First Half 2017 Growth of 8% in Revenue and 76% Decline in Operating Loss Additional Volume of Transactions Supported by Special
Purpose Entity Sufficiently Capitalized for Growth Plans over Next 12 Months
NEW YORK, NY / ACCESSWIRE / August 11, 2017 / uSell.com (OTCQB: USEL), a large market maker of used smartphones, today reported
financial and operational results for the three month period ended June 30, 2017.
Key Business Highlights for Second Quarter and First Half 2017:
- Continued to invest in online platform and transitioned a
higher percentage of customer interactions online - Continued to focus on increasing capacity and decreasing processing lead-time -
Increased scale and strengthened supplier relationships - Largest supplier's share of purchases dropped to 69% for the six months
ended June 30, 2017, down from 90% during the same period in 2016 - Gross Merchandise Volume ("GMV"), a newly reported metric which
is a non-GAAP financial measure, increased by 15% and 26% for the quarter and the six months ended June 30, 2017, respectively
Key Financial Highlights for First Half 2017:
- Revenues increased by $3,988,000, or 8%, to $52,269,000 for the six months
ended June 30, 2017, from $48,281,000 for the six months ended June 30, 2016 - Operating loss for the six months ended June 30,
2017 was $259,000, compared to $1,068,000 for the six months ended June 30, 2016, an improvement of $809,000, or 76% - Net loss for
the six months ended June 30, 2017 was $1,895,000, compared to $2,123,000 for the six months ended June 30, 2016 - Adjusted EBITDA,
a non-GAAP financial measure, was $706,000 for the six months ended June 30, 2017, compared to $203,000 for the six months ended
June 30, 2016
Key Financial Highlights for Second Quarter 2017:
- Revenues decreased by $1,192,000, or 5%, to $24,637,000 for the three
months ended June 30, 2017, from $25,829,000 for the three months ended June 30, 2016 - Operating loss for the three months ended
June 30, 2017 was $802,000, compared to $60,000 for the three months ended June 30, 2016, a change of $742,000, or 1,237% - Net
loss for the three months ended June 30, 2017 was $1,149,000, compared to $33,000 for the three months ended June 30, 2016 -
Adjusted EBITDA, a non-GAAP financial measure, was ($310,000) for the three months ended June 30, 2017, compared to $572,000 for
the three months ended June 30, 2016
See discussions below in regards to non-GAAP Financial Measures - Adjusted EBITDA.
Nik Raman, Chief Executive Officer, commented, "We believe that our growth in Gross Merchandise Volume over the last 12 months
is indicative of our progress with suppliers and our ability to serve our growing global customer base. Through ever-improving
processes, technology, and data, we hope to become the partner of choice to our suppliers, and in doing so, benefit from industry
trends as trade-in continues to increase in importance throughout the mobile ecosystem. These favorable trends, coupled with the 10
year anniversary of the iPhone and the related upgrade cycle, should create an exciting opportunity for us over the next 12
months."
This press release refers to GMV. The Company defines GMV as the total of uSell revenue plus revenue from the Special Purpose
Entity ("SPE"). GMV is a non-GAAP financial measure because it includes SPE revenue which is not reportable in uSell's financial
statements nor is it in accordance with GAAP. See immediately below for a reconciliation between our revenue under GAAP and GMV,
which is non-GAAP, as well as later in this press release for further discussion of GMV under "Non-GAAP Financial Measure -
GMV."
Three Months Ended June 30, Percentage 2017 2016 Change uSell Revenue - as Reported $ 24,637,000 $ 25,829,000 (5)% SPE
Revenue - Non GAAP 5,142,000 - 100% Gross Merchandise Volume - Non-GAAP $ 29,779,000 $ 25,829,000 15% Six Months Ended June 30,
Percentage 2017 2016 Change uSell Revenue - as Reported $ 52,269,000 $ 48,281,000 8% SPE Revenue - Non- GAAP 8,429,000 - 100% Gross
Merchandise Volume - Non-GAAP $ 60,698,000 $ 48,281,000 26%
While quarterly revenues dropped slightly from the prior year, the Company saw a 15% increase in GMV for the quarter ended June
30, 2017 and a 26% increase in GMV for the six months ended June 30, 2017. Despite this increase in GMV, industry conditions
resulted in suppressed margins for the quarter. Margins are driven primarily by supply and demand, but can also be impacted by the
Company's ability to make opportunistic purchases. Due to these factors, management cannot predict margins from quarter to quarter.
