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U.S. Auto Parts Reports Second Quarter 2016 Results

August 8, 2016

CARSON, Calif., Aug. 8, 2016 /PRNewswire/ -- U.S. Auto Parts Network, Inc. (NASDAQ: PRTS), one of the largest online providers of aftermarket automotive parts and accessories, reported results for the second quarter ended July 2, 2016. All information and data excludes AutoMD unless specifically noted.

Second Quarter 2016 Financial Highlights vs. Year-Ago Quarter

  • Net sales up 2% to $78.0 million
  • Gross margin increased 320 basis points to 30.4%
  • Net income increased to $1.2 million, or $0.03 per diluted share, compared to a net loss of $0.6 million, or $(0.02), per diluted share
  • Adjusted EBITDA (a non-GAAP measure defined below) increased 129% to $4.0 million
  • Ended the quarter with no revolver debt compared to $8.0 million at July 4, 2015

Second Quarter 2016 Operational Highlights vs. Year-Ago Quarter

  • Unique visitors increased 3% to 30.2 million
  • Total online orders increased by 8% to 859,000 orders

Management Commentary

"The momentum from Q1 has carried into the second quarter," said Shane Evangelist, CEO of U.S. Auto Parts. "The continued focus on our higher-margin private label business, coupled with operational efficiencies, led to our second consecutive quarter of GAAP profitability and a 129% year-over-year increase in adjusted EBITDA. We also ended the quarter with no revolver debt and a cash net of revolver debt swing of $9 million from last year. "

Second Quarter 2016 Financial Results

Net sales in the second quarter of 2016 increased 2% to $78.0 million compared to $76.4 million in the year-ago quarter. The increase was largely driven by an 16% increase in online marketplace sales to $20.6 million.

Gross profit in the second quarter of 2016 increased 14% to $23.7 million compared to $20.8 million in the year-ago quarter. As a percentage of net sales, gross profit increased 320 basis points to 30.4% compared to 27.2%. The increase in gross margin was primarily driven by a higher mix of private label sales, which were 65% of net sales compared to 60% in the year-ago quarter. The increase was also driven by freight and warehouse supplies savings.

Total operating expenses in the second quarter were $22.1 million compared to $21.2 million in the year-ago quarter. As a percentage of net sales, operating expenses were 28.4% compared to 27.8%.

Net income in the second quarter increased to $1.2 million, or $0.03 per diluted share, compared to a net loss of $0.6 million, or $(0.02) per diluted share in the year-ago quarter.

Adjusted EBITDA in the second quarter of 2016 increased 129% to $4.0 million compared to $1.8 million in the year-ago quarter. As a percentage of net sales, adjusted EBITDA increased 290 basis points to 5.2% compared to 2.3%. The significant increase was driven by the aforementioned improvements in gross margin, partially offset by the aforementioned increases in operating expenses.

At July 2, 2016, cash and cash equivalents totaled $2.1 million compared to $1.5 million at January 2, 2016. The Company also had no revolver debt as of July 2, 2016 compared to revolver debt of $11.8 million at January 2, 2016.

 

Key Operating Metrics



Q2 2016


Q2 2015


Q1 2016

Conversion Rate 1

1.80

%


1.79

%


1.78

%

Customer Acquisition Cost 1

$

7.54



$

7.91



$

7.73


Unique Visitors (millions) 1

30.2



29.2



31.4


Number of Orders - E-commerce only (thousands)

544



523



559


Number of Orders - Online Marketplace (thousands)

315



276



322


Total Number of Internet Orders (thousands)

859



799



881


Revenue Capture (% Sales) 2

84.0

%


85.7

%


85.5

%

Average Order Value - E-commerce only

$

109



$

112



$

106


Average Order Value - Online Marketplace

$

71



$

71



$

72


Average Order Value - Total Internet Orders

$

95



$

98



$

94














1.

Excludes online marketplaces and media properties (e.g. AutoMD).

2.

Revenue capture is the amount of actual dollars retained after taking into consideration returns, credit card declines and product fulfillment and excludes online marketplaces and media properties (e.g. AutoMD).

