Newegg Commerce, Inc. (NASDAQ: NEGG), a leading global
technology e-commerce retailer, today announced results for the
nine months ended September 30, 2023, and revised guidance for the
year ending December 31, 2023.
“While we continued to experience lower-than-expected results in
the third quarter due to challenging macroeconomic conditions and
declining consumer demand, I am excited to share the launch of
several new initiatives underway, including the development of new
sales channels through Walmart.com and TikTok Shop, our renewed
focus on systems and finished good categories, and the expansion of
our U.S. marketplace efforts,” said Newegg CEO Anthony Chow. “I am
also proud of our continued progress in streamlining operations, an
example of which includes our implementation of Geek+ autonomous
robots to enhance warehouse operational efficiency. Further, we are
beginning to see some positive momentum for Black Friday, Cyber
Monday and holiday shopping during the fourth quarter, which we
hope to carry into the new year.”
“Finally, I am pleased to have announced our inaugural $10.0
million share repurchase program last month, which we intend to use
opportunistically to enhance shareholder value.”
Newegg Chief Accounting Officer Christina Ching added, “We have
started to see some moderation in the rate of decline in our
business in the second half as a result of momentum from our Black
Friday and Cyber Monday sales period.”
“Our team has moved swiftly to realize SG&A savings in
response to declining demand this year, and I am pleased with our
progress thus far in achieving substantial year-over-year savings.
As a result of various one-time reduction expenses, we expect to
see the full benefit of these initiatives in 2024. Separately, our
full year projections were negatively impacted by a combination of
external factors, including one-time product shortages and delayed
product launch cycles, particularly in the GPU category.”
“We remain keenly focused on maintaining healthy inventory
turnover and a strong cash position. Our current average inventory
turnover is 40 days, and we have reduced total inventory levels
from $156 million, as of December 31, 2022, to $142 million as of
September 30, 2023. Furthermore, as of September 30, 2023, we had
$54 million in cash on hand and no outstanding balance under our
revolving credit facility.”
2023 Q3 Financial
Highlights
- Net sales decreased 16.0% to $1,040.8 million for the nine
months ended September 30, 2023, compared to $1,239.7 million for
the nine months ended September 30, 2022.
- GMV (defined below) decreased 20.2% to $1,265.0 million for the
nine months ended September 30, 2023, compared to $1,585.0 million
for the nine months ended September 30, 2022.
- Gross profit decreased 24.7% to $118.1 million for the nine
months ended September 30, 2023, compared to $156.9 million for the
nine months ended September 30, 2022.
- Net loss was $44.0 million for the nine months ended September
30, 2023, compared to $27.4 million for the nine months ended
September 30, 2022.
- Adjusted EBITDA (defined below) decreased to $(17.0) million
for the nine months ended September 30, 2023, compared to $(4.5)
million for the nine months ended September 30, 2022.
2023 Updated Full Year
Guidance
The Company currently expects to achieve the following financial
performance for the current year ending December 31, 2023:
- Net sales to be between $1.42 billion and $1.47 billion.
- GMV to be between $1.78 billion and $1.83 billion.
- Gross profit to be between $160.0 million and $165.0
million.
- Net loss to be between $56.0 million and $60.0 million.
- Adjusted EBITDA to be between $(21.0) million and $(25.0)
million.
Mr. Chow added, “We remain optimistic about the future of the
business. We continue to innovate in important areas, such as
social media and social sharing. As a key partner of TikTok Shop,
we have substantially enhanced our social media presence and reach
within the key Gen Z demographic. We also launched an innovative
social sharing sales channel, Group Buy, in November. Group Buy is
our daily deal offer that requires a minimum number of customers to
register online each day in order to unlock an attractive deal.
Group Buy is designed to encourage customers to share daily deals
through social media in order to generate group excitement and
attract additional traffic to our site. We believe these types of
forward-looking initiatives continue to set Newegg apart in the
e-commerce market.”
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 X (formerly 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.
The Company provides certain guidance on a non-GAAP basis but is
unable to provide a reconciliation to the most directly comparable
GAAP financial measure without unreasonable efforts, as the Company
cannot predict some elements that are included in such directly
comparable GAAP financial measure. These elements could have a
material impact on the Company’s reported GAAP results for the
guidance period.
