Welcome to U.S. Auto Parts First 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 first 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. 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 May 24, 2017. Before we begin, we would like to remind everyone that the prepared remarks contain certain forward-looking statements within the meaning of the federal securities laws and management may make additional forward-looking statements in response to your questions. The forward-looking statements include but are not limited to statements regarding future events, our future operating and financial results, financial expectations, expected growth and strategies, key operating metrics, and current business indicators, capital needs and deployment, liquidity, product offerings, customers and suppliers, and competition. The forward-looking statements are based on certain information and expectations are subject to uncertainties and changes in circumstances and do not constitute guaranties of future performance. The forward-looking statements involve a number of factors that could cause actual results to differ materially from those statements. We refer all of you to the Risk Factors contained in U.S. Auto Parts' Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission for a detailed discussion on the factors that can cause actual results to differ materially from those projected in any forward-looking statements. U.S. Auto Parts assumes no obligation to nor does it intend to update or revise any forward-looking…

Thank you, Operator. Good afternoon everyone and thank you for joining us to discuss our first quarter results. Before I begin, I would like to take a moment to introduce and congratulate Aaron Coleman on his new position as CEO for U.S. Auto Parts. Aaron has been with the company for more than nine years and has served as Chief Operating Officer since 2010 before being appointed the President last year. Needless to say he has been instrumental to the company's operations over his tenure and we're all very excited to have him lead our organization. Turning to the quarter, I'd like to provide a summary of our financials reported in our press release today, as well as an overview of key business metrics. Unless specifically noted, I would also like to remind listeners that all metrics exclude the AutoMD operating segment which we will be reporting as discontinued operations following the recent dissolution of the AutoMD entity. Net sales in the first quarter were up slightly to $80.8 million compared to $80.7 million in the year ago quarter. As mentioned during our last quarterly update, we experienced a soft February which we believe was largely attributable to mild weather trends related to milder temperatures in many markets and delayed tax refunds by the IRS. We experienced a sales pick up in March as tax refunds were received but it wasn't enough to fully offset the shortfall in February. Sales in the second quarter have since returned to normal levels with private label business seen double-digit year-over-year growth thus far. Looking at the marketplace sales channel which are largely private label sales, we saw a 24% increase. This was offset by e-commerce sales which were down 10% primarily driven by lower traffic and lower average order values. Offline sales remain…

Thank you, Neil. Let me start by saying that I'm very honored by this great opportunity and I'm proud to lead an amazing team and company with a clear focus on creating value for our customers, employees, and shareholders. I'm excited that we compete in a large addressable market with many favorable macro trends including a continued increase in vehicle miles driven, the aging of the vehicle population and a 15% to 20% online growth trend. Over the last few years, we've been transitioning to a vertically integrated e-commerce company and we've proven that when we have the most competitive supply chain we win. Our strategic plan is simply to create a compelling value proposition by offering our customers a wide selection of Auto Parts at tremendous quality and value and providing them the confidence that they're selecting the right products for the job and ultimately making it as easy as possible for them to do business with us. The growth of our private label business is strong and continues to be a major focus point as it enables us to be price point competitive with our customers at a higher margin than our branded business. During the first quarter, we added more than 1,500 new private label skews and we continue to anticipate adding a total of 7,000 to 8,000 new skews in 2017. We also continue to expect private label sales to grow double-digits for the year, despite the 6% private label sales growth in the quarter. We are maintaining our previous 2017 guidance of low-to-mid-single-digit revenue growth and $4.8 million to $7.8 million of net income with $15 million to $18 million in adjusted EBITDA. However based on our current year-to-date performance, we're trending towards the lower end of guidance. As we manage and monitor sales channel performance, we will ensure that our expense structure is aligned with the margin contribution to ensure EBITDA flow through is healthy. Turning to AutoMD, after agreeing to redeem out the minority shareholders, the AutoMD board decided to dissolve AutoMD entity and distribute the assets to U.S. Auto Parts. As a result, the AutoMD website and assets are now fully owned and operated by U.S. Auto Parts. As we renew our focus to our core business AutoMD will no longer be a key initiative. However, we continue to anticipate positive net income from AutoMD as the revenues generated from the media sales will be greater than the ongoing operating expenses. We will also no longer be reporting on AutoMD's financial results as an operating segment. With that, we will now open up the call for questions.

