SOURCE: uSell.com, Inc.

August 15, 2016 16:00 ET

uSell.com Reports Second Quarter 2016 Results

849% YOY Revenue Growth to $25.8 Million; Net Loss Reduced to $33,000; Positive Adjusted EBITDA (a non-GAAP Financial Measure) of $572,000; Substantially Improved Margins; Successful Integration of uSell Technology

NEW YORK, NY--(Marketwired - Aug 15, 2016) - uSell.com (OTCQB: USEL), a technology driven company focused on extracting the maximum value from used mobile devices, today reported results for the second quarter ended June 30, 2016.

Key Financial Highlights:

  • Working capital increased to $7.0 million at June 30, 2016 from $5.6 million at December 31, 2015
  • Revenues increased by $23.1 million, or 849%, to $25.8 million for the three months ended June 30, 2016, from $2.7 million for the three months ended June 30, 2015
  • Revenues increased by $43.4 million, or 893%, to $48.3 million for the six months ended June 30, 2016, from $4.9 million for the six months ended June 30, 2016
  • Net loss decreased $502,000, or 94%, to $33,000 for the three months ended June 30, 2016, from $535,000 for the three months ended June 30, 2015
  • Net loss increased $118,000, or 6%, to $2,123,000 for the six months ended June 30, 2016, from $2,005,000 for the six months ended June 30, 2015
  • Adjusted EBITDA, a non-GAAP financial measure, improved to $0.6 million for the three months ended June 30, 2016, from ($0.2) million for the three months ended June 30, 2015
  • Adjusted EBITDA, a non-GAAP financial measure, improved to $0.2 million for the six months ended June 30, 2016, from ($1.2) million for the six months ended June 30, 2015

The following table presents Adjusted EBITDA, a non-GAAP financial measure, and provides a reconciliation of Adjusted EBITDA to the directly comparable GAAP measure reported in the Company's consolidated financial statements:

                 
  Three Months Ended
June 30,
    Six Months Ended
June 30,
 
  2016     2015     2016     2015  
Net loss $ (33,000 )   $ (535,000 )   $ (2,123,000 )   $ (2,005,000 )
  Stock-based compensation expense   145,000       212,000       272,000       459,000  
  Depreciation and amortization   487,000       139,000       999,000       302,000  
  Interest expense   328,000       -       685,000       1,000  
  Interest and other income   -       -               (1,000 )
  Change in fair value of derivative liability   (355,000 )     -       370,000       -  
Adjusted EBITDA $ 572,000     $ (184,000 )   $ 203,000     $ (1,244,000 )
                               

During the quarter ended June 30, 2016, the Company experienced a substantial bounce back in margins, confirming that the margin pressure in the first quarter of 2016 was not a trend, but rather a cyclical event triggered by the unanticipated launch of the iPhone SE. uSell.com was able to liquidate most of the inventory associated with the write down it took in the first quarter by mid-May, which enabled it to purchase new inventory at favorable prices. While margins have stabilized, the Company has continued to maintain a conservative philosophy and has taken steps to minimize the impact on its financial statements of any potential price fluctuations due to the anticipated iPhone 7 release in September.

From a technology perspective, uSell.com made great strides in the second quarter of 2016. In early May, the Company began running auctions through its newly rebranded We Sell Cellular website. In May and June, approximately $1.7 million in value of devices was sold through these eCommerce auctions. Through this process, it was proven that by leveraging uSell's technology, the Company is able to drive sales in a much more efficient and scalable manner. The auction technology that uSell.com developed was targeted at a specific subset of We Sell Cellular's customers. The Company will not move 100% of We Sell Cellular's volume through this particular mechanism, but is in the process of building additional mechanisms to move the bulk of We Sell Cellular's sales online over the next 12 months.

Nik Raman, Chief Executive Officer, stated, "We are very pleased with our results, as we not only made substantial operational gains, but we also proved that the synergy between uSell and We Sell Cellular is real. Technology improvements are transforming the business by making our processes more efficient and scalable. Technology enhancements are also making a positive impact on our approach to inventory purchasing and management, which has stabilized and improved our margins. We continue to see this trend in July and August. We will continue to transition more of the business from offline to online, enabling us to increase inventory turns and device margins over time. We continue to see favorable trends in the industry and believe we are well-positioned to continue to take market share and grow our business in a profitable manner."

Finally, uSell.com made substantial improvements to its balance sheet by restructuring the terms of its bank facility with its lender and by eliminating Brian and Scott Tepfers' Placement Rights. The modification of the agreement with its lender resulted in an increase in uSell's working capital to close to $7.0 million, while the elimination of the Tepfer's Placement Rights will add $1.5 million of equity to the balance sheet. The Placement Rights had resulted in cumulative income statement charges of $0.37 million for the six months ended June 30, 2016.

