NASDAQ: PRTS. Investor Presentation

Transcription

1 NASDAQ: PRTS Ivestor Presetatio August 2018

2 Safe Harbor This presetatio cotais forward-lookig statemets, withi the meaig of the federal securities laws, that are based o our maagemet s beliefs ad assumptios ad o iformatio curretly available to maagemet. Forward-lookig statemets iclude iformatio cocerig our possible or assumed future results of operatios, expected growth ad busiess strategies, key operatig metrics, fiacig plas, competitive positio, idustry eviromet, potetial product offerigs, potetial market ad growth opportuities ad the aticipated outcome of ay litigatio. Forward-lookig statemets iclude all statemets that are ot historical facts ad ca be idetified by terms such as aticipates, believes, could, seeks, estimates, iteds, may, plas, potetial, predicts, projects, should, will, would or similar expressios ad the egatives of those terms. Forward-lookig statemets ivolve kow ad ukow risks, ucertaities ad other factors that may cause our actual results, performace or achievemets to be materially differet from ay future results, performace or achievemets expressed or implied by the forward-lookig statemets. Forward-lookig statemets represet our maagemet s beliefs ad assumptios oly as of the date of this presetatio. These statemets do ot guaratee future performace ad speak oly as of the date hereof, ad qualify for the safe harbor provided by Sectio 21E of the Securities Exchage Act of 1934, as ameded, ad Sectio 27A of the Securities Act of We refer all of you to the disclosures cotaied i the U.S. Auto Parts Aual Report o Form 10-K, Quarterly Reports o Form 10-Q ad Curret Reports o Form 8-K filed with the Securities ad Exchage Commissio, icludig the risk factors set forth therei, for more detailed discussio o the factors that ca cause actual results to differ materially from those projected i ay forward-lookig statemets. Except as required by law, we assume o obligatio to update these forward-lookig statemets publicly, or to update the reasos actual results could differ materially from those aticipated i the forward-lookig statemets, eve if ew iformatio becomes available i the future. This presetatio icludes certai o-gaap fiacial measures as defied by SEC rules. We have provided a recociliatio of those measures to the most directly comparable GAAP measures i this presetatio, where applicable, as well as i the appedix to this presetatio. We have ot icluded a recociliatio of Adjusted EBITDA guidace to projected et icome due to the high variability ad difficulty i makig accurate log-term forecasts ad projectios of our et operatig loss carryforwards, which have a sigificat impact o future et icome. As a result, we are uable to quatify projected et icome without ureasoable efforts. All fiacial measures i this presetatio refer solely to the Compay s core auto parts operatig segmet ( Base USAP ) ad exclude the AutoMD operatig segmet ( AutoMD ), a olie automotive repair iformatio source which was classified as discotiued operatios i March 2017, uless otherwise specified o a cosolidated basis U.S. Auto Parts Network, Ic. All rights reserved 1

3 2 Compay Overview US Auto Parts is a leadig pure-play iteret retailer of aftermarket auto parts A Value Leader i Aftermarket Auto Parts We operate olie sites, marketplace storefrots ad wholesale chaels focused o the do-it-yourself (DIY) customer Offer over 1 millio SKUs of high quality private label ad braded aftermarket products Extesive reach of olie customers per moth through our well-established etwork of websites ad marketplace parterships

4 Olie Aftermarket Auto Parts Sales Beefits From Macro Treds Olie aftermarket sales to more tha double by 2023 as market share cotiues to icrease Average age of light vehicles o the road remais high Olie Aftermarket Sales Olie Market Share 17% CAGR 11% 6% 20% $29B (i years) $6B $13B P 2019P 2020P Source: US Auto Care Associatio Source: IHS 3

5 How We Go To Market: Chaels & Percet of Reveue ecommerce Websites: Network of flagship websites supported by our call ceter agets. Sites also geerate advertisig & sposorship reveue. 90% Olie Marketplaces: 3rd party auctio sites ad shoppig portals, eablig access to additioal cosumer segmets. Offlie/Wholesale: Products distributed directly to commercial customers ad our Kool-Vue braded products sold to wholesale distributors. 10% Based o estimates usig Trailig Twelve Moths (TTM) Q2-18 4

