PRTS - Earnings call transcript Q1 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Welcome to the U.S. Auto Parts First Quarter 2019 Conference Call.

On the call from the company are Lev Peker, Chief Executive Officer; and David Meniane, Chief Operating Officer and Chief Financial Officer. By now, everyone should have access to the first quarter 2019 earnings release, which went out today at approximately 4:05 p.m. Eastern Time.

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

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

Peker. over discussing basis online which to net and that we'll please the and addition, also turn expectation that, like With to be net using to the percentage are In points of I the comparing calculated with note sales. sales call would discussed Lev advertising, now

Lev Peker

and afternoon, you, good everyone. operator, Thank

begun our Manila Parts. Financial in our U.S. whom foundation and to Manager to all Officer took Chief profitable with to have a bring the Parts for of revenue and new Chief strengths team growth. Country Operating leadership rebuild to skill began Officer, operation, we Auto to position already the sets Chief Marketing quarter, Officer, unique Legal first a qualifications over and return I and Auto the lay During the U.S. in we January,

to We teams have also our a growth SEM execute team. team, user marketing retention a brought new new including and in critical personnel experience content strategy, and

and Although planning, first prior to we marketing continue initiatives, the several supply impacted new our disruption related results be by have of begun inventory decisions growth to deploy management's quarter our to chain strategy.

accumulating tons storage are which late detention our not frame. for containers charges, of fees been have returning We time within contracted

organic the both margin resulted which in short-term year sites gross one traffic, was lower and inbound reduced and will the These to been shipments. rates, over our max continue and revenue last adjusted change and while executed necessary the have our consolidation charges to marketplace XX quarter. EBITDA aside, These for the at the actions taken website have also stores. allowing seizures these count One setbacks we capacity to to with quarter, our are and and on of reduce for charges profit impacted DC inventory, catch in We quarters. e-commerce impacted initiatives has to of being we gross our key our up the Port processing of in-stock impact DCs and marketing the X. next on amortized year three a during our inbound which started strategy of the late

Over the consolidate the we our course of stores. We're with to expect marketplace three same also exercise through XXXX, going further sites. to

revenue our profitable growth. while COO to property leveraging to to the proposition to we extensive these our and products look fewer the and commenting differentiated and on brings But forward to our Operator customer. I'd plans, CFO, unique ensuring want value Financier, quarterly and focus David at on a our like a in an we mentioned to for our As properties, David? platform expertise before resources do update, to Auto call on has new turn David both as over optimizing job growing each better Meniane. and further last U.S. his sites consumer enhance both experience return Parts and

David Meniane

Thank net million first to lower XX% kind in sales results; the sales words, year ago and for as to decisions. in customs driven compared was XX.X% in from and QX ago. Jumping e-commerce net label the well sales to in-stock down you, rates and compared Gross sales This were year primarily in decrease last issues margin the year's Private X% reduction due in in the was to by first as right $XX.X appreciate resulting Lev. inventory accounted I planning into million the $XX.X hit excited X% a quarter XX.X% compared in to in XX% of the quarter. a period. were running. the I'm ago year ground traffic quarter

costs As decrease the associated increased port Lev carrier driven fees costs from along with freight by the issue. mentioned, with and customs excess was primarily

Additionally, in this we've charges. quarter, $XXX,XXX incurred approximately detention and in related

being additional in of continue charges incur of quarter. throughout the the into gross are amortized expect We sold second an goods and will year. end the $XXX,XXX These to cost to impact margin

OpEx first to quarter total million $XX.X compared the in on; was million $XX.X Moving last year.

Adjusted other of first due severance Note to and transition by income year our and lower end EBITDA a percentage anticipate revenues, $X.X of employee costs was $X.X through compared $X.XX aforementioned million expense, driven employees. quarter's prior in We transitions compared to $X.X impact investments customs the the marketing including EBITDA with issue, with by or quarter adjusted in negative marketing result lower share of increased and increased quarter. the net driven $X.XX million that expenses, million to $X.X the in million channel a million Net e-commerce primarily decrease or platforms per this was of within management in adjusted to XX.X% a As was the loss these costs ago share costs, decline The loss associated XX.X% to back adds year. in compensation spend the team. in-stock the per also sales was stock-based compared OpEx further of the to of rates. $X.X quarter. EBITDA issues related year as

metrics mix out-of-stock marketing to provide last up year, compared for reduced million and to to and quarter, year me Traffic a XX.X compared decrease which key our the retained and product to decline in value, XX.X details taking X.X% both orders average XX.X% in which traffic. period consideration compared XX last credit some from basis year. channel in fulfilment Revenue was total million with let defined declines channel the AOV driven by part was mostly Online first mix into in Now card was our benefited to on $XX points e-commerce in our QX quarter. to QX sales driven marketplaces collision of was as efficient X.X% well returns, operating Conversion Decline XX.X% higher order our as from capture, due less traffic dollars platform includes after as product the marketplaces, for same JC primarily was the conversion mix compared rates Whitney spend issues. from ago and driven out-of-stock in lower business. to by in sites $XX by AOV XXXX.

