1 U.S. Auto Parts Network, Inc. Leading online source for automotive aftermarket parts and repair information Investor Presentation March 11, 2014 Exhibit 99.1 |
Safe Harbor This presentation may contain certain forward-looking statements and management may make additional forward-looking statements in response to your questions. These statements do not guarantee future performance and speak only as of the date hereof, and qualify for 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. We refer all of you to the risk factors contained in US Auto Parts Annual Report on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission, for more detailed discussion on the factors that can cause actual results to differ materially from those projected in any forward-looking statements. 2 |
3 Broad Auto Parts Product Offering Body Parts Engine Parts Performance & Accessories *Represents USAP online mix **Source; AAIA Factbook Research 19% 41% 40% $15B $15B Revenue* Overall Market** $50B Brake Discs Catalytic Converters Radiators Headers Oxygen Sensors Alternators Exhaust Driveshaft Fuel Injection / Delivery Lamps Mirrors Bumpers Hoods Tailgates Doors Grills Wheels Window Regulators Seat Covers Car Covers Floor Mats / Carpeting Cold Air Intakes Vent Visors Tonneau Covers Nerf Bars Bug Shields Car Bras |
Online sales of automotive parts and accessories continue to grow Google has experienced a 6 year compound annual growth rate (“CAGR”) of 16% in queries for automotive parts 4 $1.3 $1.3 $1.2 $1.3 $1.5 $1.6 $1.5 $1.5 $1.8 $1.8 $1.9 $1.9 $2.0 $2.2 $2.1 $1.0 $1.1 $1.2 $1.3 $1.4 $1.5 $1.6 $1.7 $1.8 $1.9 $2.0 $2.1 $2.2 $2.3 Source: eBay filings, press releases Source: Google eBay Parts Sales Continue to Increase Google Queries for Parts Growing Online Market is Vibrant and Growing Aftermarket e-Commerce Overview Mobile year over year queries increased 50% and 80% for cellphones and tablets, respectively, for September 2013 YTD 300% 250% 200% 150% 100% 50% 0% 2008 2009 2010 2011 2012 2013 16% CAGR |
Online penetration for auto parts has trailed penetration rates of other consumer product categories for two reasons: 1) Auto parts are traditionally bought by demographics that have lower internet access rates We believe consumer buying will shift from offline to online as mobile device penetration increases for these demographics 2) Shopping for auto parts online can be difficult for consumers The complexity required to buy an auto part online increases consumers concerns it will not fit their vehicle Online retailers continue to make improvements to online shopping, reducing concerns and increasing conversion Size and Penetration of Online Automotive Parts Aftermarket e-Commerce Overview 5 Source: Morgan Stanley and Forrester Research Low Automotive Online Sales Penetration Source: AAIA Estimate based on AAAI Fact book - $85B in parts, $70B in labor * Excludes eBay Automotive Aftermarket by Segment Desire to Repair High Low $155B Do-It-For-Me $45B Do-It-Yourself (USAP Target Market) $3.1B-$4.0B Online Sales* High Online penetration rates for most consumer products categories range from 4% to 6% Online sales of automotive parts significantly lag other product categories 45% 27% 24% 24% 21% 19% 19% 18% 13% 12% 11% 10% 10% 9% 9% 8% 6% 5% 4% 3% 1% Product Category |
Changes to Our Business 6 * FCF is defined as Adjusted EBITDA less CAPX 2012 - 2013 • Traffic and revenue declined resulting from search engine changes forcing us to consolidate websites • Gross margin compression from increased competition • Cost reductions could not be eliminated fast enough to keep up with gross profit dollar lost Go Forward • Traffic is stabilizing and revenue from go forward sales channels has turned slightly positive • Larger focus on Private Label business with healthier margins at competitive prices • Cost reductions have now exceeded gross profit dollars loss from 2012 – 2013 $0 |
