U.S. Auto Parts Reports Fourth Quarter and Full Year 2017 Results
U.S. Auto Parts Reports Fourth Quarter and Full Year 2017 Results
CARSON, Calif., March 8, 2018 /PRNewswire/ -- U.S. Auto Parts Network, Inc. (NASDAQ: PRTS), one of the largest online providers of aftermarket automotive parts and accessories, reported results for the fourth quarter and fiscal year ended December 30, 2017. All information and data are from continuing operations, which exclude the AutoMD operating segment unless specifically noted.
Fourth Quarter 2017 Summary vs. Year-Ago Quarter
-- Net sales were $68.5 million compared to $71.1 million.
-- Gross margin increased 20 basis points to 30.3%.
-- Net loss was $4.1 million or $(0.12) per share, compared to a net loss
of $0.2 million or $(0.01) per share.
-- Adjusted EBITDA (a non-GAAP measure defined below) increased 10% to $2.8
million.
-- Conversion rate increased 20 basis points to 2.1% versus year-ago
quarter
-- Customer acquisition cost decreased 7% to $7.14
Full Year 2017 Summary vs. 2016
-- Net sales were $303.4 million compared to $303.3 million.
-- Gross margin was 29.6% compared to 30.3%.
-- Net income increased to $24.6 million, or $0.62 per diluted share,
compared to net income of $3.0 million, or $0.08 per diluted share.
-- Adjusted EBITDA increased to $14.2 million compared to $14.0 million.
-- Total online orders increased 6% to 3,632,000 orders.
Management Commentary
"In Q4, our continued focus on profitability led to another double-digit increase in adjusted EBITDA, as well as the highest gross margin quarter in 2017," said Aaron Coleman, CEO of U.S. Auto Parts. "Throughout 2017, we experienced a shift in channel mix with our online marketplaces gaining significant momentum which has been offset by a decrease in our e-commerce channel. To address the channel mix trends we managed expenses to maintain profitability and developed a strategy to improve the customer experience and re-accelerate e-commerce sales."
"We have deployed a number of customer experience initiatives in the first quarter which have recently resulted in a material impact on conversion. We are encouraged by these recent trends as they reinforce our customer experience strategy and we expect to roll out similar initiatives across all of our key sites in 2018. In addition, we are excited about the growing opportunity in the marketplace channels to expose our value proposition to new customers."
Fourth Quarter 2017 Financial Results
Net sales in the fourth quarter of 2017 were $68.5 million down 4% compared to $71.1 million in the year-ago quarter. The decrease was largely driven by an 18% decrease in e-commerce sales, partially offset by a 26% increase in online marketplace sales to $24.5 million.
Gross profit in the fourth quarter of 2017 was $20.8 million compared to $21.4 million in the year-ago quarter. As a percentage of net sales, gross profit increased 20 basis points to 30.3% compared to 30.1%. The increase in gross profit margin was primarily driven by a higher mix of private label sales, which was 72% of net sales compared to 68% in the year-ago quarter.
Total operating expenses in the fourth quarter decreased 5% to $20.2 million compared to $21.3 million in the year-ago quarter. As a percentage of net sales, operating expenses decreased 50 basis points to 29.4% compared to 29.9% in the year-ago quarter primarily as a result of lower call center and marketing expenses.
Net loss in the fourth quarter was $4.1 million, or $(0.12) per share, compared to a net loss of $0.2 million, or $(0.01) per share in the year-ago quarter. The $4.1 million net loss for the quarter included a $4.2 million income tax expense due to the change in the valuation allowance in addition to the impacts of the Tax Cuts and Jobs Act.
Adjusted EBITDA in the fourth quarter of 2017 increased 10% to $2.8 million, compared to $2.5 million in the same period of 2016, primarily driven by the aforementioned increase in gross margin and judicious cost management.
At December 30, 2017, cash and cash equivalents totaled $2.9 million compared to $2.7 million at December 31, 2016. The Company also had no revolver debt at each of December 30, 2017 and December 31, 2016.
Key Operating Metrics
Q4 2017 Q4 2016 Q3 2017
------- ------- -------
Conversion
Rate (1) 2.08% 1.87% 1.99%
Customer
Acquisition
Cost (1) $7.14 $7.64 $6.95
Unique
Visitors
(millions)
1 20.1 27.9 23.1
---- ---- ----
Number of
Orders -
E-
commerce
only
(thousands) 419 521 460
Number of
Orders -
Online
Marketplace
(thousands) 395 319 455
Total
Number of
Internet
Orders
(thousands) 814 840 915
=== === ===
Revenue
Capture (%
Sales) 2 86.1% 85.2% 85.6%
Average
Order
Value -
E-
commerce
only $100 $99 $99
Average
Order
Value -
Online
Marketplace $67 $66 $64
Average
Order
Value -
Total
Internet
Orders $82 $86 $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, payment capture and
product fulfillment and excludes
online marketplaces and media
properties (e.g. AutoMD).
