MONTREAL, Aug. 11,
2023 /CNW/ - LXRandCo, Inc. ("LXR" or the
"Company") (TSX: LXR), a North American socially
responsible, digital-first omni-channel retailer of authenticated
pre-owned handbags and personal accessories, today reported its
financial results for the second quarter ended June 30, 2023 ("Q2 2023").
"In Q2 2023, a seasonally slower quarter in the year for us, we
continued to experience the effects of a weakening economy and its
impact on higher AOV discretionary consumer products, which began
in Q4 2022. This resulted in a 32% decline in total net revenue for
the quarter relative to last year. On a year-to-date basis, LXR is
running 24% behind last year's very strong first half revenue
performance. Despite these headwinds, our continued focus on cost
measures allowed us to increase our gross margin and generate
positive Free Cash Flow of $0.3
million in Q2 2023, an improvement of $0.9 million versus last year", said Nadine Eap, Co-Chief Executive Officer and Chief
Financial Officer.
"While the second quarter resulted in net revenue decline
against our strongest quarter of growth in 2022, we remain
optimistic about growing our revenue to offset our Q2 shortfall,
given our current B2B order backlog and momentum in our e-commerce
channels. We will also continue to manage our costs to improve our
profitability as we enter the second half of the year", said
Laura Swan, Co-Chief Executive
Officer and Chief Revenue Officer.
This press release should be read in conjunction with the
unaudited interim condensed consolidated financial statements of
LXR and the accompanying notes thereto for the three-month and
six-month periods ended June 30,
2023, as well as the Company's management's discussion and
analysis ("MD&A") dated August
11, 2023 and its most recent AIF (all incorporated by
reference herein).
Overview of Results for the Three-Month Period Ended
June 30, 2023 ("Q2 2023") as Compared
to the Three-Month Period Ended June 30,
2022 ("Q2 2022")
Selected financial highlights include the following:
- In Q2 2023, total net revenue decreased 32.0% to $3.7 million from $5.5
million.
- E-commerce net revenue decreased 14.4% to $2.8 million, and e-commerce average order value
("AOV") decreased 29.3% to $810 per
transaction as consumers opted for lower priced merchandise.
E-commerce net revenue as a proportion of total net revenue
("E-commerce penetration") was 75%.
- Retail net revenue was $0.9
million versus $2.2 million, a
decrease of 57.8%. At quarter-end, we had eight stores in operation
as compared to nine in Q2 2022.
- Gross profit margin increased to 36.9% compared to 35.5% in Q2
2022.
- Selling, general and administrative ("SG&A") expenses
increased by 12.1% to $3.1 million,
representing 82.4% of total net revenue, from $2.7 million, or 50% of total net revenue.
Excluding stock-based compensation expense, SG&A decreased by
14.2%, representing 57.3% of total net revenue.
- Adjusted Net loss (a non-IFRS measure) was $1.0 million versus a loss of $0.7 million.
- Adjusted EBITDA loss (a non-IFRS measure) was $0.8 million versus a loss of $0.5 million.
- Free Cash Flow (a non-IFRS measure) was positive $0.3 million, an improvement as compared to
negative $0.7 million.
- Cash Earnings (a non-IFRS measure) was negative $1.2 million compared to nil in Q2 2022.
Overview of Results for the Six-Month Period Ended
June 30, 2023 ("YTD 2023"), compared
to the Six-Month Period Ended June 30, 2022 ("YTD 2022")
During the first half of this year, we experienced a sales
decline when compared to the relatively strong first half of the
prior year. In the face of this, to the extent possible we have
been managing our cost base which has led to improvements in Free
Cash Flow.
Selected financial highlights include the following:
- YTD 2023 total net revenue decreased 23.8% to $7.4 million from $9.8
million.
- E-commerce net revenue decreased 13.4% to 5.6 million, and
e-commerce average order value ("AOV") decreased by 19.2% to
$848 per transaction. E-commerce net
revenue as a proportion of total net revenue ("E-commerce
penetration") was 74.7%.
