PRTS - Earnings call transcript Q3 2017

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Operator

Welcome to U.S. Auto Parts Third Quarter 2017 Conference Call.

On the call from the Company are Aaron Coleman, Chief Executive Officer; and Neil Watanabe, Chief Financial Officer. By now, everyone should have access to the third quarter 2017 earnings release, which went out today at approximately 4:00 PM Eastern Time.

If you have not received your release, it is available on the Investor Relations portion of the U.S. at clicking site the Web Parts' usautoparts.net on by U.S. Auto Investor Relations Parts' tab. Auto being replay This on and call webcast is a Website November the through will XX, XXXX. Company's available be

that company's and in with is information non-GAAP any non-GAAP calculated note discussing Neil to reported the to an Company's available Please Auto online detailed results measures this net gross future. margin, and Watanabe. we a those the to even release in revise reporting with also between update in on forward-looking limitations, made in actual such it detailed the The Relations does Form any segment. projected U.S. derived note a number which from the turn statements. GAAP that or found may today, that use financial Annual or income Form Quarterly differ metrics, of have are results future include forward-looking EBITDA call adjusted we’d which GAAP stated, not uncertainties results, using I on response these for but the based addition on offerings, materially The be Investor With including in non-GAAP performance of financial be any and for in that questions. forward-looking EBITDA, capital to regarding in forward-looking to basis release. discussing Auto and required factors changes and or guaranties net be The forward-looking begin, to to to our deployment, within explanation Factors outlook in of and management financial the your statements laws now measure no sales. key otherwise actual the meaning expense, on and expectations, comparing but nor The of you competition. constitute could press operating anticipated for expected these excludes growth not limited in statements, of like on to call, those Unless to AutoMD limited those with which can discussed: the the and U.S. by percentage and advertising, the will federal non-GAAP XX-K will future that materially those update becomes call, performance. measures not all to are data of the remarks are the refer statements product and needs current operating Commission all press forward-looking on be contained Please Parts' and in and in SEC following U.S. to substitute may we from We statements. Before and obligation make discussed Reports statements is over a call, results Parts' circumstances site. strategies, involve discontinued the remind accordance information could liquidity, U.S. factors the financial Parts customers differ differ everyone XX-Q revenue, additional are G that discussion contain reasons future the to information operating not non-GAAP cause actual a can loss, Parts' exception like events, new if and would statements indicators, and and Risk financial Regulation Web certain measures with points securities from suppliers, filed current Report and cause company, our to statements GAAP expectations today's Securities net do measures intend business or forward-looking materially the and that, forward-looking financial reconciliation Auto sales results projections revise and subject of Auto prepared to statements and in are included of again section release today's Exchange assumes

Neil Watanabe

you as Operator. million segment, reported $XX.X summary dissolution million AutoMD us you, operating Good quarter the the would also I the Thank following to like third to like as in $XX.X specifically results. noted, metrics. reported of metrics operations release to in third that in financials to everyone, the morning, overview year-ago key to today, listeners being press of discontinued exclude the the quarter increased remind all and our subsidiary. provide which for as thank recent joining I’d compared a AutoMD Unless is sales business Net discuss quarter. of our well an

sales increased XX% expanding marketplace year-over-year Our proposition. driven private-label assortment our strong value and channel by

sales to later cost Our for higher is margin period. lower which margin mix were by driven lower sales partially margin compared was sales driven primarily were lower XX% our wholesale in of the average comprise note which up quarter primarily period. net by total XX% X% QX and accounted dynamic anticipated in order the Gross came to channel color will in freight XX% in and year-ago at higher e-commerce lower XX.X% million. to lower down this revenues in This and offline the provide call. primarily traffic QX private-label Also XX.X% on values. by private-label the grew mix. for offset the margins The of was offset XX% channel Aaron and by in compared $X.X year-ago more sales a that

going in between third compared to $XX.X XX% to million gross expect margins quarter the $XX.X year. reduced forward. last million We We OpEx total continue range XX% to to to