Full Year Financial Results
Net sales in 2017 increased to $303.4 million compared to $303.3 million in 2016.
Gross profit in 2017 was $89.7 million compared to $92.0 million in 2016. As a percentage of net sales, gross profit decreased 70 basis points to 29.6% compared to 30.3%.
Total operating expenses in 2017 decreased to $85.0 million compared to $87.8 million in 2016. As a percentage of net sales, operating expenses were 28.1% compared to 29.0%.
Net income in 2017 increased significantly to $24.6 million, or $0.62 per diluted share, compared to net income of $3.0 million, or $0.08 per diluted share in 2016. The $24.6 million net income for the year included a $21.5m income tax benefit due to the change in valuation allowance in addition to the impacts of the Tax Cuts and Jobs Act.
Adjusted EBITDA in 2017 was $14.2 million compared to $14.0 million in 2016. As a percentage of net sales, adjusted EBITDA was 4.7% compared to 4.6%.
2018 Outlook
U.S. Auto Parts continues to expect net sales to increase low single digits on a percentage basis compared to 2017. The company also expects adjusted EBITDA to range between $14.5 million and $16.0 million compared to $14.2 million in 2017. U.S. Auto Parts is not including a reconciliation of adjusted EBITDA guidance to projected net income due to the high variability and difficulty in making accurate long-term forecasts and projections of net operating loss carryforwards which have a significant impact on future net income results. As a result, U.S. Auto Parts is unable to quantify its projected net income without unreasonable efforts.
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 fourth quarter and full year ended December 30, 2017.
The company's CEO Aaron Coleman and CFO Neil Watanabe will host the conference call, followed by a question and answer period.
Date: Thursday, March 8, 2018
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: 13676067
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 Liolios 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 March 22, 2018.
Toll-free replay number: 844-512-2921
International replay number: 412-317-6671
Replay ID: 13676067
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 individual 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; and (e) share-based compensation expense.
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, 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 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, the Company's expectations regarding its future operating results and financial condition, impact of changes in our key operating metrics, 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 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 our credit agreement, the weather, 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.
Company Contacts:
Neil T. Watanabe, Chief Financial Officer
U.S. Auto Parts Network, Inc.
(424) 702-1455 x127
nwatanabe@usautoparts.com
Investor Relations:
Cody Slach or Sean Mansouri
Liolios
949-574-3860
PRTS@liolios.com
Summarized information for our continuing operations for the periods presented is as follows (in millions):
Thirteen Weeks Ended Fifty-Two Weeks Ended
---------------------
December 30, 2017 December 31, 2016 December 30, 2017 December 31, 2016
----------------- ----------------- ----------------- -----------------
Net sales $68.52 $71.13 $303.37 $303.32
Gross profit $20.75 21.44 $89.66 $92.05
------ ----- ------ ------
30.3% 30.1% 29.6% 30.3%
---- ---- ---- ----
Operating
expenses $20.16 $21.30 $85.03 $87.78
------ ------ ------ ------
29.4% 29.9% 28.0% 28.9%
---- ---- ---- ----
Income from
operations $0.59 $0.15 $4.64 $4.27
----- ----- ----- -----
0.9% 0.2% 1.5% 1.4%
--- --- --- ---
Income from
continuing
operations $(4.08) $(0.20) $24.57 $2.97
------ ------ ------ -----
(6.0)% (0.3)% 8.1% 1.0%
----- ----- --- ---
Adjusted
EBITDA $2.79 $2.53 14.21 $14.02
----- ----- ----- ------
4.1% 3.6% 4.7% 4.6%
--- --- --- ---
The table below reconciles (loss) income from continuing operations to Adjusted EBITDA for the periods presented (in thousands):
Thirteen Weeks Ended Fifty-Two Weeks Ended
December 30, December 31, December 30, December 31,
2017 2016 2017 2016
---- ---- ---- ----
(Loss) income
from continuing
operations $(4,079) $(195) $24,574 $2,973
Depreciation &
amortization 1,507 1,640 6,397 6,351
Amortization of
intangible
assets 48 113 319 449
Interest expense,
net 407 344 1,647 1,219
Taxes 4,264 13 (21,540) 100
EBITDA $2,147 $1,915 $11,397 $11,092
====== ====== ======= =======
Stock comp
expense $643 $611 $2,816 $2,932
------
Adjusted EBITDA $2,790 $2,526 $14,213 $14,024
====== ====== ======= =======
U.S. Auto Parts is not including a reconciliation of adjusted EBITDA guidance to projected net income due to the high variability and difficulty in making accurate long-term forecasts and projections of net operating loss carryforwards which have a significant impact on future net income results. As a result, U.S. Auto Parts is unable to quantify its projected net income without unreasonable efforts.
