detailed update then.

But right now, it's about 50% capacity. We do have some new SKUs. We do have incremental inventory. So, at the end of the year, we had, call it, $90 million worth of inventory on the books, which is more than we have ever had in company history.

The challenge is, it's at SKU level, so sometimes if a fast-moving item gets impacted, your sales get impacted. If it's a slower-moving item, it doesn't. So it's really at SKU level. And it's hard to give you kind of an exact number..

Got it.

On the EV and hybrid side, how much of your, I assume it's a small amount, but how much of your mix in 2020 was from that category? And then how should we think about that mix in 2021?.

It typically reflects kind of the car parts. So about 2% to 4% of the vehicles today on the road are EVs and hybrids. And so 2% to 4% of our sales are for EVs and hybrids. So it tends to mirror kind of what's out there on the road..

Great. And then last one for me. I know in the past, you guys have talked about getting more aggressively into the accessories category. I am just kind of curious what the update is on that strategy? And how much of a needle mover it could be in the next 12 months? Thanks..

Yes. Right now, we are really focused on mechanical parts. So we started the initiative in Q3 of last year. It's taking us a little bit longer than we would have liked. Again, because of the supply chain problems and longer lead times, it is taking a little bit longer.

So we are really focused on the mechanical parts side of the business, not really going after accessories just yet..

And then if I can add to that, Darren, one of the reasons why we are really focused on mechanical parts is because the total addressable market is the largest. The TAM for mechanical parts is close to $250 billion. Now performance and accessories is really interesting, but it's closer to $40 billion or $50 billion.

And our business and our supply chain is really built for replacement parts. But the natural evolution from a user experience standpoint is mechanical parts. So for us, it's the most immediate opportunity with the biggest upside..

Great. Thank you..

Thank you. Our next question comes from the line of Ryan Sigdahl from Craig-Hallum Group. Please go ahead..

Good afternoon, David and Lev. Congrats on the transformation of the business, Q4 results and the trends here to start the year..

Thanks..

Curious, David, you said 20% to 25% sales growth CAGR going forward. I know you are not giving guidance. I don't want to beat you over the head here.

But can we assume that's a reasonable expectation kind of starting this year? Or are the reasons why with the supply chain and all the reasons why that's not necessarily your expectation this year?.

Yes. Ryan, listen, we’ve talked many times and I know you know me. I think assumptions, I wouldn't assume anything and I wouldn't read into what I am saying either a positive or negative. We are trying to stay away from guidance. We don't have a crystal ball. Again, the global supply chain disruption is impacting everyone.

So I can't tell you exactly what's going to happen because I don't know. What I can tell you is that we are committed to our long-term targets. We just released our investor deck that has a lot of great information as to where we are going and how we are going to get there. I think we have an exceptional business. We have built a great team.

We have some amazing competencies. We have a vertically integrated supply chain. We have a great website. We have a great catalog. We have our own brand. So we have a lot of things going for us. But again, we have more of a long term view and I wouldn't really feel comfortable giving you kind of a number for next year.

But I do think, like a CAGR of 20% to 25% over the long term, that's a good number to think about..

And then just on the margin side, I know you guys are reinvesting kind of building the infrastructure. I know, the ERP system, I think you are upgrading this year. Some other costs following through.

So I guess help me with the cadence of kind of getting those long term margin targets, should we assume reinvestment this year and then start seeing that operating leverage in 2022 and beyond? Or any help there would be a helpful..

Yes. That's a fair question. I think to hit a long term model in our industry, I think some of the investments have to be front-loaded. Historically, our company was very aggressive in terms of cost cutting. But everyone understands that there's a balance between sales and net margin. So I think we are in a unique position to disrupt the space.

But again that's going to take some investments. Some of it is through the P&L. Some of it is through the balance sheet. But at least for the next couple of years, I think it's safe to assume that we are going to be more aggressive with the investments.

Now, I think it's important to remember our personal investment philosophy, like we only deploy capital when we see an opportunity to accelerate the growth and earn a return on investment. And we are going to look at every single project on a standalone basis and it has to make economic sense. Otherwise we are not going to do it.

So it's not investing for the sake of investing. The long term target is our next checkpoint. What are the investments that we are going to make and when is really project-by-project..

And then more specifically, I know you have mentioned kind of supply chain challenges which have been ongoing for a while but more recently here we have heard shipping container shortages, port congestion, et cetera across a number of the e-commerce importers from China, Taiwan, et cetera.

Have you guys felt an outsized pressure here in Q1? Or is it manageable and things are getting better, I guess, help walk through kind of current supply chain relative to how it was in the second half of last year?.

I think Q1 has actually been a little bit better but not by much. So we have visibility about 12 weeks out in terms of getting space on ships or containers. Right now, it's still pretty difficult looking out 12 weeks. And it also costs more to get containers from Taiwan and China to the U.S.