Product Assortment • Over 50% of product sales directly sourced from Asia • Transition away from lower margin stock ship branded product while expanding private label mix • Broad assortment Marketing • Over 10 million unique monthly visitors to our websites • Unique visitors more than two times higher then any other auto parts retailer • $7 customer acquisition cost (“CAC”) USAP has two main competitive advantages Competitive Advantages • Over 40,000 private label SKUs • Over 1.5M branded SKUs 7 |
USAP’s Supply Chain Creates Pricing Advantage USAP’s ability to competitively price products while maintaining healthy margins is a function of the Company’s ability to leverage its robust private label supply chain. The Company is working to increase margins by shifting its product mix toward increased private label offerings - current margins range from 29% - 31% The Company sources product directly from over 200 factories in Asia 8 Margin % In-Stock Private Label (Asia Sourced) Branded (U.S. Sourced) 40% - 70% 25% - 40% 10% - 25% Drop Shipped Current Mix 55% 45% Current Mix 63% 37% 75% 25% Goal 70% 30% Goal |
US Auto Parts Dominant Reach- Largest Pure Play Internet Retailer 9 0 2,000 4,000 6,000 8,000 10,000 USAP traffic includes traffic from USAP continued sales channels and WAG since the acquisition Competitive sites’ traffic based on Compete December 2013 reports (some overlap of monthly visitors across websites) USAP’s traffic is 2x larger than any other pure play online auto parts seller |
Revenue 100% Gross Margins 29% - 31% Variable OPEX Costs 15% Fixed Costs 0% Incremental Flow Thru 14% - 16% 10 Growth and Profitability Incremental Flow Thru |
11 • Excludes stock based compensation, depreciation and amortization • For every incremental year required to achieve growth levels, fixed expenses increase $1.0M or 3% Financial Sensitivity Our business model has significant cost leverage as revenues grow Base 10% 20% 30% 40% Revenue $250 $275 $300 $325 $350 Gross Margin % Variable: Fulfillment 3.2% 3.2% 3.2% 3.2% 3.2% Marketing 9.3% 9.3% 9.3% 9.3% 9.3% Technology 0.7% 0.7% 0.7% 0.7% 0.7% G&A 1.8% 1.8% 1.8% 1.8% 1.8% Total Variable 14.9% 14.9% 14.9% 14.9% 14.9% Fixed: Fulfillment 2.5% 2.2% 2.0% 1.9% 1.8% Marketing 4.0% 3.6% 3.3% 3.0% 2.8% Technology 1.2% 1.1% 1.0% 0.9% 0.9% G&A 4.0% 3.6% 3.3% 3.1% 2.9% Total Fixed 11.6% 10.6% 9.7% 9.0% 8.3% Adjusted EBITDA % Adjusted EBITDA $ $6 – $11 $10 – $15 $13 – $19 $17 – $23 $20 – $27 29.0% – 31.0% 29.0% – 31.0% 29.0% – 31.0% 29.0% – 31.0% 29.0% – 31.0% 2.4% – 4.4% 3.5% – 5.5% 4.4% – 6.4% 5.1% – 7.1% 5.8% – 7.8% |
12 AutoMD – Addressing the DIFM Market |
$153.4 $176.3 $262.3 $327.1 $304.0 $254.8 2008 2009 2010 2011 2012 2013 $5.2 $13.5 $19.5 $16.3 $9.4 $6.0 2008 2009 2010 2011 2012 2013 13 Sales & Adjusted EBITDA Consolidated Sales 1 Consolidated Adjusted EBITDA 2 ($ In Millions) ($ In Millions) Adj. EBITDA Margin 3% 5% 8% 7% 3% 2% 1. JC Whitney was acquired in Aug 2010 adding revenue of $39.1M in 2010 and $83.4M in 2011. Amounts not separately disclosed after 2011. 2. Non-GAAP financial measure EBITDA consists of net income before (a) interest expense, net; (b) income tax provisions; (c) amortization of intangible assets; (d) depreciation and amortization. Adjusted EBITDA excludes restructuring costs and other one time charges of $0.4M, $5.8M, $8.0M, $0.7M and $0.8M in 2009, 2010, 2011, 2012 and 2013, respectively, stock based compensation of $2.9M, $3.3M, $2.7M, $2.6M, $1.7M and $1.3M in 2008, 2009, 2010, 2011, 2012 and 2013 respectively. There were no restructuring or other one time charges in 2008. |
Recent Revenue Trends Completed the retirement of a number of websites by the end of 2Q ‘13 14 |
