PRTS - Earnings call transcript Q4 2017

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Operator

Welcome to the U.S. Auto Parts Fourth 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 fourth 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. usautoparts.net on at U.S. Web-site Parts by the clicking Auto tab. Auto Relations Parts' Investor Webcasted This Web-site the XXXX. on call through and XX, replay is being a will be available March Company's

assumes discussion can obligation that and forward-looking use Factors to We on performance. that actual materially of on which for changes report of the U.S. with the it not if Securities note impact statements, a does including anticipated filed quarterly number difficulty the no which the release release. and the Web-site. to to of today's non-GAAP guaranties a non-GAAP and non-GAAP these the needs financial to significant to explanation projected be refer like The following uncertainties the measures be Please The strategies, customers questions. and and G found Company's discussing and future factors in Exchange within operating those reconciliation results of financial liquidity, regarding net on The such to today, a loss from expectations, and this but will cause U.S. Auto again annual high current information in cause required update in Regulation information press and in GAAP and future with additional the that from future limitations, with detailed and forward-looking and include, Parts events, for net and in EBITDA. that note of Parts' GAAP the circumstances remind SEC would forecasts offerings, long-term growth results, key the which call, on outlook by to have Commission, forward-looking derived variability these in financial forward-looking is non-GAAP statement. financial Auto on those EBITDA GAAP reports and constitute forward-looking projections section adjusted of to due detailed projected on laws accurate based meaning current Form information any performance Relations factors actual those Investor the Auto we are An guidance future. in in statements are can Risk those EBITDA addition new securities the discussed, included expected substitute forward-looking to, our may press our competition. product the we measure U.S. Parts' statements. becomes Parts' begin, even contain not are certain accordance financial Please adjusted reasons operating in net on involve have measures suppliers, not are making in between and the results for measures you materially from a income. carryforwards, do a statements we and of in income everyone Before non-GAAP business results statements and could and could available actual not measures your that The materially metrics differ contained all Form statements reconciliation subject operating to the future and management Company's and the expectations Auto XX-K differ Company, U.S. indicators, capital prepared deployment, federal of intend of is call statements remarks XX-Q, to forward-looking any are statements response differ to results limited make in nor

efforts. projected net to income without unable are we result, a our unreasonable As quantify

financial With income net online segment. Neil now net AutoMD will I loss, data percentage limited and our exception like reporting we would of excludes be net reported, gross comparing otherwise not discontinued using and to call sales revenue, all that, Watanabe. Unless advertising, over expense, with to, operating calculated to points please addition, sales. margin, but turn basis the note to are stated, which In also the that discussing discussed and

Neil Watanabe

XX% XXXX. million AutoMD compared of Good for Net Operator. of year fourth you, in afternoon driven Thank and partially sales million results. ago everyone of segment, full summary private to an with listeners reported specifically Unless quarter, subsidiary first like as down a business fourth the like marketplace that X% label joining e-commerce quarter to products. offset strong year the in financials well primarily us were the in XX% our provide $XX.X XXXX you increase by driven and following was our of quarter by in the thank This remind our all and discuss a quarter the I'd AutoMD by to decrease our proposition dissolution the as the metrics. $XX.X lower being today key as metrics channel, reported discontinued to I'd sales operations also operating sales. continuous value release overview which in noted, to is exclude the of press expansion

SKUs compared was in In pricing strategies. new for year Also mix our with in in XX well the margins ago up wholesale as sales $X XX% compared our year were bringing note which target private to X,XXX Gross The in to X,XXX SKU to comprised the driven that million. grew our full points label to accounted Private to the increased fact, added ago of X% we sales, revenues, the QX by new approximately as net our quarter, QX X% count SKUs. period. our XX% to and for offline XX.X%, year in X,XXX, basis sales higher-margin X,XXX line new increase during private label of of margin over quarter, is period. label

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

loss or loss unfavorable year million $X.X $X.XX overall revenues marketplace share by channels quarter the was or points an maintain from XX quarter, we quarter. With profit increased the and resulting allowing basis from the a valuation our OpEx both reduced $X.XX lower quarter to was Cuts million impact release in million million Jobs expenses, per marketing the The loss coming at million compared objectives. of tax partially percentage net $X.X our XX.X%. versus by the percentage Net was a in $XX fourth $X the As revenues, call center us rates, $X.X of benefit from ago of XX.X% allowance. per share, and tax net during in driven offset Tax Act's a new of to a an

compared two been Adjusted $X.X full the line fourth net EBITDA have would our to items, with these income XX% the year. Excluding prior our in $X.X million, in in increased million year to quarter guidance.

