U.S. Auto Parts Network, Inc. Reports Second Quarter Results
- Adjusted EBITDA $3.2 million. - Net sales were $43.8 million. - Gross margin 36.2%.
CARSON, Calif., Aug. 6 -- U.S. Auto Parts Network, Inc. , the largest online provider of automotive aftermarket parts and accessories, today reported net sales for the second quarter ended July 4, 2009 of $43.8 million, an increase of $0.7 million or 2% over Q2 2008 net sales of $43.1 million. Q2 2009 net income was $0.6 million or $0.02 per diluted share, an increase of $12.7 million over Q2 2008. Diluted EPS for the quarters ended July 4, 2009 and June 30, 2008 included amortization expense and impairment charges related to intangibles of $0.1 million net of tax or $0.00 per diluted share and $12.3 million net of tax or $0.41 per diluted share, respectively. The Company generated adjusted EBITDA of $3.2 million for the quarter compared to $1.9 million for Q2 2008. For further information regarding adjusted EBITDA, including a reconciliation of Adjusted EBITDA to net income (loss), see non-GAAP Financial Measures below.
"The second quarter of 2009 is our second consecutive quarter of improved profitability and cash generation," stated Shane Evangelist, Chief Executive Officer. "These results were driven by both top line growth and intelligent expense management. Following our long term strategy, we continued to invest $2.0 million in our growth initiatives."
"The combination of favorable macro trends and better execution by our team produced a new company quarterly sales record," continued Evangelist. "June actually comped up 18% year-over-year and we are pleased to see similar trends continue through July."
Q2 2009 Financial Highlights
-- Net sales for Q2 2009 increased by 2% from Q2 2008. Online sales for
Q2 2009 increased 3.5% and offline sales declined by 19.0% compared to
Q2 2008. The decline in offline sales was primarily due to a loss of
sales to a large customer in Q3 2008.
-- Gross profit for Q2 2009 was $15.9 million or 36.2% of net sales
compared to 33.8% of net sales for Q2 2008. The increase in gross
margin was primarily due to initiatives that reduced freight expense.
-- Online advertising expense was $2.8 million or 7.0% of internet net
sales for the second quarter of 2009 compared to 7.5% of internet net
sales for the prior year period, which excludes $0.2 million of
marketing co-op received in 2008. Marketing expense, excluding
advertising expense, was $2.9 million or 6.6% of net sales for the
second quarter of 2009 compared to 9.5% 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 11.0% of net
sales for the second quarter of 2009 compared to 10.6% of net sales in
the prior year period. This increase was primarily due to higher
personnel incentive costs related to better company performance,
higher depreciation and amortization related to capital investment,
partially offset by a reduction in professional fees.
-- Fulfillment expense was $2.8 million or 6.4% of net sales in the
second quarter of 2009 compared to 5.6% 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 $1.3 million or 3.0% of net sales in the second
quarter of 2009 compared to 1.9% of net sales in the prior year
period. The increase reflects additional headcount resources deployed
to support the Company's strategic technology plan.
-- Amortization of intangibles and impairment loss was $0.2 million in
the second quarter of 2009 compared to $20.5 million in the prior year
period. The decrease is primarily due to impairment charges of
certain intangible assets during 2008.
-- Capital expenditures for the second quarter of 2009 were $2.0 million
which included $1.5 million of internally developed software and
website development costs.
-- Cash, cash equivalents and investments were $42.6 million at July 4,
2009. The Company includes $4.1 million of investments in United
States treasury bills in short-term assets and $5.9 million of
investments in auction rate preferred securities in long-term assets,
which are not included in cash. Cash and securities increased $2.3
million over the previous quarter.
Q2 2009 Operating Metrics
Q2 2009 Q2 2008 Q1 2009
------- ------- -------
Conversion Rate 1.35% 1.39% 1.17%
-------------------------- ---- ---- ----
Customer Acquisition Cost $6.65 $5.77 $6.40
-------------------------- ----- ----- -----
Unique Visitors (millions) 26.9 24.1 27.1
-------------------------- ---- ---- ----
Orders (thousands) 363 334 316
-------------------------- --- --- ---
Revenue Capture (% Sales)* 80.5% 76.6% 81.8%
-------------------------- ---- ---- ----
Average Order Value $121 $128 $120
-------------------------- ---- ---- ----
*Revenue capture is the amount of actual dollars retained after taking
into consideration returns, credit card declines and product fulfillment.
