PRTS - Earnings call transcript Q2 2019

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

Operator

Welcome to the U.S. Auto Parts Second 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 second quarter 2019 earnings release, which went out today at approximately 4:05 PM Eastern Time.

If you have not viewed the release, it is available on the Investor Relations section of the U.S. usautoparts.com. at website Parts Auto

This call available XXXX. replay be and being the company's webcast, on XX, a website will is through August

Before in statements to remarks we and management the like that additional laws, your begin, prepared forward-looking questions. make the statements federal remind securities contain to the within everyone forward-looking may meaning response of certain we'd

operating limited financial The forward-looking and metrics operating future and results. events, capital deployment, expectations, regarding current needs strategies, statements and include, customer liquidity, and key to, but indicators, business product our statements are and growth Financial not competition. expected and future suppliers offerings,

forward-looking are The involve factors of could circumstances statements subject do a to cause information and that to differ actual based statements. forward-looking The and those and expectations of are materially statements on current guarantees from not number in changes constitute results uncertainties performance. future

reports annual with Auto all Form XX-K refer in contained We U.S. quarterly Form you factors of report Exchange Commission. on risk Securities and the on XX-Q Parts to and the filed

in it revise discussion from on materially cause to results obligation the available or forward-looking can actual the made assumes be statement. nor that becomes or projections reasons Auto factors differ no to anticipated does in detailed materially any statements, or may update information the Parts that projected to U.S. or any even in those forward-looking a new in today's call these forward-looking to intend differ update For those from release release if revise to actual future. could results

such the results today's company, addition will be and for discussed. outlook GAAP as on discussing EBITDA, in financial that note call, adjusted Please non-GAAP financial measures, the to

included again, of this the the the which use Investor section U.S. U.S. Parts is the measures financial Relations release website. between and required press can Auto Regulation-G by call of on be Auto GAAP of today, non-GAAP explanation Company's measures non-GAAP issued An in and SEC reconciliation Parts in found

limitations, detailed substitute press GAAP for derived the such are which a in not is information have any accordance measure with Company's with in those measures and non-GAAP The performance release. non-GAAP

like our Please turn I'd go that, to call With Lev CEO, over ahead, Peker. the sir. to

Lev Peker

operator, you, over good U.S. very and took has progress repositioning has CEO, profitability. our I growth months as over proud little been seven made I'm since to a and of and for afternoon, It Auto Thank the everyone. team Parts begin

now We with team and have key out months, most the strengthened in We core XX of three rebuilt our significant the of on a started websites the initiatives ending with which including at our executed the last have sites. of personnel, start joined and consolidation goal year four various websites. with laid with few e-commerce year, and year we are the down the of to

later on job autopartswarehouse.com. discussed in these focus each has to better discuss include fewer a both resources the more was calls, these These do a to growing want differentiated our on carparts.com, on I'll and on we core websites customer. proposition while three for and ensuring property call. value have the unique optimizing jcwhitney.com As and to previous properties sites,

customer our Since parts. we simply, we're To our on to quickly X-year install how to their out we'll to have they I'll we more and have strategy for later right the in sure last as want well. deliver to want calling want be new roll make to want their right to place. put and them vehicle, it we begun call that to our update, agnostic right right time strategy parts, the parts that orders

private As noted press today, label our in focus products. begun our our have emphasize release to we on

catalog of a chain and great hours that invested supply a capabilities, it. has We into thousands have sourcing

advantage assets, source effectively one and that. of is strongest products these take our of full label to private to and monetize ability we Our plan

the of a which business, revenue have will traffic in shift to continue we over the to impact term. As fewer and to allocate result branded our near begun focus, resources

and expect business drive expenses, run enable manage cost a our we margins to the we're various private Emphasizing more However, of and initiatives and benefit of better profitability. will the higher label us private to of label leaner our implementing process better structure. considerably proportion operating a in to sales efficient

the financial speak I'd But like on before in David, our and to more further over quarter to commenting detail our call CFO, results. plans, David? to COO our about turn second