a margin of by management. As and driven expense improvement our improved revenues, adjusted XX percentage points EBITDA gross the with basis X.X%, to

marketing details points conversion during $XXX, by in orders some value our orders in the define retained to provide we fourth placed taking compared spend we metrics to for me consideration, to The to XX% by were actual XX% which costs $X.XX more total our XX% basis capture, in the the Revenue and orders product decrease decline payment returns, to let mix in versus $X.XX acquisition a ago in during Total after efficient E-commerce we Now of QX with XXX,XXX sales an reduced the as on prior operating decreased quarter the capture, orders was traffic. quarter as in amount we fourth customer quarter. period. compared QX continued driven lower to XX period. of the also dollars the year driven year. year improvement quarter, was declined, the to year. of key a order $XX gross to average ago fulfillment Though to X.X%. was The with the sales. were decision In experience e-commerce XXX,XXX in marketplace reduce shift last XXX,XXX, online channel compared in our

to XX, million of revolver sheet, compared million, Turning cash due $XX.X $X.X achieve We primarily debt the to in higher debt goal label quarter rate at on inventory, stock cash a no balance compared with December part while ended of having was no end revolver our XXXX, to year-end increase balance of The XXXX. of private fiscal we of $XX.X million, and continued the have the at $X.X increased to in-stock inventory to key XXXX. to at million a items.

$X of estimate will For XXXX. XXXX, million also $X.X XXXX incur $X.X to in million we million million CapEx, we in compared incurred between that to $X.X in We CapEx.

XXXX. a the we X.X brings X.X million and approximately during to believe our quarter, over turn to that With fourth million efforts going cost We the be repurchases will total to with I'll $X purchased total continue we enhancing value stock opportunistic During underscore amount million $X.X forward. fiscal shares This repurchased Aaron. to million. shares at our for of to continue commitment that, shareholder call buyback

Aaron E. Coleman

Thank you, Neil.

me for all the and by building long-term value. customer on Auto continued U.S. Parts begin members experience team their Let of thanking improving the focus

our we of adjusted gross generated increase quarter results focus as As in another XXXX. margin mentioned QX profitability, highest earlier, continued our reflect double-digit EBITDA on the in

our product a second online experience, implementing e-commerce increase experienced improvements in which our our and our communicated mix accelerate the landing we a half pages, with mobile, significant by the year, to by channel. discovery process, the In channel has in been experience. checkout, improve customer we of post-purchase offset product XXXX, the strategy shift marketplaces speed, site throughout optimizing to conversion, discussed e-commerce growth, gaining we've As decrease and momentum,

accelerated launched have To had mobile implemented impact sales carparts.com. the on we recently of recent material in a a last began few, name initiatives but soft to QX, customer we trends conversion. a as new a web month for progressive the Turning have number quarter application that the

very customers allows an quick that easy it interface about mobile new simplified for provides excited are this and our experience with checkout. as engaging and We a

Parts on we addition, Whitney several and a to improvements JC migration platform Auto performance launched Warehouse. completed recently In

online. recent With reinforce that these are purchasing our customer our encouraging experience in partnering placed the months, our process across improved. working is business last e-commerce some marketplace emphasis sites existing comp it wherever sales parts also XXXX. the and and a key We're with build upon are note our marketplace the out are expect and on similar also roll over of improvements we initiatives in of in Though our significantly to plan strong in to has e-commerce are this These results momentum new auto to be deepen experience, consumers the to trend relationships. to revitalizing we’ve all present important channel growth of six marketplaces we strategy and embracing customer

assortment, our channels. as opportunity these tremendous is as supply there believe expand chain Given our marketplace efficient to well through we broad our product reach

that business suppliers efforts shipping the enable be expenses expect On our reinforces our will renegotiated guidance, we've one OpEx and our terms with over XXXX and to last to the ongoing we year's Similar our competitive us branded cost front, structure. to manage in by continue decline double-digits align to of more to near-term. better

However, more we expect than offset label private decline. of this growth to the

XXXX revenue EBITDA $XX.X low XXXX. to that, million, the expect single-digit million we growth such, As With between call in $XX million in to we with up will for compared questions. adjusted $XX.X ranging open now

Operator

Our [Operator ahead. Aftahi is ROTH go Capital Darren first Partners. Instructions] question from Please from

Darren Aftahi

programs? your going first some you sort I'm see thought Just to Thanks. pertains that customer continued accelerate in e-com? to of but and and your curious, what on how makes kind continued these that then sense, process a online marketing understand channels That between is just I'm of are in some may, all. as is you're channel you’ve growth get your and that, initiatives balance implementing, online of trying reduction to seen try to to reaccelerate of I via few growth you to of as your the it acquisition, kind partners, curious if a third-party And versus if you’ve

Aaron E. Coleman

sure. Yes,

pure listings, well partnerships In different adding of as plan as just direct the terms bringing and new out we versus terms also products again at of in fulfillment models marketplace new market, marketplace. on online channels, there, looking new to

marketplace bring are way could our private that our product, channels has we first assortment, I'm to the large SKUs sorry, that think a repeat a platform you So question? to reach. label the for our us the And tremendous

Darren Aftahi

in was is more your question just first around the still guess first was I Actually around mind. The question marketing. just core business. it my on

you conversion on see put reaccelerate So, and to going some spending going and of your year-on-year as seeing sites these platforms, rates. initiatives years, continued some last better CAC if mobile your of to for to with your own operating? emphasis as more decline the has to you I'm upgrade you better owned Are curious you’re few you're -- conversion