However, management believes that, due to the Company's scale and supplier relationships, it is able to purchase at prices lower
than its customers, which results in low risk of loss on its inventory. uSell's management therefore believes that increasing GMV
is of primary importance, as this should result in increased gross margin dollars in future quarters. Management further believes
that increasing GMV, coupled with limiting growth in fixed costs, should lead to a positive impact to profitability over the long
term.
Technology and operational processes continue to play a key role in limiting the growth of uSell's fixed costs while increasing
capacity, sales velocity, and average selling prices. The Company continues to invest in its online platform and has steadily
transitioned more of its customer interactions online. uSell has also invested resources in optimizing the processes and technology
needed to test and grade devices in its warehouse, with the aim of increasing capacity and decreasing processing lead-time.
Management believes that these investments are important to make now for two reasons: 1) they differentiate the Company from
competitors of similar scale that are looking to purchase from its suppliers, and 2) Management expects that the new iPhone launch
late this year will drive substantial trade in volume over the subsequent six months. By adding more value than its competitors and
becoming the partner of choice to our suppliers, uSell's management believes that it will greatly benefit from industry trends as
trade-in continues to increase in importance throughout the mobile ecosystem.
On the supply side, the Company continues its supplier diversification initiatives, with its largest supplier's share of
purchases representing 69% for the six months ended June 30, 2017, down from 90% during the same period in 2016. The Company views
supplier diversification, as well as expanding its relationships with existing suppliers, as long-term initiatives, and is
optimistic about its prospects over the next year.
Deloitte Global estimates that the global smartphone market was worth $17 billion in 2016, representing 50% growth over 2015.
Furthermore, it forecasts that the growth rate of the used smartphone market is 4-5 times higher than the overall smartphone market
and that it will likely accelerate through 2020 as both consumers and suppliers increasingly embrace the practice of selling or
acquiring second-hand smartphones.
Financial Results for the Six Months Ended June 30, 2017:
Revenue was $52.7 million for the six months ended June 30, 2017, an 8% increase from $48.3 million for the six months ended
June 30, 2016.
During the six months ended June 30, 2017 and 2016, 58% and 58% of the Company's revenues, respectively, were originated in the
United States, 26% and 18%, respectively, were originated in Europe and 12% and 16%, respectively, were originated in Hong
Kong.
Gross profit increased to 7.1% to $3.7 million for the six months ended June 30, 2017, compared to 5.6% for the six months ended
June 30, 2016. The increase in overall margins for the six month period were due to industry conditions, as well as the Company's
ability to make certain opportunistic purchases in the first quarter of 2017.
Sales and marketing expense increased $294,000, or 37%, from $791,000 during the six months ended June 30, 2016 to $1,085,000
during the six months ended June 30, 2017. The increase is primarily attributable to the higher fees paid as a result of the
increased eBay sales during the six months ended June 30, 2017, compared to the six months ended June 30, 2016. With the We Sell
Cellular acquisition and the Company's newfound ability to source devices directly from the carriers, retailers, and manufacturers,
its primary sales and marketing expenses have shifted from consumer marketing to paying out sales commissions and selling fees.
Because the vast majority of uSell's sales and marketing expenses are now paid to third party selling platforms, such as eBay and
Amazon, any increases or decreases in these expenses are directly tied to sales for the period.
Operating loss for the six months ended June 30, 2017 was $259,000, an improvement of $809,000 from a $1,068,000 operating loss
for the six months ended June 30, 2016.
Net loss for the six months ended June 30, 2017 was $1,895,000, an improvement of $228,000 from a $2,123,000 net loss for the
six months ended June 30, 2016. The resulting EPS decreased to ($0.09), as compared to ($0.11) for the prior year ago quarter.
Adjusted EBITDA, a non-GAAP financial measure, for the six months ended June 30, 2017 was a $706,000 income, an improvement of
$503,000 from a $203,000 Adjusted EBITDA income for the six months ended June 30, 2016.
At June 30, 2017, uSell.com had $0.6 million of cash and cash equivalents, $1.2 million of restricted cash, $9.7 million of
inventory and 20.1 million shares issued and outstanding.
Financial Results for the Second Quarter Ended June 30, 2017:
Revenue was $24.6 million for the three months ended June 30, 2017, a 5% decrease from $25.8 million for the three months ended
June 30, 2016.
During the three months ended June 30, 2017 and 2016, 87% and 60% of the Company's revenues, respectively, were originated in
the United States, 4% and 22%, respectively, were originated in Europe and 2% and 12%, respectively, were originated in Hong
Kong.
