Newegg Commerce, Inc. (NASDAQ: NEGG), a leading tech-focused
North American e-retailer, today reaffirmed its previously issued
financial forecasts for the fiscal year ending December 31, 2021,
as well as the launch of several operating initiatives to better
serve its customers, the grant of restricted stock units to key
employees, a new employment agreement for its Chief Executive
Officer, and the opening of a limited trading window for its
restricted shares.
Reaffirms Full-Year 2021 Financial Forecast
Newegg currently expects to have a favorable holiday season with
strong financial performance for the fourth quarter of 2021. Newegg
reaffirmed its previously announced full-year 2021 guidance,
reflecting consistent expectations of demand and profitability
relative to its previous guidance. For the full year 2021, Newegg
expects to achieve net sales of approximately $2.4 billion (similar
to its previously announced guidance of net sales of approximately
$2.4 billion) and net income of between $36.3 million and $40.3
million (slightly higher than its previously announced guidance of
net income of between $36.1 million and $40.1 million).
Newegg’s CEO, Anthony Chow noted, “I am very pleased with
Newegg’s strong year-to-date performance, which is a testament to
the successful execution of our strategy focusing on profitable
growth. This performance is in line with our expectations, and we
have laid the foundation for a strong fourth quarter.”
Robert Chang, the Company’s Chief Financial Officer, commented,
“We expect to see continued strength in customer demand for
technology products and anticipate a favorable holiday season. We
are confident that, with our year-to-date financial performance
combined with our positive outlook for the remainder of the year,
we are on track to hit our previously announced financial and
growth metrics for the year 2021.”
Mr. Chow continued, “Since the beginning of the pandemic,
similar to many businesses in our industry, we were and continue to
be affected by global supply chain challenges. The disruption in
the global supply chain has directly affected our vendors by
putting pressure on their profit margins. We worked hard to
optimize our relationships and create mutual trust with our
vendors, as well as offer them logistical and marketing support to
motivate them to put more of their products on the Newegg platform.
On the other hand, disruption in global supply impacted consumer
prices due to higher shipping costs, slower deliveries, and higher
labor and raw material costs. Our team navigated through these
challenges and, due to strong relationships we established with our
vendors over the last two years, we continue to offer our customers
a wide range of products at affordable prices.”
Newegg has invested in new talent and technology to expand and
improve its customer experience. The Company recently launched
several programs to better serve its global clientele,
including:
- Opened two new distribution centers in Atlanta, GA and Ontario,
CA, with more than 200,000 and 240,000 square feet of capacity,
respectively. These new facilities are important distribution
points enabling Newegg to quickly and efficiently fulfill orders
and meet growing demand from customers throughout the United
States.
- Initiated a same-day delivery service to Southern California
customers via Newegg’s growing Newegg Express delivery service,
with no membership or minimum order required.
- Piloted Newegg Live, its first app-based livestreaming platform
that allows customers to interact with hosts while securing
exclusive real-time deals available only on the app during the
livestream, to hear expert opinions, to engage with those experts
by asking questions, and to comment and react in real time using
features built directly into the Newegg mobile app.
- Launched the Black Friday Price Protection program ahead of an
early holiday shopping season, offering price protection on select
Black Friday deals to reward shoppers by automatically refunding
the price difference if purchased products drop in price.
Newegg also dedicated significant resources to improve, optimize
and expand its vendor relationships. For example, Newegg signed an
agreement with PromoteIQ, a leading retail media platform that
enables vendor-direct sellers to promote products to in-market
shoppers to increase sales in real time. The partnership with
PromoteIQ provides Newegg’s vendor-direct sellers with even greater
control over how to promote their brands on Newegg.com.
Mr. Chow concluded, “We remain committed to delivering
best-in-class services to our customers and providing our partners
with innovative and cost-effective ways to increase their
sales.”
Restricted Stock Unit Grants and 2021 Equity Incentive
Plan
Newegg approved the grant of 7.4 million restricted stock unit
awards to its executive officers and key employees. These grants
vest over four years, with 25% vesting on the one-year anniversary
of grant, and the remainder vesting monthly over the following
three years, such that they will be fully vested after four years.
The grants total approximately 2% of the current outstanding share
count for Newegg. One half of the grants, or 3,687,450 RSUs, were
granted to the company’s Chief Executive Officer, Anthony Chow. The
remaining executives received grants as follows: 280,000 RSUs
awarded to Newegg’s Chief Operating Officer, Jamie Spannos, 150,000
RSUs to Chief Financial Officer, Robert Chang, 150,000 RSUs to
Chief Technology Officer, Montaque Hou, and 100,000 RSUs to Chief
Legal Officer, Brian Waters. The remaining 3,007,450 RSUs were
granted or reserved for 252 other key employees or expected new
hires.
All grants were made pursuant to a newly adopted 2021 Equity
Incentive Plan, which has authorized shares under the plan of 7.4
million shares. After the RSU grant, there are no further shares
available under the 2021 Equity Incentive Plan.
Chief Executive Officer Employment Agreement
Newegg’s compensation committee and board also approved a new
employment agreement for its Chief Executive Officer, Anthony Chow.