6 Icreased customer LTV would result i greater mix of traffic from both direct-to-website ad paid chaels, ad less depedece o orgaic search 5 Key Aveues for Growth Icrease Customer Lifetime Value Gross Profit per Trasactio Average Order Size Repeat Purchase Coversio = Reach Efficiet sourcig strategy Private label sourcig Price optimizatio Efficiet operatios Efficiet Ivetory Maagemet Sell the job Cross-sell Warraty optios Budle Kits & Sets Quality products Easy to do busiess High service levels Reduced returs Reduced o-fills Egagig ladig pages Product Discovery Quality of data Improve Speed Frictioless checkout Mobile First Improvig our strategic objectives will provide more dollars to sped o marketig to drive traffic New marketplace parterships Rebuild orgaic performace Strategy to Icrease Customer Lifetime Value (LTV)

7 By focusig o the cosumer experiece, we will icrease coversio which we believe will allow us to drive more traffic 6 The Customer Jourey Experiece Liste to customer pai poits. Use this to guide prioritizatio ad iovatio. Ladig Experiece Product Discovery Trasactio Experiece Post-Purchase Experiece To captivate ad egage customers with our website i order to wi their attetio. Create a persoalized, smart, ad ituitive product discovery experiece Create a secure, frictioless, Omi chael checkout experiece. Provide customer with support services so they are satisfied after their purchase. Speed Provide appropriate solutios to esure a stable ad fast website.

8 Customer Value Propositio Value Cost-coscious customers are able to purchase our private label products at a sigificat cost savigs. Private label product pricigs whe compared agaist the same braded product averaged more tha 20% below the olie competitors ad over 40% below the brick ad mortars Selectio Customers have oe-stop shoppig o over 1 millio products across all major categories for auto parts Over 55K SKUs that are privately sourced at a sigificat cost savigs through Asia Product Warraties We provide a limited warraty for all products sold icludig a full parts replacemet User-Friedly Websites Our websites are desiged specifically for the auto parts segmet drive by our complex catalogs allowig customers to quickly idetify SKUs required ad build complete jobs Price & Product Availability: The Two Most Importat Factors for DIY Customers 7

9 We Address the Market with a Expasive Product Offerig TTM Q2-18 Reveue Mix 58% 28% 14% Collisio Parts Egie Parts Performace & Accessories Lamps Mirrors Bumpers Brake Discs Catalytic Coverters Radiators Seat Covers Car Covers Floor Mats / Carpetig Hoods Tailgates Doors Headers Oxyge Sesors Alterators Cold Air Itakes Vet Visors Toeau Covers Grills Wheels Widow Regulators Exhaust Driveshaft Fuel Ijectio / Delivery Nerf Bars Bug Shields Car Bras Private Label 97% 62% 3% Braded 3% 38% 97% Note: All percetages of sales reveue is estimated usig trailig twelve moths (TTM) Q2-18 Over 1 Millio SKUs Across Several Categories 8

10 Efficiet Supply Chai Creates a Pricig Advatage USAP has built a vertically itegrated olie busiess = Product Flow for Private Label = Product Flow for Drop Ship Vedors DC Stock Ship ~80% of Uits Stock-Ship Drop Ship (No Ivetory) ~20% of Uits Drop-Ship Retail Store DIY Cosumer Off-Shore Maufacturig Brad Importer Warehouse Distributor Service Ceter DIFM Cosumer Jobber Ceter 9

11 10 Overview of Custom Issues O April 2, 2018, U.S. Auto Parts filed a lawsuit agaist the Uited States Departmet of Homelad Security ( DHS ) which has oversight over the Customs ad Border Protectio ( Customs ) i the Uited States Court of Iteratioal Trade (the Court ) (Case No. 1:18-cv ). Lawsuit asserts that Customs has bee wrogfully seizig automotive grilles beig imported by U.S. Auto Parts o the basis that the grilles are allegedly couterfeit ad ifrige trademarks held by the origial automobile maufacturers. U.S. Auto Parts commeced the lawsuit to remove overly burdesome bodig requiremets arisig from the wrogful seizures ad to esure that Customs expeditiously processed the flow of imports ito the Uited States. O May 25, 2017, the Court of Iteratioal Trade grated U.S. Auto Parts motio for a prelimiary ijuctio ad ordered that Customs would be restraied from eforcig ay type of ehaced bodig requiremet o U.S. Auto Parts i order to obtai etry of its shipmets ito the Uited States, ad that Customs must use its best efforts to process all of U.S. Auto Parts import products ot implicated by Customs uderlyig trademark ifrigemet allegatios i a timely maer. Despite the favorable court order, U.S. Auto Parts cotiued to experiece issues with its product flow arisig from the iability of Customs to process U.S. Auto Parts shippig cotaiers i a expeditious fashio. At the time the court order was grated, Customs was holdig approximately 200 of U.S. Auto Parts shippig cotaiers that carried ot oly the grilles alleged to be couterfeit but may other products as well. As a result, U.S. Auto Parts icurred sigificat port ad carrier fees resultig from the icreased period of time the cotaiers remaied at the port. The amortized cost of port ad carrier fees associated with the ureleased product as well as the icreased legal costs associated with the product seizures ad the bodig litigatio aggregated to $609K durig the secod quarter, ad together with the icreased out of stock rates, culmiated i lower sales, lower gross margis ad higher operatig expeses for the secod quarter. As of the ed of July, all shippig cotaiers have bee released by Customs ad the Compay has ceased importig automotive grilles from outside the Uited States to avoid disruptio to the supply chai goig forward.

