Welcome to the U.S. Auto Parts Fourth Quarter 2013 Conference Call. On the call today from the company are Shane Evangelist, Chief Executive Officer; and David Robson, Chief Financial Officer. By now, everyone should have access to the fourth quarter 2013 earnings release, which went out today at approximately 4:00 p.m. Eastern time. If you have not received the release, it is available on the Investor Relations portion of the U.S. Auto Parts' website at usautoparts.net by clicking on the U.S. Auto Parts' Investor Relations tab. This call is being webcast, and a replay will be available on the company's website through March 20, 2014. Before we begin, we would like to remind everyone that the prepared remarks contain certain forward-looking statements, and management may make additional forward-looking statements in response to your questions. These statements do not guarantee future performance and speak only as of the date hereof. We refer all of you to the risk factors contained in U.S. Auto Parts' Annual Report on Form 10-K and the quarterly reports on Form 10-Q, filed with the Securities and Exchange Commission, for a more detailed discussion on the factors that could cause actual results to differ materially from those projected in any forward-looking statements. U.S. Auto Parts assumes no obligation to revise any forward-looking projections that may be made in today's release or call. Please note that on today's call, in addition to discussing the GAAP financial results and the outlook for the company, the following non-GAAP financial measures will be discussed. EBITDA and adjusted EBITDA, an explanation of U.S. Auto Parts' use of these non-GAAP financial measures in this call and the reconciliation between GAAP and non-GAAP measures required by SEC Regulation G, is included in U.S. Auto Parts' press release today, which, again, can be found on the Investor Relations section of the company's website. The non-GAAP information is not a substitute for any performance measure derived in accordance with GAAP, and the use of such non-GAAP measures have limitations, which are detailed in the company's press release. With that, I would now like to turn the call over Shane Evangelist. Please go ahead.

Thank you, Camille, and thank you all for joining the call. Before I get into the quarter and the current trends, I want to be clear that I'm excited about the business. I'm encouraged by both the revenue and profit trends. U.S. Auto Parts is currently in the strongest position we've been in the last 2 years, and I believe we are back in a position to be aggressive and gain market share. Turning to the quarter, I'm pleased to announced the positive trends we began to experience in the first part of the fourth quarter continued throughout the quarter. I'm also encouraged by the improved trends, so far, in the first quarter of this year. For the fourth quarter, our go-forward sales channels, meaning the channels that we currently operate today and plan to operate going forward, were up 2.7%. Our total revenues were down 5%. The gap between the positive 2.7% and the negative 5% is primarily due to revenues we generated last year from websites we retired and that no longer generate revenue today. Fortunately, we will not have these headwinds in the second half of the year. For the current quarter, trends continue to improve with our go-forward sales channels trending up 6.9%, and our overall revenues trending down only 0.4%. Certainly, the weather has been favorable this year, but I believe a good portion of the trend improvement is from our new business strategy and operational execution. I believe these trends, specifically, our go-forward sales channels, currently up 6.9%, support our previous guidance and we anticipate being down in the first half of the year and up in the second half of the year, with our go-forward sales channels being positive throughout the entire year. I also expect to get back to growing with industry…

Thanks, Shane. Good afternoon to everybody on the call. Unless otherwise stated, this quarter refers to consolidated Q4 2013, and last year refers to Q4 2012. In comparisons, our Q4 2013 compared with Q4 2012. Also, percentage and basis points discussed are calculated using net sales. However, for advertising, we'll discuss comparing to net Internet sales. Adjusted EBITDA for the quarter was $1.6 million compared to adjusted EBITDA of minus $1.1 million last year. Adjusted EBITDA excludes non-cash share-based compensation expense of $198,000 this quarter and $265,000 for the fourth quarter last year. CapEx for the quarter was $1.6 million compared to $2.3 million last year. Adjusted EBITDA less CapEx for the quarter was even compared to last year of minus $3.4 million. This quarter's net sales were $59.7 million compared to $62.8 million last year, a decrease of $3.1 million or 5%. During the same period, net sales channels, excluding websites eliminated in 2013, increased by 2.7%. Our total online sales decreased $3.1 million or 5.5% this quarter due to a $4.5 million reduction in sales from websites we retired, offset by a $1.5 million increase in revenues from our go-forward sales channels. Our off-line sales, which consist of Kool-Vue and wholesale operations were $6.4 million, essentially flat with last year. Turning to margins. This quarter's gross margin was 29.3%, up 30 basis points from last quarter of 29%, and up 100 basis points from last year of 28.3%. The 30 basis-point improvement over last quarter was primarily driven by a higher penetration of Private Label sales, which yield a higher gross margin rate. Last year's gross margin rate of 28.3% was unfavorably impacted from a write-down of inventory slated for return to suppliers. Our Private Label mix was 55% of net sales this quarter compared with 48% in…