per or to points compared committed percentage growth. driving to XX% remain call marketplace per to ensure from quarter, profits quarter. as marketing year-ago increased the XX.X% in percentage compared in OpEx the $X.XX we reduced the $X.X XXX or reduced channels share the XX.X%. year. an Income to margin was million the diluted coming and of revenues, for both a to in to million basis profitability quarter to $X.X during As $X.X revenues operations continuing over increased diluted expenses million third $X.X our increased lower center versus EBITDA prior from quarter With share adequate of we to Adjusted $X.XX million accordingly

a of percentage revenues, adjusted As EBITDA X.X% to last improved year. X.X% versus

marketplace year. let to orders, details last include was we sales XX% does fulfillment figure actual able defined XX% metrics to to versus year. during sites declines year. reduce quarter. into increase a willing In Revenue include our value orders points returns, customer an sales compared our gross third mix payment e-commerce decrease on the on The down reduced acquisition $X.XX sales. to in year. in and during E-commerce experience traffic the to QX XX% product Despite we our costs to provide were channel XXX,XXX of increased Now largely traffic our margin year-ago sacrifice X.X% placed perspective by the amount this to me decision driven some the the decreased for conversion which incremental spend QX capture continue to in to not also and as and the Unique e-commerce were X.X% compared in taking to marketplace $X.XX key for rate Total XX our not sites last quarter in capture million, expected to period. to period. Visitors retained that lower prior again operating traffic a compared was consideration after which of These dollars marketplace we of branded to channel XXX,XXX product third from traffic orders was channels. From by compared to with mentioned the earlier as year-ago quarter, driven were lower in our the $XX.X marketing shift basis totaled $XX decrease X% growth. mix to we $XXX XX% Note average order the online last the profitability quarter

of The have which sheet, vendors. to of from cash payment cash we $X.X September increasing million to while our of XXXX compared and revolver $X.X and third XXXX. the increasing at for quarter revolver in improved Turning performance to LCs debt, operating is on cash to extending cash focus vendors, no through and of balance terms at million result selected the import of no debt end increase balance accomplished continue of utilization continued our we've the our a operations XX,

higher also us achieve inventory availability XXXX. level the which We quarter to with at stock of of was and rates private-label $XX.X higher the ended quarter $XX.X on compared growth million key items. inventory third our million helped support end due The primarily increase the to of of

be we underscores enhancing opportunistic on With our next for have $X turn million call stock stockholder XXX,XXX few repurchased Aaron. over last We that acquiring planned shares value. In cost to discussed $X.X XX, QX we over I’ll we May shares was approximately to the that, of quarters. to commitment which the As quarter in authorized a total million. repurchase

Aaron Coleman

Thank you, Neil.

me by plan. thanking operating for Let the strategy Auto team Parts our focused experience and U.S. driven their of continued all customer remaining off members on and start of

our to having adjusted revenue the EBITDA XX% in quarter only third The as despite modest increase continued was underscored growth. commitment by profitability by reflected

was QX strongest to-date our margins. fact, year In quarter gross for

in higher And business plan price our us continue with we branded margin as our margin fastest it business. our the investing growing positions point to us be as private-label marketplace competitive believe private-label products. uniquely the in our enabled a of to at segment We it higher continue to in customers represents than

channel continuing experiencing mentioned this business year marketplace online to Neil our experience gaining channel traffic. with in earlier, shift our in momentum we mix e-commerce As lower are a

the the cost and customers to channel this we our improve these they selection discovery, right these most the initiatives shift improvements designed begin to as high relevant and initiatives job. do for quality in spend improve to from We’re product post providing the gradually to optimizing revenue to dynamics which the mobile profitability expect SKUs more site initiatives traffic mix manage assortment. to parts have we selecting the continuing turn as Regardless are product year, and And check-out, addressing well on customer that align our sites. can while accelerate over landing don’t purchase growth. the But to over of widest these should the remain we as us we products expect channel ensure growth add we our by continue experience. fruit a realize e-commerce until to to we will bear available in will to enable auto speed new with various with including we our next do our channel to Though pages, overnight, experience product confidence our results them them the structure conversion them, committed of with expenses

to double exceed the on-track branded we annual During current the to to quarter to SKUs X,XXX XXXX. new past added target we of the and third X,XXX to for digits expect our in decline in new by private-label near-term. X,XXX SKUs continue the our guidance over over we’re Similar business our year

the low to as for However are more of to than we mid-single digit in expect private label such XXXX. maintaining offset we this growth expectation decline, our growth revenue

also and we $XX million. for between to our adjusted income up million questions. for $XX net between open We’re with XXXX With million range that, now maintaining million EBITDA guidance ranging will the $XX call to $XX

Operator

Thank [Operator Aftahi conducting ahead. first go ROTH be from and question Darren from Please you. At we’ll Our answer Partners. a Instructions] time this Capital question is session.