The table below represents our earnings per share (in thousands, except for per share data):
Thirteen Weeks Ended Fifty-Two Weeks Ended
December 30, December 31, December 30, 2017 December 31,
2017 2016 2016
---- ---- ----
Net income (loss)
per share:
Numerator:
(Loss) income from
continuing
operations $(4,079) $(195) $24,574 $2,973
Dividends on Series
A Convertible
Preferred Stock (40) (61) (189) (241)
--- ---- ----
Income from
continuing
operations
available to
common shares $(4,119) $(256) $24,385 $2,732
======= ===== ======= ======
Denominator:
Weighted-average
common shares
outstanding
(basic) 35,070 34,878 35,192 34,765
Common equivalent
shares from common
stock options,
preferred stock
and warrants - - 4,442 1,442
Weighted-average
common shares
outstanding
(diluted) 35,070 34,878 39,634 36,207
====== ====== ====== ======
Basic net (loss)
income from
continuing
operations per
share $(0.12) $(0.01) $0.69 $0.08
Diluted net (loss)
income from
continuing
operations per
share $(0.12) $(0.01) $0.62 $0.08
U.S. AUTO PARTS NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
(Unaudited, in Thousands, Except Per Share Data)
Thirteen Weeks Ended Year Ended
December 30, 2017 December 31, 2016 December 30, 2017 December 31, 2016
----------------- ----------------- ----------------- -----------------
Net sales $68,518 $71,127 $303,366 $303,324
Cost of sales (1) 47,766 49,684 213,706 211,277
------ ------ ------- -------
Gross profit 20,752 21,443 89,660 92,047
------ ------ ------ ------
Operating expenses:
Marketing 9,255 9,728 39,293 41,104
General and administrative 4,226 4,306 17,612 17,629
Fulfillment 5,495 5,683 23,090 22,975
Technology 1,139 1,467 4,711 5,625
Amortization of intangible assets 48 113 319 449
Total operating expenses 20,163 21,297 85,025 87,782
------ ------ ------ ------
Income from operations 589 146 4,635 4,265
--- --- ----- -----
Other income (expense):
Other income, net 4 21 54 46
Interest expense (408) (349) (1,655) (1,238)
---- ---- ------ ------
Total other expense, net (404) (328) (1,601) (1,192)
---- ---- ------ ------
Income (loss) before income taxes 185 (182) 3,034 3,073
Income tax (benefit) provision 4,264 13 (21,540) 100
----- --- ------- ---
Income (loss) from continuing
operations (4,079) (195) 24,574 2,973
------ ---- ------ -----
Discontinued operations (2)
Loss from operations and disposal
of discontinued AutoMD operation - (1,719) (558) (3,875)
Income tax (benefit) provision - - 1 (299)
Loss on discontinued operations - (1,719) (559) (3,576)
Net income (loss) (4,079) (1,914) 24,015 (603)
====== ====== ====== ====
Other comprehensive income (loss):
Foreign currency translation
adjustments (24) 38 (18) 9
Actuarial gain (loss) on defined
benefit plan 20 110 20 110
Unrealized loss on investments (1) (2) (1) (2)
--- --- --- ---
Total other comprehensive income
(loss) $(5) $146 $1 $117
--- ---- --- ----
Comprehensive income (loss) $(4,084) $(1,768) $24,016 $(486)
======= ======= ======= =====
Basic net income (loss) per share $(0.12) $(0.01) $0.69 $0.08
Diluted net income (loss) per
share $(0.12) $(0.01) $0.62 $0.08
Weighted average common shares outstanding:
Shares used in computation of
basic income (loss) from
continuing operations per share 35,070 34,878 35,192 34,765
Shares used in computation of
diluted income (loss) from
continuing operations per share 35,070 34,878 39,634 36,207
____________
(1) Excludes depreciation and
amortization expense which is
included in marketing, general and
administrative and fulfillment
expense.
