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U.S. Auto Parts Network, Inc. Reports First Quarter 2007 Results

May 10, 2007

CARSON, Calif., May 10, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- U.S. Auto Parts Network, Inc. (Nasdaq: PRTS), a leading online provider of aftermarket auto parts and accessories, today reported its financial results for the first quarter ended March 31, 2007.

Net sales for the first quarter ended March 31, 2007 were $43.7 million, an increase of 143% from $18.0 million in the prior year period. The increase in net sales was driven by strong organic growth and from the acquisition of Partsbin, which closed in May 2006. Net profit for the first quarter of 2007 was $0.2 million, or $0.01 per diluted share on approximately 26.6 million shares outstanding, compared to net income of $2.7 million, or $0.18 per diluted share on approximately 15.4 million shares outstanding for the prior year period. Diluted EPS for the first quarter of 2007 includes $2.1 million of amortization expense related to intangibles or $0.08 per diluted share. Adjusted EBITDA for the first quarter of 2007, which excludes share-based compensation expense related to option grants of $0.4 million, was $3.4 million compared to Adjusted EBITDA of $3.1 million in the prior year period. For a reconciliation of Adjusted EBITDA to net income, see Non-GAAP Financial Measures below.

"We experienced accelerated growth this quarter, validating the strong market demand for our product offerings," said Mehran Nia, President and Chief Executive Officer. "While we are pleased with our sequential growth in profitability and our baseline level of profitability, many opportunities for improvement still exist. We have a number of initiatives in place that we believe will help us continue to grow sales on an even more profitable basis in the future, the impact of which we expect to realize in the second half of this year."

Michael McClane, Chief Financial Officer, added, "In the first quarter, we moved into the execution phase on many important initiatives ranging from projects designed to optimize pricing, improve our conversion rates and increase efficiency in our marketing expenditures to those that will allow us to take more direct control of the critical aspects of our customer relationships. All of these initiatives are designed to help us better serve our customers and to find more ways to grow our sales and increase our profitability over time."

    Q1 2007 Operating Metrics

    *  Conversion rate - The conversion rate in the first quarter of 2007
       increased to 1.2%, compared to 1.1% during the corresponding period of
       2006.

    *  Customer acquisition cost - The customer acquisition cost in the first
       quarter of 2007 was approximately $9 per customer, compared to
       approximately $10 in 2006.

    *  Unique visitors - The number of monthly unique visitors in the first
       quarter of 2007 rose to 23 million, an increase of 21% compared to the
       first quarter of 2006 on a pro-forma basis after giving effect to the
       acquisition of Partsbin.

    *  Orders - The number of orders placed through our e-commerce websites
       rose to approximately 268,000 orders in the first quarter of 2007 from
       88,000 in the corresponding period of 2006, representing an increase of
       approximately 205%.

    *  Average order value - The average order value of purchases on our
       websites was $124 during the first quarter of 2007, up from $120 in
       2006.

    Q1 2007 Financial Highlights

    *  Cash and cash equivalents was $45.6 million at March 31, 2007.

    *  Marketing spend was $3.4 million or 8% of net sales for the first
       quarter of 2007 compared to $1.2 million or 7% of net sales for the
       prior year period.

    *  General and administrative expense was $2.9 million or 7% of net sales
       for the first quarter of 2007 compared to $2.0 million or 11% of net
       sales in the prior year period.

    *  Operating expenses as a percentage of net sales, including $2.1 million
       of amortization expense related to intangibles, was 30% for the first
       quarter of 2007 compared to 29% in the prior year period.

    *  Capital expenditures for the first quarter of 2007 totaled
       $1.1 million, including $0.4 million of internally developed software
       and website development costs.

Non-GAAP free cash flow for the quarter increased 73% to $5.7 million from $3.3 million for the prior year period. Net cash provided by operating activities increased 94% to $6.8 million from $3.5 million for the prior year period. For a reconciliation of non-GAAP free cash flow to cash flow generated from operating activities, see Non-GAAP Financial Measures below.

Outlook for 2007

The Company is maintaining its guidance for the fiscal year ending December 31, 2007 as follows:

    *  Net sales are expected to be in the range of $170 million to
       $185 million.