Thank you. Ladies and gentlemen we will now be conducting a question-and-answer session. [Operator Instructions]. Our first question is from Darren Aftahi of ROTH Capital Partners. Please go ahead.

Hey guys, thanks for taking my questions and congratulations to you as well Aaron on the new position.

Thanks, Darren.

Just a couple quick questions, so you kind of get private label grow up in the quarter and the composition as you look at may be kind of weighed down the month of February and then rebounded in March as you look to the second quarter is some of that revenue or funding maybe from tax refund that was delayed or you I know you can may be quantify that exactly where you're seeing maybe an over indexed growth rate thus far through the quarter in Q2 and then I have a couple of follow-ups.

No, Darren, it’s Neil. We're seeing actually immediately after the tax refund started getting released our sales week-over-week really rebounded significantly to where it followed into March where we are seeing clearly back to our traditional double-digit increases in private label. Some of our sectors are growing a little faster rate than historically. But overall it really showed that that was a temporary issue that was related to both the weather and the IRS refunds.

Getting just to add to that -- add to Neil's answer there. We haven't seen the demand fully compensate for the headwind that we saw in February, we really saw demand return to a more normal level, so that's where you hear us reaffirm the low-to-mid-single-digit guidance for the year.

Got it. Let me be transitioning to kits I know you talked about adding 7,000 or 8,000 by the skews this year, can you just talk about kits in general, what portion of your business are kits and then what are your kind of plans over the next 12 months in terms of scaling that? And then maybe just how that benefits you kind of from a margin perspective and is that something where it's going to have more of an impact longer term on fiscal 2018 and beyond are there actually could be a near-term benefit if you guys ramp up kits this year?

Yes, kits are certainly included into our overall sales and EBITDA guidance as it is. We have seen some success with kits. We think that there are great value option for our consumer. However it isn't something that will drive enough sales for us to meaningfully change the guidance for 2017.

We have made pretty good progress. So Darren in the first quarter, we actually entered about 2,500 kits into our assortment and we've actually increased some of the staffing levels to do the mapping required to actually map more kits, so we believe that that number we anticipate will increase as we keep pacing through the year by providing more resources to get those onboard without any working capital commitment. Needless to say it's an existing skew that we've already owned that we're just putting a few things together. So as Aaron mentioned we have embedded and reflected that in our sales numbers but we clearly believe it is an opportunity to raise average order value and other things and potentially gain some efficiencies on freight as we ship more items under one shipment.

That's helpful. I know you said last one, just when we look at your profit ranges for the year both on EBITDA and the net income, I know Aaron you said you're kind of trending towards one of those and what's the only variable in terms of that really the growth in sales at a particular private label, can you just kind of help me help understand how you come in at the low-end versus how you come in at the high-end of those EBITDA ranges? Thanks.

Sure. Certainly the big inputs there are going to be in the top-line but also the margin line and one of the things that we have witnessed is that we've seen some growth into some of our channels that have a lower average selling price and that put some pressure on some of our variable line items. So what we are going to do on a go-forward basis is that we're either going to adjust the selling price or adjust the expense lines within those margins to make sure that they flow through at the EBITDA ranges that we're comfortable with and get those back on track. So clearly the sales line will drive it and also kind of restoring our gross margins back to that 29% to 30% range for the year.

Thank you. At this time, I would like to turn the conference back over to management for any closing remarks.

Thank you for joining the call today. Please note we will be participating on several Mundial road shows over the next couple of months and I hope to meet with some of you then, if not we will look forward to speaking to you during our next report for our second quarter which will be in August. Thank you.

Thank you. Ladies and gentlemen this does conclude today's teleconference. You may disconnect your lines at this time and thank you for your participation.