U.S. Auto Parts Network, Inc.
May 9, 2016

U.S. Auto Parts Reports First Quarter 2016 Results

- Net Sales up 6% to $80.7 Million; Adjusted EBITDA up 52% to $4.3 Million

CARSON, Calif., May 9, 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 first quarter ended April 2, 2016. All information and data excludes AutoMD unless specifically noted.

First Quarter 2016 Financial Highlights vs. Year-Ago Quarter

  • Net sales up 6% to $80.7 million
  • Gross margin increased 230 basis points to 30.4%
  • Adjusted EBITDA (a non-GAAP measure defined below) increased 52% to $4.3 million
  • Net income increased 8x to $1.5 million, or $0.03 per diluted share

First Quarter 2016 Operational Highlights vs. Year-Ago Quarter

  • Unique visitors increased 3% to 31.4 million
  • Conversion rate increased by 10 basis points to 1.8%
  • Total online orders increased by 8.5% to 881,000 orders

Management Commentary

"Our first quarter was highlighted by the continued strength of our private label business, which realized double-digit year-over-year growth for the ninth consecutive quarter," said Shane Evangelist, CEO of U.S. Auto Parts. "The higher-margin nature of this business, coupled with our continued execution of strategic pricing initiatives and freight efficiencies, enabled us to generate our strongest quarter of net income since 2010."

First Quarter 2016 Financial Results

Net sales in the first quarter of 2016 increased 6% to $80.7 million compared to $76.3 million in the year-ago quarter. The increase was largely driven by an 11% increase in online marketplace sales to $21.3 million, as well as a 5% increase in e-commerce sales to $50.9 million.

Gross profit in the first quarter of 2016 increased 15% to $24.5 million compared to $21.4 million in the year-ago quarter. As a percentage of net sales, gross profit increased 230 basis points to 30.4% compared to 28.1%. The increase in gross margin was primarily driven by a higher mix of private label sales, which were 67% of net sales compared to 64% in the year-ago quarter. The increase was also driven by strategic pricing initiatives and freight efficiencies.

Total operating expenses in the first quarter were $22.6 million compared to $20.7 million in the year-ago quarter. As a percentage of net sales, operating expenses increased to 28.0% compared to 27.1%. The increase was primarily the result of increased fulfillment costs and marketing spend.

Adjusted EBITDA in the first quarter of 2016 increased 52% to $4.3 million compared to $2.9 million in the year-ago quarter. As a percentage of net sales, adjusted EBITDA increased 170 basis points to 5.4% compared to 3.7%. The significant increase was driven by the aforementioned improvements in gross margin, partially offset by the aforementioned increases in operating expenses.

Net income in the first quarter increased 8x to $1.5 million, or $0.03 per diluted share, compared to net income of $0.2 million, or $0.00 per diluted share in the year-ago quarter.

At April 2, 2016, cash and cash equivalents totaled $1.3 million compared to $1.5 million at January 2, 2016. Total debt decreased to $3.0 million from $11.8 million at January 2, 2016.

Key Operating Metrics



Q1 2016


Q1 2015


Q4 2015

Conversion Rate 1

1.78

%


1.69

%


1.78

%

Customer Acquisition Cost 1

$

7.73



$

7.30



$

7.95


Unique Visitors (millions) 1

31.4



30.6



27.6


Number of Orders - E-commerce only (thousands)

559



516



492


Number of Orders - Online Marketplace (thousands)

322



296



246


Total Number of Internet Orders (thousands)

881



812



738


Revenue Capture (% Sales) 2

85.5

%


85.5

%


85.8

%

Average Order Value - E-commerce only

$

106



$

110



$

106


Average Order Value - Online Marketplace

$

72



$

71



$

71


Average Order Value - Total Internet Orders

$

94



$

96



$

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).

 

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 first quarter ended April 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, May 9, 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

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 May 23, 2016.

Toll-free replay number: 877-870-5176
International replay number: 858-384-5517
Replay ID: 13635142

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 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 consumer websites are located at www.autopartswarehouse.com, www.jcwhitney.com, and www.AutoMD.com and the Company's corporate website is located 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



April 2, 2016


April 4, 2015



Base USAP


AMD


Consol


Base USAP


AMD


Consol

Net sales


$

80.75



$

0.06



$

80.81



$

76.33



$

0.06



$

76.39


Gross profit


$

24.53



$

0.06



$

24.59



$

21.42



$

0.06



$

21.48




30.4

%


100.0

%


30.4

%


28.1

%


100.0

%


28.1

%

Operating expenses


$

22.62



$

0.79



$

23.41



$

20.72



$

0.78



$

21.50




28.0

%


%


29.0

%


27.1

%


%


28.1

%

Income (loss) from operations


$

1.91



$

(0.73)



$

1.18



$

0.70



$

(0.71)



$

(0.02)




2.4

%


%


1.5

%


0.9

%


%


%

Net income (loss)


$

1.54



$

(0.55)



$

0.99



$

0.19



$

(0.50)



$

(0.32)




1.9

%


%


1.2

%


0.2

%


%


(0.4)

%

Adjusted EBITDA


$

4.34



$

(0.39)



$

3.96



$

2.85



$

(0.29)



$

2.56




5.4

%


%


4.9

%


3.7

%


%


3.4

%

       

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


Thirteen Weeks Ended


April 2, 2016


April 4, 2015


Base USAP


AMD


Consolidated


Base USAP


AMD


Consolidated













Net income (loss)

$

1,537



$

(547)



$

990



$

187



$

(503)



