U.S. Auto Parts Reports Third Quarter 2019 Results

CARSON, Calif., Nov. 1, 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 third quarter ended September 28, 2019.

Third Quarter 2019 Summary vs. Year-Ago Quarter

• Gross profit increased 15% to $21.1 million compared to $18.4 million. As a percentage of net sales, gross profit increased 400 basis points to 30.5% compared to 26.5%.
• Net sales were $69.3 million compared to $69.5 million.
• Online sales increased 2% while offline sales declined 17%.
• Net loss was $1.4 million or $(0.04) per share, compared to net loss of $0.2 million or $(0.01) per share.
• Adjusted EBITDA (a non-GAAP measure defined below) was $1.3 million compared to $2.6 million.
• Ended the quarter with no revolver debt.
• Conversion rate increased 50 basis points to 3.2%.

Management Commentary

"Last quarter, we introduced a new operating plan that is centered on three key pillars: the right part, the right time, and the right place. Each of these pillars represents an important aspect of the customer experience as we need to ensure that our customers order the right part for their vehicle, deliver it quickly, and be agnostic to how the customer wants to install their auto parts.

"We have also renewed our focus on improving gross margins and profitability, which will be accomplished in-part by increasing the revenue mix of our highest margin products—private label—and better utilizing our resources to grow and optimize our three core websites.

"During the third quarter, we began to realize the early benefits of executing this new operating plan, highlighted by our second consecutive quarter of gross margin expansion, as well as our second consecutive quarter of positive adjusted EBITDA.  This was also our strongest quarter of private label sales growth in nearly two years, which tells us that our strategy is working. Further, our new 125,000 square foot distribution center went live in Las Vegas in early August, and we have already shipped more than 80,000 auto parts in less than 3 months.

"The momentum in our business is evident. Key metrics are trending in the right direction, our cash flow cycle is healthy and we remain debt-free. There is still plenty of work ahead to further improve our inventory optimization, cost structure and core websites. But everywhere we look, we see opportunity, and our team remains committed to delivering positive adjusted EBITDA this year and carrying this strong momentum into 2020," said Lev Peker, CEO of U.S. Auto Parts.

Third Quarter 2019 Financial Results

Net sales in the third quarter of 2019 were $69.3 million compared to $69.5 million in the year-ago quarter. The decline was largely driven by a reduction in branded sales and offline sales mostly offset by a 15% increase in higher margin private label sales.  Our online sales were up 2% and our offline sales declined 17% due to a change in pricing strategy and exiting unprofitable businesses.

Gross profit in the third quarter of 2019 increased 15% to $21.1 million compared to $18.4 million in the year-ago quarter. As a percentage of net sales, gross profit increased 400 basis points to 30.5% compared to 26.5%. Excluding detention and demurrage related costs from both quarters, gross margin for the quarter would be 31.3% compared to 28.9% last year. The increase was primarily driven by a greater proportion of higher margin private label sales and improved pricing strategies.

Total operating expenses in the third quarter were $22.6 million compared to $19.6 million in the third quarter of last year. As a percentage of net sales, operating expenses increased to 32.6% compared to 28.3% 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 third quarter was $1.4 million, or $(0.04) per share, compared to a net loss of $0.2 million or $(0.01) per share in the year-ago period.

Adjusted EBITDA in the third quarter of 2019 was $1.3 million compared to $2.6 million in the year-ago quarter.

At September 28, 2019, cash and cash equivalents totaled $1.1 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 September 28, 2019 and December 29, 2018.

Conference Call

U.S. Auto Parts CEO Lev Peker and CFO/COO David Meniane will host the conference call, followed by a question and answer period.

Date: Friday, November 1, 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: 13694403

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.com.

A telephone replay of the conference call will also be available on the same day through November 15, 2019.

Toll-free replay number: 844‑512‑2921
International replay number: 412‑317‑6671
Replay ID: 13694403

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.

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 and the costs associated with the customs issue, 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 all 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, its future operating results and financial condition, the impact of changes in our key operating metrics, and 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 and channel mix 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 its credit agreement, the weather, the impact of the customs issues 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.

Investor Relations:

Sean Mansouri, CFA or Cody Slach
Gateway Investor Relations
949‑574‑3860
[email protected]

Summarized information for our continuing operations for the periods presented is as follows (in millions):

The table below reconciles income from continuing operations to Adjusted EBITDA for the periods presented (in thousands):

SOURCE U.S. Auto Parts Network, Inc.

Related Links

http://www.usautoparts.net