Newegg Commerce, Inc. (NASDAQ: NEGG), a leading global
technology e-commerce retailer, today announced results for the six
months ended June 30, 2023.
“We continued to experience weaker than expected demand for
consumer technology products and finished goods during the first
half of 2023 as consumers remain cautious in the current
macroeconomic environment,” said Newegg CEO Anthony Chow. “In light
of the challenging environment, we continued to make progress on
several key cost saving initiatives designed to protect our bottom
line. For example, in June 2023, we terminated the lease of one of
our Southern California warehouses as part of our ongoing effort to
optimize our real estate footprint and improve overall utilization
rates. In the same month, we also closed escrow on an office
building in Diamond Bar, California, where we intend to relocate
our corporate headquarters in 2024. Through the first six months of
2023, we realized SG&A savings of $23 million compared to the
first six months of 2022, and we expect to realize additional cost
savings for the remainder of 2023 and beyond as a result of these
and other payroll and warehouse optimization measures.”
Newegg Chief Accounting Officer Christina Ching added, “In
addition to our cost optimization initiatives, we continue to
remain keenly focused on maintaining healthy inventory turnover and
a strong cash position. We reduced our net inventory balance from
$179 million as of June 30, 2022 to $138 million as of June 30,
2023. Furthermore, as of June 30, 2023, we had $51.8 million in
cash on hand and $75 million in revolving credit availability under
our credit agreement, which we believe is sufficient to cover our
current working capital requirements.”
2023 First Half Financial
Highlights
- Net sales decreased 18.8% to $723.2 million for the six months
ended June 30, 2023, compared to $890.5 million for the six months
ended June 30, 2022.
- GMV (defined below) decreased 21.8% to $882.5 million for the
six months ended June 30, 2023, compared to $1,128.7 million for
the six months ended June 30, 2022.
- Gross profit decreased 26.6% to $81.3 million for the six
months ended June 30, 2023, compared to $110.8 million for the six
months ended June 30, 2022.
- Net loss was $29.3 million for the six months ended June 30,
2023, compared to $18.9 million for the six months ended June 30,
2022.
- Adjusted EBITDA (defined below) decreased to $(10.3) million
for the six months ended June 30, 2023, compared to $(3.9) million
for the six months ended June 30, 2022.
2023 First Half Operational
Metrics
- Average order value was $390 for the six months ended June 30,
2023, compared to $444 for same period in prior year.
- Active customers, defined as unique customer IDs with at least
one item purchased on Newegg platforms in the past 6 months,
totaled approximately 1.3 million as of June 30, 2023, a decrease
from 1.5 million for the same period in the prior year.
- Repeat purchase rate, which is the percentage of active
customers who made at least two purchases on Newegg platforms
during the past 6 months, was 27.9% as of June 30, 2023, compared
to 27.1% for the same period in the prior year.
Mr. Chow added, “Despite broad macroeconomic challenges, Newegg
continues to prioritize the use of cutting-edge technology,
including artificial intelligence (‘AI’) and machine learning,
across our services and platforms to support a better customer
experience. To date, we’ve developed innovative AI solutions to,
among other things, summarize customer product reviews, make
purchase recommendations through our PC Builder shopping tool, and
manage quality assurance on our marketplace seller listings. We
have also started to deploy robotics in our warehouses, which we
expect to reduce our fulfillment time and costs to better serve our
customers throughout North America. Newegg continues to push
forward on a number of innovative initiatives that we believe will
position the company for long-term growth.”
About Newegg
Newegg Commerce, Inc. (NASDAQ: NEGG), founded in 2001 and based
in the City of Industry, California, is a leading global online
retailer for PC hardware, consumer electronics, gaming peripherals,
home appliances, automotive and lifestyle technology. Newegg also
serves businesses’ e-commerce needs with marketing, supply chain,
and technical solutions in a single platform. For more information,
please visit Newegg.com.
Follow Newegg on Twitter, TikTok, Instagram, Facebook, YouTube,
Twitch and Discord.
Non-GAAP Financial
Information
This press release presents certain “non-GAAP” financial
measures. The components of these non-GAAP measures are computed by
using amounts that are determined in accordance with accounting
principles generally accepted in the United States of America
(“GAAP”). A reconciliation of non-GAAP financial measures used in
this press release to their nearest comparable GAAP financial
measures is included in the schedules attached hereto.
