819% YOY Revenue Growth to $24.8 Million Operating Loss Reduced to $7,000 Gross Margins of 8.3% Continued Diversification of
Supply
NEW YORK, NY / ACCESSWIRE / November 9, 2016 / uSell.com (OTCQB: USEL), a technology driven company focused on extracting the
maximum value from used mobile devices, today reported results for the third quarter ended September 30, 2016.
Key Business Highlights:
- Trailing 12 months revenue of $92.5 million - Gross margins increased to 8.3% - Continued
migration of customers to online platform - Positive trends in diversification of supply
Key Financial Highlights:
- Revenues increased by $22.1 million, or 819%, to $24.8 million for the three months ended
September 30, 2016, from $2.7 million for the three months ended September 30, 2015; in what is typically a slower seasonal period
- Revenues increased by $65.5 million, or 867%, to $73.1 million for the nine months ended September 30, 2016, from $7.6 million
for the nine months ended September 30, 2015 - Operating loss decreased $286,000, or 98%, to $7,000 for the three months ended
September 30, 2016, from $293,000 for the three months ended September 30, 2015 - Operating loss decreased $1.2 million, or 53%, to
$1.1 million for the nine months ended September 30, 2016, from $2.3 million for the nine months ended September 30, 2015 - Net
loss increased by $117,000, or 40%, to $411,000 for the three months ended September 30, 2016 from $294,000 for the three months
ended September 30, 2015, which was prior to the We Sell Cellular acquisition - Net loss increased by $235,445, or 10%, to
$2,534,732 for the nine months ended September 30, 2016 from $2,299,287 for the nine months ended September 30, 2015 - Adjusted
EBITDA, a non-GAAP financial measure, improved to $0.6 million for the three months ended September 30, 2016, from $0.0 million for
the three months ended September 30, 2015 - Adjusted EBITDA, a non-GAAP financial measure, improved to $0.8 million for the nine
months ended September 30, 2016, from ($1.2) million for the nine months ended September 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 September
30, Nine Months Ended September 30, 2016 2015 2016 2015 Net loss $ (412,000 ) $ (293,000 ) $ (2,535,000 ) $ (2,299,000 )
Stock-based compensation expense 92,000 196,000 364,000 654,000 Depreciation and amortization 505,000 131,000 1,504,000 433,000
Interest expense 405,000 - 1,090,000 1,000 Interest and other income - - (1,000 ) Change in fair value of derivative liability - -
370,000 - Adjusted EBITDA $ 590,000 $ 34,000 $ 793,000 $ (1,212,000 )
The Company's gross profit increased substantially to 8.3% for the three months ended September 30, 2016, compared to 7.0% for
the three months ended June 30, 2016 and 4.0% for the three months ended March 31, 2016. The margin improvement in the third
quarter of 2016 was driven by both improved inventory management and controls and opportunistic purchases that uSell was able to
make from new suppliers. Given that the market was experiencing a supply shortage, the Company benefitted greatly from its ability
to purchase at favorable prices.
From a technology perspective, the Company continued to successfully run online auctions for a subset of the product sourced
through its wholesale subsidiary, We Sell Cellular, while laying the building blocks for shifting more of its wholesale sales
online. In particular, it launched an "Online Stock List," where buyers can log in and view its inventory on demand. The Company
also consolidated and streamlined its processes for lead capture, lead management, prospect management, and customer relationship
management. In the short term, this will enable uSell's salesforce to focus on high value activities, such as acquiring new
customers and increasing customer engagement and retention. In the long term, these systems are critical to managing uSell's
customer interactions as it migrates more of its wholesale customers onto its online platforms.
On the supplier side, the Company continued to make great strides, as its largest supplier's share of purchases dropped from 85%
in the second quarter of 2016 to 62% in the third quarter of 2016. The Company continues to view supplier diversification as a
long-term initiative that will be measured over the next 12-24 months.
Nik Raman, Chief Executive Officer, stated, "We are very pleased with our results, as we continue to build upon the operational
gains achieved in the second quarter. We are now realizing many of the synergies associated with combining uSell's technology,
systems, and data driven management approach with We Sell Cellular's intimate knowledge of the market, supply relationships, and
growing customer base. We are focused on making fundamental improvements to the business that will translate to short term
financial wins while positioning us for a longer term step change in performance."
Financial Results for the Quarter Ended September 30, 2016:
Total revenue was $24.8 million for the three months ended September 30, 2016, an 819% increase from $2.7 million for the three
months ended September 30, 2015. Principal Device Revenue increased by $22.1 million, or 853%, from $2.6 million for the three
months ended September 30, 2015 to $24.7 million for the three months ended September 30, 2016. Principal Device Revenue related to
We Sell Cellular amounted to $23.8 million for the three months ended September 30, 2016.
