Hour Loop Reports Third Quarter 2022 Results

Rhea-AI Summary

Hour Loop, Inc. reported strong third-quarter 2022 results, with revenues increasing by 68.4% year-over-year to $17.6 million. Despite a challenging e-commerce environment, the company returned to profitability, achieving a net income of $0.15 million following two consecutive quarters of losses. Operating expenses rose 78.8% to $9.5 million due to higher platform fees and workforce growth. The company has raised its full-year revenue guidance to $91 million to $100 million, indicating a 36% to 50% growth compared to the previous year.

Positive

• Revenue increased 68.4% year-over-year to $17.6 million.
• Net income returned to profitability at $0.15 million after previous losses.
• Raised full-year 2022 revenue guidance to $91 million - $100 million.

Negative

• Operating expenses increased 78.8% to $9.5 million.
• Cash and cash equivalents decreased from $10.6 million at the end of 2021 to $1.7 million.

Demonstrates Strong Execution Despite Challenging Macroeconomic Environment and Unfavorable e-Commerce Environment

Raises Full Year 2022 Revenue Guidance Range of $91 million to $100 million

REDMOND, Wash., Nov. 14, 2022 (GLOBE NEWSWIRE) -- Hour Loop, Inc. (NASDAQ: HOUR) (“Hour Loop”), a leading online retailer, announces its financial and operational results for the third quarter ended September 30, 2022.

Financial Highlights for Third Quarter 2022:

• Total revenues increased 68.4% and 18.6% to $17.6 million, compared to $10.4 million in the year-ago period and $14.8 million for the second quarter of 2022, respectively.
• Net income totaled $0.15 million, compared to $0.30 million in the year-ago period and net loss of $0.31 million for the second quarter of 2022.
• Cash used in operating activities for the nine months ended September 30, 2022, was $14.5 million, compared to cash provided by operating activities $1.6 million in the year-ago period.
  

Management Commentary

“We are pleased to report our strong third quarter results, in which we saw accelerated revenue growth and a return to profitability,” said Sam Lai, CEO of Hour Loop, “We take the long term view on growth, which is why we strategically front loaded our investment in the first half of the year. Our headcount grew from 67 to 191 and our inventories grew from $7 million to $21 million. This put tremendous pressure on our bottom line in a very challenging year for e-commerce. Nevertheless, we executed well and continue to position the business for long-term growth and value creation.”

Third Quarter 2022 Financial Results

Total revenues in the third quarter of 2022 were $17.6 million compared to $10.4 million in the year-ago period and $14.8 million for the second quarter of 2022, respectively. The increase was primarily due to continued growth and maturity in our operating model, despite a continuation in overall e-commerce traffic slowdown.

Gross profit percentage increased 1.58% to 54.43%, compared to 52.85% of total revenues in the comparable period a year ago but decreased from 56.46% for the second quarter of 2022. The quarter-over-quarter increase was a function of our aggressive growth initiatives and a heightened inflationary environment causing higher cost of goods sold, increased FBA fees, and strong competition.

Operating expenses increased 78.8% to $9.5 million compared to $5.3 million in the year- ago period. This was a function of increased platform fees paid to Amazon, and a significant increase in our labor force.

Net income in the third quarter was $0.15 million, or $0.005 per diluted share, compared to $0.30 million, or $0.009 per diluted share, in the comparable year-ago period. The decrease was driven by increased costs and expenses as a result of the reasons mentioned above. Nevertheless, the Company was able to quickly bounce back to profitability after net loss for consecutive two quarters.

As of September 30, 2022, the Company had $1.7 million in cash and cash equivalents, compared to $10.6 million as of December 31, 2021. This decrease was driven by the growth of inventory and labor force.

Inventories as of September 30, 2022, were $21.4 million compared to $7.0 million as of December 31, 2021. The Company intentionally invested heavily in inventories for strategic reasons.

Full Year 2022 Financial Outlook

For the full year 2022, the Company is raising its guidance for gross revenue to be in the range of $91 million to $100 million, representing 36% to 50% year-over-year growth.