So the spot rates are about double what they were in the fourth quarter. So its easing up, I believe, but we don't expect for it to return to "normal" until probably the second half of this year..

And then last question for me.

Early sales from mechanical product category expansions, are you seeing an outsized majority or greater proportion of retention sales there from existing customers also buying there are coming back? What's kind of the customer mix? I know it's early but any indications there?.

Yes. It's pretty similar to what we saw on the replacement parts. So remember, we still don't [indiscernible] that we were aiming to have in Q1 and it's also not the season for mechanical right now. When it's really cold outside, people aren't working on their cars.

So in spring and summer is when we expect to see a better pickup in the mechanical parts. And on our Q1 call, we will share our kind of some of those numbers and what we are seeing in terms of customer repeat rates..

Great. That's it for me. Thank guys. Good luck..

Thanks..

Thank you. I show our next question comes from the line of Scott Ciccarelli from RBC Capital Markets. Please go ahead..

Good afternoon guys. Scott Ciccarelli, RBC. So historically, a lot of auto part customers have tended to want to go to the store, auto parts store, for both speed purposes and customer service reasons.

What is the time line you think you need to get to, to really satisfy customer requirements for speed of product acquisition to basically address the bulk of customer needs?.

Yes. I think our goal is to get to 80% or 90% of the country in one day or less. But I think how customers shop is going to evolve and it's started evolving already. I don't think customers want to go shopping for parts the way that they used to 20, 30 years ago. There hasn't been a better alternative up until now. We have easy-to-use website.

We get parts to you, for most customers, within two-and-a-half, three days. We make it really easy to find because we have a curated catalog. So we reduce the paradox of choice which kind of mirrors them going into a store and talking to a counter man and then setting out one part.

So we make it really easy to find the right parts for their vehicle and they never have to leave their house or however they want to shop. They never have to leave their mobile device. So I think we are very well positioned and not all repairs have to be done immediately. So a lot of the repairs are planned.

If you look at kind of the average in the industry, when customers make appointments through the mechanics, it usually takes three-and-a-half days between the time the time they make the appointment and the time they actually go in. So a lot of the repairs are planned.

Now if you need a battery or starter or alternator, like those, will probably stay in the store because that's an immediate need. But we are working on some things to even address that problem. So we think we are pretty well positioned right now..

Interesting. And then just a follow up. Lev, you have cited higher growth rate for CarParts.com than the industry average.

Do you have a feel for where those share gains may be coming from? Is it other website? Is it coming from the bricks-and-mortar retailers? Do you have any data on that?.

Yes. It's coming from both brick-and-mortar as well as other pure plays. We can probably share some data around that and we get it from SimilarWeb. So you can look that up there as well..

Got it. All right. Thanks a lot guys..

Thanks..

Thank you. Our next question comes from the line of Josh Goldberg from G2. Please go ahead..

Hi guys..

Hi Josh..

Can you hear me okay?.

Yes..

I have two question that will be helpful as we set the stage for 2021. I think going into COVID, the expectation was you can do $330 million of revenue this year. You have ended up doing $443 million, which has been a fantastic result. And I think the concern from some investors is that that was a non-sustainable level.

And that, regardless of whether you are able to able to grow on a CAGR that this artificial high growth was led by COVID and not by your internal objectives.

Maybe if you could just spend a minute on that? And then I have a follow-up about the inventory about what you are seeing just in terms of conversion rate, site traffic and others that make you feel that this was not just a COVID beneficiary?.

Yes. So I guess I will take the first question. So if you look at the Q1 of last year, before COVID hit, we were growing our private label at 44%, something like 44% and that includes two weeks when the whole country went into lockdown and when demand was basically diminished.

And then if you look at every quarter after that, we have pretty much sustained the same sales are through the whole year. So it was basically $120 million which is our capacity. And so what we have always said is that we are limited not by the demand but by the supply of inventory.

Whatever we bring in, we are really good at forecasting where to put the inventory and what inventory to put there in order to accelerate sales. And so that was our belief going into opening Texas. Unfortunately, we can't keep it stocked. We can't get enough inventory in there in order to fully stock it to see the full potential of that DC.

But that's temporary. At some point, maybe second half of this year the supply chain problems well ease up and we will be able to fully stock it. But we wouldn't be putting out a long term model --.

How confident are you that the demand will be there if your supply there, post the COVID, where things reopen, I guess that's my question?.

So again, we do forecasting at the SKU level and we are really encouraged by what we are seeing today in the market in terms of traffic gains that we are having, in terms of our conversion rate on the website. And we still have a lot of work to do. We are just getting started. And remember, we are not really a big player in mechanical parts today.

And that's where a lot of opportunity for us is. A lot of our customers are working on their car and we don't have the right offering for them. So we have a lot of work to do in terms of merchandising, in terms of our assortment strategy. We are just getting started on mechanical parts and we have a lot of room to grow there..