Gross profit increased substantially to 8.3% for the three months ended September 30, 2016, compared to 7.0% for the three
months ended June 30, 2016 and 4.0% for the three months ended March 31, 2016. Any comparison prior to the We Sell Cellular
acquisition in October 2015 would not be meaningful. As noted above, margins improved during the second and third quarters 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. The margin improvement in the third quarter of 2016 was also driven by
opportunistic purchases that we were able to make from new suppliers. Given that the market was experiencing a supply shortage, we
benefitted greatly from our ability to purchase at favorable prices.
Sales and marketing expense increased $414,000, or 753%, from $55,000 during the three months ended September 30, 2015 to
$469,000 during the three months ended September 30, 2016. Sales and marketing include $459,000 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 September 30, 2016 was $7,000, an improvement of $0.3 million from a $0.3 million
operating loss for the three months ended September 30, 2015 which was prior to the WeSell Cellular acquisition.
Net loss for the three months ended September 30, 2016 was $412,000, an increase of $119,000 from a $293,000 net loss for the
three months ended September 30, 2015. The resulting EPS improved to ($0.02), as compared to ($0.04) for the prior year ago
quarter.
Adjusted EBITDA for the three months ended September 30, 2016 was $0.6 million, an improvement of $0.6 million from a $0.0
million Adjusted EBITDA loss for the three months ended September 30, 2015.
At September 30, 2016, uSell.com had $1.2 million of cash and cash equivalents, $4.3 million of restricted cash and 20.1 million
shares issued and outstanding.
Financial Results for the Nine Months Ended September 30, 2016
Total revenue was $73.1 million for the nine months ended September 30, 2016, an 867% increase from $7.6 million for the nine
months ended September 30, 2015. Principal Device Revenue increased by $66.1 million, or 975%, from $6.8 million for the nine
months ended September 30, 2015 to $72.9 million for the nine months ended September 30, 2016. Principal Device Revenue related to
We Sell Cellular amounted to $69.1 million for the nine months ended September 30, 2016.
Sales and marketing expense decreased $0.2 million, or 11%, from $1.4 million during the nine months ended September 30, 2015 to
$1.3 million during the nine months ended September 30, 2016. While the decrease in spend between 2015 and 2016 is not material
between periods, the nature of the spend is substantially different, and is much smaller as a percentage of overall sales.
Operating loss for the nine months ended September 30, 2016 was $1.1 million, an improvement of $1.2 million from a $2.3 million
operating loss for the nine months ended September 30, 2015.
Net loss for the nine months ended September 30, 2016 was $2.5 million, an increase of $0.2 million from a $2.3 million net loss
for the nine months ended September 30, 2015. The resulting EPS improved to ($0.13), as compared to ($0.30) for the prior year ago
period, mainly as a result of an increase in shares outstanding.
Adjusted EBITDA for the nine months ended September 30, 2016 was $0.8 million, an improvement of $2.0 million from a $1.2
million Adjusted EBITDA loss for the nine months ended September 30, 2015.
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 Adjusted 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 2. 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: Wednesday, November 9, 2016 Time: 4:30PM ET Dial-in Number: (866) 320-0174 International Dial-in Number: (785) 424-1631
Webcast: http://www.investorcalendar.com/event/175451
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 December 9, 2016. To listen to the replay, dial (877) 481-4010
(domestic) or (919) 882-2331 (international) and use replay ID 10143. The webcast replay will be available through February 9,
2017.