Under the terms of the agreement, Mr. Chow has a base salary of
$1.1 million per year, and a target bonus of 160% to 200% of his
base salary. The new employment agreement has a four-year term, and
has guaranteed base salary compensation to Mr. Chow during the
term, even if he is terminated during the term for any reason other
than for cause.
If Mr. Chow is terminated other than for cause, he also gets
severance of one year’s base salary plus an annual bonus equal to
the average of the prior three years’ annual bonuses at the time of
termination. These severance amounts are in addition to the
guaranteed base salary for Mr. Chow for the remainder of the term
of his employment agreement. In addition, any unvested equity
incentive awards that are outstanding and due to be vested within
one year of his termination are subject to accelerated vesting, if
he is terminated other than for cause.
If that termination (other than for cause) occurs in the context
of a change in control of Newegg, then Mr. Chow is entitled to two
years’ base salary plus an annual bonus equal to the average of the
prior three years’ annual bonuses, at the time of termination. In
addition, all unvested equity incentive awards that are outstanding
and unvested at the time of his termination, are subject to
accelerated vesting, if he is terminated other than for cause in
the context of a change in control of Newegg.
Temporary, Limited Trading Window for Restricted
Shares
Currently, approximately 365 million of the Company’s
outstanding common shares remain subject to various transfer
restrictions contained in Newegg’s Amended and Restated
Shareholders Agreement dated October 23, 2020 (the “Shareholders
Agreement”) or its 2005 Incentive Award Plan. In addition, all of
the shares issuable under the 2005 Incentive Award Plan and the
2021 Equity Incentive Plan are also subject to various transfer
restrictions set forth in those plans.
Over the next three weeks, beginning Tuesday, November 30, 2021
and ending Friday, December 17, 2021, inclusive of those dates (the
“Trading Window”), the Company will allow a strictly controlled,
temporary waiver of these transfer restrictions to enable limited
trading of common shares by its employees, former employees,
officers, directors, and stockholders who received restricted
common shares of the Company as part of the merger between Newegg
Inc. and Lianluo Smart Limited (the Company’s predecessor). Each
such employee, former employee, officer, director, or stockholder,
together with their respective affiliates, is referred to below as
a “Restricted Holders.”
As of November 26, 2021, there were approximately 96 Restricted
Holders, who will be limited to selling an aggregate of 1,575,463
shares during the Trading Window. The two largest Restricted
Holders, Hangzhou Liaison Interactive Information Technology Co.,
Ltd., and Mr. Fred Faching Chang, will be limited to selling
408,750 and 245,250 shares, respectively, with daily sales limits
of not more than the lesser of 5% of daily volume or 27,250 for
Hangzhou Liaison Interactive Information Technology Co., Ltd., and
the lesser of 3% of daily volume or 16,350 for Mr. Fred Faching
Chang during the Trading Window. All other Restricted Holders will
be limited to selling 921,463 shares in total, with daily sales
limits from zero to 5,500 common shares per Restricted Holder per
trading day, during the Trading Window. Newegg may decide to
further limit, but not expand, the volume limitations imposed on
such Restricted Holders in its sole discretion during the Trading
Window based on prevailing market conditions and other factors. No
sales would be allowed by the Restricted Holders when the NASDAQ
stock market is closed (i.e., in after-hours trading). Based on
recent historical trading volumes, the Company expects that
aggregate sales by the Restricted Holders could comprise a material
portion of the trading volume during the Trading Window; however,
the actual number of common shares offered for sale by Restricted
Holders is subject to their own discretion, within the limits
described above, and could vary from the Company’s
expectations.
The Trading Window provides Restricted Holders with the
opportunity to obtain some liquidity for their common shares and
vested stock options, while also gradually increasing the size of
the public float for Newegg common shares.
After the Trading Window closes on December 17, all trading
restrictions contained in the 2005 Incentive Award Plan, 2021
Equity Incentive Plan, and the Shareholders Agreement will be in
full effect in accordance with their original terms and
restrictions. However, the Company intends to allow Restricted
Holders to adopt customary trading plans under Rule 10b5-1 of the
Securities Exchange Act of 1934, as amended, subject to similar
volume limitations described above. These plans will likely result
in continued sales of the Company’s common shares into the public
market after December 17, 2021.
About Newegg Commerce, Inc.
Newegg Commerce, Inc., headquartered in the City of Industry,
California, is a leading tech-focused North American e-retailer and
serves a global customer base throughout Europe, Asia Pacific,
Latin America and the Middle East. Founded in 2001, the company
offers direct sales and an online marketplace platform for PC and
IT hardware, consumer electronics, automotive, gaming products and
finished goods. Newegg also offers an extensive portfolio of
technology, marketing, logistics and other partner services to help
companies grow their business. For more information, please visit
https://www.newegg.com/.
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 of the other
foregoing statements may be deemed forward-looking statements.
Although Newegg believes that the expectations reflected in such
forward-looking statements are reasonable, 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. 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.
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version on businesswire.com: https://www.businesswire.com/news/home/20211129005255/en/
Public Relations: John Snedigar Faultline Communications
john@faultlinecomms.com 408-705-7518
Investor Relations: Lena Cati The Equity Group Inc.
212-836-9611 lcati@equityny.com
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