12 Fiacial Highlights 11

13 Compay Profile Reveues ~ $300M Q2-18 TTM Net loss of ($2.9M) which icluded a o cash tax impact of ~($4M) for the Tax Cuts & Jobs Act Q2-18 TTM Adjusted EBITDA of $13.4M 1 High Margi private label busiess was 74% of sales for Q2-18 TTM Positive Free Cash Flow with o revolver debt Public Compay sice 2007 NASDAQ (PRTS) 1) No-GAAP fiacial measure Adjusted EBITDA cosists of et icome before iterest expese, et; icome tax provisio; depreciatio ad amortizatio expese; amortizatio of itagible assets; restructurig costs; share-based compesatio expese; ad costs associated with our customs issue. See Appedix for recociliatio of Adjusted EBITDA to et icome 12

14 Strog Net Icome & Adjusted EBITDA¹ Growth Treds for U.S. Auto Parts $30 Net Icome Adj. EBITDA $25 $20 $15 $14.0M $14.2M $13.4 $12M - $14M $10 $8.4M $10.0M $5 $0 -$5 ($4.9M) ($0.1M) $3.0M $24.6M ($2.9) Q2-18 TTM 2018E 1) No-GAAP fiacial measure Adjusted EBITDA cosists of et icome before iterest expese, et; icome tax provisio; depreciatio ad amortizatio expese; amortizatio of itagible assets; restructurig costs; share-based compesatio expese; ad costs associated with our customs issue. See Appedix for recociliatio of Adjusted EBITDA to et icome 2) 2017 Net Icome icludes et tax beefit due to the chage i valuatio allowace i additio to the impact of the Tax Cuts ad Jobs Act 3) Net Icome impacted due to impact of the Tax Cuts & Jobs Act 4) Represets guidace for Adjusted EBITDA growth, issued ad oly effective August 8, We did ot provide guidace o et icome ad have ot icluded a recociliatio of Adjusted EBITDA guidace to projected et icome due to the high variability ad difficulty i makig accurate log-term forecasts ad projectios of our et operatig loss carryforwards, which have a sigificat impact o future et icome. As a result, we are uable to quatify projected et icome without ureasoable efforts. 13

15 Fiacial Performace Net Sales $254.4 $283.2 $290.8 $303.3 $ Operatig Expeses as a % of et sales 34.0% 28.9% 28.2% 28.9% 28.0% 28.1% i millios as a % of et sales FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 Q2 TTM FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 Q2 TTM Net Icome $24.6 Adjusted EBITDA 1 i millios $3.0 $(0.1) -2.9 $(4.9) $(13.6) FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 Q2 TTM i millios $14.0 $ $10.0 $8.4 $6.4 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 Q2 TTM 1) No-GAAP fiacial measure Adjusted EBITDA cosists of et icome before iterest expese, et; icome tax provisio; depreciatio ad amortizatio expese; amortizatio of itagible assets; restructurig costs; share-based compesatio expese; ad costs associated with our customs issue. Adjusted EBITDA excludes Stock based compesatio of $1.2M, $2.4M, $2.3M, $2.9M, $2.8M & $1.2M for FY-13, FY-14, FY-15, FY-16, FY-17 & Q2 TTM respectively, customs costs of $0.7M for Q2 TTM ad restructurig costs ad ot expected to be recurrig charges of $6.8M & $2.0M for FY-13 & FY-14 respectively. Refer to the appedix for a full Adjusted EBITDA recociliatio to et icome. 14