U.S. AUTO PARTS NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, In Thousands, Except Par and Liquidation Value)
December 30, 2017 December 31, 2016
----------------- -----------------
ASSETS
Current assets:
Cash and cash equivalents $2,850 $6,643
Short-term investments 9 30
Accounts receivable, net 2,470 3,266
Inventory 54,231 50,904
Other current assets 2,972 2,815
----- -----
Total current assets 62,532 63,658
Deferred income taxes 21,476 -
Property and equipment, net 15,085 16,478
Intangible assets, net 651 969
Other non-current assets 954 1,029
--- -----
Total assets $100,698 $82,134
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $35,999 $33,697
Accrued expenses 7,363 6,860
Revolving loan payable - -
Current portion of capital leases payable 579 542
Customer deposits 2,500 3,718
Other current liabilities 2,457 1,972
----- -----
Total current liabilities 48,898 46,789
Capital leases payable, net of current portion 9,173 9,770
Deferred income taxes - 156
Other non-current liabilities 2,266 2,097
----- -----
Total liabilities 60,337 58,812
------ ------
Commitments and contingencies
Stockholders' equity:
Series A convertible preferred stock, $0.001 par value;
$1.45 per share liquidation value or aggregate of $6,017;
4,150 shares authorized; 2,771 and 4,150 shares issued and
outstanding at December 30, 2017 and December 31, 2016,
respectively 3 4
Common stock, $0.001 par value; 100,000 shares authorized;
34,666 and 34,623 shares issued and outstanding at
December 30, 2017 and December 31, 2016, respectively (of
which 2,525 and 445 are treasury stock, respectively) 37 35
Treasury stock (7,146) (1,376)
Additional paid-in capital 179,906 180,153
Accumulated other comprehensive income 557 557
Accumulated deficit (132,996) (156,520)
-------- --------
Total stockholders' equity 40,361 22,853
Noncontrolling interest - 469
--- ---
Total equity 40,361 23,322
------ ------
Total liabilities and stockholders' equity $100,698 $82,134
======== =======
U.S. AUTO PARTS NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, In Thousands)
Year Ended
December 30, December 31,
2017 2016
---- ----
Operating activities
Net
income
(loss) $24,015 $(603)
Adjustments to reconcile
net loss to net cash
(used in) provided by
operating activities:
Depreciation
and
amortization
expense 6,397 7,510
Amortization
of
intangible
assets 319 482
Deferred
income
taxes (21,476) (838)
Share-
based
compensation
expense 2,842 3,131
Stock
awards
issued
for non-
employee
director
service 9 9
Impairment
loss on
intangible
assets - 1,130
Amortization
of
deferred
financing
costs 32 70
Gain from
disposition
of
assets (8) -
Changes in operating
assets and liabilities:
Accounts
receivable 796 (30)
Inventory (3,327) 312
Other
current
assets (292) (255)
Other
non-
current
assets 40 203
Accounts
payable
and
accrued
expenses 2,725 7,906
Other
current
liabilities (712) 1,775
Other
non-
current
liabilities 274 769
Net cash
provided
by
operating
activities 11,634 21,571
------ ------
Investing activities
Additions
to
property
and
equipment (4,896) (6,353)
Proceeds
from
sale of
property
and
equipment 39 -
Cash paid
for
intangibles - (125)
Proceeds
from
sale of
marketable
securities
and
investments - 1
Net cash
used in
investing
activities (4,857) (6,477)
------ ------
Financing activities
Proceeds
from
revolving
loan
payable 3,835 13,727
Payments
made on
revolving
loan
payable (3,835) (25,485)
Minority
shareholder
redemption (2,486) -
Payments
on
capital
leases (561) (587)
Treasury
stock
purchases (5,823) (1,387)
Statutory
tax
withholding
payment
for
share-
based
compensation (1,644) (969)
Proceeds
from
exercise
of stock
options 258 908
Payment
of
liabilities
related
to
financing
activities (100) (100)
Preferred
stock
dividends
paid (209) (61)
---- ---
Net cash
(used
in)
provided
by
financing
activities (10,565) (13,954)
Effect of
exchange
rate
changes
on cash (5) (34)
--- ---
Net
change
in cash
and cash
equivalents (3,793) 1,106
Cash and
cash
equivalents,
beginning
of
period $6,643 $5,537
Cash and
cash
equivalents,
end of
period $2,850 $6,643
====== ======
Supplemental disclosure
of non-cash investing
and financing
activities:
Accrued
asset
purchases $831 $744
Property
acquired
under
capital
lease $ - $211
Preferred
stock
dividends
declared
and not
paid $ - $60
Unrealized
loss on
investments $ - $(2)
Supplemental disclosure
of cash flow
information:
Cash paid
during
the
period
for
income
taxes $78 $89
Cash paid
during
the
period
for
interest $1,536 $1,077
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SOURCE U.S. Auto Parts Network, Inc.