 

2016 Outlook

U.S. Auto Parts continues to expect net sales to be up low to mid-single digits on a percentage basis compared to 2015, and Adjusted EBITDA to range between $13.0 and $15.0 million, an improvement from U.S. Auto Parts' previously issued Adjusted EBITDA outlook.

Conference Call

U.S. Auto Parts will conduct a conference call today at 5:00 p.m. Eastern time (2:00 p.m. Pacific time) to discuss its financial results for the second quarter ended July 2, 2016.

The company's CEO Shane Evangelist and CFO Neil Watanabe will host the conference call, followed by a question and answer period.

Date: Monday, August 8, 2016
Time: 5:00 p.m. Eastern time (2:00 p.m. Pacific time)
Toll-free dial-in number: 877-407-9039
International dial-in number: 201-689-8470
Conference ID: 13640390

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Liolios at 1-949-574-3860.

The conference call will be broadcast live and available for replay via the investor relations section of the company's website at www.usautoparts.net.

A telephone replay of the conference call will also be available on the same day through August 22, 2016.

Toll-free replay number: 877-870-5176
International replay number: 858-384-5517
Replay ID: 13640390

About U.S. Auto Parts Network, Inc.

Established in 1995, U.S. Auto Parts is a leading online provider of automotive aftermarket parts, including collision , engine, and performance parts and accessories. Through the Company's network of websites, U.S. Auto Parts provides consumers with a broad selection of competitively priced products, all mapped by a proprietary database with applications based on vehicle makes, models and years. U.S. Auto Parts' flagship websites include www.autopartswarehouse.com, www.carparts.com, www.jcwhitney.com, and www.AutoMD.com, as well as the Company's corporate website at www.usautoparts.net.

U.S. Auto Parts is headquartered in Carson, California.

Non-GAAP Financial Measures

Regulation G, 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," which is a non-GAAP financial measure. Adjusted EBITDA consists of net income before (a) interest expense, net; (b) income tax provision; (c) depreciation and amortization expense; (d) amortization of intangible assets; and (e) share-based compensation expense.

The Company believes that this non-GAAP financial measure provides important supplemental information to management and investors. This 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 reconciliation to corresponding GAAP financial measures, provides a more complete understanding of factors and trends affecting the Company's business and results of operations.

Management uses Adjusted EBITDA as one measure of the Company's operating performance because it assists in comparing the Company's operating performance on a consistent basis by removing the impact of stock compensation expense, as well as items that are not expected to be recurring. Internally, this non-GAAP measure is also used by management for planning purposes, including the preparation of internal budgets; for allocating resources to enhance financial performance; and for evaluating the effectiveness of operational strategies. The Company also believes that analysts and investors use Adjusted EBITDA as a supplemental measure to evaluate the ongoing operations of companies in our industry.

This non-GAAP financial measure is 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.

Safe Harbor Statement

This press release contains statements 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. These statements are forward looking statements for the purposes of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended and Section 27A of the Securities Act of 1933, as amended. Words such as "anticipates," "could," "expects," "intends," "plans," "potential," "believes," "predicts," "projects," "seeks," "estimates," "may," "will," "would," "will likely continue" 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 operating results and financial condition, impact of changes in our key operating metrics, our potential growth and our liquidity requirements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason. 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, competitive pressures, our dependence on search engines to attract customers, demand for the Company's products, the online market for aftermarket auto parts, the economy in general, increases in commodity and component pricing that would increase the Company's product costs, the operating restrictions in our credit agreement, the weather, and any 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 Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, which are 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.