    *  Operating expenses (including depreciation and amortization of software
       and intangibles) as a percentage of net sales is expected to be in the
       range of 30% to 33%.

    *  Diluted net income per share is expected to be in the range of $0.05 to
       $0.17 assuming approximately 29.3 million shares outstanding.

       -  This includes the estimated impact of share-based compensation
          expense of $0.09 per diluted share.

       -  This includes the estimated impact of depreciation and amortization
          of software and intangibles of approximately $0.31 per diluted
          share.

    *  Adjusted EBITDA is expected to be in the range of $14 million to
       $18 million.

Non-GAAP Financial Measures

Regulation G, "Conditions for Use of Non-GAAP Financial Measures," and other provisions of the Securities Exchange Act of 1934, as amended, define and prescribe the conditions for use of certain non-GAAP financial information. We provide "Adjusted EBITDA" and "free cash flow," which are non- GAAP financial measures. Adjusted EBITDA consists of net income before (a) interest expense, net; (b) income tax provision (benefit); (c) amortization of intangibles; and (d) depreciation and amortization, and excludes share-based compensation expense related to the Company's grant of stock options and other equity instruments. U.S. Auto Parts defines non-GAAP free cash flow as net cash provided by operating activities less cash paid for purchases of fixed assets and intangibles.

The Company believes these non-GAAP financial measures provide important supplemental information to management and investors. These non-GAAP financial measures reflect an additional way of viewing aspects of the Company's operations that, when viewed with the GAAP results and the accompanying reconciliations to corresponding GAAP financial measures, provide a more complete understanding of factors and trends affecting the Company's business and results of operations.

Management uses Adjusted EBITDA as a measurement of the Company's operating performance because it assists in comparisons of the Company's operating performance on a consistent basis by removing the impact of items not directly resulting from core operations. Internally, these non-GAAP measures are also used by management for planning purposes, including the preparation of internal budgets; to allocate resources to enhance financial performance; to evaluate the effectiveness of operational strategies; and to evaluate the Company's capacity to fund capital expenditures and to expand its business. The Company also believes that analysts and investors use Adjusted EBITDA as supplemental measures to evaluate the overall operating performance of companies in our industry.

Management believes that non-GAAP free cash flow provides meaningful information about the Company's liquidity and future cash availability. Management uses this measure internally for planning purposes and resource allocations. Further, management believes that non-GAAP free cash flow provides increased consistency in financial reporting and comparability with similar companies in the Company's industry.

These non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP and should not be relied upon to the exclusion of GAAP financial measures. Management strongly encourages investors to review the Company's consolidated financial statements in their entirety and to not rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. In addition, the Company expects to continue to incur expenses similar to the non-GAAP adjustments described above, and exclusion of these items from the Company's non-GAAP measures should not be construed as an inference that these costs are unusual, infrequent or non-recurring.

    The table below reconciles net income to EBITDA and Adjusted EBITDA for
the periods presented:



                                                 Three Months Ended
                                                     March 31,
                                                  2007       2006
                                                   (in thousands)

    Net income                                     $235     $2,720

    Interest expense, net                           280         40
    Income tax provision (benefit)                  160       (156)
    Amortization of intangibles                   2,054          4
    Depreciation and amortization                   243        531
    EBITDA                                        2,972      3,139
    Share-based compensation                        406          4
    Adjusted EBITDA                              $3,378     $3,143



    The table below reconciles free cash flow for the periods presented:

                                                         Three Months Ended
                                                             March 31,
                                                          2007       2006
                                                           (in thousands)

    Net cash provided by operating activities            $6,800      $3,527
    Additions to property, equipment and intangibles     (1,073)       (193)
    Free cash flow                                       $5,727      $3,334



Conference Call

The Company will conduct a conference call with analysts and investors to discuss the results today, Thursday, May 10, 2007, at 2:00 pm Pacific Time (5:00 pm Eastern Time). The conference call will be conducted by Mehran Nia, President and Chief Executive Officer, Howard Tong, Chief Operating Officer, and Michael McClane, Chief Financial Officer, and will be broadcast live over the Internet and accessible through the Investor Relations section of the Company's website at www.usautoparts.net where the call will be archived until May 19, 2007. To view this press release or the financial or other statistical information required by SEC Regulation G, please visit the Investor Relations section of the U.S. Auto Parts website at investor.usautoparts.net.