16 2 Year Stacked Private Label Quarterly Sales Tred 1 Two Year Stack Comps 45.0% 13.6% 35.0% 22.4% 25.0% 21.3% 10.5% 12.5% 12.8% 15.0% 5.0% 24.4% 31.8% 19.1% 23.7% 7.8% 24.4% 31.8% 19.1% 23.7% 22.4% 9.4% 13.6% 21.3% 14.2% 6.4% 14.2% 10.4% 3.2% 3.1% 10.5% 12.5% 9.4% 12.8% 14.2% 6.5% 14.2% -5.0% -12.1% -3.1% -8.0% -0.1% -15.0% Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Prior Year Curret Year 1 Comparables et sales was calculated by excludig $2.0M i private label sales related to the extra week i Q4-14, as well as $1.7M, $1.4M, $0.8M ad $0.5M i sales related to the West Coast Wholesale operatios from Q1-14, Q2-14, Q3-14 ad Q4-14, respectively. Private Label cotiues to be a major focus of our busiess 15

17 Key Takeaways A leadig pure-play iteret retailer of aftermarket auto parts $13 billio o-lie market expected by 2018 ad aticipated to early double by Extesive reach across our websites ad marketplace parterships Trasitioig to a higher mix of private label products to drive icreased coversio rates, higher-margi reveues, et icome ad Adjusted EBITDA Shiftig Focus from Growth to Profitability Improved profitability resultig i free cash flow geeratio ad o revolver debt 1) US Auto Care Associatio 16

18 APPENDIX 17

19 Compay History Iitiated Compay Stock Buy Back Pla 2017 JC Whitey completely itegrated Achieved double digit sales growth & positive FCF Compay begis sigificatly expadig its private label egie lie 2014 Aaro Colema becomes ew CEO Acquires PartsBi Adds Egie Lie Ivestig i LTV ad GMROI / JC Whitey turs 100 years old Lauched first iteret site sellig automotive Collisio Lie Cosolidated websites to focus o Flagship sites 2007 USAP fouded to serve local collisio shops i Los Ageles Acquires JC Whitey Adds Accessories Lie 2000 IPO (NASDAQ: PRTS) 1995 Lauches a etwork of sites catered to various cosumer segmets 18

20 19 Experieced Leadership Team Aaro E. Colema Chief Executive Officer Sice April 2017 Presidet sice October 2016 ad COO sice September 2010 Vice Presidet of Operatios ad CIO from April September 2010 Over 18 years of e-commerce experiece Seior Vice Presidet Olie Systems at Blockbuster Ic. B.A. degree i Busiess Admiistratio from Gozaga Uiversity Neil Wataabe Chief Fiacial Officer Sice March 2015 Over 30 years of fiace, accoutig ad retail experiece i both private & public compaies Chief Operatig Officer of Natioal Stores EVP & Chief Fiacial Officer Pet Smart B.A. degree i Social Scieces from the Uiversity of Califoria, Los Ageles ad CPA certificatio i Illiois Jim Hastie VP of Product Maagemet Sice December 2012 Over 18 years of progressively resposible experiece i the automotive aftermarket collisio idustry CEO/Presidet of America Codeser ad Coil Ower/Cofouder of EJB Medical B.A. degree from Uiversity of Califoria Davis MBA degree from Chapma Uiversity Charles Fischer SVP of Global Procuremet Sice May 2008 Over 30 years of global sourcig experiece Vice Presidet, Supply Chai Maagemet for Keystoe Automotive Idustries Director, Busiess Developmet for Moder Egieerig Multiple leadership positios with multiple compaies i the automotive aftermarket idustry

21 Fiacial Highlights Q2-18 Total reveue $77.0M Net icome (loss) from cotiuig operatios was ($0.5M) vs. the prior year $26.9M. Last year icluded a $25.9M beefit due to the release of valuatio tax allowace Adjusted EBITDA 1 $2.8M vs. prior year of $3.8M $6.8M i cash with zero revolver debt vs. last year of $9.9M i cash with zero revolver debt Added approximately 1,800 Private Label SKUs durig the quarter Ecom reveue capture 2 of 88% vs. 85% last year 1) No-GAAP fiacial measure Adjusted EBITDA cosists of et icome before iterest expese, et; icome tax provisio; depreciatio ad amortizatio expese; amortizatio of itagible assets; restructurig costs; share-based compesatio expese; ad costs associated with our customs issue. See Appedix for recociliatio of Adjusted EBITDA to et icome 2) Reveue capture is the amout of actual dollars retaied after takig ito cosideratio returs, credit card declies ad product fulfillmet ad excludes olie marketplaces ad media properties 20

