U.S. Auto Parts Network, Inc. Reports First Quarter 2007 Results
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CARSON, Calif., May 10, 2007 -- U.S. Auto Parts Network, Inc. , 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
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.
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