And then on the inventory, I mean you have increased your inventory dramatically in the last 12 months. It went up again in the fourth quarter up to $89 million exiting and it's probably even higher now in the first quarter. It seems like that will edge up your capacity of sales throughout this year as your inventory goes up.

Is there a number that you feel comfortable expecting the inventory to get to? Could you get to $120 million, $130 million of inventory and feel comfortable and convey the sense of optimism that it's not obsolete and the reason why it's increasing was just based on demand? Thanks again..

Yes. So remember, in Q4, so for us the way the year breaks out is that, Q1 is kind of a collision and replacement parts, Q2 and Q3 are mechanical parts and then Q4, you start getting into collision and replacement again. And so we stock up in Q4 in anticipation of a bigger Q1. And then that kind of set the stage for what Q2 and Q3 will be.

I think the most inventory we can hold is maybe $105 million across all of our DCs. I don't think we can hold any more than $105 million. So $89 million is a lot. It's not the max because, like I said, Texas is only 15% full but we can probably only holds another $10 million to $15 million..

Okay. Great. Congrats again. Thanks guys..

Thanks..

[Operator Instructions]. I show your next question comes from the line of Steven Connell from Diamond Head Financial. Mr. Connell, your line is open..

Yes. Thank you. I have a strategic question for you.

How do you prevent a large online competitive from coming in and preempting one of your key suppliers?.

When you say a large online competitor, like could you, like a brick-and-mortar, you mean?.

No. Online, like an Amazon. They have been known to do that. Wayfair hides where the parts are coming from.

So I am just curious if that's something that you experience or anticipate?.

So on the replacement part side, we don't really experience it. Now if you think about kind of what Amazon likes to sell, it's nice square boxes. They don't really like products like cars. And they also like demand to be concentrated in a few SKUs. And this is a really long-tail business. The 80/20 rule doesn't really apply here.

We have, call it, 800,000 SKUs and the fastest selling SKU probably sells 10,000 units a year. So it's a really, really long-tail business. And if you think about how many different cars are on the road today, you will you will understand why because each car requires different parts. So we are not really that concerned on the replacement side.

On the mechanical parts side, Amazon does sell a lot of the branded merchandise. And we think where we will there is in being able to present the customer with a better experience to buy parts.

And what I mean by that is, Amazon's product detail, they just have to look the same whether you are buying an auto or milk or a T-shirt whereas we can tailor our experience to selling auto parts. And so we think, long term, that's how we win against Amazon. Now they may be able to source parts but we think the user will choose us over Amazon..

Did I hear you say you actually send mechanics to houses?.

We are testing that right now in a few markets, yes..

And how is that going?.

So we don't like talking about stuff that's not fully baked. It's going pretty well in our testing. But we are going to continue testing probably through 2021 and have a big roll out in 2022..

What percent of your current revenues are still legacy sale?.

What do you mean by legacy sales?.

Not online..

5%..

5%.

Do you still sell to the Philippines?.

No. We only sell in the U.S. but we do sell to shops. So the 5%, that's wholesale revenue and that's us selling to various shops..

Right.

What kind of competitive response are you seeing from retailers like O'Reilly?.

So I think, yes, the brick-and-mortar are really focused on buy-online, pick-up-in-store which makes sense for them because they have to utilize the assets that they have. So they have to utilize the stores and they are not really focused on online.

And if you look at pricing, you can buy a headlight from a brick-and-mortar for, call it, $300, the same applied on our website is $140. So we do have a pricing advantage because of how we source products. So that's how --.

And they couldn't match that?.

They can't really match not for two reasons. One, they buy it from another brand that imports the product. And so we source directly from the factory. And on top of it, they sell to shops and they have channel conflict. And so for us, we don't have the same channel conflict..

Right. One final question. And this is a stock market question. Mechanical parts are viewed as a declining industry because of the rise of EV. How do you respond to that? You want to increase that business but at the same time, you are going into "a dying industry".

What are your thoughts on that?.

Yes. If you look at our deck that we just published today, we actually have a slide on that. 90% of our revenue today is agnostic to the power train. So whether it's an ICE or an EV, it doesn't really matter to us. 90% of our revenue is agnostic to the power train.

And a lot of the parts are the same, like think about an electric vehicle like Tesla and an ICE car, you still have bumper covers, mirrors, headlights, window regulators, door handles, like you still have a lot of the same parts. And then all the --.

But those are not mechanical. So you don't see an intent to go into mechanical. Mechanical is where you are not going to have that 90% anymore..

So the chassis parts are also the same. You still have the same shocks and struts, control arms, breaks. So a lot of the parts are actually the same. So what you don't have is fuel pumps and things like that. But a lot of the parts are actually the same..

Thank you very much..

Yes..

Thank you. I show no further questions in the queue at this time. Ladies and gentlemen, this concludes our Q&A session and today's conference call. Thank you for participating. You may all now disconnect..