David Meniane

quarter. by right reduction was e-commerce million de-emphasis driven due low-margin of Net results. sales Jumping branded $XX of and in second the sales the product compared into $XX.X sales. to This ago in Lev. you, negative XX% transactions quarter primarily decrease Thank was proactive in year and to million our

label sales ago and the net to QX for sales in of X% accounted XX% XX% period. Private in compared increased year

accelerate we trend expect pace. faster a label As continue at our sales, we private this to

the in profit last Gross to million second compared X% million quarter year. $XX.X to $XX.X increased

product in of reduction for revenue to profit branded going XX% barometer we gross proactive effective total of XXXX, more believe now our growth a forward. is which accounted our sales, gauge Given

second the Last points margins our were year, this margin ago to to impacted by year we have detention quarter charges increased quarter detention as compared XXX and merge period. in basis the charges the XX.X% Gross well. XX.X% and in

XX.X% higher-margin to by QX improvement, in which our point XX.X% a have products both improved from gross selling primarily led pricing increase XXXX XXXX, margin private in an periods QX label basis XXX compared and in to charges these strategies. of was Excluding a would driven

second the $XX million million Total in to OpEx last compared was $XX year. quarter

other increased people primarily marketing well As costs. in increased investments as a as severance compared marketing employee OpEx our driven and to and transition platforms revenues, percentage of spend, XX.X%, to by XX.X%

year, operating improving margin company we joined focus gross since we the on team Our and laser-focused now been to this cost are beginning has on structure. our

can to match to operated plan structure our action and more aggressive be directive strategy. As Lev our this cost so to efficiently, mentioned, business take realign we better new

$X.XX million the compared to in Adjusted a in year-ago $X.X $X.XX $X.X in the loss or proactive due sales. quarter The share by quarter. per of $X.X compared was decline lower million our share net the million a and quarter. sales $X.X the second QX million in EBITDA Net loss to e-commerce in was prior reduction or channel aforementioned lower-margin decrease to driven year was of

continue adjusted adjusted these we the of remain XXXX. EBITDA factors through positive Although the in impacting to to EBITDA end anticipate year, we committed

let spend details which million the quarter, the Now focus key our the sites consolidation sales. result metrics and lower sites. our are now had in as decrease XX also the of of operating $XX.X a QX with reduce product last me primarily is down million led was quarter. marketing driven And Traffic we mentioned, the provide proactively our year-ago label us to some in for branded to $XX.X on sales, second compared by private on X as traffic for year to Lev

branded label, by year. higher to but X% with for private was in Decline capture, channel Conversion sites average AOV both primarily XXXX. benefited the margin. from declines year, our last e-commerce orders driven in product same to traffic. shift in compared returns, credit and to and $XX which defined sales was compared mix mix from last from X.X% XX.X% which significantly after lower includes a XX.X% comes to as in fulfillment the points product period which a second basis compared up order QX Revenue $XX total card price XX quarter mostly and to in was marketplaces Online decline value, was point

month fiscal revolver well as of of Turning a for XXXX. of employee to marketing a new sheet. which set-up The result the million shipping a transition to a week no of $X technology XX, $X.X schedule. expenses next center Las year-end as June will we compared about XXXX, in CapEx, at cash distribution cash balance At costs, had in begin debt balance as decrease Vegas, cash ahead and costs million

realizing two XX% as or has square-foot enable XXX,XXX us us freight two of country, costs. footprint shipping a effectively to provide of also expansion delivery a consumers. than in for our to or many more will into new while requirement the This day evolved position The day DC compete will savings less less

do $XX.X compared for the quarter XXXX position current of is in our and inventory optimized. this to not the million ended focus to will productivity, $XX.X of us a improve inventory We XXXX. with work as to remain We end still key have million at our