"We have seen the impact of uSell's technology on our operations, and we believe that we are just scraping the surface of what we can do together," said Brian Tepfer, CEO of We Sell Cellular, uSell's wholly owned subsidiary. "We believe that most of the value from the uSell and We Sell Cellular combination will be realized in the future, so we had little incentive to retain our placement rights. We are in this for the long term."

Financial Results for the Quarter Ended June 30, 2016:
Total revenue was $25.8 million for the three months ended June 30, 2016, a 849% increase from $2.7 million for the three months ended June 30, 2015. Principal Device Revenue increased by $23.2 million, or 912%, from $2.5 million for the three months ended June 30, 2015 to $25.8 million for the three months ended June 30, 2016. Principal Device Revenue related to We Sell Cellular amounted to $24,529,000 for the three months ended June 30, 2016.

Gross profit increased substantially to 7.0% for the three months ended June 30, 2016, compared to 4.0% for the three months ended March 31, 2016. As noted above, margins improved during the second quarter of 2016, confirming that the margin pressure that was experienced in the first quarter was not a trend, but rather a cyclical event triggered by the unanticipated launch of the iPhone SE.

Sales and marketing expense increased $65,000, or 19%, from $349,000 during the three months ended June 30, 2015 to $414,000 during the three months ended June 30, 2016. Sales and marketing include $378,000 of expenses related to We Sell Cellular for the three months ended June 30, 2016. With the We Sell Cellular acquisition and our newfound ability to source devices directly from the carriers, retailers, and manufacturers, our primary sales and marketing expenses have shifted from consumer marketing to paying out sales commissions. We believe this shifting profile will enable us to scale volume significantly while maintaining sales and marketing expense as a much lower percentage of sales than in prior years.

Operating loss for the three months ended June 30, 2016 was $60,000, an improvement of $0.5 million from a $0.5 million operating loss for the three months ended June 30, 2015.

Net loss for the three months ended June 30, 2016 was $33,000, an improvement of $0.5 million from a $0.5 million net loss for the three months ended June 30, 2015. The resulting EPS improved to ($0.00), as compared to ($0.07) for the prior year ago quarter.

Adjusted EBITDA for the three months ended June 30, 2016 was $0.6 million, an improvement of $0.8 million from a $0.2 million Adjusted EBITDA loss for the three months ended June 30, 2015. Excluding a $0.4 million negative change in fair value of derivative liability, Adjusted EBITDA would have been $0.9 million.

At June 30, 2016, uSell.com had $1.0 million of cash and cash equivalents, $1.6 million of restricted cash and 20.1 million shares issued and outstanding.

Financial Results for the Six Months Ended June 30, 2016
Total revenue was $48.3 million for the six months ended June 30, 2016, a 893% increase from $4.9 million for the six months ended June 30, 2015. Principal Device Revenue increased by $44.0 million, or 1,052%, from $4.2 million for the six months ended June 30, 2015 to $48.2 million for the six months ended June 30, 2016. Principal Device Revenue related to We Sell Cellular amounted to $45.3 million for the six months ended June 30, 2016.

Any gross profit comparison prior to the We Sell Cellular acquisition in October 2015 would not be meaningful.

Sales and marketing expense decreased $564,000, or 42%, from $1,355,000 during the six months ended June 30, 2015 to $791,000 during the six months ended June 30, 2016, mainly as a result of our decision to strategically reduce our marketing staff and marketing spend in favor of seeking out wholesale supply. Sales and marketing include $724,000 of expenses related to We Sell Cellular for the six months ended June 30, 2016.

Operating loss for the six months ended June 30, 2016 was $1.1 million, an improvement of $0.9 million from a $2.0 million operating loss for the six months ended June 30, 2015.

Net loss for the six months ended June 30, 2016 was $2.1 million, an increase of $0.1 million from a $2.0 million net loss for the six months ended June 30, 2015. The resulting EPS improved to ($0.11), as compared to ($0.27) for the prior year ago period, mainly as a result of an increase in shares outstanding.

Adjusted EBITDA for the six months ended June 30, 2016 was $0.2 million, an improvement of $1.0 million from a $1.2 million Adjusted EBITDA loss for the six months ended June 30, 2015. The six months ended June 30, 2016 calculation includes a $0.4 million positive change in fair value of derivative liability.