had moving balance balance $X.X XXXX. compared debt and March we XX, our XX year-end from at balance at that the and Note benefited no at of be the March forward million vendors. of XXXX, working million cash Inventory the quarter revolver to $X due terms cash end of Turning a sheet; compared a to to cash our not $XX.X both timing fiscal to inventory favorable optimized. the more million improvements as our ended focus XXXX. at current for is with million key with capital will us negotiated We $XX.X position of

our need signed go XXX,XXX expect closer Nevada, things over in we customers. that, center we in the Vegas, we of Lev. one Las distribution Lastly, and discussed our With new new turn the call lease to September. to I'll back to was to facility this the calls for get Subsequent a quarter, the live to square-foot a prior on

Lev Peker

Thank you, David.

we'll marketing traffic earlier, deployments several quarter, on the make of with initiatives the new strategies. mentioned I acquisition beginning As during key progress and

the and begun have March, an we our help to in architecture SEO with agency hired our structure rebuild campaigns. of SEM to We

up, and away to sites. with these in will it our take we a come stronger traffic organic spend ramped our better to efficiency Although to months expect get few processes marketing

this ready will area to is initiative. retention have the key market of dedicated for brought millions We're should new on we that in better and process a be Another of solely implementing to to our fall, by us team in database. the E-CRM be marketing an consumers that of focus

have need we the merchandising need amounts they're offers means to We and And them while ease of in of if meeting users funded exceeding post-purchase the better to site long-term massive us specific database, our on we're of checkout; and our of we vastly underutilized vehicles the most to regardless have have data their experience of discovery on. of we standard. improve From selling expectations. and their products; all millions that other send of perspective, those experience; we products need. are customers these note not a ourselves may know type we our even cars, they up to expect ensure to technology not to higher the sheet. that a our that speed. importantly, success a are and are hold going certain for including being Consumers products for they that our through to site It's setting This important balance initiatives the

strengthen and online that, take to auto fully up EBITDA foundation, With to our we to XXXX, and implementing returning achieving to is call still initiatives. questions. remain adjusted done, rate Parts revenue improving U.S. look our it's the Although Auto in-stock committed Nevertheless, steps technology growth we new now have various forward in open be the begun work for to marketing much will position leading and particularly to parts with we marketplace. and there in positive our

Operator

come from first our SCC question will And Research. Instructions] Beder from of the Eric [Operator line

Eric Beder

third-party how want terms we through they this at look business? those in take of marketplaces, the your And you about to where thinking When here goals? as be should go you

Lev Peker

Yes.

e-commerce quarter, team goal channel. the will And quarter. our kind the and our continuing aligning we on to as a is we're hiring the strategy In grow grow stated still we the on the at online what marketplaces at than e-commerce as still in this faster the our So marketplaces our that and prior still pace be to online marketplaces first of rate calls, growing. are were themselves same

the reliance reduce want until not marketplaces goal we the own So faster But year. same. our that do still half the the our don't grow We of expect e-commerce to because on to channels we customer. is back

is growth goal our faster own than channels grow the marketplaces. to So our of

Eric Beder

job great management affect where are think Is a And team. see? you've a And done how reshaping you're to the spot looking still of what you do to basically hire? that there going you will

Lev Peker

new a consultant new a have we we we Country CTO; Manager. the COO, perspective, a company new also founder executive-team back CMO, has as an hereon. from a come The have So have new a of

I have on is now, we needs below we're across that's side, And have this have looking executive at And at end marketing on by what now. that quarter. think needs next next so the level management, down management working organization and the team. the level are should what we the technology; the completed of product we we the

Eric Beder

lot mean? to does should to you've start term, we like to you And move business of about like? it what The you that moving when will look positive. It you're a this got sounds When starting last want be question; like when will the thinking -- think to look pieces. longer

Lev Peker

Yes.

so momentum, exiting into So year said I to think like I is year. think we next this we the expect can positive prior when see going call, on

heard to the from much through the the pretty on as us all As David that's you you hamper charges, -- QX. going detention way can

to expect momentum. see margins the from we year the to pressure But continue detention we'll with exit on charges. So positive

Eric Beder

we And thinking in higher at of how of [indiscernible] orders? be guide Both the Is should about -- be those we conversion? there? it it? what should it in terms looking Is posts