is accomplish this, items past. objective to In outs, stock have have revenues do significant we also We more had and on have our threefold. inventory solutions. Our improve overhauled the Out-of-stock demand order software carrying costs. turns planning use negative started our advanced minimize team completely and and in forecasting formulas impact to forecasting and

continue we position So forward. moving inventory our expect to improving

over the Lev. to With turn that, I'll back call

Lev Peker

order this down to continue In new At our our focus sites unique and part, we you, right our needed pillars, to teams right David. place. assets. the attention path and our three offers execute embraced Thank of each down management right we this time, associate our until Across value strategy have of on a consolidated the on X, consumer proposition. we'll these fewer and time organization, sites have to

carparts.com too Without goal flagship much into is going site. detail, our our make to

We last the the entirely. rolling have We're replatformed XXX% site months process traffic and the August. have that in it of right be end the our now, by focused few should new our to users to out of efforts select the of site over available on and site

it have easier also seconds, redesigned with find to the checkout. faster for significantly vehicle right is make the and user your site he and three to speed to parts experience we below

months, we'll the We out over on be to those few improvements plan call. and have next share other rolling our that next I

this improved experience user experience getting users Overall, technology schedule. and have the and of done great to new a job our teams ahead

Parts still We serves the that the to the usautoparts.com also our JC over noting X General as and also X Corporate Investor expect worth and that It's months. now Auto both domain Relations we sites Whitney website. next replatform, have Warehouse

received Moving third deliver which we Las Vegas, right to part have quicker, center our the facility. in able is be time distribution parts in and initiative, several opened the containers on, as of to

it expect I'll of the on fully with by end more to call. month. our be share you We details to this have operational next

and the continue us brought we but new few highly new for work VP been over initiative enforcement issues new to the from team outstanding no admitted personnel. party and talented say last outstanding we progress, are still of the now team. has or terms be to Operations our can round we update all any our teams of are have key replenishment VP of our that of have There early promising. Another growth. with doing, regarding with have neither made duty agreement and Since resolved year's call, senior these confidential, damage is the out that with wrong claims. the terms issues to Border and And have a a planning our automotive also reached building to settlement happy results while Customs Agency organizations, very and I'm last Protection Engineering, great months last and out individuals announce on these been recently we U.S. done we

have be that lot and next well are greatly out remainder charges our we the temporary to related Accordingly, as month. the our sold on majority flow cost being season containers of a XXXX. The that reduced as financials over for our clear managed of to time, charges are through remaining the storage charges to by goods should of amortized will completely retention-related

to of issues and finally We're with automotive to aggressive customs now to competitors. aftermarket our these manufacturer, particular, for levels. sell our work in grilles. litigating taken previously all taking approach expect One, have with grilles. rates moving importing a ability And grilles we is and do growth, As still this and an parts and back to be normal manufacturers has otherwise, issue the to seized. we're of we're past wait with substantially improve to not now respect in-stock our although But against we one our see stance the in ports, terms inventory

As our this is productivity not standards inventory meeting has that new David the team set. management mentioned,

optimization keenly we'll focused So year. inventory be the back the in on half of

the but and in multiple better initiatives reposition growth profitability. personnel importantly, on need now is is company execute the we our fronts and we to the margins. made a Overall, still for technology, have progress have many company to There We moving right marketing infrastructure and direction. and handle that on, on most

as and to our look our are cost structure, steps journey DC expected new forward adjusted were improve speed to just to to shipping reduce Auto times all customers. result realign U.S. operating taking our the for next execute year-end, plan. sites, and XXXX but Vegas our Parts beginning, is for The the and leverage EBITDA which to in meaningful shareholders by in maximizing productivity in inventory we value necessary we're costs deliver optimize for our steps reduction positive and on begin Our Las cost new replatform up freight to

now that, for call open we will With questions. the up Operator?