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," which is a non-GAAP financial measure. Adjusted EBITDA consists of net income before (a) interest income (expense), net; (b) income tax provision (benefit); (c) amortization of intangibles and impairment loss; (d) depreciation and amortization; and (e) share-based compensation expense related to stock options.
The Company believes this non-GAAP financial measure provides important supplemental information to management and investors. This non-GAAP financial measure reflects 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 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, 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; for evaluating the effectiveness of operational strategies; and for evaluating the Company's capacity to fund capital expenditures and expand its business. The Company also believes that analysts and investors use Adjusted EBITDA as a supplemental measure to evaluate the overall operating performance of companies in our industry. Additionally, lenders or potential lenders use Adjusted EBITDA to evaluate the Company's ability to repay loans.
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.
The table below reconciles net income (loss) to Adjusted EBITDA for the periods presented (in thousands):
Thirteen Three Twenty- Six
Weeks Months Six Weeks Months
Ended Ended Ended Ended
-------- ---------- --------- ----------
July 4, June 30, July 4, June 30,
2009 2008 2009 2008
-------- ---------- --------- ----------
Net income (loss) $629 $(12,063) $(50) $(12,938)
Interest income, net (49) (234) (140) (502)
Income tax provision
(benefit) 469 (8,042) 1,832 (8,606)
Amortization of
intangibles 153 2,096 520 4,195
Depreciation and
amortization 1,134 964 2,153 1,758
----- --- ----- -----
EBITDA 2,336 (17,279) 4,315 (16,093)
Impairment loss on
intangibles - 18,445 - 18,445
Share-based
compensation 820 686 1,847 1,318
--- --- ----- -----
Adjusted EBITDA $3,156 $1,852 $6,162 $3,670
====== ====== ====== ======
Conference Call
As previously announced, the Company will conduct a conference call with analysts and investors to discuss the results today, Thursday, August 6, 2009, at 6:00 am Pacific Time (9:00 am 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 (866) 225-8754 (domestic) or (480) 629-9692 (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 www.usautoparts.net where the call will be archived for two weeks. A telephone replay will be available through August 20, 2009. To access the replay, please dial (800) 406-7325 (domestic) or (303) 590-3030 (international), passcode 4132450.
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.
About U.S. Auto Parts Network, Inc.
Established in 1995, U.S. Auto Parts is a leading online provider of automotive aftermarket 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.autopartswarehouse.com and www.partstrain.com and the Company's corporate website is located at www.usautoparts.net.
U.S. Auto Parts is headquartered in Carson, California. 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, our liquidity requirements, and the status of our auction rate preferred securities. 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, economic downturn that could adversely impact retail sales; marketplace illiquidity; demand for the Company's products; increases in commodity and component pricing that would increase the Company's per unit cost and reduce margins; the competitive and volatile environment in the Company's industry; the Company's ability to expand and price its product offerings, control costs and expenses, and provide superior customer service; the mix of products sold by the Company; the effect and timing of technological changes and the Company's ability to integrate such changes and maintain, update and expand its infrastructure and improve its unified product catalog; the Company's ability to improve customer satisfaction and retain, recruit and hire key executives, technical personnel and other employees in the positions and numbers, with the experience and capabilities, and at the compensation levels needed to implement the Company's business plans both domestically and internationally; the Company's cash needs; any changes in the search algorithms by leading Internet search companies; the Company's need to assess impairment of intangible assets and goodwill; and the Company's ability to comply with Section 404 of the Sarbanes-Oxley Act and maintain an adequate system of internal controls; any remediation costs or 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.