[Operator Instructions] Our first question is from the line of Jared Schramm with Roth Capital Partners.

A series of questions here to jump into. How do you intend to pursue revenue growth going forward?

Yes. So a good question there. From a revenue perspective, we think about it probably 2 ways. One is e-commerce; two is the online marketplaces, which includes eBay, Amazon and the like. The online marketplaces, we see good double-digit growth in that space, basically because we add so much PL product that, that business continues to grow. On the e-commerce front, we think about growth there probably 3 ways: Traffic, AOV and conversion. From the traffic front, certainly, I think we'll see some pick up in the back half of the year as we get past the websites that we retired. And then, our normal traffic growth -- we've consistently been able to grow traffic, outside of this period that we've been through, we're shutting sites take down. But our big focus, Jared, has been around conversion this year. And going forward this year, I think you've seen conversion up from 1.42% in Q3 to 1.52% in Q4. And then, last year, Q4 was 1.41%. So conversion is up about 8% year-over-year. I think you'll see that continue to happen. Of course, SKU expansion still helps that, 4,000 to 5,000 Private Label SKUs, as we mentioned. We probably add 50,000 branded SKUs somewhere in that timeframe -- or that frame. Product availability, another point out that we are -- or product find-ability is another point that we're really focused on. And that's really broke down to search, and where our real focus is this year is around navigation -- on two fronts. One is just making is served in a lower quantity that's more relevant, meaning it fits the car. And then second, our sites are going through a bit of a redesign right now to make sure that we've got them in a responsive set, to make sure we can handle the growth in mobile traffic. And then, as I alluded to on the call a little bit, our branded business is off right now. We've typically been premium priced in branded. And frankly, the gap between our Private Label growth and our branded growth has clearly alerted us to the fact that we probably need to be more competitive on price point there, and you'll see us take some steps there this year to make sure we don't lose share in the branded business.

Okay, that's very helpful. Looking at the weather, particularly in Midwest, East Coast, Q4 into Q1, as vehicles get more damage, do you expect some sort of a decent bump coming into Q3 and Q2 as a result of that?

Yes. So I think, certainly the weather's helpful. You've seen it across the auto parts space in general. It's probably, my guess is 2 to 3 points of our up -- 7 in our continued operations, 2 to 3 is probably weather. And I guess, we'll see how long that lasts. But certainly, I think it's been favorable to date. And I don't -- I think we'll see good help from the weather. That said, we had a difficult first half of the year with in-stock rates because of some of the financial difficulties we went through. And as we get more in stock, I think operations of business will far exceed any weather impact this year.

Okay. And then you touched on in the first question I asked about conversion rates improving, customer acquisition costs down 12.6% year-over-year. Could you go into a little more detail as far as the metrics driving that improvement?

Well, the acquisition cost is down -- some of it's mix, for us. And so, we've got some more efficient channels to acquire through. The other time it comes down is, is if we're not getting a variable return that's high enough, then you'll see marketing spend decrease. So -- but a lot of that is mix amongst the actual pay channels that we spend into. From a conversion perspective, I mean, the best number on conversion is what the rate looks like right now. And of course, internally, we've got a bunch of different metrics around bounce rates and time on site, and those are the metrics that we try to improve going forward.

Okay. And then, CapEx, you talked about that briefly, I think, as far as the full year is concerned. Is the $6 million annually a good run rate to look at on a base level?

Yes, the $6.5 million, I think, is the number we said. I think that's about the right number this year.

And then could you elaborate a little more -- you mentioned that comps being tougher in the first half year and you expect to see a stronger growth in the back half?