- Retail net revenue was $1.9
million versus $3.4 million, a
decrease of 43.8%. At quarter-end, we had eight stores in operation
as compared to nine in YTD 2022.
- Gross profit margin increased to 36.4% compared to 35.4% in YTD
2022.
- Selling, general and administrative ("SG&A") expenses
decreased by 5.0% to $4.5 million,
representing 60.5% of total net revenue, from $4.7 million, or 48.5% of total net revenue.
Excluding stock-based compensation expense, SG&A decreased by
11.1%, representing 54.7% of total net revenue.
- Adjusted Net loss (a non-IFRS measure) was $1.9 million versus a loss of $1.5 million.
- Adjusted EBITDA loss (a non-IFRS measure) was $1.4 million versus a loss of $1.1 million.
- Free Cash Flow (a non-IFRS measure) was negative $0.1 million an improvement as compared to
negative $1.2 million in YTD
2022.
- Cash Earnings (a non-IFRS measure) was negative $1.9 million compared to negative $0.9 million in YTD 2022.
- Cash availability at the end of Q2 2023 was $2.1 million as compared to $2.9 million in Q4 2022, due primarily to the
partial repayment of debt.
Selected Consolidated Financial Information
The following table summarizes LXR's recent results for the
periods indicated:
LXR
Consolidated statements of loss and
comprehensive loss
(in Canadian dollars)
|
For the three-months
ended
June
30,
|
|
For the six-months
ended
June
30,
|
|
2023
|
2022
|
|
2023
|
2022
|
|
|
|
|
|
|
Net
revenue
|
3,729,896
|
5,481,267
|
|
7,445,063
|
9,776,783
|
Cost of
sales
|
2,354,825
|
3,537,665
|
|
4,736,090
|
6,317,470
|
Gross
profit
|
1,375,071
|
1,943,602
|
|
2,708,973
|
3,459,313
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
Selling, general and
administrative expenses
|
3,073,951
|
2,743,075
|
|
4,507,473
|
4,745,527
|
Depreciation of
property and equipment
|
79,022
|
81,702
|
|
158,860
|
150,466
|
Amortization of
intangible assets
|
1,092
|
4,407
|
|
3,126
|
8,814
|
Loss from operating
activities
|
(1,778,994)
|
(885,582)
|
|
(1,960,486)
|
(1,445,494)
|
Other income and
expenses
|
|
|
|
|
|
Finance
costs
|
185,929
|
116,745
|
|
321,779
|
258,419
|
Foreign exchange loss
(gain)
|
327,790
|
(656,101)
|
|
347,834
|
(433,721)
|
Loss before income
taxes
|
(2,292,713)
|
(346,226)
|
|
(2,630,099)
|
(1,270,192)
|
|
|
|
|
|
|
Income tax
expense
|
|
|
|
|
|
Current
|
17,676
|
7,326
|
|
17,676
|
7,326
|
Net
loss
|
(2,310,389)
|
(353,552)
|
|
(2,647,775)
|
(1,277,518)
|
The following table provides a reconciliation of Net Loss to
Adjusted Net Income or Adjusted Net Loss and Net Loss to EBITDA and
Adjusted EBITDA for the periods indicated:
|
For the three-months
ended
June
30,
|
|
For the six-months
ended
June
30,
|
|
2023
|
2022
|
|
2023
|
2022
|
Reconciliation of
Net Loss to Adjusted Net Loss
|
|
|
|
|
|
Net Loss
|
(2,310,389)
|
(353,552)
|
|
(2,647,775)
|
(1,277,518)
|
Adjustments to Net
Loss:
|
|
|
|
|
|
Foreign exchange loss
(gain)
|
327,790
|
(656,101)
|
|
347,834
|
(433,721)
|
Stock-based
compensation expense
|
934,942
|
250,750
|
|
432,413
|
162,027
|
Information technology
expense
|
—
|
62,479
|
|
—
|
62,479
|
Adjusted Net
Loss
|
(1,047,657)
|
(696,424)
|
|
(1,867,528)
|
(1,486,733)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three-months
ended
June
30,
|