U.S. AUTO PARTS NETWORK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data and par value)
July 4, December 31,
2009 2008
------------ ------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $32,597 $32,473
Short-term investments 4,096 -
Accounts receivable, net 1,864 1,353
Inventory, net 12,185 10,910
Deferred income taxes 2,095 2,095
Other current assets 3,133 2,090
----- -----
Total current assets 55,970 48,921
Property and equipment, net 9,927 8,203
Intangible assets, net 2,508 3,028
Goodwill 9,772 9,772
Deferred income taxes 12,329 14,061
Investments 5,876 6,351
Other non-current assets 93 94
------- -------
Total assets $96,475 $90,430
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $6,090 $5,702
Accrued expenses 8,466 5,663
Capital leases payable,
current portion 8 47
Other current liabilities 2,421 1,496
----- -----
Total current liabilities 16,985 12,908
Commitments and contingencies - -
Stockholders' equity:
Common stock, $0.001 par value;
100,000,000 shares authorized at
July 4, 2009 and December 31,
2008; 29,846,757 shares issued
and outstanding at July 4, 2009
and December 31, 2008 30 30
Additional paid-in capital 148,366 146,408
Accumulated other
comprehensive loss (28) (88)
Accumulated deficit (68,878) (68,828)
------ ------
Total stockholders' equity 79,490 77,522
------- -------
Total liabilities and
stockholders' equity $96,475 $90,430
======= =======
U.S. AUTO PARTS NETWORK, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
Thirteen Three Twenty-Six Six
Weeks Months Weeks Months
Ended Ended Ended Ended
July 4, June 30, July 4, June 30,
------- -------- ------- --------
2009 2008 2009 2008
------- -------- ------- --------
Net sales $43,805 $43,105 $83,469 $83,114
Cost of sales 27,937 28,518 52,961 54,777
------ ------ ------ ------
Gross profit 15,868 14,587 30,508 28,337
Operating expenses:
Marketing (1) 5,680 6,635 11,015 12,602
General and
administrative (1) 4,811 4,588 9,576 9,211
Fulfillment (1) 2,809 2,377 5,461 4,465
Technology (1) 1,343 787 2,271 1,471
Amortization of
intangibles and
impairment loss 153 20,541 520 22,640
--- ------ --- ------
Total operating expenses 14,796 34,928 28,843 50,389
Income (loss) from
operations 1,072 (20,341) 1,665 (22,052)
Other income:
Other income (loss) (23) 2 (23) 6
Interest income, net 49 234 140 502
--- --- --- ---
Other income, net 26 236 117 508
Income (loss) before
income taxes 1,098 (20,105) 1,782 (21,544)
Income tax provision
(benefit) 469 (8,042) 1,832 (8,606)
---- -------- ---- --------
Net income (loss) $629 $(12,063) $(50) $(12,938)
==== ======== ==== ========
Basic net income (loss)
per share $0.02 $(0.40) $(0.00) $(0.43)
Diluted net income
(loss) per share $0.02 $(0.40) $(0.00) $(0.43)
Shares used in
computation of basic
and diluted net loss
per share 29,846,757 29,846,757 29,846,757 29,846,757
Shares used in
computation of diluted
net income (loss)
per share 30,395,189 29,846,757 29,846,757 29,846,757
----------------------------
Thirteen Three Twenty-Six Six
Weeks Months Weeks Months
Ended Ended Ended Ended
July 4, June 30, July 4, June 30,
------- -------- ------- --------
2009 2008 2009 2008
------- -------- ------- --------
(1) Includes share-based
compensation expense
as follows:
Marketing $110 $112 $216 $196
General and
administrative 495 500 1,317 1,003
Fulfillment 57 30 104 63
Technology 158 44 210 56
--- --- --- ---
Total share-based
compensation
expense $820 $686 $1,847 $1,318
==== ==== ====== ======
U.S. AUTO PARTS NETWORK, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Twenty-Six Six Months
Weeks Ended Ended
July 4, 2009 June 30, 2008
------------ -------------
Operating activities
Net loss $(50) $(12,938)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation and amortization 2,153 1,758
Amortization of intangibles 520 4,195
Impairment loss on intangibles 18,445
Share-based compensation expense 1,847 1,318
Deferred taxes 1,731 (8,452)
Changes in operating assets and
liabilities:
Accounts receivable, net (511) 472
Inventory, net (1,274) (2,651)
Prepaid expenses and other
current assets (1,044) (1,532)
Other non current assets - (8)
Accounts payable and accrued
expenses 3,267 1,321
Other current liabilities 925 19
--- ---
Net cash provided by (used in)
operating activities 7,564 1,947
Investing activities
Additions to property and equipment (3,862) (1,975)
Proceeds from the sale of marketable
securities 475 21,275
Purchases of marketable securities (4,096) (5,500)
------ ------
Net cash provided by (used in)
investing activities (7,483) 13,800
Financing activities
Payments made on notes payable - (1,000)
Payments on short-term financing (39) (31)
--- ------
Net cash used in financing activities (39) (1,031)
--- ------
Effect of changes in foreign currencies 82 5
Net increase in cash and cash equivalents 124 14,721
Cash and cash equivalents at
beginning of period 32,473 19,399
------- -------
Cash and cash equivalents at end
of period $32,597 $34,120
======= =======
Supplemental disclosure of non-cash
investing activities:
Accrued asset purchases $75 -
Investor Contacts:
Ted Sanders, Chief Financial Officer
U.S. Auto Parts Network, Inc.
tsanders@usautoparts.com
(424) 702-1455