$

(316)


Depreciation & amortization

1,544



307



1,851



1,549



385



1,934


Amortization of intangible assets

112



8



120



107



8



115


Interest expense, net

346





346



373





373


Taxes

33



(182)



(149)



158



(210)



(52)


EBITDA

$

3,572



$

(414)



$

3,158



$

2,374



$

(320)



$

2,054


Stock comp expense

$

772



$

29



$

801



$

477



$

33



$

510


Adjusted EBITDA

$

4,344



$

(385)



$

3,959



$

2,851



$

(287)



$

2,564


 

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

CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS

(Unaudited, in Thousands, Except Per Share Data)



Thirteen Weeks Ended


April 2, 2016


April 4, 2015

Net sales

$

80,806



$

76,388


Cost of sales (1)

56,214



54,910


Gross profit

24,592



21,478


Operating expenses:




Marketing

11,490



10,852


General and administrative

4,485



4,181


Fulfillment

6,038



5,060


Technology

1,277



1,288


Amortization of intangible assets

120



115


Total operating expenses

23,410



21,496


Income (loss) from operations

1,182



(18)


Other income (expense):




Other income, net

6



23


Interest expense

(347)



(373)


Total other expense, net

(341)



(350)


Income (loss) before income taxes

841



(368)


Income tax provision (benefit)

(149)



(52)


Net income (loss) including noncontrolling interests

990



(316)


Net loss attributable to noncontrolling interests

(262)



(256)


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

1,252



(60)


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






Foreign currency translation adjustments

(5)



(10)


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

(5)



(10)


Comprehensive loss attributable to U.S. Auto Parts

$

1,247



$

(70)


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




Basic and diluted net income (loss) per share

$

0.03



$

0.00


Diluted net income (loss) per share

$

0.03



$

0.00


Weighted average common shares outstanding:




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

34,497



33,720


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

39,359



33,720








(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)



April 2, 2016


January 2, 2016

ASSETS




Current assets:




Cash and cash equivalents

$

4,542


$

5,537

Short-term investments

65


65

Accounts receivable, net of allowances of $34 and $17 at April 2, 2016 and January 2, 2016, respectively

3,461


3,236

Inventory

46,937


51,216

Other current assets

3,109


2,475

Total current assets

58,114


62,529

Property and equipment, net

18,138


18,431

Intangible assets, net

1,356


1,476

Other non-current assets

1,253


1,320

Total assets

$

78,861


$

83,756

LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Accounts payable

$

27,635


$

25,523

Accrued expenses

7,679


7,267

Revolving loan payable

3,000


11,759

Current portion of capital leases payable

530


521

Other current liabilities

4,456


3,854

Total current liabilities

43,300


48,924

Capital leases payable, net of current portion

10,128


10,168

Deferred income taxes

766


944

Other non-current liabilities

1,566


1,577

Total liabilities

55,760


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 April 2, 2016 and January 2, 2016

4


4

Common stock, $0.001 par value; 100,000 shares authorized; 34,675 and 34,137 shares issued and outstanding at April 2, 2016 and January 2, 2016

35


34

Additional paid-in capital

176,919


176,873

Accumulated other comprehensive income

421


440

Accumulated deficit

(155,819)


(157,011)

Total stockholders' equity

21,560


20,340

Noncontrolling interest

1,541


1,803

Total equity

23,101


22,143

Total liabilities and stockholders' equity

$

78,861


$

83,756

 

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

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, In Thousands)



Thirteen Weeks Ended


April 2, 2016


April 4, 2015

Operating activities




Net income (loss) including noncontrolling interests

$

990



$

(316)


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




Depreciation and amortization expense

1,851



1,934


Amortization of intangible assets

120



115


Deferred income taxes

(178)



(67)


Share-based compensation expense

802



510


Stock awards issued for non-employee director service

2




Amortization of deferred financing costs

20



20


Gain from disposition of assets



(13)


Changes in operating assets and liabilities:




Accounts receivable

(225)



(405)


Inventory

4,279



15


Other current assets

(630)



(506)


Other non-current assets

49



(7)


Accounts payable and accrued expenses

2,492



2,497


Other current liabilities

601



904


Other non-current liabilities

78



(131)


Net cash provided by operating activities

10,251



4,550


Investing activities




Additions to property and equipment

(1,276)



(2,151)


Proceeds from sale of property and equipment



13


Cash paid for intangible assets

(125)



(110)


Net cash used in investing activities

(1,401)



(2,248)


Financing activities




Borrowings from revolving loan payable

5,939



4,314


Payments made on revolving loan payable

(14,698)



(5,850)


Proceeds from stock options

127



13


Payments on capital leases

(141)



(66)


Statutory tax withholding payment for share-based compensation

(970)



(438)


Payment of liabilities related to financing activities

(100)




Net cash used in financing activities

(9,843)



(2,027)


Effect of exchange rate changes on cash

(2)



(11)


Net change in cash and cash equivalents

(995)



264


Cash and cash equivalents, beginning of period

5,537



7,653


Cash and cash equivalents, end of period

$

4,542



$

7,917


Supplemental disclosure of non-cash investing and financing activities:




Accrued asset purchases

$

849



$

700


Property acquired under capital lease

$

111



$


Accrued intangible asset



15


Supplemental disclosure of cash flow information:




Cash (paid) received during the period for income taxes

$

(7)



$

7


Cash paid during the period for interest

315



303


 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/us-auto-parts-reports-first-quarter-2016-results-300265226.html

SOURCE U.S. Auto Parts Network, Inc.

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