|
For the six-months
ended
June
30,
|
|
2023
|
2022
|
|
2023
|
2022
|
Reconciliation of
Net Loss to Adjusted EBITDA
|
|
|
|
|
|
Net Loss
|
(2,310,389)
|
(353,552)
|
|
(2,647,775)
|
(1,277,518)
|
Adjustments to Net
Loss:
|
|
|
|
|
|
Amortization and
depreciation expenses
|
80,114
|
86,109
|
|
161,986
|
159,280
|
Finance
costs
|
185,929
|
116,745
|
|
321,779
|
258,419
|
Income Tax
Expense
|
17,676
|
7,326
|
|
17,676
|
7,326
|
EBITDA
|
(2,026,670)
|
(143,372)
|
|
(2,146,334)
|
(852,493)
|
|
|
|
|
|
|
Adjustments to
EBITDA:
|
|
|
|
|
|
Foreign exchange loss
(gain)
|
327,790
|
(656,101)
|
|
347,834
|
(433,721)
|
Stock-based
compensation
|
934,942
|
250,750
|
|
432,413
|
162,027
|
Information technology
expense
|
—
|
62,479
|
|
—
|
62,479
|
Adjusted
EBITDA
|
(763,938)
|
(486,244)
|
|
(1,366,087)
|
(1,061,708)
|
The following tables provide a reconciliation of Net Profit or Loss
to Cash Earnings and Free Cash Flow for the periods indicated:
|
For the three-months
ended June 30,
|
($)
|
2023
|
2022
|
Increase
(decrease)
|
Net loss from
continuing operations
|
(2,310,389)
|
(353,552)
|
(1,956,837)
|
Non-cash
items:
|
|
|
|
Depreciation of
property and equipment
|
79,022
|
81,702
|
(2,680)
|
Amortization of
intangible assets
|
1,092
|
4,407
|
(3,315)
|
Amortization of
deferred financing costs
|
31,344
|
7,126
|
24,218
|
Stock-based
compensation expense
|
934,942
|
250,750
|
684,192
|
Unrealized foreign
exchange loss
|
96,792
|
10,355
|
86,437
|
|
1,143,192
|
354,340
|
788,852
|
Cash
Earnings
|
(1,167,197)
|
788
|
(1,167,985)
|
Net change in non-cash
working capital balances
|
1,426,919
|
(646,138)
|
2,073,057
|
Cash flows generated
(used) in operating activities
|
259,722
|
(645,350)
|
905,072
|
|
|
|
|
Less: Acquisitions of
property and equipment
|
—
|
(6,062)
|
6,062
|
Free cash
flow
|
259,722
|
(651,412)
|
911,134
|
|
For the six-months
ended June 30,
|
($)
|
2023
|
2022
|
Increase
(decrease)
|
Net loss from
continuing operations
|
(2,647,775)
|
(1,277,518)
|
(1,370,257)
|
Non-cash
items:
|
|
|
|
Depreciation of
property and equipment
|
158,860
|
150,466
|
8,394
|
Amortization of
intangible assets
|
3,126
|
8,814
|
(5,688)
|
Amortization of
deferred financing costs
|
38,389
|
14,171
|
24,218
|
Stock-based
compensation expense
|
432,413
|
162,027
|
270,386
|
Unrealized foreign
exchange loss
|
84,170
|
7,767
|
76,403
|
|
716,958
|
343,245
|
373,713
|
Cash
Earnings
|
(1,930,817)
|
(934,273)
|
(996,544)
|
Net change in non-cash
working capital balances
|
1,836,217
|
(252,570)
|
2,088,787
|
Cash flows used in
operating activities
|
(94,600)
|
(1,186,843)
|
1,092,243
|
Less: Acquisitions of
property and equipment
|
(972)
|
(10,497)
|
9,525
|
Free cash
flow
|
(95,572)
|
(1,197,340)
|
1,101,768
|
Selected Quarterly Financial Information
The following table summarizes certain of our financial results
for the most recently completed eight quarters for which financial
statements have been prepared by us as a reporting issuer. This
unaudited quarterly information has been prepared in accordance
with IFRS. Due to the impact of COVID-19 and other factors such as
seasonality, the results of operations for any quarter are not
necessarily indicative of the results of operations for the full
year.