Company Contacts:
Neil T. Watanabe, Chief Financial Officer
U.S. Auto Parts Network, Inc.
(424) 702-1455 x421
nwatanabe@usautoparts.com

Investor Relations:
Cody Slach or Sean Mansouri
Liolios
949-574-3860
PRTS@liolios.com

Summarized segment information for our continuing operations from the two reportable segments for the periods presented is as follows (in millions):



Thirteen Weeks Ended



July 2, 2016


July 4, 2015



Base USAP


AMD


Consol


Base USAP


AMD


Consol

Net sales


$

78.00



$

0.06



$

78.06



$

76.41



$

0.05



$

76.46


Gross profit


$

23.70



$

0.05



$

23.75



$

20.82



$

0.05



$

20.87




30.4

%


83.3

%


30.4

%


27.2

%


100.0

%


27.3

%

Operating expenses


$

22.13



$

0.76



$

22.89



$

21.24



$

0.74



$

21.98




28.4

%


%


29.3

%


27.8

%


%


28.7

%

Income (loss) from operations


$

1.57



$

(0.70)



$

0.87



$

(0.42)



$

(0.69)



$

(1.11)




2.0

%


%


1.1

%


(0.5)%



%


(1.5)%


Net income (loss)


$

1.22



$

(0.54)



$

0.68



$

(0.61)



$

(0.41)



$

(1.02)




1.6

%


%


0.9

%


(0.8)%



%


(1.3)%


Adjusted EBITDA


$

4.03



$

(0.32)



$

3.71



$

1.76



$

(0.32)



$

1.44




5.2

%


%


4.8

%


2.3

%


%


1.9

%

 



Twenty-Six Weeks Ended



July 2, 2016


July 4, 2015



Base USAP


AMD


Consol


Base USAP


AMD


Consol

Net sales


158.75



0.12



158.86



152.74



0.11



152.85


Gross profit


48.23



0.11



48.35



42.23



0.11



42.35




30.4

%


91.7

%


30.4

%


27.6

%


100.0

%


27.7

%

Operating expenses


44.75



1.55



46.30



41.96



1.52



43.47




28.2

%


%


29.1

%


27.5

%


%


28.4

%

Income (loss) from operations


3.48



(1.43)



2.05



0.28



(1.40)



(1.13)




2.2

%


%


1.3

%


0.2

%


%


(0.7)

%

Net income (loss)


2.75



(1.08)



1.67



(0.42)



(0.91)



(1.34)




1.7

%


%


1.1

%


(0.3)

%


%


(0.9)

%

Adjusted EBITDA


8.37



(0.70)



7.67



4.61



(0.61)



4.00




5.3

%


%


4.8

%


3.0

%


%


2.6

%

 

The table below reconciles net income (loss) to Adjusted EBITDA for the periods presented (in thousands):


Thirteen Weeks Ended


July 2, 2016


July 4, 2015


Base USAP


AMD


Consolidated


Base USAP


AMD


Consolidated













Net income (loss)

$

1,216



$

(535)



$

681



$

(611)



$

(411)



$

(1,022)


Depreciation & amortization

1,556



297



1,853



1,484



338



1,822


Amortization of intangible assets

113



8



121



107



8



115


Interest expense, net

242





242



272





272


Taxes

113



(169)



(56)



(69)



(278)



(347)


EBITDA

$

3,240



$

(399)



$

2,841



$

1,183



$

(343)



$

840


Stock comp expense

$

785



$

82



$

867



$

574



$

22



$

596


Adjusted EBITDA

$

4,025



$

(317)



$

3,708



$

1,757



$

(321)



$

1,436


 


Twenty-Six Weeks Ended


July 2, 2016


July 4, 2015


Base USAP


AMD


Consolidated


Base USAP


AMD


Consolidated













Net income (loss)

$

2,753



$

(1,082)



$

1,671



$

(424)



$

(914)



$

(1,338)


Depreciation & amortization

3,100



604



3,704



3,033



723



3,756


Amortization of intangible assets

225



16



241



214



16



230


Interest expense, net

588





588



645





645


Taxes

146



(351)



(205)



89



(488)



(399)


EBITDA

$

6,812



$

(813)



$

5,999



$

3,557



$

(663)



$

2,894


Stock comp expense

$

1,557



$

111



$

1,668



$

1,051



$

55



$

1,106


Adjusted EBITDA

$

8,369



$

(702)



$

7,667



$

4,608



$

(608)



$

4,000


 