Adjusted EBITDA (Non-GAAP Financial Measure – in thousands ) 15 Thirteen Weeks Ended Fifty-Two Weeks Ended December 28 December 29 December 28 December 29 2013 2012 2013 2012 Net loss (1,325) $ (30,783) $ (15,634) $ (35,978) $ Interest expense, net 276 274 972 774 Income tax provision (48) (1,230) 43 (937) Amortization of intangible assets 82 177 381 1,189 Depreciation and amortization expense 2,439 3,671 12,175 15,204 EBITDA 1,424 (27,891) (2,063) (19,748) Impairment loss on goodwill - 18,854 - 18,854 Impairment loss on property and equipment - 1,960 4,832 1,960 Impairment loss on intangible assets - 5,613 1,245 5,613 Shared-based compensation expense 198 265 1,263 1,673 Loss on debt extinguishment - - - 360 Legal costs related to intellectual property - 67 - 67 Restructuring costs - - 723 640 Adjusted EBITDA 1,622 $ (1,132) $ 6,000 $ 9,419 $ |
Consolidated Statements of Comprehensive Operations (Unaudited, in Thousands, Except Per Share Data) 16 Thirteen Weeks Ended Fifty-two Weeks Ended December 28 December 29 December 28 December 29 2013 2012 2013 2012 Net sales 59,735 $ 62,848 $ 254,753 $ 304,017 $ Cost of sales (1) 42,260 45,072 180,620 212,379 Gross profit 17,475 17,776 74,133 91,638 Operating expenses: Marketing 9,284 12,079 41,045 51,416 General and administrative 3,941 4,347 17,567 19,857 Fulfillment 4,112 5,023 18,702 22,265 Technology 1,093 1,448 5,128 6,274 Amortization of intangible assets 82 177 381 1,189 Impairment loss on goodwill - 18,854 - 18,854 Impairment loss on property and equipment - 1,960 4,832 1,960 Impairment loss on intangible assets - 5,613 1,245 5,613 Total operating expenses 18,512 49,501 88,900 127,428 Loss from operations (1,037) (31,725) (14,767) (35,790) Other income (expense): Other income (expense), net (66) (14) 148 20 Interest expense (270) (274) (972) (785) Loss on debt extinguishment - - - (360) Total other expense, net (336) (288) (824) (1,125) Loss before income tax provision (1,373) (32,013) (15,591) (36,915) Income tax provision (48) (1,230) 43 (937) Net loss (1,325) (30,783) (15,634) (35,978) Other comprehensive income, net of tax: Foreign currency translation adjustments 24 (4) 55 31 Unrealized gains on investments 3 (4) 7 26 Total other comprehensive income 27 (8) 62 57 Comprehensive loss (1,298) $ (30,791) $ (15,572) $ (35,921) $ Basic and diluted net loss per share (0.04) $ (0.99) $ (0.48) $ (1.17) $ Shares used in computation of basic and diluted net loss per share 33,308 31,128 32,697 30,818 (1) Excludes depreciation and amortization expense which is included in marketing, general and administrative and fulfillment expense. |
Consolidated Balance Sheets (In Thousands, Except Par and Per Share Liquidation Value) 17 December 28 December 29 ASSETS 2013 2012 Current assets: Cash and cash equivalents 818 $ 1,030 $ Short-term investments 47 110 Accounts receivable, net of allowances of $213 and $221 at December 28, 2013 and December 29, 2012, respectively 5,029 7,431 Inventory 36,986 42,727 Deferred income taxes - 39 Other current assets 3,234 4,176 Total current assets 46,114 55,513 Property and equipment, net 19,663 28,559 Intangible assets, net 1,601 3,227 Other non-current assets 1,804 1,578 Total assets 69,182 $ 88,877 $ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable 19,669 $ 28,025 $ Accrued expenses 5,959 10,485 Revolving loan payable 6,774 16,222 Current portion of capital leases payable 269 70 Other current liabilities 3,682 4,738 Total current liabilities 36,353 59,540 Capital leases payable, net of current portion 9,502 70 Deferred income taxes 335 314 Other non-current liabilities 2,126 1,309 Total liabilities 48,316 61,233 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; 4,150 and 0 shares issued and outstanding at December 28, 2013 and December 29, 2012, respectively 4 - Common stock, $0.001 par value; 100,000 shares authorized; 33,352 shares and 31,128 shares issued and outstanding at December 28, 2013 and December 29, 2012, respectively 33 31 Additional paid-in capital 168,693 159,781 Common stock dividend distributable 60 - Accumulated other comprehensive income 446 384 Accumulated deficit (148,370) (132,552) Total stockholders' equity 20,866 27,644 Total liabilities and equity 69,182 $ 88,877 $ |
Thank You 18 |