Envela Reports Third Quarter 2024 Financial Results

Rhea-AI Summary

Envela reported Q3 2024 financial results with record revenue of $46.9 million, up 27.2% year-over-year. The company achieved earnings per diluted share of $0.06, with gross margin increasing 17.8% and operating income rising 3.6% compared to Q3 2023. The Consumer Division revenue grew 25.6% to $33.8 million, while the Commercial Division saw a 31.5% increase to $13.1 million. Despite revenue growth, gross margin decreased to 24.4% from 26.4% year-over-year. The company maintained strong liquidity with $17.8 million in cash and reduced long-term debt to $13.8 million.

Positive

• Record quarterly revenue of $46.9M, up 27.2% YoY
• Commercial Division revenue increased 31.5% to $13.1M
• Consumer Division revenue grew 25.6% to $33.8M
• Long-term debt reduced to $13.8M from $14.9M
• Strong cash position of $17.8M
• Total shareholders' equity increased to $51.1M from $47.3M YoY

Negative

• Overall gross margin declined to 24.4% from 26.4% YoY
• Consumer Division reported pre-tax operating loss of $149K vs. $888K income in prior year
• Operating expenses increased 53% in Consumer Division
• Cash and equivalents decreased from $18.4M to $17.8M YoY

Insights

Financial Analyst

The Q3 2024 results show mixed performance. While revenue hit a record $46.9M, up 27.2% YoY, profitability metrics remained flat or declined. Net income stayed at $1.7M with EPS unchanged at $0.06. The Consumer Division's performance is concerning, swinging from $888K pre-tax profit to $149K loss, despite 25.6% revenue growth. Margin compression is evident with consolidated gross margins dropping to 24.4% from 26.4%. The Commercial Division shows promise with 111.3% pre-tax income growth and strong ITAD performance. The balance sheet remains solid with $17.8M cash and reduced debt, while the ongoing share buyback program demonstrates confidence in long-term value.

Market Research Analyst

The divergent performance between divisions reveals strategic challenges and opportunities. The Consumer Division's expansion through Four Nines™ stores is pressuring margins and creating short-term losses, though it positions for long-term growth. Higher inventory levels suggest potential execution challenges in new store ramp-ups. The Commercial Division's success in ITAD and electronic scrap processing demonstrates effective diversification, with new client acquisitions driving growth. The 31.5% revenue increase and improved operating margins in this segment offset consumer weakness, indicating a resilient business model. The market should monitor holiday season performance and new store metrics for signs of successful execution.

IRVING, TX / ACCESSWIRE / November 5, 2024 / Envela Corporation today reported financial results for its third quarter ended September 30, 2024. The Company reported quarterly revenue of $46.9 million and quarterly earnings per diluted share of $0.06.

Management Commentary

"Today, we are excited to announce a new third-quarter revenue record of $46.9 million, reflecting a 27.2 percent increase compared to last year. This achievement highlights the dedication of our exceptional people, who remain focused on building a solid foundation for outstanding growth," said John Loftus, Envela's CEO. "Our teams work hard to deliver extraordinary value to our clients; they are the backbone of our company as we continue to execute and grow our future."

"We achieved another quarter of positive growth and delivered a strong performance across our key metrics, with notable results in both top and bottom line in Q3. Compared to the prior-year quarter, gross margin and operating income increased by 17.8% and 3.6%, respectively," said John DeLuca, Envela's CFO. "Envela continues to operate with financial discipline while investing for the long term and generating significant earnings growth and capital returns for shareholders."

Consumer Division

"Looking back on the last quarter, we are pleased with the strides we are making in our key strategic initiatives aimed at increasing our store count and expanding our physical presence. Our Four Nines™ branded stores are at the forefront of our growth strategy, and as our advantageous business model gains traction, we are well-equipped to attract and retain value-conscious customers. This will be the primary growth driver for our business over the next five to ten years. In the upcoming fourth quarter as the holiday season approaches, we are also eager to reveal what we have planned for our customers." - Allison DeStefano, Head of Envela's Consumer Division.

Commercial Division

"Our business continued to generate strong financial results during the third quarter. Fundamentals remain good as we observed solid operational performance across our footprint. Underpinned by our commitment to offering tailored solutions to our clients, we are enthusiastic about the strong demand for our fee-for-service offerings as we diversify our revenue by expanding the variety of services we provide. Our core recycling and ITAD businesses remain strong, and we believe the underlying near- and long-term demand fundamentals will continue to be robust based on customer conversations." - Tommy McGuire, Head of Envela's Commercial Division.