About U.S. Auto Parts Network, Inc.

Established in 1995, U.S. Auto Parts is a leading online provider of aftermarket auto parts, including body parts, engine parts, performance parts and accessories. Through the Company's network of websites, U.S. Auto Parts provides individual consumers with a broad selection of competitively priced products that are mapped by a proprietary product database to product applications based on vehicle makes, models and years. U.S. Auto Parts' flagship websites are located at www.partstrain.com and www.autopartswarehouse.com and the Company's corporate website is located at www.usautoparts.net.

Safe Harbor Statement

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are based on management's current expectations, estimates and projections about the Company's business and its industry, as well as certain assumptions made by the Company. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," "may," "will" and variations of these words or similar expressions are intended to identify forward-looking statements. These statements include, but are not limited to, the Company's expectations regarding its future financial condition, operating results, potential growth and market share. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors.

Important factors that may cause such a difference include, but are not limited to, the demand for the Company's products; the Company's ability to expand its product offerings; the competitive environment in the Company's industry; the effect of technological changes; the transition of certain call center operations in-house; the Company's cash needs and ability to control costs; changes in general economic or market conditions; the Company's ability to comply with Section 404 of the Sarbanes-Oxley Act and maintain an adequate system of internal controls, and other factors discussed in the Company's filings with the Securities and Exchange Commission (the "SEC"), including the Risk Factors contained in the Company's filings with the Securities and Exchange Commission (the "SEC"), including the Risk Factors contained in the Company's Annual Report on Form 10-K, and available at www.usautoparts.net and the SEC's website at www.sec.gov. You are urged to consider these factors carefully in evaluating the forward-looking statements in this release and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. Unless otherwise required by law, the Company expressly disclaims any obligation to update publicly any forward-looking statements, whether as result of new information, future events or otherwise.

    Investor Contacts:
    Michael McClane, Chief Financial Officer
    U.S. Auto Parts Network, Inc.
    michael@usautoparts.com
    (310) 735-0085

    Anne Rakunas / Laura Foster
    ICR, Inc.
    (310) 954-1100
    anne.rakunas@icrinc.com
    laura.foster@icrinc.com

    Media Contacts:
    Stephanie Sampiere / Matt Lindberg
    ICR, Inc.
    (203) 682-8200
    stephanie.sampiere@icrinc.com
    matthew.lindberg@icrinc.com



                        U.S. AUTO PARTS NETWORK, INC.
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                                (in thousands)

                                                     March 31,   December 31,
                                                       2007          2006
   ASSETS                                           (unaudited)
   Current assets:
       Cash and cash equivalents                       $45,611       $2,381
       Accounts receivable, net                          3,024        2,789
       Inventory, net                                   10,218        8,796
       Deferred income taxes                               934          934
       Other current assets                              1,691        1,149
    Total current assets                                61,478       16,049

    Property and equipment, net                          3,676        2,716
    Intangible assets, net                              31,308       33,362
    Goodwill                                            14,201       14,179
    Deferred income taxes                                1,703        1,703
    Other noncurrent assets                                157        1,901
          Total assets                                $112,523      $69,910

    LIABILITIES AND STOCKHOLDERS' EQUITY

    Current liabilities:
       Accounts payable                                $13,153       $9,091
       Accrued expenses                                  3,341        2,912
       Line of credit                                       --        2,000
       Notes payable                                     1,000       10,805
       Capital leases payable, current portion              63           62
       Other current liabilities                         1,972        2,392
          Total current liabilities                     19,529       27,262
    Notes payable less current portion, net                 --       21,922
    Capital leases payable, less current portion            92          114
          Total liabilities                             19,621       49,298

    Commitments and contingencies

    Stockholders' equity:
       Preferred stock, $0.001 par value; 11,100,000
        shares authorized; none and 11,055,425 shares
        issued and outstanding at March 31, 2007 and
        December 31, 2006, respectively                     --           11
       Common stock, $0.001 par value; 50,000,000
        shares authorized; 29,832,927 and 15,199,672
        shares issued and outstanding at March 31
        2007 and December 31, 2006, respectively            30           15
       Additional paid-in capital                      140,948       68,906
       Accumulated other comprehensive income               14            5
       Accumulated deficit                             (48,090)     (48,325)
          Total stockholders' equity                    92,902       20,612
            Total liabilities and stockholders'
             equity                                   $112,523      $69,910