 The table below represents our earnings per share by segment (in thousands, except for per share data):


Thirteen Weeks Ended


July 2, 2016


July 4, 2015


Base USAP


AMD


Consolidated


Base USAP


AMD


Consolidated













Net income (loss) per share:












Numerator:












Net income (loss) attributable to U.S. Auto Parts

$

1,216



$

(282)



$

934



$

(611)



$

(164)



$

(775)


Dividends on Series A Convertible Preferred Stock

60





60



60





60


Net income (loss) available to common shares

$

1,156



$

(282)



$

874



$

(671)



$

(164)



$

(835)


Denominator:












Weighted-average common shares outstanding (basic)

34,753





34,753



33,963





33,963


Common equivalent shares from common stock options, preferred stock and warrants

5,254





5,254








Weighted-average common shares outstanding (diluted)

40,007





40,007



33,963





33,963


Basic net income (loss) per share

$

0.03



$



$

0.03



$

(0.02)



$



$

(0.02)


Diluted net income (loss) per share

$

0.03



$



$

0.02



$

(0.02)



$



$

(0.02)


 

The table below reconciles the high and low ends of our projected range of net income to projected Adjusted EBITDA for the period presented (in thousands):


Low End
52 Weeks Ending
December 31, 2016


High End
52 Weeks Ending
December 31, 2016





Net income (loss)

$

1,655



$

3,655


Depreciation & amortization

6,349



6,349


Amortization of intangible assets

437



437


Interest expense, net

1,099



1,099


Taxes

256



256


EBITDA

$

9,796



$

11,796


Stock comp expense

$

3,204



$

3,204


Adjusted EBITDA

$

13,000



$

15,000


 

U.S. AUTO PARTS NETWORK, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS

(Unaudited, in Thousands, Except Per Share Data)



Thirteen Weeks Ended


Twenty-Six Weeks Ended


July 2, 
2016


July 4
2015


July 2
2016


July 4,
2015

Net sales

$

78,055


$

76,462


$

158,861


$

152,850

Cost of sales (1)

54,301


55,594


110,515


110,504

Gross profit

23,754


20,868


48,346


42,346

Operating expenses:








Marketing

11,046


11,148


22,536


22,000

General and administrative

4,626


4,484


9,111


8,665

Fulfillment

5,658


4,978


11,696


10,038

Technology

1,438


1,250


2,715


2,538

Amortization of intangible assets

121


115


241


230

Total operating expenses

22,889


21,975


46,299


43,471

Income (loss) from operations

865


(1,107)


2,047


(1,125)

Other income (expense):











Other income, net

11


10


17


33

Interest expense

(251)


(272)


(598)


(645)

Total other expense, net

(240)


(262)


(581)


(612)

Income (loss) before income taxes

625


(1,369)


1,466


(1,737)

Income tax benefit

(56)


(347)


(205)


(399)

Net income (loss) including noncontrolling interests

681


(1,022)


1,671


(1,338)

Net income (loss) attributable to noncontrolling interests

(253)


(247)


(515)


(503)

Net income (loss) attributable to U.S. Auto Parts

934


(775)


2,186


(835)

Other comprehensive loss attributable to U.S. Auto Parts:







Foreign currency translation adjustments

(8)


(12)


(13)


(22)

Total other comprehensive loss attributable to U.S. Auto Parts

(8)


(12)


(13)


(22)

Comprehensive income (loss) attributable to U.S. Auto Parts

$

926


$

(787)


$

2,173


$

(857)

Net income (loss) attributable to U.S. Auto Parts per share:











Basic net income (loss) per share

$

0.03


$

(0.02)


$

0.06


$

(0.03)

Diluted net income (loss) per share

$

0.02


$

(0.02)


$

0.05


$

(0.03)

Weighted average common shares outstanding:








Shares used in computation of basic net income (loss) per share

34,753


33,963


34,625


33,842

Shares used in computation of diluted net income (loss) per share

40,007


33,963


39,655


33,842









(1)

Excludes depreciation and amortization expense which is included in marketing, general and administrative and fulfillment expense

 

