Welcome to U.S. Auto Parts Second 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 second quarter 2017 earnings release, which went out today at approximately 7:30 AM Eastern Time. If you have not received your release, it is available on the Investor Relations portion of the U.S. Auto Parts' Web site 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 Web site through August 24, 2017. Before we begin, we’d 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. These forward-looking statements are based on current 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…

Thank you, Operator. Good morning, everyone, and thank you for joining us to discuss our second quarter results. I’d like to provide a summary of the financials reported in our press release today, as well as an overview of key business metrics. Unless specifically noted, I'd also like to remind listeners that all metrics exclude the AutoMD operating segment, which is being reported as discontinued operations following the recent dissolution of the AutoMD subsidiary. Net sales in the second quarter were up 3% to $80.2 million compared to $78 million in the year-ago quarter. Looking at our marketplace sales channel, which is primarily comprised of private-label sales, we saw a 37% increase driven by our expanding private-label assortment and value proposition. Our total private-label sales grew 14% in Q2 and accounted for 72% of net sales compared to 65% in the year-ago period. This was offset by lower e-commerce sales which were down 13% primarily driven by lower traffic to our sites and lower average order values. Aaron will provide more color on this channel dynamic later in the call. Also note that offline sales for the quarter were up 14% to $7.5 million. Gross margins in Q2 were 29% compared to 30.4% in the year-ago period. The reduced margin was primarily driven by higher freight costs and the impact of lower margin channel mix, partially offset by a higher margin private-label mix. We continue to expect gross margins to range between 29% and 30% going forward. Total OpEx in the second quarter was down to $21.7 million compared to $22.1 million last year. As a percentage of revenue, OpEx was reduced 130 basis points to 27.1% versus 28.4% in the prior year. With an increased percentage of revenues coming from our lower margin marketplace channel during the quarter, we…

Thank you, Neil. Our second quarter was highlighted by the return to double-digit growth in our private-label business. We continue to believe our private-label business uniquely positioned us in the marketplace as it enables us to be price point competitive with our customers at a higher margin than our branded products. We plan to continue investing in private-label as it represents the fastest growing and highest margin portion of our business. During the second quarter, we added over 2,500 new private-label SKUs and we continue to anticipate adding a total of 7,000 to 8,000 new SKUs in 2017. As Neil mentioned earlier, we are experiencing a shift in channel mix this year with our online marketplace channel gaining momentum and our e-commerce business seeing lower traffic. We are addressing these channel dynamics with various initiatives designed to accelerate e-commerce growth and cost reductions to properly adjust our expense model. Though we are certainly embracing our marketplace growth and capitalizing on that segment, we plan to accelerate e-commerce growth by reinvesting our websites to enhance the consumer experience. We want to ensure our customers have the widest selection of high-quality auto parts available to them, while providing them with the confidence that they are selecting the right products for the job. Ultimately we’re going to be focused on ensuring the auto parts purchase process as easy and seamless as possible across our sites, including the mobile experience. We can do this by continuing to add the most relevant new SKUs to our sites, making it easier for consumers to find the products they need, improving our site speed, and creating a frictionless checkout experience for our customers. We expect these investments to further improve conversion which will enable us to drive more traffic. On the expense side, we paired back on…

[Operator Instructions] Thank you. Our first question is coming from the line of Darren Aftahi with ROTH Capital Partners. Please proceed with your question.

Hi. Good morning, guys. Just a few, if I may. So a lot of your competitors kind of talk about some weakness in the macro auto parts sector, I guess, outside of the shift in channel mix. I’m just kind of curious, if you’re seeing anything in particular in that regard?

Good morning, Darren.

Good morning.

Well, what we’re witnessing is a little bit more of a competitive environment online. So while the macro across the industry might be facing a little bit of pressure. They're still inherent online growth out there. So we're seeing increases in demand and search terms and things of that nature. So while we can't comment on the overall industry, we are still seeing that migration online providing some incremental growth for DIY online.

I guess in terms of the strength you’re seeing in the marketplace, is there anything you would call out that’s doing particularly well or is it just kind of just a macro shift of consumers moving online for shopping in this vertical?

Certainly there is a shift online in this vertical, but I think executing on the marketplaces requires you to have a very compelling product offering and we've done a good job with our private-label assortment. It also requires to execute with high service levels in the marketplaces to make sure that you’ve got the presence within the marketplace. So, certainly part of a shift that we’re experiencing and a part of it's bringing the right product to market and providing good service levels.

And then on the last call, I think you had mentioned with the growth in the marketplace business you're going to make augmentations to call center marketing, which I think you called out, but I think you also said testing price elasticity on some of the products. I’m just kind of curios, any update in that regard?

Yes. So we certainly looked at a short-term perspective around managing expenses and offsetting some of the margin compression with that operating expenses. But we will continue to touch pricing and on a day -- on a regular weekly basis, but our real initiative to try to address the shift in marketplaces is around creating our experience on e-com and trying to make sure that again we focus on speed, we focus on a mobile first experience, we make it easy for consumers to find product. And I think that that's how long-term we plan on addressing the shift between the sales channels.

Got it. And then, two more, if I may. On a reduced EBITDA guidance, can you just talk about kind of the magnitude of one, the compliance cost, and then two, the freight costs and what’s kind of driving, I guess, the latter?

So in terms of the adjustment there to the range, you could think about the mix we’ve already spoke to and the remainder of the lower end to our new guidance range, pretty evenly mix between the new accessorial charges announced by the carriers, as well as our compliance cost. So, roughly half that.

And then, lastly, just to clear, you didn’t repurchase any stock during the quarter, correct?

We did not.

Okay. Excellent.

We have that authorized through the next three quarters and as stated we're going to be opportunistic in acquiring that stock.

Great. Thank you.

Thanks, Darren.

Thank you. The next question is coming from the line of Carolina Jolly with Gabelli & Company. Please proceed with your question.

Good morning, guys. Thanks for taking my questions. I know that you’ve kind of already spoken about this, but can you expand on what is driving customers towards the marketplace and is most of the marketplace growth cannibalization of your e-commerce channel or is that also just marketplace growth in general?

Yes. Good morning. We believe that most of the growth is actually the shift from offline to online. So the marketplaces are certainly experiencing that. We still see trends in -- within Google that suggests that the peer players certainly can attract more traffic. And again, what we’re going to do there is focus on the consumer experience and make sure that we get our fair share of that channel. So, we think that its less cannibalistic and more making sure that we get our share within the directive side as well as the search channel.

Great. Thanks.

Thank you. It appears we have no additional questions at this time. So, I’d like to pass the floor back over to management for any additional or concluding comments.

Thank you all for joining the call today. Please note that we will be participating at the Canaccord Conference today and the Liolios Gateway Conference next month, and hope to meet with some of you there. If not, we look forward to speaking with you next when we report our third quarter results in November.

Ladies and gentlemen, this does conclude today’s teleconference. Again, we thank you for your participation, and you may disconnect your lines at this time.