Newegg Announces First Half 2023 Results
- Newegg's cost-saving initiatives, including terminating warehouse lease and reducing net inventory balance, may positively impact the bottom line.
- Newegg's focus on cutting-edge technology and innovative initiatives may position the company for long-term growth.
- Weaker than expected demand for consumer technology products and finished goods may negatively affect sales and profitability.
- Decreased net sales, GMV, gross profit, and increased net loss and adjusted EBITDA may negatively impact the stock price.
“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
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
2023 First Half Financial Highlights
-
Net sales decreased
18.8% to$723.2 million $890.5 million -
GMV (defined below) decreased
21.8% to$882.5 million $1,128.7 million -
Gross profit decreased
26.6% to$81.3 million $110.8 million -
Net loss was
$29.3 million $18.9 million -
Adjusted EBITDA (defined below) decreased to
$(10.3) million $(3.9) million
2023 First Half Operational Metrics
-
Average order value was
$390 $444 - 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 to27.1% 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
About Newegg
Newegg Commerce, Inc. (NASDAQ: NEGG), founded in 2001 and based in the
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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
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
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. |
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Consolidated Balance Sheets |
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(In thousands, except par value) (Unaudited) |
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June 30,
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December 31, 2022 |
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Assets |
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Current assets: |
|
|
|
|
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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 |
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Liabilities and Equity |
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Current liabilities: |
|
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|
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|
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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 |
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|
|
|
|
|
|
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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 |
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|
296,154 |
|
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|
386,873 |
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Stockholders’ Equity |
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Common Stock, |
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|
8,282 |
|
|
|
8,230 |
|
Additional paid-in capital |
|
|
251,314 |
|
|
|
232,776 |
|
Notes receivable – related party |
|
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(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. |
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Consolidated Statements of Operations |
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(In thousands, unaudited) |
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Six Months Ended
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2023 |
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2022 |
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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 |
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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. |
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Consolidated Statements of Cash Flows |
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(In thousands) (Unaudited) |
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Six Months Ended
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2023 |
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2022 |
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Cash flows from operating activities: |
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Net loss |
|
$ |
(29,331 |
) |
|
$ |
(18,869 |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
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|
Depreciation and amortization |
|
|
6,331 |
|
|
|
5,026 |
|
Allowance for expected credit losses |
|
|
(469 |
) |
|
|
65 |
|
Recovery of related party receivable |
|
|
— |
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(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: |
|
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|
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Accounts receivable |
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|
25,912 |
|
|
|
10,183 |
|
Inventories |
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|
14,292 |
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|
|
61,433 |
|
Prepaid expenses |
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|
4,268 |
|
|
|
3,610 |
|
Other assets |
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|
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 |
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|
2 |
|
|
|
2 |
|
Net cash used in operating activities |
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(74,959 |
) |
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|
(49,769 |
) |
Cash flows from investing activities: |
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|
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 |
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Reconciliation of Net Sales to GMV |
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For the Six Months Ended
|
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|
2023 |
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2022 |
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(in millions) |
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Net Sales |
|
$ |
723.2 |
|
|
$ |
890.5 |
|
Adjustments: |
|
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|
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|
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 |
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Reconciliation of Net Loss to Adjusted EBITDA |
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For the Six Months Ended
|
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|
2023 |
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2022 |
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(in millions) |
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|||||
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
Source: Newegg Commerce, Inc.