Yes. So if you recall, last year, in the second quarter, we retired a lot of websites. And those websites drove traffic and revenues. And as we get past the first half of this year, we get into a point where we'll just be talking about the operations of our business on a go-forward basis. What we've just indicated here is those comps were up 7%. And so hopefully, we continue that trend and maybe even accelerate it. And so, in the second half of the year, we shouldn't have that headwind from the sites that we turned off in the end of the second quarter last year.

And then, 2 quick last ones here. You mentioned that where you're positioned now is a new expense floor for the company. Anything more to squeeze out of it? Or is this about as bottom of the barrel as you think you'll see on the expense side across the board?

Well, I think we've cut the expenses. You'll see them come out on a year-over-year basis through the P&L, right? Because we took them out last year. I think we've got the right floor, though, and details as we gave you there. So I think we're on a good spot there from an expense perspective. Obviously, Jared, if we needed to reduce more expenses, we would look at those and take those actions. And, conversely, if we felt like there was upside where if we spent some more dollars in there we could get more revenue growth and profit growth, then we would also obviously evaluate that.

And then, last question here. Looking at the marketing expense specifically, has time made you more efficient with that marketing spend? $9.3 million compared to $12.1 million year-over-year? It seems like you're getting some better growth out of that. Is that more of your experience as far as the marketing is concerned, you know where to go? Or is there some other element behind that I'm unaware of?

Yes, little bit -- certainly, our experience of where to go but there are some mix shifts where the cost of sale in one channel would have been 18%, and the cost of sale in another channel might be 10%. So I think part of it is -- that we're just more efficient with what channel mixes we're spending through. And then also a lot of it has to do, Jared, with the gross profit dollars you have to spend against it, so if margins compress, you can just spend as much in marketing. So the combination of those 2 is really what's going to dictate that percentage.

[Operator Instructions] Our next question is from the line of Mitch Bartlett with Craig-Hallum.

So Jared's questions kind of ran the gamut there. But maybe we could focus on gross margins. I think you said gross margins in Q1, 31.5%? Is that correct?

I said, they are going to be above 30%, is what I said in Q1. They're trending above 30%.

Okay. I had heard 31.5%, and I thought that was a pretty strong number. So Private Label was 55% of sales in Q4, up from 48%. Where might that trend over the next 4 quarters or so?

Yes. Truth be told, I hope it might trend down a little bit as we get some more market share back from our branded business, Mitch. But I do think the PL business, just the base number will continue to grow at double-digits, which is what it's doing now. So I like the growth on that business. And I think part of the reason you're [ph] from 48% to 55%, is because we had more growth from PL, but part of it is because we had a retraction in the branded business. So I'd really like to get that branded business back on track, always profitable. And so what I would tell you, though, is we're going to continue to increase our PL SKU count by, whether it's going to be 5% to 15% a year, and hopefully, we see -- continue to see the overall dollar value increase by that. And then, it's going to be the mix percentage will really depend on how fast we grow the branded business.

And the branded business, the slippage from not as [indiscernible] pricing as you may have wanted, is that because pricing continues to get tighter or is it just a -- your own pricing matrix?

I think it's less that pricing is getting tighter necessarily out there and more that we don't have as much visibility as we had previously. And hence, we probably have to get a little sharper on the pencil on the pricing.

Right. And now the money is a little bit easier for you, might you, at some point, put the pedal to the metal again and start to really aggressively market?

Yes. So we'll continue to market to where the variable contribution margin breakeven and keep pushing forward with that, Mitch. I don't think we'll change how we market from that perspective. I think our big opportunity, though, is around some conversion metrics on the site. Obviously, if the conversion goes up, then you can spend more money on marketing. And so I think, this year, I got a big focus around the site conversion, user experience, making sure that we're set up for that mobile experience in a big way. And obviously, if conversion increases, you can spend more marketing because you're driving more gross profit dollars per dollar spent.

[Operator Instructions] And that does conclude the Q&A session today. I'd now like to turn the call back over to Mr. Evangelist for closing remarks.

Thanks, Camille, and just want to thank everyone for joining the call. We look forward to speaking to you again for the first quarter. Thanks.

Ladies and gentlemen, that does conclude our conference call for today. Thank you for your participation. You may now disconnect.