NEGG Newegg Commerce Inc

Newegg Commerce, Inc. (NASDAQ:NEGG) (the “Company” or “Newegg”), a leading global technology e-commerce retailer, today announced results for the six months ended June 30, 2024.

Newegg Chief Executive Officer Anthony Chow stated, “As expected, the first half of the year saw a slowdown in computer hardware sales due to ongoing macroeconomic challenges and a shortage of new product launches. However, we anticipate a rebound in sales during the second half as consumers begin to upgrade their pandemic-era devices. We believe the increasing availability, affordability, and capabilities of AI-powered PCs will strengthen our long-term outlook for core computer sales. We are particularly enthusiastic about the upcoming release of next-generation CPUs from AMD and Intel, which we expect to drive component sales and fuel demand for refreshed desktop systems among both consumers and system integrators.”

Newegg Chief Accounting Officer Christina Ching added, “In the first half of 2024, our industry faced continued macroeconomic challenges from high interest rates, inflation, and consumer spending shifts, thus resulting in a 15% year-over-year decline in sales. We are actively working to adjust our company’s size and structure to better align with our revenue outlook. As a result, our adjusted EBITDA improved by 29% in the first half of 2024 compared to the same period last year. We remain keenly focused on our inventory and cash balance, which, as of June 30, 2024, we maintained at $132.0 million and $49.7 million, respectively. In addition, on August 27, 2024, we successfully renewed our credit agreement for an additional two-year period. The credit agreement provides for borrowing capacity of up to $40 million from April 1 to September 30 and $50 million from October 1 to March 31 for each year during the renewal term. Looking ahead, our priority is redefining our company’s direction by concentrating on our core competencies in IT products and enhancing our customer experience to regain market share.”

2024 First Half Financial Highlights

• Net sales decreased 14.5% to $618.1 million for the six months ended June 30, 2024, compared to $723.2 million for the six months ended June 30, 2023.
• GMV (defined below) decreased 15.4% to $746.7 million for the six months ended June 30, 2024, compared to $882.5 million for the six months ended June 30, 2023.
• Gross profit decreased 22.4% to $63.1 million for the six months ended June 30, 2024, compared to $81.3 million for the six months ended June 30, 2023.
• Net loss was $25.0 million for the six months ended June 30, 2024, compared to $29.3 million for the six months ended June 30, 2023.
• Adjusted EBITDA (defined below) improved to $(7.3) million for the six months ended June 30, 2024, compared to $(10.3) million for the six months ended June 30, 2023.

2024 First Half Operational Metrics

• Average order value was $401 for the six months ended June 30, 2024, compared to $390 for same period in prior year.
• Active customers, defined as unique customer IDs with at least one item purchased on Newegg platforms in the past 6 months, totaled approximately 1.1 million as of June 30, 2024, a decrease from 1.3 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 23.0% as of June 30, 2024, compared to 27.9% for the same period in the prior year.

Mr. Chow added, “Our strategic focus for the remainder of the year is threefold. We aim to aggressively capitalize on the surging demand for servers by expanding our product offerings, tailoring comprehensive service packages, forging strategic partnerships, and diversifying our Rosewill portfolio to include server chassis. Our goal is to become the go-to destination for server solutions, from hardware to expert services. Secondly, we plan to accelerate brand growth by expanding our mainstream PC offerings, particularly targeting college students through strategic partnerships with AMD and Intel. Lastly, we will work to strengthen our vendor relationships, as exemplified by our ASUS NUC configurator and build-to-order service, to deliver even greater value and customization options to our customers.”

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.

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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 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.