Operator

from first today Prestopino coming Our is question Research. Barrington Gary for

alive. now line Your

Gary Prestopino

gentlemen. afternoon, Good

Lev Peker

Hi, Gary

Gary Prestopino

flow the price they those possibly were you just we of went could Well, revisit just much? first narrative, numbers Daniel, your when all, sales? kind on of through private some of label? you how X.X% some up You said of label through,

David Meniane

That's the product It's built is line, for. company focus is correct, of much yes, what is main forward. we're higher-margin that the on. and what we're focusing This a this moving

Gary Prestopino

Okay. XX% quarter? the And in of they comprise your sales

David Meniane

last Yes, year. this quarter, XX.X% XX.X% compared to

Gary Prestopino

in branded, growth you the the and then terms of could those of give then of stats the And too Okay. terms sales? percentage me in

David Meniane

year-over-year. Yes. Branded about down was XX%

Gary Prestopino

said was you think of had I it about? a percentage yes, sales, And

David Meniane

was quarter year, So yes, XX.X%, the this last second XX.X%. year, for

Gary Prestopino

because expansion, company gross differential gross great you is to get selling label private some do a margin growth from a the Can basis? betterment us, of you had How many branded what – to also, product? private the help margin you versus a label your Okay. bps gross just margin from

David Meniane

is down profit about what to the be if say. I even quarter-over-quarter or company-wide. label gross That's that's you main higher. branded going Private XX% focus. see And year-over-year, forward, moving sales Again, significantly the is higher can

Gary Prestopino

Right.

am So your as private – exercise, the this of in of quarters but overall, correct that take margin, the least mute you gross sales, would through growth in couple the really improve kind go that I this fact of the label sales to that assumption? going your is more at next

Lev Peker

And on our better private that's we report think think call, in a as David's think gross the remarks, growth maybe I label. Yes, correct. on profit dollars, I is I we'll stated barometers in also and

lot our detention of that as have lot issues still not far goal sell So in it. sitting to to inventory is parking being growth. and in QX accelerate able and as a Obviously, bills we the

our of So accelerate business. to is the goal growth growth was kind of label muted, private the but our

Operator

next from question today [indiscernible] Research. from is Our coming Cap Small Consumer

alive. Your now is line

Unidentified Analyst

Good afternoon.

the is Just the What have and what the over team for have at greatest little now a a upside driver? couple And has longer-term biggest of quarters. what questions. been been you biggest surprises? been Auto do think Parts the Lev, or two U.S. potential you

Lev Peker

Yes.

I detention biggest the was think the issue. surprise

here one, David X call So I've been here been quarter, for months. it, for months, X has maybe X

issue. we right when So when I that's think he started, caught the detention

our was that a gross and call expenses. million So it, $X our a, margin operating hit to to about

So surprise. that has definitely been the biggest

strategy I as think of as far the upside, I addresses our kind think that.

we the on Our focus at a label, margin. private label. sell which actually higher is was private company to sell And built

very quality capabilities, product. sourcing control, good we have We warehouse

far there to into private some So label as this barriers business as goes. are entry

the us, And that's where the biggest and company. for so upside, taking we're think that's I

Unidentified Analyst

Okay.

for the back the Going charges detention the first to of half year.

the on to So the – second affect touched this, going for are I and year? think the of half they Dave how company certainly,

David Meniane

Right.

charges, containers that that different for it, we're the to on we in question. prior just returning which from costs good soon discovered carriers, fees as to quick make a joined the Lev the this we years. page. – not These on just is are the same This I the were that detention late customs the reminder the just So the issue A is company. mentioned is incurring as sure

capacity that detention charges and of these but cost up amortized they a hit of a being But charges, financial from standpoint, goods OpEx. temporary reduce set storage kind sold. also increase we into to So those are

about $XXX,XXX to $XXX,XXX. impact gross for was OpEx second impact the to the and profit So quarter, was the about

QX, impact for overall, the $XXX,XXX. financial was So

of impact is company year, about the the on million. the back the $X for half total Now

million impact. and combination about $X OpEx with impact left gross margin of we're So

a Now of year. financial standpoint, But cash the already until from trickle money. we've most to the down going spent from a that standpoint, of reporting it's end

Unidentified Analyst

Okay.