Non-GAAP Financial Measure - Adjusted EBITDA
We make reference to "Adjusted EBITDA," a measure of financial performance not calculated in accordance with accounting principles generally accepted in the United States ("GAAP"). Management has included EBITDA because it believes that investors may find it useful to review our financial results as adjusted to exclude items as determined by management. Reconciliations of this non-GAAP financial measure to the most directly comparable GAAP financial measure, net loss, to the extent available without unreasonable effort, are set forth below. The Company defines Adjusted EBITDA as earnings or (loss) from continuing operations before the items noted in the table on page 1.

Management believes Adjusted EBITDA provides a meaningful representation of our operating performance that provides useful information to investors regarding our financial condition and results of operations. Adjusted EBITDA is commonly used by financial analysts and others to measure operating performance. Furthermore, management believes that this non-GAAP financial measure may provide investors with additional meaningful comparisons between current results and results of prior periods as they are expected to be reflective of our core ongoing business. However, while we consider Adjusted EBITDA to be an important measure of operating performance, Adjusted EBITDA and other non-GAAP financial measures have limitations, and investors should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. Further, Adjusted EBITDA, as we define it, may not be comparable to EBITDA, or similarly titled measures, as defined by other companies.

Conference Call Details:
Date: Tuesday, August 16, 2016
Time: 11:00AM ET
Dial-in Number: (866) 932-0173
International Dial-in Number: (785) 424-1630
Webcast: http://www.investorcalendar.com/event/175254.

Participants are recommended to dial-in approximately 10 minutes prior to the start of the event. A replay of the call will be available approximately two hours after completion through September 16, 2016. To listen to the replay, dial (877) 481-4010 (domestic) or (919) 882-2331 (international) and use replay ID 10076. The webcast replay will be available through November 16, 2016.

About uSell.com, Inc.
uSell.com, Inc. is a technology driven company focused on extracting the maximum value from used mobile devices, at large scale. uSell acquires products from both individual consumers, on its website, uSell.com, and from major carriers, big box retailers, and manufacturers through its subsidiary, We Sell Cellular. These devices are then distributed globally, leveraging both a traditional sales force and an online marketplace where professional buyers of used smartphones compete to buy inventory in an on-demand fashion. Through participation on uSell's marketplace platforms and through interaction with uSell's salesforce, buyers can acquire high volumes of inventory in a cost effective manner, while minimizing risk.
Visit www.uSell.com and http://wesellcellular.com

Forward-Looking Statements
This press release includes forward-looking statements including statements regarding future margins, improving efficiencies including increased inventory turns, profitability, and future growth. The words "believe," "may," "estimate," "continue," "anticipate," "intend," "should," "plan," "could," "target," "potential," "is likely," "will," "expect" and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. The results anticipated by any or all of these forward-looking statements might not occur. Important factors that could cause actual results to differ from those in the forward-looking statements include competition from large retail stores and wireless operators, unanticipated issues with the integration of the We Sell business with uSell, and our ability to further or maintain our relationships with large wholesalers. Further information on our risk factors is contained in our filings with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2015. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise.

Contact Information
Nik Raman
Chief Executive Officer
p212-213-6805

 
uSell.com, Inc. and Subsidiaries
Consolidated Balance Sheets
 
    June 30,     December 31,  
    2016     2015  
    (unaudited)        
Assets                
Current Assets:                
Cash and cash equivalents   $ 1,012,868     $ 1,047,786  
Restricted cash     1,606,102       801,230  
Accounts receivable, net     276,842       463,187  
Inventory     8,413,671       7,099,970  
Prepaid expenses and other current assets     171,583       297,023  
Total Current Assets     11,481,066       9,709,196  
                 
Property and equipment, net     175,640       193,243  
Goodwill     8,448,759       8,406,561  
Intangible assets, net     4,329,888       5,043,972  
Capitalized technology, net     891,135       886,543  
Other assets     52,580       79,145  
                 
Total Assets   $ 25,379,068     $ 24,318,660  
                 
Liabilities and Stockholders' Equity                
Current Liabilities:                
Accounts payable   $ 3,367,258     $ 2,563,598  
Accrued expenses     694,455       729,160  
Deferred revenue     424,822       814,295  
Lease termination payable     -       5,000  
Total Current Liabilities     4,486,535       4,112,053  
                 
Promissory note payable     6,851,791       5,087,043  
Placement rights derivative liability     1,500,000       1,130,000  
Total Liabilities     12,838,326       10,329,096  
                 
Stockholders' Equity:                
                 