About Hour Loop, Inc.
Hour Loop is an online retailer engaged in e-commerce retailing in the U.S. market. It has operated as a third-party seller on www.amazon.com and has sold merchandise on its website at www.hourloop.com since 2013. The Company expanded its operations to www.walmart.com in October 2020. To date, the Company has generated practically all of its revenue as a third-party seller on www.amazon.com and only a negligible amount of revenue from its own website and Walmart. Hour Loop manages more than 100,000 stock-keeping units (“SKUs”). Product categories include home/garden décor, toys, kitchenware, apparels, and electronics. The Company's primary strategy is to bring most of its vendors product selections to the customers. It has advanced software that assists the Company in identifying product gaps so it can keep such products in stock year-round including the entirety of the last quarter (holiday season) of the calendar year. In upcoming years, Hour Loop plans to expand its business rapidly by increasing the number of business managers, vendors and SKUs.

Forward-Looking Statements
This press release contains statements that constitute "forward-looking statements" including with respect to the Company's business strategy, product development and industry trends. Forward-looking statements are subject to numerous conditions, many of which are beyond the control of the Company. While the Company believes these forward-looking statements are reasonable, undue reliance should not be placed on any such forward-looking statements, which are based on information available to the Company on the date of this release. These forward-looking statements are based upon current estimates and assumptions and are subject to various risks and uncertainties, including, without limitation, those set forth in the Company's filings with the Securities and Exchange Commission, as the same may be updated from time to time. Thus, actual results could be materially different. The Company undertakes no obligation to update these statements whether as a result of new information, future events or otherwise, after the date of this release, except as required by law.

Investor Contact
Finance Department
finance@hourloop.com

HOUR LOOP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
As of Sep 30, 2022 (Unaudited) and December 31, 2021

		September 30,				December 31,
		2022				2021
			(unaudited)
ASSETS
Current assets
Cash and cash equivalents		$	1,704,106			$	10,592,572
Accounts receivable, net			263,425				125,991
Inventory, net			21,358,386				7,041,864
Prepaid expenses and other current assets			856,543				965,298
Total current assets			24,182,460				18,725,725
Property and equipment, net			238,403				15,667
Deferred tax assets			312,197				45,488
Right-of-use lease assets			518,575				30,111
TOTAL ASSETS		$	25,251,635			$	18,816,991
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Short-term debt		$	630,915			$	-
Accounts payable			11,013,769				9,539,258
Accrued expenses and other current liabilities			1,129,555				1,282,161
Due to related parties			4,316,211				5,214,794
Income taxes payable			126,333				126,333
Current operating lease liabilities			372,579				-
Total current liabilities			17,589,362				16,162,546
Non-current liabilities
Long-term operating lease liabilities			151,314				-
Total liabilities			17,740,676				16,162,546
Commitments and contingencies							-
Stockholders’ equity
Preferred stock: $0.0001 par value, 10,000,000 shares authorized, none issued and outstanding as of September 30, 2022 and December 31, 2021			-				-
Common stock: $0.0001 par value, 300,000,000 shares authorized, 35,047,828 and 33,300,000 shares issued and outstanding   as of September 30, 2022 and December 31, 2021, respectively			3,505				3,330
Additional paid-in capital			5,660,321				4,291
Retained earnings			1,846,605				2,654,695
Accumulated other comprehensive income (loss)			528				(7,871	)
Total stockholders’ equity			7,510,959				2,654,445
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	25,251,635			$	18,816,991

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

HOUR LOOP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
For the Periods Ended September 30, 2022 and 2021
(Unaudited)