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, including those regarding the long-term outlook for core computer sales, the impact of next-generation CPUs on component sales and demand for desktop system, efforts to regain market share, strategies to provide server solutions, brand growth acceleration, and strengthening vendor relationships. 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. Readers are cautioned not to place undue reliance on these forward-looking statements. 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)

 

 

 

June 30, 2024

 

December 31, 2023

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

49,678

 

 

$

102,512

 

Restricted cash

 

 

3,435

 

 

 

3,962

 

Accounts receivable, net

 

 

36,576

 

 

 

80,383

 

Inventories, net

 

 

131,986

 

 

 

136,164

 

Income taxes receivable

 

 

2,706

 

 

 

3,226

 

Prepaid expenses

 

 

8,492

 

 

 

13,424

 

Other current assets

 

 

6,277

 

 

 

4,780

 

Total current assets

 

 

239,150

 

 

 

344,451

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

56,413

 

 

 

61,479

 

Noncurrent deferred tax assets

 

 

1,756

 

 

 

1,607

 

Investment at cost

 

 

—

 

 

 

2,250

 

Right of use assets, net

 

 

70,109

 

 

 

77,150

 

Other noncurrent assets

 

 

10,998

 

 

 

12,110

 

Total assets

 

$

378,426

 

 

$

499,047

 

 

 

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

110,771

 

 

$

206,588

 

Accrued liabilities

 

 

34,763

 

 

 

43,014

 

Deferred revenue

 

 

17,329

 

 

 

25,614

 

Line of credit

 

 

20,735

 

 

 

7,330

 

Current portion of long-term debt

 

 

262

 

 

 

268

 

Lease liabilities – current

 

 

14,301

 

 

 

13,730

 

Total current liabilities

 

 

198,161

 

 

 

296,544

 

 

 

 

 

 

 

 

 

 

Long-term debt, less current portion

 

 

939

 

 

 

1,110

 

Income taxes payable

 

 

1,981

 

 

 

1,981

 

Lease liabilities – noncurrent

 

 

60,766

 

 

 

68,126

 

Other liabilities

 

 

1,952

 

 

 

1,894

 

Total liabilities

 

 

263,799

 

 

 

369,655

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity

 

 

 

 

 

 

 

 

Common Stock, $0.021848 par value; unlimited shares authorized; 387,928 and 380,413 shares issued and outstanding as of June 30, 2024, and December 31, 2023, respectively

 

 

8,476

 

 

 

8,312

 

Additional paid-in capital

 

 

277,983

 

 

 

266,774

 

Notes receivable – related party

 

 

(15,186

)

 

 

(15,189

)

Accumulated other comprehensive income

 

 

(993

)

 

 

194

 

Accumulated deficit

 

 

(155,653

)

 

 

(130,699

)

Total stockholders’ equity

 

 

114,627

 

 

 

129,392

 

Total liabilities and stockholders’ equity

 

$

378,426

 

 

$

499,047

 

 

NEWEGG COMMERCE, INC.

Consolidated Statements of Operations

(In thousands) (Unaudited)

 

 

 

Six Months Ended June 30,

 

 

2024

 

2023

Net sales

 

$

618,119

 

 

$

723,249

 

Cost of sales

 

 

555,003

 

 

 

641,977

 

Gross profit

 

 

63,116

 

 

 

81,272

 

Selling, general, and administrative expenses

 

 

93,083

 

 

 

115,877

 

Loss from operations

 

 

(29,967

)

 

 

(34,605

)

Interest income

 

 

1,544

 

 

 

821

 

Interest expense

 

 

(440

)

 

 

(463

)

Other income, net

 

 

1,880

 

 

 

57

 

Gain from sales of investment

 

 

1,619

 

 

 

3,053

 

Change in fair value of warrants liabilities

 

 

(64

)

 

 

21

 

Loss before provision for income taxes

 

 

(25,428

)

 

 

(31,116

)

Benefit from income taxes

 

 

(474

)

 

 

(1,785

)

Net loss

 

$

(24,954

)

 

$

(29,331

)

 

NEWEGG COMMERCE, INC.