Third Quarter 2024 Financial Highlights

		Three Months Ended September 30,
		2024				2023
Sales		$	46,899,559			$	36,876,486
Gross margin		$	11,464,239			$	9,734,282
Operating income		$	2,020,472			$	1,950,189
Net income		$	1,685,039			$	1,707,493
Diluted earnings per share		$	0.06			$	0.06
Adjusted EBITDA (non-GAAP measure)		$	2,435,251			$	2,287,902

Envela will report more complete earnings information within its Form 10-Q.

Third Quarter 2024 Consolidated Operating Highlights

• Third quarter revenue was $46.9 million compared to $36.9 million in the prior-year quarter.

• Despite the increased revenue, third quarter gross margin decreased to 24.4% of quarterly revenue, compared to 26.4% in the prior-year quarter.

• Third quarter operating expenses were $9.4 million compared to $7.8 million in the prior-year quarter.

• Third quarter operating income remained consistent at $2.0 million, or 4.3% of revenue, compared to $2.0 million, or 5.3% of revenue for the prior-year quarter.

• Third quarter net income was $1.7 million, or $0.06 per basic and diluted share, compared to $1.7 million or $0.06 per basic and diluted shared in the prior-year quarter.

• Third quarter Adjusted EBITDA was $2.4 million or 5.2% of revenue, compared to $2.3 million or 6.2% of revenue in the prior-year quarter.

• Cash and cash equivalents decreased to $17.8 million at September 30, 2024, compared to $18.4 million at September 30, 2023.

• Total stockholders' equity grew to $51.1 million at September 30, 2024, compared to $47.3 million at September 30, 2023.

Third Quarter Consumer Division Operating Highlights

• Consumer Division revenue was $33.8 million for the third quarter of 2024, an increase of 25.6% compared to revenue of $26.9 million in the prior-year quarter. Revenues were primarily impacted by our wholesale precious metals sales which also benefited from underlying historical gold and silver prices. We also experienced incremental improvements in our stores and online business. Consistent with the prior quarters in Fiscal 2024 we are carrying a higher inventory position that is expected to relieve upon full ramp up of our new store operations.

• Consumer Division gross margin decreased to 11.6% in the third quarter of 2024 compared to 13.4% in the prior-year quarter, which was primarily a result of the relief of lower margin scrap grade precious metals via our wholesale channel.

• Operating expenses increased 53.0% to $4.1 million in the third quarter of 2024 compared to $2.7 million in the prior-year quarter, primarily reflecting the continued investment in bringing the new stores online along with the impact of operating costs from our new stores.

• Consumer Division pre-tax operating loss in the third quarter of 2024 was $149 thousand compared to pre-tax operating income of $888 thousand in the prior-year quarter.

Third Quarter Commercial Division Operating Highlights

• Commercial Division revenue was $13.1 million for the third quarter of 2024, an increase of 31.5% compared to revenue of $10.0 million in the prior-year quarter. Revenues strengthened on the continued performance of our ITAD business and incrementally from the sale of personal technology assets and shredded electronic scrap grades and associated recoveries. Specific to ITAD, sales benefited from the intake of assets from a new client that we were able to recognize outbound sales on during quarter.

• Commercial Division gross margin decreased to 57.4% in the third quarter of 2024 compared to 61.5% in the prior-year quarter. While gross margin dollars increased as a result of the aforementioned, our gross margin as a % of sales was impacted by a higher mix of lower margin electronic scrap grades sold.

• Operating expenses increased 4.8% to $5.4 million in the third quarter of 2024 compared to $5.1 million in the prior-year quarter. Albeit, operating expenses increased it was correlated with our new retail returns client and processing electronic scrap grades which resulted in improved gross margin dollars.

• Commercial Division pre-tax operating income in the third quarter of 2024 was $2.4 million, an increase of 111.3% compared to $1.1 in the prior-year quarter. The resulting pre-tax operating margin was 18.3% for the third quarter of 2024, increasing from an 11.4% margin for the prior-year quarter.

Balance Sheet, Cash Flow and Liquidity

• Cash and cash equivalents decreased to $17.8 million from $17.9 million on December 31, 2023.

• The Company reduced its long-term debt to $13.8 million at September 30, 2024, compared to $14.9 million at December 31, 2023.

• Total shareholders' equity increased to $51.1 million at September 30, 2024, compared to $48.3 million on December 31, 2023.

• For the nine months ended September 30, 2024, consolidated operating cash flows totaled $6.4 million.