		Three Months Ended September 30,								Nine Months Ended September 30,
		2022				2021				2022				2021
Revenues, net		$	17,556,053			$	10,425,111			$	44,710,554			$	31,391,254
Cost of revenues			(7,999,769	)			(4,915,116	)			(20,340,948	)			(13,855,109	)
Gross profit			9,556,284				5,509,995				24,369,606				17,536,145
Operating expenses
Selling and marketing			7,779,145				4,427,774				19,785,872				13,058,566
General and administrative			1,740,427				896,993				5,692,033				2,359,500
Total operating expenses			9,519,572				5,324,767				25,477,905				15,418,066
Income (loss) from operations			36,712				185,228				(1,108,299	)			2,118,079
Other (expenses) income
Other expense			(6,651	)			(877	)			(16,045	)			(5,501	)
Interest expense			(22,876	)			(20,005	)			(127,001	)			(30,333	)
Other income			155,983				106,990				176,676				161,494
Total other income (expenses), net			126,456				86,108				33,630				125,660
Income (loss) before income taxes			163,168				271,336				(1,074,669	)			2,243,739
Income tax (expense) benefit			(12,963	)			24,770				266,579				24,770
Net income (loss)			150,205				296,106				(808,090	)			2,268,509
Other comprehensive income (loss)
Foreign currency translation adjustments			12,441				(6,750	)			8,399				(6,301	)
Total comprehensive income (loss)		$	162,646			$	289,356			$	(799,691	)			2,262,208
Basic and diluted income (loss) per common share		$	0.01			$	0.01			$	(0.02	)			0.07
Weighted-average number of common shares outstanding			33,300,058				33,300,000				34,973,580				33,300,000

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

HOUR LOOP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2022 and 2021
(Unaudited)

		Nine Months Ended September 30,
		2022				2021
Cash flows from operating activities
Net (loss) income		$	(808,090	)		$	2,268,509
Reconciliation of net (loss) income to net cash (used in) provided by operating activities:
Depreciation expenses			39,993				-
Noncash lease expenses			212,126				52,668
Distribution to director and supervisor			76,013				-
Changes in operating assets and liabilities:
Accounts receivable			(137,434	)			68,422
Inventory			(14,316,522	)			(1,146,755	)
Prepaid expenses and other current assets			(734,121	)			(167,231	)
Accounts payable			1,474,511				1,132,211
Accrued expenses and other current liabilities			(152,606	)			(598,828	)
Operating lease liabilities			(179,701	)			(34,532	)
Net cash (used in) provided by operating activities			(14,525,831	)			1,574,464
Cash flows from investing activities:
Purchases of property and equipment			(268,342	)			-
Net cash used in investing activities			(268,342	)			-
Cash flows from financing activities:
Net advances from related parties			(898,583	)			67,291
Capital contribution			-				2,800
Distribution to stockholders			-				(2,132,000	)
Issuance of shares			5,580,192				-
Prepaid expenses			576,168				-
Net change in line of credit			630,915				(27,012	)
Net cash provided by (used in) financing activities			5,888,692				(2,088,921	)
Effect of changes in foreign currency exchange rates			17,015				(134	)
Net change in cash and cash equivalents			(8,888,466	)			(514,591	)
Cash and cash equivalents at beginning of year			10,592,572				4,968,064
Cash and cash equivalents at end of year		$	1,704,106			$	4,453,473
Supplemental disclosures of cash flow information:
Cash paid for interest		$	-			$	-
Cash paid for income tax		$	-			$	-
Noncash investing and financing activities:
Right-of-use of assets and operating lease liabilities recognized		$	688,440			$	-
Noncash distribution to stockholders		$	76,013			$	-

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

FAQ

What were Hour Loop's revenues for Q3 2022?

Hour Loop reported revenues of $17.6 million for the third quarter of 2022.

How much did Hour Loop's net income change in Q3 2022?

Net income decreased to $0.15 million in Q3 2022, compared to $0.30 million in the same period last year.

What is Hour Loop's full-year revenue guidance for 2022?

Hour Loop raised its full-year revenue guidance to a range of $91 million to $100 million.

What caused the increase in Hour Loop's operating expenses?

Operating expenses increased due to higher platform fees to Amazon and significant workforce growth.

How did Hour Loop's cash position change since December 2021?

As of September 30, 2022, Hour Loop's cash and cash equivalents decreased to $1.7 million from $10.6 million at the end of 2021.