U.S. Auto Parts Network, Inc. Reports First Quarter Results
- Adjusted EBITDA $3.0 million.
- Net sales were $39.7 million.
- Gross margin 36.9%.
CARSON, Calif., May 6 -- U.S. Auto Parts Network, Inc. , the largest online provider of automotive aftermarket parts and accessories, today reported financial results for the first quarter ended April 4, 2009. Net sales for the first quarter were $39.7 million and net loss was $0.7 million or $0.02 per diluted share. Net loss includes a $1.3 million or $0.04 per diluted share non-cash charge for stock option forfeitures of which $0.6 million, or $0.02 per diluted share, resulted from the CEO's voluntary forfeiture in an effort to reduce stock option overhang and reduce on-going share-based compensation.
Q1 2009 results also include three additional business days caused by a change in the Company's fiscal year to a 52/53 week period ending on the first Saturday following December 31st. Excluding the three additional business days, net sales would have been $38.3 million and net loss would have been $0.8 million, or $0.03 per diluted share. This compares to Q1 2008 net sales of $40.0 million and a net loss of $0.9 million, or $0.03 per diluted share.
Diluted EPS for the quarters ended April 4, 2009 and March 31, 2008 included amortization expense related to intangibles of $0.4 million, or $0.01 per diluted share, and $2.1 million, or $0.07 per diluted share, respectively. The Company generated adjusted EBITDA of $3.0 million for the quarter or $2.8 million on a calendar quarter basis compared to $1.8 million for Q1 2008. For further information regarding adjusted EBITDA, including a reconciliation of Adjusted EBITDA to net income (loss), see non-GAAP Financial Measures below.
"We are pleased that the initiatives launched in 2008 are delivering meaningful year over year and sequential adjusted EBITDA improvements," stated Shane Evangelist, Chief Executive Officer. "Equally important is the progress made on our growth initiatives to improve the customer experience, lower the cost consumers pay for parts and develop how-to content to educate the consumer on maintaining their vehicles. Despite investing $1.6 million in these initiatives, we generated excess cash and our cash balance exiting the quarter was $1.5 million higher than Q4 2008."
"Macro-economic conditions are still turbulent but our online sales per day for Q1 2009 were approximately equal to Q1 2008, a modest recovery from recent quarters," continued Evangelist. "We believe that the online sales recovery supports our contention that long-term consumer behavior trends are lining up in favor of US Auto Parts. The recession has brought a dose of reality to consumer spending; people are keeping their vehicles longer and looking for ways to reduce maintenance cost. These trends fit perfectly with our strategic initiatives to lower the cost consumers pay for auto parts and educate them on how to maintain their vehicle themselves."
Q1 2009 Financial Highlights -- Net sales for calendar Q1 2009 (reported on a calendar basis for comparison purposes) declined by 4.2% from Q1 2008. Online sales for calendar Q1 2009 declined 1.4 % and offline sales declined by 27.5% compared to Q1 2008. The decline in offline sales was primarily due a loss of sales to a large customer in Q3 2008. -- Gross profit for Q1 2009 was $14.6 million or 36.9% of net sales compared to 34.4% of net sales for Q1 2008. The increase in gross margin was due in part to initiatives to reduce freight costs and a previously disclosed contract change with one of our suppliers regarding marketing co-op (now included in product cost). -- Online advertising expense was $2.5 million or 7.1% of online net sales for the first quarter of 2009 compared to 7.6% of online net sales for the prior year period. The decline in advertising spend as a percent of sales reflects improvements from our ROI-based spending model. -- Marketing expense, excluding advertising expense, was $2.8 million or 7.1% of net sales for the first quarter of 2009 compared to 8.2% of net sales in the prior year period. The decrease was primarily due to lower personnel-related costs and depreciation expense. -- General and administrative expense was $4.8 million or 12.1% of net sales for the first quarter of 2009 compared to 11.5% of net sales in the prior year period. This increase was primarily due to higher personnel-related expenses including a one-time charge of $0.3 million in share-based compensation related to the voluntary forfeiture of CEO stock options; partially offset by lower professional fees. -- Fulfillment expense was $2.7 million or 6.8% of net sales in the first quarter of 2009 compared to 5.3% in the prior year period. The increase is primarily due to the opening of our new distribution center on the East Coast. -- Technology expense was $0.9 million or 2.3% of net sales in the first quarter of 2009 compared to 1.8% of net sales in the prior year period. -- Amortization expense was $0.4 million in the first quarter of 2009 compared to $2.1 million in the prior year period. The decrease is primarily due to impairment charges of certain intangible assets during 2008. -- Income tax expense increased by $1.0 million due to the tax effect of stock option forfeitures. -- Capital expenditures for the first quarter of 2009 were $1.6 million which included $1.2 million of internally-developed software and website development costs. -- Cash, cash equivalents and short term investments were $33.9 million at April 4, 2009. The Company includes $6.4 million of investments in auction rate preferred securities in long-term assets, which are not included in cash. Cash increased by $1.5 million over the sequential quarter. Conference Call
As previously announced, the Company will conduct a conference call with analysts and investors to discuss the results today, Wednesday, May 6, 2009, at 2:00 pm Pacific Time (5:00 pm Eastern Time). The conference call will be conducted by Shane Evangelist, Chief Executive Officer and Ted Sanders, Chief Financial Officer. Participants may access the call by dialing (888) 561-1803 (domestic) or (480) 629-9870 (international). In addition, the call will be broadcast live over the Internet and accessible through the Investor Relations section of the Company's website at US AUTO where the call will be archived for two weeks. A telephone replay will be available through May 20, 2009. To access the replay, please dial (800) 406-7325 (domestic) or (303) 590-3030 (international), passcode 4050441. To view the 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.