($)
|
|
|
Consolidated
statements of loss
|
Q2-2023
|
Q1-2023
|
Q4-2022
|
Q3-2022
|
Q2-2022
|
Q1-2022
|
Q4-2021
|
Q3-2021
|
Total net
revenue
|
3,729,896
|
3,715,167
|
5,223,973
|
5,006,612
|
5,481,267
|
4,295,516
|
6,415,527
|
4,987,628
|
E-commerce
revenue
|
2,796,830
|
2,761,264
|
3,028,134
|
2,669,366
|
3,268,570
|
3,149,395
|
3,958,670
|
2,506,850
|
E-commerce revenue % of
total net
revenue
|
75.0 %
|
74.3 %
|
58.0 %
|
53.9 %
|
59.6 %
|
73.3 %
|
61.7 %
|
50.3 %
|
Gross margin
|
36.9 %
|
35.9 %
|
44.0 %
|
37.5 %
|
35.5 %
|
35.3 %
|
40.0 %
|
38.4 %
|
Adjusted Net (Loss)
Income
|
(1,047,657)
|
(819,871)
|
(317,620)
|
(562,799)
|
(696,424)
|
(790,309)
|
123,230
|
(367,455)
|
Adjusted
EBITDA
|
(763,938)
|
(602,149)
|
(50,159)
|
(317,434)
|
(486,244)
|
(575,464)
|
298,025
|
(171,149)
|
Adjusted EBITDA % of
total net
revenue
|
(20.5 %)
|
(16.2 %)
|
(1.0 %)
|
(6.3 %)
|
(8.9 %)
|
(13.4 %)
|
4.6 %
|
(3.4 %)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Run rate metrics and
growth:
|
|
|
|
|
|
|
|
|
Total net revenue –
last 12 months
revenue run-rate
|
17,675,648
|
19,427,019
|
20,007,368
|
21,198,922
|
21,179,938
|
19,724,699
|
18,031,254
|
15,007,540
|
E-commerce revenue –
last 12
months revenue run-rate
|
11,285,594
|
11,757,334
|
12,145,465
|
13,076,001
|
12,883,485
|
12,137,597
|
10,560,842
|
8,317,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash
Flow:
|
|
|
|
|
|
|
|
|
Net loss
|
(2,310,389)
|
(337,386)
|
(739,531)
|
370,210
|
(353,552)
|
(923,966)
|
(492,803)
|
59,223
|
Add: non-cash
items
|
1,143,192
|
(426,234)
|
228,056
|
346,803
|
354,340
|
(11,095)
|
724,391
|
87,287
|
Cash
Earnings
|
(1,167,197)
|
(763,620)
|
(511,475)
|
717,013
|
788
|
(935,061)
|
231,588
|
146,510
|
Add: Net change in
non-cash working
capital
|
1,426,919
|
409,298
|
500,609
|
470,826
|
(646,138)
|
393,568
|
1,221,311
|
(2,322,046)
|
Cash flows
provided/(used) in
operating activities
|
259,722
|
(354,322)
|
(10,866)
|
1,187,839
|
(645,350)
|
(541,493)
|
1,452,899
|
(2,175,536)
|
Less: acquisition of
property and
equipment
|
-
|
(972)
|
(2,150)
|
(4,050)
|
(6,062)
|
(4,435)
|
(4,283)
|
(15,436)
|
Free Cash
Flow
|
259,722
|
(355,294)
|
(13,016)
|
1,183,789
|
(651,412)
|
(545,928)
|
1,448,616
|
(2,190,972)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidity:
|
|
|
|
|
|
|
|
|
Cash
availability
|
2,074,391
|
3,001,298
|
2,868,350
|
2,231,325
|
2,934,437
|
3,662,768
|
3,810,767
|
2,640,169
|
Working
capital
|
1,526,092
|
(805,319)
|
(949,149)
|
(551,302)
|
(59,214)
|
6,833,114
|
7,052,502
|
7,083,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalization:
|
|
|
|
|
|
|
|
|
Shares
outstanding
|
91,425,499
|
91,425,499
|
91,425,499
|
91,425,499
|
91,425,499
|
92,783,155
|
92,783,155
|
92,783,155
|
Closing share
price
|
0.10
|
0.07
|
0.105
|
0.11
|
0.11
|
0.11
|
0.14
|
0.10
|
Market
capitalization
|
9,142,550
|
6,399,785
|
9,599,677
|
10,056,805
|
10,056,805
|
10,206,147
|