Share Repurchase Program

During the quarter ended September 30, 2024, the Company repurchased 147,195 shares of common stock at a cost of $729 thousand. Since the beginning of the share repurchase program in March of 2023, Envela has spent more than $4.5 million to purchase 916,597 shares of common stock under the 1,000,000 share repurchase program authorized through March 31, 2026.

Non-GAAP Financial Measures

This press release contains non-GAAP financial measures. A "non-GAAP financial measure" is defined as a numerical measure of a company's financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with GAAP in the statements of income, balance sheets or statements of cash flows of the Company.

Adjusted EBITDA is a key performance measure that management uses to assess our operating performance. Because Adjusted EBITDA facilitates internal comparisons of our historical operating performance on a more consistent basis, we use this measure as an overall assessment of our performance, to evaluate the effectiveness of our strategies and for planning purposes. Adjusted EBITDA may not be comparable to similarly titled metrics of other companies. Adjusted EBITDA is defined as the sum of net income (loss) of the Company, adjusted for additions (deductions) of interest expense, other (income) expense, income tax expense (benefit), and depreciation and amortization. Adjusted EBITDA is a non-GAAP financial measure and should not be considered is an alternative to the presentation of net income or any other measure of financial performance calculated and presented in accordance with U.S. GAAP.

The following table provides a reconciliation of net income to Adjusted EBITDA for the three months ended September 30, 2024 and 2023:

		Three Months Ended September 30,
		2024												2023
		Consumer				Commercial				Consolidated				Consumer				Commercial				Consolidated
Adjusted EBITDA Reconciliation:
Net income (loss)		$	(26,843	)		$	1,711,882			$	1,685,039			$	767,376			$	940,117			$	1,707,493
Addition (deduction):
Depreciation and amortization			150,657				264,122				414,779				75,842				261,871				337,713
Other income			(62,502	)			(277,849	)			(340,351	)			(22,851	)			(169,586	)			(192,437	)
Interest expense			51,486				54,653				106,139				59,631				57,535				117,166
Income tax expense (benefit)			(122,464	)			692,109				569,645				120,637				197,330				317,967
		$	(9,666	)		$	2,444,917			$	2,435,251			$	1,000,635			$	1,287,267			$	2,287,902

Investor Relations

Our quarterly investor presentations can be viewed at https://envela.com/presentations/.

About Envela®

Envela Corporation (NYSE American:ELA), a leading provider of re-commerce services, is at the forefront of the circular economy. The company is comprised primarily of two key business segments: Consumer and Commercial. The Consumer segment operates retail stores and online sites that offer premium brands and luxury hard assets, while the Commercial segment provides personalized re-commerce solutions to meet the needs of various clients, including Fortune 500 companies. We execute with passion and meticulous attention to detail, focusing on our strengths rather than trying to be everything to everyone.

At Envela, we Reuse, Recycle, and Reimagine. To learn more, visitEnvela.comand follow our social media channels on Twitter,Instagram,Facebook, and LinkedIn.

Cautionary Statement Regarding Forward-Looking Information

This press release contains statements that may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995's safe harbor provisions, including statements regarding future events and developments; potential expansions, purchases and acquisitions; potential future success of business lines and strategies; and management's expectations, beliefs, plans, estimates and projections relating to the future. Words such as "believes," "anticipates," "plans," "may," "intends," "will," "should," "expects" and similar expressions are intended to identify forward-looking statements. Forward-looking statements are based on management's then current views and assumptions and, as a result, are subject to certain risks and uncertainties, which could cause the Company's actual results to differ materially from those projected. These risks and uncertainties include, but are not limited to, risks described more fully in Item 1A in the Company's Annual Report on Form 10-K, which are expressly incorporated herein by reference, and other factors as may periodically be described in the Company's filings with the SEC. By making these statements, the Company undertakes no obligation to update these statements for revisions or changes after the date of this release except as required by law.

Investor Relations Contact:

Andrew Stacey
ir@envelacorp.com
972-587-4030

SOURCE: Envela Corporation

View the original press release on accesswire.com

FAQ

What was Envela's (ELA) revenue in Q3 2024?

Envela reported record revenue of $46.9 million in Q3 2024, representing a 27.2% increase from Q3 2023.

What was Envela's (ELA) earnings per share in Q3 2024?

Envela reported earnings of $0.06 per diluted share in Q3 2024, unchanged from Q3 2023.

How did Envela's (ELA) Commercial Division perform in Q3 2024?

The Commercial Division revenue increased 31.5% to $13.1 million, with pre-tax operating income growing 111.3% to $2.4 million.

How many shares did Envela (ELA) repurchase in Q3 2024?

Envela repurchased 147,195 shares at a cost of $729 thousand during Q3 2024.