So do year. to And But of you looking – place the you towards now. things when the a have flows going think have be in of half inventory couple I think normalized? are some back the you you're

David Meniane

have inventory address going long But been we've is plan to Yes, in little place, good Obviously, very our take long. for bit and it takes to a really, longer stuff we for issues sitting issues lead little is a the but that's goal underlying time. bit to times. is I out-of-stock mean, a in something the the us too which that warehouse facing, due

we So but for to to it costs, it X 's optimize want terms XX minimizing and months. does carrying to – going take

Lev Peker

– the here is of of David execute really on teams planning what people to add lot have to were to this that a didn't think in kind give proper right inventory. We just And I place. didn't tools we the saying,

have So you'll and well I for for for started getting it's X little replenishment bit think, next of us a now the formulas, use because we them the right improving, to we'll as are get and right. times I tools have planning started it QX building but as by of see by lead right going a team months, utilize think as Hopefully, year, time QX, the to to X – correctly. it it for to the take

Unidentified Analyst

you. That it. is thank Okay

Operator

a question from Next follow-up is Gary Research. from Prestopino Barrington

Your line now is alive.

Gary Prestopino

couple more guys. questions, a Just of

fairly private of or as marketplace agnostic through? terms sales any go to e-commerce are your you of with focus marketplaces, those on In which online label,

Lev Peker

the channel. think while Correct. about to a seeing may little be And you e-commerce on why decline e-commerce the was our of. transactions the think revenue That's pulling it out the a our majority branded in I of doing that way is, bit of channel we're

agnostic the label, and it. growth we're we're where sell However, the going to pretty we reporting be private to in

that. for some in more, to have but us cost we'll marketplaces mechanisms compensate place Now pricing

Gary Prestopino

what on believe. what that for stock to? when and I'm said is one eventually XX,XXX And out done? – and branded to you at would I had you Where branded, SKUs does sorry Lev, want shake time, categories then And Right. all about

Lev Peker

Yes.

number So XX,XXX. I reporting private had label where SKUs, at think we've we're that the and one point, was

we're now. up XX,XXX I to think

have side, it, not including the branded call like color variance, XXX,XXX we the roughly, material. SKUs, and On XXX,XXX to

way is SKU label every going tail. business the approaching that's long it extremely be private we're to think that there. not I to able we're This out is

with to brands anywhere we X we SKU complementing stock one be it's so other we in and everything. where strategy for we user to because don't also label will inventory, don't the have may then good-better-best private example, branded choose impossible show that almost a stay SKU, a And on may where pursue we where or a have

So be It just it not there's still different a role – going to we're completely. now. plays business, branded it exiting has

Gary Prestopino

And your as I is to then down? is Okay. your rates? the to want of know you through don't doing target what out exactly rightsize for work more for getting stock what really what would company, want it you're What to now, think you public. But mind, change it is is your stock-outs where be obviously, from you where But you right it make – unless optimal. zero now? are optimal an what do in target

Lev Peker

Yes.

there's think amount least trying most What for optimize sales is the number to we're carrying the really time I that of us. was optimize for to what no for optimal costs.

But And higher because they a parts, stock door lights, or take just it's different be it's may tolerance. so so we space. if little that up like because bit is, hoods, number it to if say a have what hard it's handles smaller much out may

varies communicate kind total. to why of really So it's is part it's hard theme, on by which I think

Gary Prestopino

Okay, thanks guys.

Operator

like the turn session. I'd floor to further Thank comments. management you. or of closing end back the our We've to for question-and-answer any reached

Lev Peker

quarter will getting and you you November. our call much. on we in Thank third so for with update all the you today us, Thank on

Operator

teleconference. conclude does That you. Thank today's

a may have participation day. We at You wonderful your your you lines time, and thank disconnect today. for this

CarParts.com (PRTS) 10 Aug 192019 Q2 Earnings call transcript