GMV
The Company defines gross merchandise value, or GMV, as the
total dollar value of products sold on its websites and third-party
marketplace platforms, directly to customers and by its Marketplace
sellers through Newegg Marketplace, net of returns, discounts,
taxes, and cancellations. GMV also includes the services fees
charged through its Newegg Partner Services (“NPS”) in rendering
services for its third-party logistics (“3PL”), shipped-by-Newegg
(“SBN”), staffing and media ad services, as well as the sales made
by its Asia subsidiaries.
Adjusted EBITDA
Newegg calculates Adjusted EBITDA as net income/loss, excluding
stock-based compensation expense, depreciation and amortization
expense, interest income, net, income tax (benefit) provision,
gain/loss from warrants liabilities, gain/loss from sales of
investment, impairment of equity investment, and loss (income) from
equity investment.
Newegg believes that exclusion of certain expenses in
calculating Adjusted EBITDA facilitates operating performance
comparisons on a period-to-period basis and excludes items that it
does not consider to be indicative of its core operating
performance. Accordingly, Newegg believes that Adjusted EBITDA
provides useful information to investors and others in
understanding and evaluating its operating results in the same
manner as its management and board of directors.
Adjusted EBITDA has limitations as an analytical tool, and you
should not consider it in isolation or as a substitute for analysis
of Newegg’s results as reported under GAAP. Some of these
limitations are: although depreciation and amortization are
non-cash charges, the assets being depreciated and amortized may
have to be replaced in the future, and Adjusted EBITDA does not
reflect cash capital expenditure requirements for such replacements
or for new capital expenditure requirements; Adjusted EBITDA does
not reflect changes in, or cash requirements for, working capital
needs; Adjusted EBITDA does not consider the potentially dilutive
impact of stock-based compensation; Adjusted EBITDA does not
reflect tax payments that may represent a reduction in cash
available to Newegg; and other companies, including companies in
our industry, may calculate Adjusted EBITDA differently, which
reduces its usefulness as a comparative measure. Because of these
limitations, you should consider Adjusted EBITDA alongside other
financial performance measures, including various cash flow
metrics, operating profit and Newegg’s other GAAP results.
Cautionary Statement Concerning
Forward-Looking Statements
This news release includes “forward-looking statements” within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Forward-looking statements give our current expectations,
opinion, belief or forecasts of future events and performance. A
statement identified by the use of forward-looking words including
“will,” “may,” “expects,” “projects,” “anticipates,” “plans,”
“believes,” “estimate,” “should,” and certain other statements
about the future may be deemed forward-looking statements. Although
Newegg believes that the expectations reflected in such
forward-looking statements are reasonable at the time given, these
statements involve risks and uncertainties that may cause actual
future activities and results to be materially different from those
suggested or described in this news release. These risks and
uncertainties include changes in global economic and geopolitical
conditions, fluctuations in customer demand and spending,
inflation, interest rates and global supply chain constraints.
Investors are cautioned that any forward-looking statements are not
guarantees of future performance and actual results or developments
may differ materially from those projected. The forward-looking
statements in this press release are made as of the date hereof.
The Company takes no obligation to update or correct its own
forward-looking statements, except as required by law, or those
prepared by third parties that are not paid for by the Company. The
Company’s SEC filings are available at http://www.sec.gov.
NEWEGG COMMERCE, INC.
Consolidated Balance
Sheets
(In thousands, except par
value) (Unaudited)
June 30, 2023
December 31,
2022
Assets
Current assets:
Cash and cash equivalents
$
51,797
$
122,559
Restricted cash
1,173
947
Accounts receivable, net
58,069
83,517
Inventories, net
137,789
156,016
Income taxes receivable
5,297
5,173
Prepaid expenses
12,729
16,999
Other current assets
9,415
5,611
Total current assets
276,269
390,822
Property and equipment, net
64,508
45,075
Noncurrent deferred tax assets
2,784
868
Investment at cost
5,625
11,250
Right of use assets, net
81,940
84,161
Other noncurrent assets
9,308
9,919
Total assets
$
440,434
$
542,095
Liabilities and Equity
Current liabilities:
Accounts payable
$
125,071
$
207,147
Accrued liabilities
34,529
51,003
Deferred revenue
15,654
31,028
Line of credit
32,354
6,056
Current portion of long-term debt
269
269
Lease liabilities – current
12,603
14,265
Total current liabilities
220,480
309,768
Long-term debt, less current portion
1,266
1,404
Income taxes payable
739
739
Lease liabilities – noncurrent
73,558
74,838
Other liabilities
111
124
Total liabilities
296,154
386,873
Stockholders’ Equity
Common Stock, $0.021848 par value;
unlimited shares authorized; 379,050 and 376,660 shares issued and
outstanding as of June 30, 2023, and December 31, 2022,
respectively
8,282
8,230
Additional paid-in capital
251,314
232,776
Notes receivable – related party
(15,187
)
(15,189
)
Accumulated other comprehensive income
911
1,114
Accumulated deficit
(101,040
)
(71,709
)
Total stockholders’ equity
144,280
155,222
Total liabilities and stockholders’
equity
$
440,434
$
542,095
NEWEGG COMMERCE, INC.