22 Key Busiess Metrics Over Last Nie Quarters Margi % Y/Y BPS Chage Private Label % Mix Y/Y BPS Chage Q % -1.1% Q % 3% Q % 0.5% Q % 5% Q % 0.2% Q % 4% Q % -0.9% Q % 6% Q % -1.4% Q % 7% Q % -1.0% Q % 4% Q % 0.5% Q % 5% Q % 0.8% Q % 6% Q % 3.2% Q % 5% Q % 2.3% Q % 4% Traffic (i millios) Y/Y % Chage Coversio Y/Y BPS Chage Q % Q % 0.71% Q % Q % 0.50% Q % Q % 0.21% Q % Q % 0.10% Q % Q % 0.20% Q % Q % 0.01% Q % Q % 0.09% Q % Q % 0.14% Q % Q % 0.01% Q % Q % 0.09% 21

23 Yearly Adjusted EBITDA Recociliatio FY-13 FY-14 FY-15 FY-16 FY-17 Q2-18 TTM 52 Weeks Edig 53 Weeks Edig 52 Weeks Edig 52 Weeks Edig 52 Weeks Edig 52 Weeks Edig (i thousads) December 28, 2013 Jauary 2, 2015 Jauary 2, 2016 December 31, 2016 December 30, 2017 Jue 30, 2018 Net icome (loss) $ (13,644) $ (4,907) $ (136) $ 2,973 $ 24,574 $ (2,910) Depreciatio 10,676 7,230 6,141 6,351 6,397 6,120 Amortizatio of itagibles Iterest expese, et 972 1,101 1,208 1,219 1,647 1,657 Taxes (21,540) 5,278 EBITDA $ (1,572) $ 3,983 $ 7,732 $ 11,092 $ 11,397 $ 10,334 Stock comp expese 1,211 2,367 2,297 2,932 2,816 2,345 Ivetory write dow related to Carso closure Restructurig Cost 723 1, Impairmet loss o property & equipmet 4, Impairmet loss o itagible assets 1, Customs Costs Adjusted EBITDA 6,439 8,384 10,029 14,024 14,213 13,419 1) No-GAAP fiacial measure Adjusted EBITDA cosists of et icome before iterest expese, et; icome tax provisio; depreciatio ad amortizatio expese; amortizatio of itagible assets; restructurig costs; share-based compesatio expese; ad costs associated with our customs issue. 22

24 Quarterly Adjusted EBITDA Recociliatio (i thousads) Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Net icome (loss) $ 187 $ (611) $ 353 $ (65) $ 1,537 $ 1,216 $ 358 $ (195) $ 816 $ 26,918 $ 919 $ (4,079) $ 735 $ (485) Depreciatio 1,549 1,484 1,539 1,570 1,544 1,556 1,611 1,640 1,633 1,637 1,620 1,507 1,504 1,489 Amortizatio of itagibles Iterest expese, et Taxes 158 (69) (22) (2) (25,859) 28 4, EBITDA $ 2,374 $ 1,183 $ 2,250 $ 1,936 $ 3,572 $ 3,240 $ 2,365 $ 1,915 $ 2,964 $ 3,274 $ 3,012 $ 2,147 $ 3,159 $ 2,016 Stock comp expese , Customs Costs Adjusted EBITDA 2,851 1,757 2,837 2,595 4,344 4,025 3,129 2,526 4,028 3,818 3,577 2,790 4,266 2,786 1) No-GAAP fiacial measure Adjusted EBITDA cosists of et icome before iterest expese, et; icome tax provisio; depreciatio ad amortizatio expese; amortizatio of itagible assets; restructurig costs; share-based compesatio expese; ad costs associated with our customs issue. 23

25 Key Stats: PRTS (NASDAQ) Cosolidated Tradig Data August 6, 2018) Fiacial Highlights Jue 30, 2018) Stock Price $1.36 Reveues (TTM) $297.7M 52 Wk. High/Low $3.14/1.32 Avg. Daily Vol. (3 mo.) 193,400 Shares Outstadig M Istitutioal Holdigs 69% Isider Holdigs 18% Valuatio Measures Gross Margi (TTM) 29.4% Cash & Equiv. $6.8M Total Assets $104.7M Total Revolver Debt $0 Total Liabilities $63.2M Total Equity $41.6M Market Cap Eterprise Value $47.6M $40.8M EV/Reveue 0.1x Employees 2 1,069 Data sources: Yahoo! Fiace, S&P Capital IQ, compay filigs. 1) Icludes 2.8M preferred shares 2) As of Jue 30,