Convertible Series A preferred stock; $0.0001 par value; 325,000 shares authorized; no shares issued and outstanding.     -       -  
Convertible Series B preferred stock; $0.0001 value per share; 4,000,000 shares authorized; no shares issued and outstanding.     -       -  
Convertible Series C preferred stock; $0.0001 value per share; 146,667 shares authorized; no shares issued and outstanding.     -       -  
Convertible Series E preferred stock; $0.0001 value per share; 103,232 shares authorized; no shares issued and outstanding     -       -  
Common stock; $0.0001 par value; 43,333,333 shares authorized; 20,120,999 and 19,751,999 shares issued and outstanding, respectively     2,012       1,976  
Additional paid in capital     69,336,972       68,662,578  
Accumulated deficit     (56,798,242 )     (54,674,990 )
Total Stockholders' Equity     12,540,742       13,989,564  
                 
Total Liabilities and Stockholders' Equity   $ 25,379,068     $ 24,318,660  
                 
                 
uSell.com, Inc. and Subsidiaries  
Consolidated Statements of Operations  
   
    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    2016     2015     2016     2015  
Revenue   $ 25,829,187     $ 2,720,455     $ 48,281,335     $ 4,863,438  
                                 
Cost of Revenue     24,021,565       2,156,542       45,569,316       3,599,061  
                                 
Gross Profit     1,807,622       563,913       2,712,019       1,264,377  
                                 
Operating Expenses:                                
  Sales and marketing     413,805       349,017       790,900       1,355,040  
  General and administrative     1,453,403       750,220       2,989,238       1,914,303  
    Total operating expenses     1,867,208       1,099,237       3,780,138       3,269,343  
Loss from Operations     (59,586 )     (535,324 )     (1,068,119 )     (2,004,966 )
                                 
Other (Expense) Income:                                
  Interest income     -       253       -       785  
  Interest expense     (328,082 )     (5 )     (685,133 )     (822 )
  Change in fair value of placement rights derivative liability     355,000       -       (370,000 )     -  
Total Other (Expense) Income, Net     26,918       248       (1,055,133 )     (37 )
                                 
Net Loss   $ (32,668 )   $ (535,076 )   $ (2,123,252 )   $ (2,005,003 )
                                 
Basic and Diluted Loss per Common Share:                                
Net loss per common share - basic and diluted   $ (0.00 )   $ (0.07 )   $ (0.11 )   $ (0.27 )
                                 
Weighted average number of common shares outstanding during the period - basic and diluted     20,110,625       7,541,626       19,931,312       7,537,743  
                                 
                                 
uSell.com, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
 
    Six Months Ended
June 30,
 
    2016     2015  
CASH FLOWS FROM OPERATING ACTIVITIES:                
Net loss   $ (2,123,252 )   $ (2,005,003 )
  Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:                
    Depreciation and amortization     998,632       302,487  
    (Recovery of) Provision for bad debt expense     (1,828 )     749  
    Stock based compensation expense     271,930       458,723  
    Amortization of debt issue costs into interest expense     216,799       -  
    Change in fair value of placement rights derivative liability     370,000       -  
Changes in operating assets and liabilities:                
  Accounts receivable     188,173       966  
  Inventory     (1,355,899 )     (211,960 )
  Prepaid and other current assets     125,440       21,687  
  Other assets     690       -  
  Accounts payable     803,660       13,258  
  Accrued expenses     (34,704 )     -  
  Lease termination payable     (5,000 )     -  
  Deferred revenues     (389,473 )     70,843  
  Net Cash and Cash Equivalents Used In Operating Activities     (934,832 )     (1,348,250 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
Website development costs     (267,293 )     (310,897 )
Restricted cash     (804,872 )     -  
Cash paid to purchase property and equipment     (4,245 )     -  
Security deposits     25,875       -  
  Net Cash and Cash Equivalents Used In Investing Activities     (1,050,535 )     (310,897 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
Proceeds from note payable     2,000,000       -  
Cash paid for debt issue costs     (49,551 )     -  
  Net Cash and Cash Equivalents Provided By Financing Activities     1,950,449       -  
                 
Net Decrease in Cash and Cash Equivalents     (34,918 )     (1,659,147 )
Cash and Cash Equivalents - Beginning of Period     1,047,786       2,414,757  
                 
Cash and Cash Equivalents - End of Period   $ 1,012,868     $ 755,610  
                 
SUPPLEMENTARY CASH FLOW INFORMATION:                
Cash Paid During the Period for:                
  Interest   $ 382,117     $ -  
  Taxes   $ -     $ -  
                 
SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:                
Adjustment to goodwill for inventory valuation   $ 42,198     $ -  
Common stock issued in connection with note payable   $ 402,500     $ -  
                 

Contact Information

  • Contact Information
    Nik Raman
    Chief Executive Officer
    p212-213-6805