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 supplier diversification and future
revenue growth and anticipated sales and marketing expenses. 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, our continued success in reducing dependence on a few suppliers, the
expected growth and usage of our technology platform, 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 nik@usell.com
uSell.com, Inc. and Subsidiaries Consolidated Balance Sheets
September 30, December 31, 2016 2015 (unaudited) Assets Current Assets: Cash and cash equivalents $ 1,188,318 $ 1,047,786
Restricted cash 4,329,303 801,230 Accounts receivable, net 227,518 463,187 Inventory, net 5,054,265 7,099,970 Prepaid expenses and
other current assets 154,627 297,023 Total Current Assets 10,954,031 9,709,196 Property and equipment, net 174,433 193,243 Goodwill
8,448,759 8,406,561 Intangible assets, net 3,972,846 5,043,972 Capitalized technology, net 919,410 886,543 Other assets 75,668
79,145 Total Assets $ 24,545,147 $ 24,318,660 Liabilities and Stockholders' Equity Current Liabilities: Accounts payable $
2,821,213 $ 2,563,598 Accrued expenses 674,513 729,160 Promissory note payable 168,333 - Deferred revenue 289,971 814,295 Capital
lease obligations 11,026 - Lease termination payable - 5,000 Total Current Liabilities 3,965,056 4,112,053 Promissory note payable,
net of current portion 6,815,052 5,087,043 Capital lease obligations, net of current portion 44,103 - Placement rights derivative
liability - 1,130,000 Total Liabilities 10,824,211 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; 20,128,999 and 19,751,999 shares issued and outstanding, respectively 2,013 1,976 Additional paid in capital 70,928,645
68,662,578 Accumulated deficit (57,209,722 ) (54,674,990 ) Total Stockholders' Equity 13,720,936 13,989,564 Total Liabilities and
Stockholders' Equity $ 24,545,147 $ 24,318,660 uSell.com, Inc. and Subsidiaries Consolidated Statements of Operations Three Months
Ended September 30, Nine Months Ended September 30, 2016 2015 2016 2015 Revenue $ 24,817,307 $ 2,699,863 $ 73,098,642 $ 7,563,301
Cost of Revenue 22,750,001 2,165,410 68,319,317 5,764,471 Gross Profit 2,067,306 534,453 4,779,325 1,798,830 Operating Expenses:
Sales and marketing 468,624 55,436 1,259,524 1,410,476 General and administrative 1,605,398 773,439 4,594,637 2,687,742 Total
operating expenses 2,074,022 828,875 5,854,161 4,098,218 Loss from Operations (6,716) (294,422 ) (1,074,836 ) (2,299,388 ) Other
(Expense) Income: Interest income 429 138 429 923 Interest expense (405,192 ) - (1,090,325 ) (822 ) Change in fair value of
placement rights derivative liability - - (370,000 ) - Total Other (Expense) Income, Net (404,763 ) 138 (1,459,896 ) 101 Net Loss $
(411,479 ) $ (294,284 ) $ (2,534,732 ) $ (2,299,287 ) Basic and Diluted Loss per Common Share: Net loss per common share - basic
and diluted $ (0.02 ) $ (0.04 ) $ (0.13 ) $ (0.30 ) Weighted average number of common shares outstanding during the period - basic
and diluted 20,123,042 7,549,929 19,995,689 7,541,850 uSell.com, Inc. and Subsidiaries Consolidated Statements of Cash Flows Nine
Months Ended September 30, 2016 2015 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (2,534,732 ) $ (2,299,287 ) Adjustments to
reconcile net loss to net cash and cash equivalents provided by (used in) operating activities: Depreciation and amortization
1,504,049 433,427 (Recovery of) Provision for bad debt expense (1,876 ) 749 Stock based compensation expense 363,604 654,341
Amortization of debt issue costs into interest expense 348,393 - Loss on disposal of property and equipment 112,284 - Change in
fair value of placement rights derivative liability 370,000 - Changes in operating assets and liabilities: Accounts receivable
237,545 17,317 Inventory 2,003,507 (288,968 ) Prepaid and other current assets 142,396 42,414 Other assets 11,912 (26,750 )
Accounts payable 257,615 (301,560 ) Accrued expenses (54,647 ) 452,614 Lease termination payable (5,000 ) - Deferred revenues
(524,324 ) 34,690 Net Cash and Cash Equivalents Provided By (Used In) Operating Activities 2,230,726 (1,281,013 ) CASH FLOWS FROM
INVESTING ACTIVITIES: Website development costs (435,116 ) (467,655 ) Restricted cash (3,528,073 ) - Cash paid to purchase property
and equipment (69,019 ) - Security deposits (8,435 ) - Net Cash and Cash Equivalents Used In Investing Activities (4,040,643 )
(467,655 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from note payable 2,000,000 - Cash paid for debt issue costs (49,551 )
(75,000 ) Net Cash and Cash Equivalents Provided By (Used In) Financing Activities 1,950,449 (75,000 ) Net Increase (Decrease) in
Cash and Cash Equivalents 140,532 (1,823,668 ) Cash and Cash Equivalents - Beginning of Period 1,047,786 2,414,757 Cash and Cash
Equivalents - End of Period $ 1,188,318 $ 591,089 SUPPLEMENTARY CASH FLOW INFORMATION: Cash Paid During the Period for: Interest $
744,931 $ - 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 $ - Common stock issued for services
$ - $ 4,450 Elimination of Placement Rights Derivative Liability $ 1,500,000 - Purchases of property and equipment through capital
leases $ 55,129 -
SOURCE: uSell.com, Inc.