12,989,642
|
9,278,316
|
Add: Total
debt
|
4,698,114
|
5,973,393
|
5,252,143
|
4,645,115
|
6,619,796
|
6,526,453
|
5,999,440
|
6,272,286
|
Less: Cash
|
1,869,187
|
2,909,786
|
2,586,237
|
2,007,396
|
2,884,427
|
3,570,681
|
3,695,677
|
2,603,395
|
Enterprise value
(EV)
|
11,971,477
|
9,463,392
|
12,265,583
|
12,694,524
|
13,792,174
|
13,161,919
|
15,293,405
|
12,947,207
|
Multiple of EV/Last 12
months
revenue
|
0.68x
|
0.49x
|
0.61x
|
0.60x
|
0.65x
|
0.67x
|
0.85x
|
0.86x
|
About LXR
LXR is a socially responsible, digital-first omni-channel
retailer of authenticated pre-owned handbags and personal
accessories. Since 2010, we have been providing consumers with
authenticated branded luxury products from Hermès, Louis Vuitton, Gucci, Prada and Chanel, among
other high-quality brands, by promoting their reuse and providing
an environmentally responsible way for consumers to purchase luxury
products. We achieve this through our digital-first strategy by
selling directly to consumers through our website
at www.lxrco.com and indirectly by powering the e-commerce and
other platforms of key channel partners. Our omni-channel model is
also supported by retail "shop-in-shop" experience centers and by
wholesale activities with select retail partners across
North America.
Non-IFRS Measures
This press release refers to certain non-IFRS measures. These
measures are not recognized under IFRS, do not have a standardized
meaning prescribed by IFRS and are therefore unlikely to be
comparable to similar measures presented by other companies.
Rather, these measures are provided as additional information to
complement IFRS measures by providing further understanding of
LXR's performance and results of operations from management's
perspective. Accordingly, these measures should not be considered
in isolation nor as a substitute for analysis of LXR's financial
information reported under IFRS. Management uses non-IFRS measures
including: "EBITDA," "Adjusted EBITDA," "Adjusted Net
Loss", "Cash Earnings", "Free Cash Flow", "LTM Total Net
Revenue", "LTM E-commerce Net Revenue" and "Inventory Turns".
These non-IFRS measures are used to provide investors with
supplemental measures of LXR's operating performance and thus
highlight trends in LXR's core business that may not otherwise be
apparent when relying solely on IFRS measures. Management believes
that securities analysts, investors and other interested parties
frequently use non-IFRS measures in the evaluation of company
performance. Management also uses non-IFRS measures to facilitate
operating performance comparisons from period to period, to prepare
annual operating budgets and forecasts and to determine components
of management compensation. For a definition of EBITDA, Adjusted
EBITDA, and Adjusted Net Loss, Cash Earnings, Free Cash Flow, and a
reconciliation of these non-IFRS measures to IFRS measures, see the
above tables presented.
