CarParts.com (PRTS) risk factors, FY2024 10-K

Risks Related To Our Operations

1. 01We are dependent upon relationships with suppliers in Taiwan and China for the majority of our products, which exposes us to complex regulatory regimes and logistical challenges
2. 02Our preliminary exploration of potential strategic alternatives may not be successful, resulting in our needing to explore potential alternatives that may materially adversely affect the value of our business and our stock price
3. 03Higher wage costs due to changes in federal and state minimum wage laws, or due to unstable market conditions, could adversely affect our business
4. 04If commodity prices such as fuel, plastic and steel increase, our margins may be negatively impacted
5. 05Purchasers of aftermarket auto parts may not choose to shop online, which would prevent us from acquiring new customers who are necessary to the growth of our business
6. 06Shifting online consumer behavior of purchasers of aftermarket auto parts could adversely impact our financial results and the growth of our business
7. 07If the hosts of third-party marketplaces limit our access to such marketplaces, our operations and financial results will be adversely affected
8. 08During fiscal year 2024, we recorded a net loss, and our net losses may continue in the future
9. 09Our operations are restricted by our credit agreement, and our ability to borrow funds under our Credit Facility is subject to a borrowing base
10. 10If our long-lived assets become impaired, we may be required to record a significant charge to earnings
11. 11We are highly dependent upon key suppliers and an interruption in such relationships or our ability to obtain parts from such suppliers could adversely affect our business and results of operations
12. 12If we are unable to manage the challenges associated with our international operations, the growth of our business could be limited and our business could suffer
13. 13If our fulfillment operations are interrupted for any significant period of time or are not sufficient to accommodate increased demand, our sales could decline and our reputation could be harmed
14. 14We face intense competition and operate in an industry with limited barriers to entry, and some of our competitors may have greater resources than us and may be better positioned to capitalize on the growing eCommerce auto parts market
15. 15If we fail to offer a broad selection of products at competitive prices or fail to maintain sufficient inventory to meet customer demands, our revenue could decline
16. 16We rely on key personnel and may need additional personnel for the success and growth of our business
17. 17A public health pandemic, such as the COVID-19 pandemic, or another pandemic and its effects, potentially could adversely affect future years
18. 18As a result of our international operations, we have foreign exchange risk
19. 19If our product catalog database is stolen, misappropriated or damaged, or if a competitor is able to create a substantially similar catalog without infringing our rights, then we may lose an important competitive advantage
20. 20Economic conditions have had, and may continue to have, an adverse effect on the demand for aftermarket auto parts and could adversely affect our sales and operating results
21. 21The seasonality of our business places increased strain on our operations
22. 22Vehicle miles driven, vehicle accident rates and insurance companies’ willingness to accept a variety of types of replacement parts in the repair process have fluctuated and may decrease, which could result in a decline of our revenues and negatively affect our results of operations
23. 23We may be required to collect and pay more sales taxes, and could become liable for other fees and penalties, which could have an adverse effect on our business
24. 24If we are unable to substantially utilize our net operating loss (“NOLs”) carry-forwards, our financial results may be adversely affected, and protections implemented by us to preserve our NOLs may have unintended anti-takeover effects
25. 25Our estimate of the size of our addressable market may prove to be inaccurate

Regulatory and Litigation Risks

1. 26Possible new tariffs that might be imposed by the United States government could have a material adverse effect on our results of operations
2. 27We face exposure to product liability lawsuits
3. 28Failure to comply with privacy laws and regulations and failure to adequately protect customer data could harm our business, damage our reputation and result in a loss of customers
4. 29The regulatory framework for data privacy is constantly evolving, and privacy concerns could adversely affect our operating results
5. 30Challenges by OEMs to the validity of the aftermarket auto parts industry and claims of intellectual property infringement could adversely affect our business and the viability of the aftermarket auto parts industry
6. 31If we are unable to protect our intellectual property rights, our reputation and brand could be impaired and we could lose customers
7. 32Because we are involved in litigation from time to time and are subject to numerous laws and governmental regulations, we could incur substantial judgments, fines, legal fees and other costs as well as reputational harm
8. 33Changes in tax laws or regulations that are applied adversely to us or our customers may have a material adverse effect on our business, cash flow, financial condition or results of operations
9. 34Existing or future government regulation could expose us to liabilities and costly changes in our business operations and could reduce customer demand for our products and services
10. 35We may be affected by global climate change or by legal, regulatory, or market responses to such change
11. 36Increased public attention related to ESG matters may expose us to negative public perception and could result in additional costs on our business

Risks Related To Our Use Of Technology

1. 37We depend on search engines and other online sources to attract visitors to our websites and marketplace channels, and if we are unable to attract these visitors and convert them into customers in a cost-effective manner, our business and results of operations will be harmed
2. 38We rely on bandwidth and data center providers and other third parties to provide products to our customers, and any failure or interruption in the services provided by these third parties could disrupt our business and cause us to lose customers
3. 39Security threats, such as ransomware attacks, to our IT infrastructure could expose us to liability, and damage our reputation and business
4. 40Our eCommerce system is dependent on open-source software, which exposes us to uncertainty and potential liability
5. 41System failures, including failures due to natural disasters or other catastrophic events, could prevent access to our websites, which could reduce our net sales and harm our reputation
6. 42We maintain an enterprise resource planning system that was implemented in fiscal year 2022, and we may occasionally update or integrate other IT systems. Problems with the design, integration or implementation of these systems could interfere with our business and operations
7. 43If we do not respond to technological change, our websites could become obsolete and our financial results and conditions could be adversely affected
8. 44Use of social media may adversely impact our reputation or subject us to fines or other penalties

Risks Related To Our Capital Stock

1. 45Our common stock price has been and may continue to be volatile, which may result in losses to our stockholders
2. 46Our future operating results may fluctuate and may fail to meet market expectations
3. 47If we fail to maintain an effective system of internal control over financial reporting or comply with Section 404 of the Sarbanes-Oxley Act of 2002, we may not be able to accurately report our financial results or prevent fraud, and our stock price could decline
4. 48Our charter documents could deter a takeover effort, which could inhibit your ability to receive an acquisition premium for your shares
5. 49We cannot guarantee that our share repurchase program will enhance shareholder value, and share repurchases could affect the price of our common stock
6. 50We are required to meet the Nasdaq Global Market’s continued listing requirements and other Nasdaq rules, or we may risk delisting. Delisting could negatively affect the price of our common stock which, could make it more difficult for us to sell securities in a future financing or for you to sell our common stock