Consolidated Statements of Cash Flows

(In thousands) (Unaudited)

 

 

 

Six Months Ended June 30,

 

 

2024

 

2023

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(24,954

)

 

$

(29,331

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

5,739

 

 

 

6,331

 

Allowance for expected credit losses

 

 

1,193

 

 

 

(469

)

Provision for obsolete and excess inventory

 

 

1,569

 

 

 

3,906

 

Stock-based compensation

 

 

15,022

 

 

 

17,923

 

Gain from sales of investment

 

 

(1,619

)

 

 

(3,053

)

Change in fair value of warrant liabilities

 

 

65

 

 

 

(21

)

Loss on disposal of property and equipment

 

 

52

 

 

 

184

 

Unrealized gain on marketable securities

 

 

(10

)

 

 

(1

)

Deferred income taxes

 

 

(169

)

 

 

(1,916

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

42,426

 

 

 

25,912

 

Inventories

 

 

2,223

 

 

 

14,292

 

Prepaid expenses

 

 

4,913

 

 

 

4,268

 

Other assets

 

 

8,959

 

 

 

3,955

 

Accounts payable

 

 

(95,388

)

 

 

(82,097

)

Accrued liabilities and other liabilities

 

 

(15,036

)

 

 

(19,446

)

Deferred revenue

 

 

(8,182

)

 

 

(15,398

)

Dues from affiliate

 

 

—

 

 

 

2

 

Net cash used in operating activities

 

 

(63,197

)

 

 

(74,959

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Payments to acquire property and equipment

 

 

(1,212

)

 

 

(26,750

)

Proceeds on disposal of property and equipment

 

 

15

 

 

 

60

 

Proceeds from sale of investment

 

 

2,076

 

 

 

3,412

 

Net cash provided by (used in) investing activities

 

 

879

 

 

 

(23,278

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Borrowings under line of credit

 

 

41,098

 

 

 

27,594

 

Repayments under line of credit

 

 

(27,474

)

 

 

(1,153

)

Repayments of long-term debt

 

 

(132

)

 

 

(134

)

Proceeds from exercise of stock options

 

 

95

 

 

 

1,078

 

Payments for employee taxes related to stock compensation

 

 

(241

)

 

 

(411

)

Payments for shares buyback

 

 

(3,503

)

 

 

—

 

Net cash provided by financing activities

 

 

9,843

 

 

 

26,974

 

Foreign currency effect on cash, cash equivalents and restricted cash

 

 

(886

)

 

 

727

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(53,361

)

 

 

(70,536

)

Cash, cash equivalents and restricted cash:

 

 

 

 

 

 

 

 

Beginning of period

 

 

106,474

 

 

 

123,506

 

End of period

 

$

53,113

 

 

$

52,970

 

 

Schedule 1

Reconciliation of Net Sales to GMV

 

 

 

Six Months Ended June 30,

 

 

2024

 

2023

 

 

(in millions)

 

Net Sales

 

$

618.1

 

 

$

723.2

 

Adjustments:

 

 

 

 

 

 

 

 

GMV - Marketplace

 

 

153.0

 

 

 

198.7

 

Marketplace Commission

 

 

(12.7

)

 

 

(18.2

)

Deferred Revenue

 

 

(5.8

)

 

 

(9.3

)

Other

 

 

(5.9

)

 

 

(11.9

)

GMV

 

$

746.7

 

 

$

882.5

 

 

Schedule 2

Reconciliation of Net Loss to Adjusted EBITDA

 

 

 

Six Months Ended June 30,

 

 

2024

 

2023

 

 

(in millions)

 

Net loss

 

$

(25.0

)

 

$

(29.3

)

Adjustments:

 

 

 

 

 

 

 

 

Stock-based compensation expenses

 

 

15.0

 

 

 

17.9

 

Interest income, net

 

 

(1.1

)

 

 

(0.4

)

Income tax benefit

 

 

(0.4

)

 

 

(1.8

)

Depreciation and amortization

 

 

5.7

 

 

 

6.3

 

Gain from sale of investment

 

 

(1.6

)

 

 

(3.0

)

Loss from change in fair value of warrants liabilities

 

 

0.1

 

 

 

—

 

Adjusted EBITDA

 

$

(7.3

)

 

$

(10.3

)

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240828738369/en/

Newegg Commerce, Inc.: Investor Relations ir@newegg.com