Consolidated Statements of
Operations
(In thousands,
unaudited)
Six Months Ended June
30,
2023
2022
Net sales
$
723,249
$
890,540
Cost of sales
641,977
779,769
Gross profit
81,272
110,771
Selling, general, and administrative
expenses
115,877
138,996
Loss from operations
(34,605
)
(28,225
)
Interest income
821
412
Interest expense
(463
)
(339
)
Other income, net
57
3,219
Gain from sales of investment
3,053
1,669
Change in fair value of warrants
liabilities
21
737
Loss before provision for income taxes
(31,116
)
(22,527
)
Benefit from income taxes
(1,785
)
(3,658
)
Net loss
$
(29,331
)
$
(18,869
)
NEWEGG COMMERCE, INC.
Consolidated Statements of
Cash Flows
(In thousands)
(Unaudited)
Six Months Ended June
30,
2023
2022
Cash flows from operating activities:
Net loss
$
(29,331
)
$
(18,869
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
6,331
5,026
Allowance for expected credit losses
(469
)
65
Recovery of related party receivable
—
(25
)
Provision for obsolete and excess
inventory
3,906
4,376
Stock-based compensation
17,923
16,143
Gain from sales of investment
(3,053
)
(1,669
)
Change in fair value of warrant
liabilities
(21
)
(737
)
Loss (gain) on disposal of property and
equipment
184
(14
)
Unrealized loss (gain) on marketable
securities
(1
)
55
Deferred income taxes
(1,916
)
(6,701
)
Changes in operating assets and
liabilities:
Accounts receivable
25,912
10,183
Inventories
14,292
61,433
Prepaid expenses
4,268
3,610
Other assets
3,955
(1,309
)
Accounts payable
(82,097
)
(80,476
)
Accrued liabilities and other
liabilities
(19,446
)
(24,469
)
Deferred revenue
(15,398
)
(16,393
)
Dues from affiliate
2
2
Net cash used in operating activities
(74,959
)
(49,769
)
Cash flows from investing activities:
Payments to acquire property and
equipment
(26,750
)
(5,890
)
Proceeds on disposal of property and
equipment
60
1
Proceeds from sale of investment
3,412
—
Net cash used in investing activities
(23,278
)
(5,889
)
Cash flows from financing activities:
Borrowings under line of credit
27,594
31,234
Repayments under line of credit
(1,153
)
(10,771
)
Repayments of long-term debt
(134
)
(141
)
Proceeds from exercise of stock
options
1,078
1,637
Payments for employee taxes related to
stock compensation
(411
)
—
Net cash provided by financing
activities
26,974
21,959
Foreign currency effect on cash, cash
equivalents and restricted cash
727
425
Net decrease in cash, cash equivalents and
restricted cash
(70,536
)
(33,274
)
Cash, cash equivalents and restricted
cash:
Beginning of period
123,506
104,330
End of period
$
52,970
$
71,056
Schedule
1
Reconciliation of Net Sales to
GMV
For the Six Months Ended June
30,
2023
2022
(in millions)
Net Sales
$
723.2
$
890.5
Adjustments:
GMV - Marketplace
198.7
288.1
Marketplace Commission
(18.2
)
(26.6
)
Deferred Revenue
(9.3
)
(15.4
)
Other
(11.9
)
(7.9
)
GMV
$
882.5
$
1,128.7
Schedule
2
Reconciliation of Net Loss to
Adjusted EBITDA
For the Six Months Ended June
30,
2023
2022
(in millions)
Net loss
$
(29.3
)
$
(18.9
)
Adjustments:
Stock-based compensation expenses
17.9
16.1
Interest income, net
(0.4
)
(0.1
)
Income tax benefit
(1.8
)
(3.6
)
Depreciation and amortization
6.3
5.0
Gain from sale of investment
(3.0
)
(1.7
)
Gain from change in fair value of warrants
liabilities
—
(0.7
)
Adjusted EBITDA
$
(10.3
)
$
(3.9
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230829654646/en/
Newegg Commerce, Inc.: Investor Relations
ir@newegg.com
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