U.S. AUTO PARTS NETWORK, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited, In Thousands, Except Par and Liquidation Value)



July 2, 2016


January 2, 2016

ASSETS




Current assets:




Cash and cash equivalents

$

4,913


$

5,537

Short-term investments

77


65

Accounts receivable, net of allowances of $36 and $17 at July 2, 2016 and January 2, 2016, respectively

2,971


3,236

Inventory

44,421


51,216

Other current assets

3,489


2,475

Total current assets

55,871


62,529

Property and equipment, net

17,900


18,431

Intangible assets, net

1,235


1,476

Other non-current assets

1,212


1,320

Total assets

$

76,218


$

83,756

LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable

$

26,545


$

25,523

Accrued expenses

7,452


7,267

Revolving loan payable


11,759

Current portion of capital leases payable

533


521

Other current liabilities

4,174


3,854

Total current liabilities

38,704


48,924

Capital leases payable, net of current portion

10,053


10,168

Deferred income taxes

690


944

Other non-current liabilities

1,677


1,577

Total liabilities

51,124


61,613

Commitments and contingencies




Stockholders' equity:




Series A convertible preferred stock, $0.001 par value; $1.45 per share liquidation value or aggregate of $6,017; 4,150 shares authorized; 4,150 shares issued and outstanding at July 2, 2016 and January 2, 2016

4


4

Common stock, $0.001 par value; 100,000 shares authorized; 34,888 and 34,137 shares issued and outstanding at July 2, 2016 and January 2, 2016

35


34

Additional paid-in capital

178,279


176,873

Accumulated other comprehensive income

432


440

Accumulated deficit

(154,944)


(157,011)

Total stockholders' equity

23,806


20,340

Noncontrolling interest

1,288


1,803

Total equity

25,094


22,143

Total liabilities and stockholders' equity

$

76,218


$

83,756

 

U.S. AUTO PARTS NETWORK, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, In Thousands)



Twenty-Six Weeks Ended


July 2, 
2016


July 4, 
2015

Operating activities




Net income (loss) including noncontrolling interests

$

1,671


$

(1,338)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:




Depreciation and amortization expense

3,704


3,756

Amortization of intangible assets

241


230

Deferred income taxes

(257)


(452)

Share-based compensation expense

1,668


1,106

Stock awards issued for non-employee director service

4


Amortization of deferred financing costs

41


41

Gain from disposition of assets


(13)

Changes in operating assets and liabilities:




Accounts receivable

265


686

Inventory

6,795


3,142

Other current assets

(1,038)


(142)

Other non-current assets

81


40

Accounts payable and accrued expenses

1,308


(1,258)

Other current liabilities

319


798

Other non-current liabilities

204


(110)

Net cash provided by operating activities

15,006


6,486

Investing activities




Additions to property and equipment

(2,887)


(3,832)

Proceeds from sale of property and equipment


13

Cash paid for intangible assets

(125)


(25)

Net cash used in investing activities

(3,012)


(3,844)

Financing activities




Borrowings from revolving loan payable

9,297


7,014

Payments made on revolving loan payable

(21,056)


(10,050)

Proceeds from stock options

536


40

Payments on capital leases

(313)


(131)

Statutory tax withholding payment for share-based compensation

(969)


(438)

Payment of liabilities related to financing activities

(100)


(100)

Net cash used in financing activities

(12,605)


(3,665)

Effect of exchange rate changes on cash

(13)


(22)

Net change in cash and cash equivalents

(624)


(1,045)

Cash and cash equivalents, beginning of period

5,537


7,653

Cash and cash equivalents, end of period

$

4,913


$

6,608

Supplemental disclosure of non-cash investing and financing activities:




Accrued asset purchases

$

735


$

791

Property acquired under capital lease

$

211


$

368

Supplemental disclosure of cash flow information:




Cash paid during the period for income taxes

$

49


$

58

Cash paid during the period for interest

564


590

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/us-auto-parts-reports-second-quarter-2016-results-300310622.html

SOURCE U.S. Auto Parts Network, Inc.

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