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)
September 30, 2023
December 31, 2022
Assets
Current assets:
Cash and cash equivalents
$
54,006
$
122,559
Restricted cash
1,137
947
Accounts receivable, net
51,582
83,517
Inventories, net
142,303
156,016
Income taxes receivable
989
5,173
Prepaid expenses
9,265
16,999
Other current assets
3,514
5,611
Total current assets
262,796
390,822
Property and equipment, net
62,793
45,075
Noncurrent deferred tax assets
2,789
868
Investment at cost
2,250
11,250
Right of use assets, net
78,493
84,161
Other noncurrent assets
9,397
9,919
Total assets
$
418,518
$
542,095
Liabilities and Equity
Current liabilities:
Accounts payable
$
143,301
$
207,147
Accrued liabilities
30,806
51,003
Deferred revenue
15,970
31,028
Line of credit
7,157
6,056
Current portion of long-term debt
259
269
Lease liabilities – current
12,868
14,265
Total current liabilities
210,361
309,768
Long-term debt, less current portion
1,154
1,404
Income taxes payable
739
739
Lease liabilities – noncurrent
70,047
74,838
Other liabilities
417
124
Total liabilities
282,718
386,873
Stockholders’ Equity
Common Stock, $0.021848 par value;
unlimited shares authorized; 380,128 and 376,660 shares issued and
outstanding as of September 30, 2023, and December 31, 2022,
respectively
8,305
8,230
Additional paid-in capital
258,362
232,776
Notes receivable – related party
(15,189
)
(15,189
)
Accumulated other comprehensive income
43
1,114
Accumulated deficit
(115,721
)
(71,709
)
Total stockholders’ equity
135,800
155,222
Total liabilities and stockholders’
equity
$
418,518
$
542,095
NEWEGG COMMERCE, INC.
Consolidated Statements of
Operations
(In thousands,
unaudited)
Nine Months Ended September
30,
2023
2022
Net sales
$
1,040,819
$
1,239,698
Cost of sales
922,692
1,082,774
Gross profit
118,127
156,924
Selling, general, and administrative
expenses
171,550
198,425
Loss from operations
(53,423
)
(41,501
)
Interest income
1,740
700
Interest expense
(909
)
(573
)
Other income, net
559
4,744
Gain from sales of investment
5,060
1,669
Change in fair value of warrants
liabilities
25
979
Loss before provision for income taxes
(46,948
)
(33,982
)
Benefit from income taxes
(2,936
)
(6,625
)
Net loss
$
(44,012
)
$
(27,357
)
NEWEGG COMMERCE, INC.
Consolidated Statements of
Cash Flows
(In thousands)
(Unaudited)
Nine Months Ended September
30,
2023
2022
Cash flows from operating activities:
Net loss
$
(44,012
)
$
(27,357
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
9,655
7,944
Allowance for expected credit losses
37
679
Allowance for related party receivable
-
(25
)
Provision for obsolete and excess
inventory
3,387
6,495
Stock-based compensation
25,881
24,395
Gain from sales of investment
(5,060
)
(1,669
)
Change in fair value of warrant
liabilities
(25
)
(979
)
Loss on disposal of property and
equipment
218
435
Unrealized loss on marketable
securities
-
55
Deferred income taxes
(1,942
)
(6,653
)
Changes in operating assets and
liabilities:
Accounts receivable
31,772
6,714
Inventories
10,332
90,894
Prepaid expenses
7,725
5,731
Other assets
12,253
(2,371
)
Accounts payable
(63,842
)
(76,527
)
Accrued liabilities and other
liabilities
(26,589
)
(33,339
)
Deferred revenue
(15,063
)
(15,713
)
Net cash used in operating activities
(55,273
)
(21,291
)
Cash flows from investing activities:
Payments to acquire property and
equipment
(28,756
)
(8,610
)
Proceeds on disposal of property and
equipment
60
1
Proceeds from sales of investment
14,060
5,419
Net cash used in investing activities
(14,636
)
(3,190
)
Cash flows from financing activities:
Borrowings under line of credit
27,502
46,211
Repayments under line of credit
(26,098
)
(45,757
)
Repayments of long-term debt
(199
)
(209
)
Proceeds from exercise of stock
options
1,163
2,366
Payments for employee taxes related to
stock-based compensation
(628
)
—
Net cash provided by financing
activities
1,740
2,611
Foreign currency effect on cash, cash
equivalents and restricted cash
(194
)
641
Net decrease in cash, cash equivalents and
restricted cash
(68,363
)
(21,229
)
Cash, cash equivalents and restricted
cash:
Beginning of period
123,506
104,330
End of period
$
55,143
$
83,101
Schedule
1
Reconciliation of Net Sales to
GMV
For the Nine Months Ended
September 30,
2023
2022
(in millions)
Net Sales
$
1,040.8
$
1,239.7
Adjustments:
GMV - Marketplace
278.5
409.3
Marketplace Commission
(25.5
)
(37.7
)
Deferred Revenue
(10.5
)
(12.1
)
Other
(18.3
)
(14.2
)
GMV
$
1,265.0
$
1,585.0
Schedule
2
Reconciliation of Net Loss to
Adjusted EBITDA
For the Nine Months Ended
September 30,
2023
2022
(in millions)
Net loss
$
(44.0
)
$
(27.4
)
Adjustments:
Stock-based compensation expenses
25.9
24.4
Interest income, net
(0.8
)
(0.1
)
Income tax benefit
(2.9
)
(6.6
)
Depreciation and amortization
9.9
7.9
Gain from sales of investment
(5.1
)
(1.7
)
Gain from change in fair value of warrants
liabilities
—
(1.0
)
Adjusted EBITDA
$
(17.0
)
$
(4.5
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231222910165/en/
Newegg Commerce, Inc.: Investor Relations
ir@newegg.com
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