Darren Aftahi

Hey, questions. my guys. Thanks taking for

if I may. few a Just

if the curious roughly sales, kind Any curious get I’m conversion the keeping some wanted you’re lower your larger growth checkout company kind going? language actual just just you of just know little growth in channel, grown kind of I you’re I’m that’s relay mid right, understand the Thanks. the fourth about kind in could with of it giving of to just forward around then of of margin, trying of sites. like growth third, some is we a of curious of Second strategically I’m I’m low math rate? as So after just expand profile the year testing mid And a seeing the with that the of if guidance the when that any what and while implementing my monitor? your initiatives I channel? kind you’ve thought kind you on online sort kind then, of maybe mobile you speed can doing marketplace kind question, the to to looks X%. to-day bit How quarter

Aaron Coleman

Sure. Hey, Darren.

outside outer question be of guidance, are are the that are between On year the we in your when then traditionally We think first the we would X% pretty to-date probably updates. numbers unless terms sales X% to go bounds, of and that close. kind the that’s anything of range, we –

you repeat don’t mind question? you the second could If

Darren Aftahi

try just step and kind relative your versus I I expand And back, more look when actually second does the Facebook but and some a the sense big sort lowered you The was picture there marketplace of in maybe in the e-com, guess, eBay around, accelerate it of just channel of make question gross declines to growth company? mean, at of or the again strategically to find other to channels margin profile its that growth an channel? some

Aaron Coleman

Yes. And to in and the bring reach. the our is Absolutely, we the strength One real other I our is advantages of good supply question. think that table. competitive two chain

product shopping. assortment can reach. further looking where So, increase want that make customers our sure to are we’re always at where are that is We opportunities partnership other we

that different participating channels within we channels are. grow not additional to the evaluate we’re well absolutely will ways as we as in, that So,

Darren Aftahi

my Great. ahead. guess – go just last And was one I

Neil Watanabe

The has support marketplace build as only we of provides good channels model as very on as well. of our efficient both various both And chain that, a to e-commerce Darren well sites opportunities product. point was that mix that that continue the can build the a private-label supply

Darren Aftahi

it. And then, Got

Aaron Coleman

And question. your third

Darren Aftahi

Yes.

place the for And owned The of on I’m not whether some earlier but around of process. question you and think some it testing I Thanks. kind sites of sites cetera? in A/B initiative that, third on doing testing that call, et how you your that conversion, were quarter, is saw, the of said kind put with you’d some you be checkout the maybe your progress more fourth just went? curious any would new speed, operated

Aaron Coleman

initiatives roadmap multi-quarter across Yes, The one. absolutely five is those Darren. strategic and thank you, the

So, improve that to to conversion. we’re benefit absolutely doing speed things try incremental with

continue there out throughout the certain to those resources. around quarters. seen over next We’ll they these are allocated year. how we’re next in And change the about things we’ve as We think pillars of some couple is setting expectations committed team have five But that’s pages. new I initiatives successes on terms available roll meaningful that mostly the and

forward to So updates providing the I additional come. look in quarters to

Darren Aftahi

Thank you. Great.

Operator

Mr. to session. like turn concludes Thank back for Watanabe closing question-and-answer This comments. you. any floor the I’d to the over

Neil Watanabe

Las Thank look to meet of be later forward Vegas with call quarter you we Please results we’ll If the in today. Noble’s Conference note tomorrow for there. when and year. joining the this you to March. participating some that you Conference we And speaking hope we Gabelli in fourth not, with next report our in

Operator

Thank you This your participation. teleconference. concludes today for

this Your lines may your disconnect at time.

CarParts.com (PRTS) 30 Oct 172017 Q3 Earnings call transcript