PRTS - Earnings call transcript Q1 2018

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Operator

Welcome to U.S. Auto Parts First Quarter 2018 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 first quarter 2018 earnings release, which went out today at approximately 4 p.m. Eastern time.

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

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

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

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

Neil Watanabe

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

Private to private sales, period. X% ago in SKUs XX% for compared new X,XXX grew QX approximately XX% added we accounted sales year the during in quarter. label label fact, and net of In the

on the private the call, discussed the softness As quarter, some label the in sales. during we prior of experienced beginning

wholesale growth up compared Gross the private pricing margins The of higher-margin up last were by began QX as to in to revenues, these is the XX ago sales offline as pick basis Also period. in mix increase our of the in and strategies. month However, XX.X%, increased well was in digit margin points nearly driven QX quarter. XX% in comprised that year double were which note to label million. our sales, $X.X optimized to

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

for status. XX reflecting per excluded revenues, of issues in XX.X%, quarter related or accelerated the if for favorable basis Net would in million points compared in maintaining to year million ago to expense at $X.X Adjusted the share, prior percentage share to our increased increase despite $X.X first overall expense $X.X filer to additional revenues a million our or and with Customs commitment per the compared have our to year. decreased remained associated legal income EBITDA million, the $X.XX the we by OpEx million objectives, $X higher quarter. to $X.X OpEx profit lower been quarter. As $X.XX

EBITDA driven $X.X noting by conversion with improvement price in in XX% a in XX adjusted cost been of As channel and addition $X.X higher revenues, million. the to optimization X.X%, improved line percentage points excluding adjusting up aforementioned in higher mix. rates, our adjusted worth that have million basis shift to OpEx, EBITDA It's sales with to the would structure

to highest XX details the me efforts is metrics taking were conversions of into year the in XX% the amount point e-commerce $X.XX capture ago higher after in by more conversion. in customer let The in the decrease average fulfillment decline company's to placed decisions quarter, in-stock for of last reduced e-commerce by returns, with shift on was channel This a X.X%. the basis to XX% in improve in QX In reduced retained also marketing e-commerce as The lower product a actual to Revenue our decreased in we continued $X.XX, sales, total improvement dollars quarter $XXX period. to XXX,XXX orders offset and partially with payment period. orders $XX, quarter. XXX,XXX, declined, versus compared to our orders efficient and driven returns. Total of Though experience by driven year. the key online in to year prior provide sales. history XX% marketplace in percentage revenue defined traffic, the we mix better XXX,XXX during our compared reduce spend rates acquisition as some to reflects the gross customer was the experience was through Now the year. consideration, compared orders ago operating QX we to and first order cost capture, value our were an to capture

in will call. see expand later the March However, strong channel, in e-commerce which in on to Aaron we began improvements our

to payment compared to cash million, our balance terms generation, March driven million with at the free XXXX, At fiscal favorable to of was debt by as $X.X XX, $X.X in year-end cash improvements revolver of and XXXX. sheet. revolver no capital, while of continued debt increase one The have temporary as we Turning a vendors. no cash shipping balance a well having working in cash

private and with in year $XX.X increased of in-stock The the of ago inventory quarter. achieve our the label to use $XX.X from favorable payment Aaron. terms items. credit. to higher million XXXX continues ended have million the over in key $XX.X the With stock of We rate due the was that, quarter debt vendors, end benefit compared a goal inventory, revolver part, our import million, turn I'll on call negotiated letters at of increase through to Our to of with to primarily we

Aaron Coleman

Thank you, Neil.

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

got slow our call, quarter on quarterly a last discussed to start. first As the off

of communicated improve sales conversion product several and comp experience, to improvements growth speed In improvements throughout customer e-commerce web experience. optimizing product the our initiatives our increase second in the mobile, we half quarter trend. conversion quickly last process, post-purchase by the site year, we launched that the accelerate However, drove landing to e-commerce implementing pages, meaningful to began our the improve checkout, strategy and discovery and

in to our our in process reflected promise. product business bear our growth is from our We're believe deploying e-commerce flagship show initiatives As additional fruit. sites, the map to to in strategy beginning we by March, and early road continue results of to the recovery our revitalize QX

purchasing consecutive are embrace our worth noting growth, We partner was present our expand with current in that our quarter marketplace our process growth of also being It's to to QX our consumers the ninth network, in relationships double-digit channel. also marketplace reflecting while expanding are online. commitment the auto partners. parts sales working our We remain marketplace strong to wherever of continuing current

inquiries we efficient from the opportunity Given We've community reach received our broad is expand continue to channels. impact product believe chain, marketplace several other regarding tremendous well business. on our assortment, of through investment and our the these there supply to as our tariffs as

of aftermarket products the any as to situation continue the appropriate. went impact effect into relevant that not We'll sell. provide monitor closely and Fortunately, the tariffs do we any updates

has recently As we of States been United wrongfully the a Customs International on press to counterfeit against the Security, Homeland Auto likelihood aftermarket mentioned Parts United there are and imported Auto basis sell today, Trade. by manufacturers. an allegedly agency States Court release grilles U.S. Border asserts trademarks Security automotive OEM are doctrines, out in held nor Parts and right original the products Department lawsuit that the trademark Department U.S. our confusion of neither being a as that seizing defend of filed vigorously the we lawsuit automotive in the grilles parts. of The the U.S. under Homeland intends aftermarket grilles and to between by the well-established is of its automotive grilles Protection, infringe our counterfeit

flow of into burdensome the the seized and and the from that States. remove represents less X% to taken overly ensure grilles Customs to arising United product number this our goods seizures have action requirements assortment, of While we currently overall of wrongful the revenue expeditiously automotive processes our bonding than

won order preliminary commercial May matter each reducing invoice scheduled have X% for requirement X. value a and the restraining on shipment to of of a already bonding hearing the have the We temporary

preliminary following the We on expect the to court's Form X-K issue injunction a decision hearing.

on we to ahead, expect compared to in single to XXXX basis, net low XXXX. sales a digits percentage Looking continue increase

the are EBITDA $XX.X However, anticipated to $XX in million. adjusted compares call compared million costs With with and we'll expected it's open XXXX. $XX.X outlook, now million million million we to associated to Customs in to now light for issues, $XX This of $XX.X and of range our up the previous questions. between that, the our revising guidance

Neil Watanabe

next for forward all our meeting second next look the the speaking to the you with results of conference in If automotive look of some today. May you or at with Thank during months. over then, Jefferies we report periodic forward we in quarter our don't joining to when we August. non-deal call We chat couple you roadshows

Operator

concludes conference. This today's

your for at disconnect may Thank lines You your this you time. participation.

Neil Watanabe	CFO
Aaron Coleman	CEO, President & Director

CarParts.com (PRTS) 13 May 182018 Q1 Earnings call transcript