Caution Regarding Forward-Looking Statements
Certain statements in this press release are prospective in
nature and constitute forward-looking information or
forward-looking statements within the meaning of applicable
securities laws (collectively, "forward-looking
statements"). Forward-looking statements include, but are not
limited to, statements concerning the financial results and
condition of the Company, expectations regarding market trends,
overall market growth rates and the Company's growth rates, future
objectives and strategies to achieve those objectives, including,
without limitation, e-commerce growth and penetration, the state of
wholesale demand, new store openings, store productivity, margin
improvements, and future acquisitions, as well as other statements
with respect to management's beliefs, plans, estimates and
intentions, and similar statements concerning anticipated future
events, results, outlook, circumstances, performance or
expectations that are not historical facts.
Forward-looking statements generally, but not always, can be
identified by the use of forward-looking terminology such as
"outlook", "objective", "may", "could", "would", "will", "expect",
"intend", "estimate", "forecasts", "project", "seek", "anticipate",
"believes", "should", "plans", "continue" or similar expressions
suggesting future outcomes or events and the negative of any of
these terms.
Forward-looking statements reflect management's current beliefs,
expectations and assumptions and are based on information currently
available to management, which includes assumptions about continued
revenues based on historical past performance, management's
historical experience, perception of trends and current business
conditions, expected future developments and other factors which
management considers appropriate. With respect to the
forward-looking statements included in this press release,
management has made certain assumptions with respect to, among
other things, the Company's ability to renew successfully the line
of credit and the long-term debt facilities, the Company's ability
to meet its future objectives and strategies, the Company's ability
to achieve its future projects and plans and that such projects and
plans will proceed as anticipated, the expected growth of the
Company's e-commerce revenue, the expected number and timing of
store openings or closings in North
America, entering into new or expanded retail partnerships
in North America, the ability of
the Company to continue to expand its wholesale activities, the
Company's ability to source products, the Company's competitive
position in the pre-owned luxury industry, and beliefs and
intentions regarding the ownership of material trademarks and
domain names used in connection with the marketing, distribution
and sale of the Company's products as well as assumptions
concerning general economic activity and market growth rates,
currency exchange and interest rates and competitive intensity.
Given the recent rise in global interest rates and inflationary
expectations, our results in the future may be materially affected
by the overall state of economic growth, customer demand and
spending (including the impact of recessionary fears), the level of
inflation, interest rates, regional labor market and global supply
chain constraints, world events, the rate of growth of online
commerce, and cloud services, and various other related
factors.
Generally, and especially given this unprecedented period of
uncertainty brought about by the geo-political events or acts of
terrorism (such as the military conflict between Russia and Ukraine and the political tensions arising
from such conflict between Russia,
the United States and countries in
Europe and elsewhere), readers are
cautioned not to place undue reliance on forward-looking
statements, as there can be no assurance that the future
circumstances, outcomes, or results anticipated or implied by such
forward-looking statements will occur or that plans, intentions or
expectations upon which the forward-looking statements are based
will occur. By their nature, forward-looking statements involve
known and unknown risks and uncertainties and other factors that
could cause actual results to differ materially from those
contemplated by such statements. Factors that could cause such
differences include, but are not limited to, those factors
described under the headings "Risk Factors" and "Management's
Discussion and Analysis of LXR – Risk Factors" in LXR's annual
information form (the "Annual Information Form"), and as described
from time to time in the reports and disclosure documents filed by
the Company with the Canadian securities regulatory agencies and
commissions. Such list of risk factors is not exhaustive of the
factors that may impact the forward-looking statements. These and
other factors should be considered carefully, and readers should
not place undue reliance on any of the forward-looking statements
in this press release. As a result of the foregoing and other
factors, there can be no assurance that actual results will be
consistent with these forward-looking statements.
All forward-looking statements included in and incorporated
into this press release are qualified by these cautionary
statements. Unless otherwise indicated, the forward-looking
statements contained herein are made as of the date of this press
release, and except as required by applicable law, the Company does
not undertake any obligation to publicly update or revise any
forward-looking statement, whether as a result of new information,
future events or otherwise.
SOURCE LXRandCo, Inc.