Lev Peker

Yes.

positive. revenue, I those of it's the think all I EBITDA; I things should turn a traffic, think it's take it's think for

Operator

next of Our question Gary from from [ph] Research. comes the line Barrington

Unidentified Analyst

call, go just the maybe did maybe detention charges there the year still of what you later? are? Could just what description are a on almost these slow you from into dealing Could they custom a give -- Why what issue. you charges

David Meniane

Yes.

background. additional me give you let So

on into started role look and issue. in to March related I my was the was areas I the one tasked it that the XX, to charges of So customs

that containers issue. different carriers, customs those realized very are is There actually of the which the charges, the One incurring charges, returning detention to different. like not things we is late we fees were were additional from which for

because fees, incurred of you are because to is remember process If warehouse. inability our containers. transload container moving issue, you've from next we've Detention which port just the the one customs from to inbound the --

took of to as So our those we basically we detention temporary immediate as capacity. soon action, goal the processing And charges, inbound was increase significantly charges. discovered those storage, reduce to instead

significant fees charges, up. but containers today, storage incurring are of we're all detention not go As are we any backed that the we until incurring through temporary

end goods, year. margin gross are they being Now, these will amortized financial from to of a standpoint, into the that cost of continue that means charges impact and until the

in both So and detention charges those to million, temporaries full charges, charges for is about security also the charges. we $X.X expect other there be year, but overtime an additional related guards, $XXX,XXX

Unidentified Analyst

of fact of Getting you websites. What really SKUs? you the to the And try you about maybe script. your into some you down you the speaking addressed and other remember going with I in about and things that it that skinny SKUs. Lev were the some these talked mentioned of narrative about; didn't

what strategy us tell there? you could So your is

Lev Peker

Yes.

and strategy serve. goal growing And for Right what label. site. will the determine formulating sites our merchandising really think I for process they our private in now, each strategy continue that purpose right So is of to now we're the our the will

our So was private in our the about quarter, of label sales. XX%

label be the private really strong, GP our it's because are our at branded contributor to and a right, a So big than of much returns GP, rate higher business. continues

SKUs start we'll SKU the the goal -- choice the because increasing we our for private on of to business. is of consumer. to label number We side paradox to our so make So decreasing of count want in the continue our branded sort reduce our

consolidated single as some SKUs, and already, has process into not we hoped. SKU. started have areas, quite many a In as we we've but had that So some removed

we lot we've of car variation, of where for variation -- SKU, historically the have a every So is there multiple a options. presented with covers, consumer like things

we've count. So reduced that SKU

So to we X,XXX. went about there from about XXX,XXX SKUs

continue So a positive customer. even to the reducing SKU that big was of count for want paradox but reduce further our to choice we the

Unidentified Analyst

quarter? last this And what sales were is your quarter branded that percentage the of versus

Lev Peker

It was year. was XX% XX% this believe year. it last I

Unidentified Analyst

branded I ask -- question Yes, I was did that's wrong? label. get that or What did private the

Lev Peker

Yes.

So other the the side. branded would be

XX% this XX% -- I'm year, year. last XX% sorry, So

Unidentified Analyst

third no you have to And and the you got you or problem numbers? you portend that terms in then then warehouse Las sales that Las in thinking in a opening going - That's in you're that be Virginia, to used report how that build just that the [ph] there. Illinois, I Was Vegas; you're does of there you about have that's one into another distribution in -- lump one that facility? category had right shutting in, where here -- okay, in you where, Vegas. you mean one

Lev Peker

other the No, to it's incremental two.

thought so customers, the DC of will the XX% us majority the about of kind allow And new to to way country days the less. of or in ship it as we two the

that we And things be to allows that are well the by that, that as that. across we're the us closer to like increase realize executing faster zones. savings cost customer, then sales we getting the by so being customer as from the of West freight and the far expecting on one is delivery offset in as will in And DC not and so things closer and some operating as to shipping do Coast

Unidentified Analyst

And us metrics and that sales us the sales reporting? the to lastly, stopped e-commerce or are you marketplace then giving give something is going you

Lev Peker

AOV. So the sales be sales. We do. traffic and in But filings out don't out believe, we channels. is it break will I in reported, don't of terms we provide do What break we the that conversion

Operator

At I to for the question-and-answer now remarks. this Mr. Peker time, turn call would to over closing back like our concludes session. this

Lev Peker

speaking our to we forward Thank in you August. you and report all call quarter results today, the second with for we look joining when

Operator

today's conference. Ladies and concludes gentlemen, this

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

CarParts.com (PRTS) 13 May 192019 Q1 Earnings call transcript