                          U.S. AUTO PARTS NETWORK, INC.
              UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                (in thousands, except share and per share amounts)

                                                          Three Months Ended
                                                              March 31,
                                                          2007         2006

    Net sales                                            $43,743      $18,005
    Cost of sales                                         30,074       10,259
    Gross profit                                          13,669        7,746

    Operating expenses:
       General and administrative                          2,876        1,965
       Marketing                                           5,900        1,976
       Fulfillment                                         1,717        1,152
       Technology                                            449          194
       Amortization of intangibles                         2,054            4
    Total operating expenses                              12,996        5,291

    Income from operations                                   673        2,455

    Other income (expense):
       Loss from disposition of assets                        --           (5)
       Other income                                            2          154
       Interest expense, net                                (280)         (40)
    Other income (expense), net                             (278)         109
    Income before income taxes                               395        2,564
    Income tax provision (benefit)                           160         (156)
    Net income                                              $235       $2,720

    Basic net income per share                             $0.01        $0.21
    Diluted net income per share                           $0.01        $0.18
    Shares used in computation of basic net income
     per share                                        23,491,850   13,200,000
    Shares used in computation of diluted net income
     per share                                        26,564,603   15,382,341



                        U.S. AUTO PARTS NETWORK, INC.
                 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS
                                OF CASH FLOWS
                                (in thousands)

                                                          Three Months Ended
                                                               March 31,
    Operating activities                                   2007         2006
       Net income                                          $235       $2,720
       Adjustments to reconcile net income to net cash
        provided by operating activities:
          Depreciation and amortization                     243          531
          Amortization of intangibles                     2,054            4
          Non-cash interest expense                         273            4
          Loss from disposition of assets                    --            5
          Share-based compensation and other                406          104
          Deferred income taxes                              --         (574)
       Changes in operating assets and liabilities:
          Accounts receivable, net                         (235)         343
          Inventory, net                                 (1,422)       1,327
          Prepaid expense and other current assets         (541)         (83)
          Other non-current assets                        1,744         (353)
          Accounts payable and accrued expenses           4,463         (508)
          Other current liabilities                        (420)           7
    Net cash provided by operating activities             6,800        3,527

    Investing activities
       Additions to property, equipment and
        intangibles                                      (1,073)        (193)
       Adjustment in goodwill associated with
        business acquisition                                (22)          --
    Net cash used in investing activities                             (1,095)
                                                           (193)

    Financing activities
       Payments of credit line                           (2,000)          --
       Proceeds received from notes payable, net of
        discount                                             --        9,800
       Payments made on notes payable                   (32,000)         (96)
       Proceeds received on issuance of common stock
        in connection with initial public offering,
        net of offering costs                            71,537           --
       Proceeds received on issuance of Series A
        convertible preferred stock, net of offering
        costs                                                --       42,246
       Payments of short-term financing                     (21)         (73)
       Stockholder distributions                             --       (1,700)
       Recapitalization distribution                         --      (50,000)
    Net cash provided by financing activities            37,516          177
    Effect of changes in foreign currencies                   9           (2)
    Net increase in cash and cash equivalents            43,230        3,509
    Cash and cash equivalents at beginning of period      2,381        1,353
    Cash and cash equivalents at end of period          $45,611       $4,862


SOURCE U.S. Auto Parts Network

Investors, Michael McClane, Chief Financial Officer of U.S. Auto Parts Network, Inc.,
+1-310-735-0085, michael@usautoparts.com; or Anne Rakunas, anne.rakunas@icrinc.com,
or Laura Foster, laura.foster@icrinc.com, both of ICR, Inc., +1-310-954-1100, for
U.S. Auto Parts Network; or Media, Stephanie Sampiere, stephanie.sampiere@icrinc.com,
or Matt Lindberg, matthew.lindberg@icrinc.com, both of ICR, Inc., +1-203-682-8200,
for U.S. Auto Parts Network
http://www.usautoparts.net

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