Aaron E. Coleman

is, leads conversion better build improvements. consumer sequence want and really that The a we experience, which product to the absolutely. improves Yes, to

your the better, tend more Google Now, can grow some traffic traditional ways. marketing a so that two dollars just SCM. of From in spend we like of perspective, shopping operate one channels paid can within the perform to we or

that we believe marketing into side. the absolutely we'll So, paid the on lean

search of better experiencing some ultimately the addition, of will engagement, traffic. In we long you get better that when and we'll rewarded better engines organic have that that the a having also think growing when you least, we a a have by drive not think of our but repeat Last some by some experience, term purchases.

in terms that term think traffic. we'll those to areas some trends of reverse able be where So, the of are long three we

Neil Watanabe

and we've needs maintaining gotten processes efficient our with infrastructure mentioned Darren, IT that more and to relative about believe capital our sites. you our we CapEx, on

believe $X very that the that with an had past the but will number, year, prior $X that over million increase million year. we at we the to even always be so, $X.X next comfortable the we CapEx in been And feel million

or efficient at believe gotten We've sacrificing operating our own to not compromising So infrastructure. generate we're investments revenues. we IT more any just

Darren Aftahi

may, And catch then if could quarter? the repeat that. just shares I one in buyback didn't I the number quite of more you

Aaron E. Coleman

Yes.

year, of we million XXXX million the bought For X.X was back stock, approximately had $X.X which shares.

Darren Aftahi

that of share repurchase, actual in the much dollars the terms but how in shares? And not of quarter fourth came

Aaron E. Coleman

X.X of million. repurchased we cost quarter, $X shares the a at In million

Darren Aftahi

wait buyback? remember any wording, have re-up feel a we like a you’d for bogie I of [ph] you million have or I – maybe do repurchase the Got I share on XX months what target if of don't kind it. kind to for are the correctly, XXXX, or or the sort recall Do XXXX $X need exact of in prior, for initiatives

Aaron E. Coleman

will perspective have or not a look for renew clearly from Board to we will We so topic whether right $X will at. that in of The authorization. months, an next upcoming through will of May whether million to discussion back going We an had there available to few half repurchase they We've approve as opportunistic of still two and XXXX. that year period the some had this another be repurchase evaluate probably far the authorization. they're a around continue stock

Darren Aftahi

Great. Thank you.

Operator

ahead. from is go Michael question Canaccord from Please next Our Graham Genuity.

Michael Graham

then and to us you I low might any if year? XX% label are I some mix, that think could might you just the revenue can us was outlook a on customer had had incorporated XX% two as that seven business. that done that what single-digit got some mix of the questions. update wondering any, and some, One what is you just and just missed engagement high impact had of some on the year. could, the you and then be implications? you QX, how from initiatives I up for to over work those that and you know longer-term if feel much, you have in next your become for the and for initiatives working landed QX where you are redesign on, might and I mobile of if that next wondering quarters. was some that better into have private profitability question give how web can already was And second it, you mentioned that guided revenue or that's you up you growth app from I'm mobile preceding but leading other

Aaron E. Coleman

is This Sure, Michael. Aaron.

a in XX%. QX, the revenue terms terms of In at question, mix for of is first

an ongoing basis. don't provide we exact on Now mix

the the in to double-digit, mention can expect an did into branded growth to that business we the but still business script that private label we overall would rate rate. by a continue would single-digit decline at translate However, grow

dollar a So, isn't of percentages. perspective. our gross business trying around lines It's actually each really from goal to mix of grow profit those

In mobile deploy of app conversion terms some We've seen improvements material experience. the carparts.com. we in a of did initiatives, mobile terms on across the

right them them question are We and for terms more sure make through occurs create future then the goes Once Website, five with business of from the conversion do want engaging us, Website, products across what find sites. our that when SKU we of or of somebody for get And we to maps with other contents. opportunities, on into it your areas, other are the once do that and will process have the really the on us. right in roadmap we that help of a One is, and a selected it's funnel. one across And they deploy can through experience most how kind usually easy to discovery they product job. them the product lands

a we as emphasizing a just the a design easy we're make to sure well want mobile-first quick that have across platform transactions. And So, philosophy. experience that's entire focus around as

into So, about significant – the are there we but is believe case and that are most roadmap we there those of even planned. our are upside improvements than base is excited baked opportunities conversion that guidance, more if obviously

Michael Graham

Okay, appreciate that's helpful, you and commentary. so I really much. the Thank

Operator

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

Neil Watanabe

the we at when to results that forward will Conference quarter then. I'd note of we'll participating If hope report for next with today. call some XX May. like the thank look with to we be in we everybody and Please first to on our speaking ROTH not, you joining meet you March

Operator

This concludes participation. for today's your teleconference. Thank you

your time. this You lines at may disconnect

CarParts.com (PRTS) 8 Mar 182017 Q4 Earnings call transcript