Market Overview

U.S. Auto Parts Reports Second Quarter 2019 Results

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CARSON, Calif., Aug. 8, 2019 /PRNewswire/ -- U.S. Auto Parts Network, Inc. (NASDAQ:PRTS), one of the largest online providers of aftermarket automotive parts and accessories, is reporting results for the second quarter ended June 29, 2019.

U.S. Auto Parts logo (PRNewsfoto/U.S. Auto Parts Network, Inc.)

Second Quarter 2019 Summary vs. Year-Ago Quarter

  • Net sales were $73.7 million compared to $77.0 million.
  • Gross profit increased 6% to $21.8 million compared to $20.5 million. As a percentage of net sales, gross profit increased 280 basis points to 29.5% compared to 26.7%.
  • Net loss was $1.5 million or $(0.04) per share, compared to net loss of $0.8 million or $(0.02) per share.
  • Adjusted EBITDA (a non-GAAP measure defined below) was $1.4 million compared to $2.8 million.
  • Ended the quarter with no revolver debt.
  • Conversion rate increased 30 basis points to 3.0%.

Management Commentary

"We began to execute on our new operating plan during the second quarter, which led to sequential improvements in gross profit, gross margin and adjusted EBITDA," said Lev Peker, CEO of U.S. Auto Parts. "In fact, this was our strongest quarter of gross margin since Q1 2018, reflecting our renewed focus on private label sales. In just over six months at the company, we have rebuilt and strengthened our team with key personnel, further consolidated our websites, and are now in the process of realigning our inventory and cost structure to better match our new directives.

"Last week, our new 125,000 square foot distribution center (DC) went live in Las Vegas, Nevada, approximately one month ahead of schedule. This is now our third DC, which will enable us to provide two-day delivery or less to 94% of the country while realizing savings in freight costs.

"As we look ahead, we will continue building out our team within merchandising, engineering, planning and operations. We believe we have a good handle on margins and are now turning our focus to operating expenses, where we expect to make significant reductions over the next six months. We will also continue to focus on better utilizing our resources to sell our highest margin products—private label—through our highest margin channels—CarParts.com, JCwhitney.com, and AutoPartsWarehouse.com. The journey for the new U.S. Auto Parts is just beginning. There is still much to improve, particularly with inventory optimization and in-stock rates, however we are taking the necessary steps to deliver positive adjusted EBITDA in 2019 and look forward to maximizing value for all shareholders as we execute on our operating plan."

Second Quarter 2019 Financial Results

Net sales in the second quarter of 2019 were $73.7 million compared to $77.0 million in the year-ago quarter. The decline was largely driven by a 13% decrease in e-commerce sales attributable to the company's proactive reduction of lower margin sales.

Gross profit in the second quarter of 2019 increased 6% to $21.8 million compared to $20.5 million in the year-ago quarter. As a percentage of net sales, gross profit increased 280 basis points to 29.5% compared to 26.7%. The increase was primarily driven by a greater proportion of higher margin private label sales and improved pricing strategies.

Total operating expenses in the second quarter were $23.0 million compared to $21.0 million in the second quarter of last year. As a percentage of net sales, operating expenses increased to 31.2% compared to 27.3% in the year ago quarter with the increase primarily driven by increased marketing spend and investments in marketing platforms and new employees.

Net loss in the second quarter was $1.5 million, or $(0.04) per share, compared to a net loss of $0.8 million or $(0.02) per share in the year-ago period.

Adjusted EBITDA in the second quarter of 2019 was $1.4 million compared to $2.8 million in the year-ago quarter.

At June 29, 2019, cash and cash equivalents totaled $0.9 million compared to $2.0 million at December 29, 2018. The decrease in cash is primarily a result of employee transition costs, technology capital expenditures, marketing, and setup costs for the company's new distribution center in Las Vegas, Nevada. U.S. Auto Parts also had no revolver debt at each of June 29, 2019 and December 29, 2018.

Key Operating Metrics




Q2 2019


Q2 2018


Q1 2019


Conversion Rate 1



2.98

%


2.70

%


2.60

%

Customer Acquisition Cost 1


$

8.20


$

7.29


$

7.33


Unique Visitors (millions) 1



14.2



16.3



18.2


Number of Orders - E-commerce only (thousands)



423



443



466


Number of Orders - Online Marketplace (thousands)



463



414



444


Total Number of Internet Orders (thousands)



886



857



910


Revenue Capture (% Sales) 2



87.8

%


87.7

%


87.5

%

Average Order Value - Total Internet Orders


$

80


$

88


$

82


_________________________

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 second quarter ended June 29, 2019.

The Company's CEO Lev Peker and CFO/COO David Meniane will host the conference call, followed by a question and answer period.

Date: Thursday August 8, 2019
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: 13692484

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 Gateway Investor Relations 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, 2019.

Toll-free replay number: 844‑512‑2921
International replay number: 412‑317‑6671
Replay ID: 13692484

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, and www.jcwhitney.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; (e) share-based compensation expense; (f) costs associated with our customs issue; and (g) costs associated with the executive transitions.

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.

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