U.S. Auto Parts Network, Inc. Reports First Quarter 2008 Results
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- Net sales of $40.0 million
- Gross profit of $13.8 million or 34.4% gross margin
- Adjusted EBITDA of $1.8 million
CARSON, Calif., May 8 -- U.S. Auto Parts Network, Inc. , a leading online provider of automotive aftermarket parts and accessories, today reported financial results for the first quarter ended March 31, 2008.
Net sales for first quarter were $40.0 million, a decrease of 8.5% from $43.7 million in the prior year period and an increase of 7.2% from the fourth quarter of 2007. Net loss for the first quarter of 2008 was $0.9 million, or $0.03 per diluted share, compared to a net profit of $0.2 million, or $0.01 per diluted share for the prior year period. Diluted EPS for the quarters ended March 31, 2008 and 2007 included amortization expense related to intangibles of $2.1 million or $0.07 per diluted share and $2.1 million or $0.08 per diluted share, respectively.
"We are pleased with the early improvement in our key business metrics and are encouraged to have finished the quarter with positive momentum in our online business," stated Shane Evangelist, Chief Executive Officer. "With the recent additions to our management team, I am confident we have the necessary capabilities to execute our plan and capture market share."
The Company generated adjusted EBITDA of $1.8 million in the first quarter of 2008 compared to $3.4 million in the prior year period. Adjusted EBITDA is a non-GAAP financial measure that further adjusts EBITDA to exclude share-based compensation expense of $0.6 million in the first quarter of 2008 and $0.4 million in the prior year period. For further information regarding Adjusted EBITDA, including a reconciliation of Adjusted EBITDA to net income (loss), see Non-GAAP Financial Measures below.
1Q 2008 Financial Highlights
-- Net sales for the first quarter ended March 31, 2008 were
$40.0 million, a decrease of 8.5% from $43.7 million in the first
quarter of 2007. The decrease is attributable to a 6.5% decrease in
our e-commerce channel and a 28.9% decrease in our online market place
channel. The number of placed orders increased due to higher website
traffic (unique visitors), but was offset by a decrease in our average
order value.
-- Gross profit was $13.8 million or 34.4% of net sales for the first
quarter of 2008 compared to $13.7 million or 31.2% of net sales for the
first quarter of 2007. The increase in gross margin was primarily due
to higher prices on certain products, lower product costs from certain
suppliers and lower outbound freight costs.
-- Marketing expense was $3.4 million or 8.5% of net sales for the first
quarter of 2008 compared to $2.5 million or 5.6% of net sales in the
prior year period. The increase was primarily due to additional
headcount in our Philippines call center; higher depreciation and
operating expenses related to our new facilities in the Philippines;
and increased marketing service expense.
-- Online advertising expense was $2.6 million or 6.4% of net sales for
the first quarter of 2008 compared to $3.4 million or 7.9% of net sales
for the prior year period. The decline in marketing spend reflects our
decision to limit incremental spending on paid search to breakeven
levels based on our estimated lifetime value of a customer.
-- General and administrative expense was $4.6 million or 11.6% of net
sales for the first quarter of 2008 compared to $2.9 million or 6.6% of
net sales in the prior year period. The increase was primarily due to
higher payroll and related expenses due to increased headcount; one
time recruiting and relocation fees; higher administrative operating
expenses including accounting, legal, SOX compliance, and insurance;
increased amortization expense; partially offset by a reduction in
merchant processing fees.
-- Fulfillment expense was $2.1 million or 5.2% of net sales in the first
quarter of 2008 compared to $1.7 million or 3.9% in the prior year
period. The increased in fulfillment is primarily due to higher
personnel costs related to the expansion of our warehouse and
purchasing personnel and increased depreciation expense.
-- Technology expense was $0.7 million or 1.7% of net sales in the first
quarter of 2008 compared to $0.4 million in the prior year period. The
increase was primarily due to higher payroll and related expenses to
support the Company's expanded infrastructure.
-- Capital expenditures for the first quarter of 2008 totaled
$1.0 million, including $0.7 million of internally developed software
and website development costs compared to $1.1 million in the same
period last year.
-- Cash, cash equivalents and short term investments were $32.2 million at
March 31, 2008. The Company includes $7.6 million of investments in
auction rate preferred securities in long-term assets which are not
included in cash.
"During the first quarter of 2008, we were pleased to see initial improvements in our conversion rate, both in our online business and our call center. We attribute these increases to improvements in the online shopping experience and greatly improved service levels in our call center," stated Michael McClane, Chief Financial Officer. "During the quarter we increased our SKU count, improved our in-stock position, and reduced our customer acquisition cost. Over the remainder of 2008, we plan to continue to drive sales while closely managing our cost structure."
1Q 2008 Operating Metrics
As of the fourth quarter 2007, the Company began using a new method to calculate key operating metrics. The new measurement is based on placed orders instead of our previous focus on net orders. The Company made this change in order to reduce the impact of returns, out of stock orders, and incomplete payment processing on the key operating metrics.
-- Conversion rate - The conversion rate in the first quarter of 2008 was
1.2% compared to 1.4% during the corresponding period of 2007, and in
line with 1.2% for the fourth quarter of 2007.
-- Customer acquisition cost - The customer acquisition cost in the
first quarter of 2008 was $5 per customer, compared to $8 during the
corresponding period of 2007, and compared to $8 in the fourth quarter
of 2007. The improvement in customer acquisition cost was largely a
result of higher levels of organic traffic and more efficient
advertising spend.
-- Unique visitors - The number of monthly unique visitors in the first
quarter of 2008 rose to 26 million, an increase of 16% compared to the
first quarter of 2007, and an increase of 7% over the fourth quarter of
2007.
-- Orders - The number of orders placed through our e-commerce websites
was approximately 320,000 orders in the first quarter of 2008 compared
to 315,000 in the corresponding period of 2007, and 293,000 in the
fourth quarter of 2007.
-- Average order value - The average order value of purchases on our
websites was $126 during the first quarter of 2008, down from $129
during the corresponding period of 2007, and just above $125 for the
fourth quarter of 2007.