Gross profit decreased to 4.0% to $1.0 million for the three months ended June 30, 2017, compared to 7.0% for the three months
ended June 30, 2016. The margins decreased as a result of industry conditions, dictated by supply and demand.
Sales and marketing expense increased $72,000, or 17%, from $414,000 during the three months ended June 30, 2016 to $486,000
during the three months ended June 30, 2017. The increase is primarily attributable to the higher fees paid as a result of the
increased eBay sales during the three months ended June 30, 2017, compared to the three months ended June 30, 2016. With the We
Sell Cellular acquisition and the Company's newfound ability to source devices directly from the carriers, retailers, and
manufacturers, its primary sales and marketing expenses have shifted from consumer marketing to paying out sales commissions and
selling fees. Because the vast majority of uSell's sales and marketing expenses are now paid to third party selling platforms, such
as eBay and Amazon, any increases or decreases in these expenses are directly tied to sales for the period.
Operating loss for the three months ended June 30, 2017 was $802,000, an increase of $742,000 from a $60,000 operating loss for
the three months ended June 30, 2016.
Net loss for the three months ended June 30, 2017 was $1,149,000, an increase of $1,116,000 from a $33,000 net loss for the
three months ended June 30, 2016. The resulting EPS decreased to ($0.06), as compared to ($0.00) for the prior year ago
quarter.
Adjusted EBITDA, a non-GAAP financial measure, for the three months ended June 30, 2017 was a loss of $310,000, a decrease of
$882,000 from a $572,000 Adjusted EBITDA income for the three months ended June 30, 2016.
Non-GAAP Financial Measure - Adjusted EBITDA
The Company makes 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 below.
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, 2017 2016 2017 2016 Net loss $ (1,148,000 ) $ (33,000 ) $ (1,895,000 ) $ (2,123,000 ) Stock-based
compensation expense 124,000 145,000 242,000 272,000 Depreciation and amortization 367,000 487,000 723,000 999,000 Interest expense
347,000 328,000 1,636,000 685,000 Change in fair value of derivative liability - (355,000) - 370,000 Adjusted EBITDA $ (310,000 ) $
572,000 $ 706,000 $ 203,000
Management believes Adjusted EBITDA provides a meaningful representation of the Company's 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 the Company's core ongoing business. However, while management considers 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.
Non-GAAP Financial Measure - GMV
As mentioned above, the Company makes reference to "GMV," a measure of performance not calculated in accordance with GAAP. Our
management believes GMV is useful in evaluating uSell's overall volume of transactions and in evaluating the SPE's performance.
Since all SPE revenue is generated by uSell's management team and employees, our management believes it demonstrates how effective
uSell's business model is and its potential if it had additional capital. Investors should recognize that uSell will not receive
all of the profits from the SPE assuming profitability; uSell receives a minority percentage of any distributions until the
investor receives an agreed upon preference at which time the profit sharing shifts to uSell receiving a majority of the
distributions.
Conference Call Details:
Date: Friday, August 11, 2017 Time: 10:00AM ET Dial-in Number: (888) 567-1603 International Dial-in Number: (862) 255-5347
Webcast: http://www.investorcalendar.com/event/19820
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 November 15, 2017. To listen to the replay, dial (877) 481-4010
(domestic) or (919) 882-2331 (international) and use replay ID 19820. The webcast replay will be available through November 11,
2017.
About uSell.com, Inc.
uSell.com, Inc. is a large market maker of used smartphones. 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, LLC
("We Sell Cellular"). The Company maximizes the value of these devices by reclassifying them, adding value to them, and moving them
throughout the world to those who want them most. In order to serve its global and highly diverse customer base, uSell leverages
both a traditional sales force and an online marketplace where professional buyers of used smartphones can buy inventory on-demand.
Through participation on uSell's online platform and through interaction with uSell's salesforce, buyers can acquire high volumes
of inventory in a cost effective manner, while minimizing risk.
For more information, please visit www.uSell.com and http://wesellcellular.com
Forward-Looking Statements
This press release includes forward-looking statements including statements regarding our growth plans, our growing global
customer base, profitability, and the expectations from the new iPhone launch and upgrade cycle. 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, our ability to react quickly and the availability of sufficient capital when supply of smartphones
increases, the expected growth and usage of our technology platform, our ability to further or maintain our relationships with
large wholesalers, favorable reviews of new iPhone and other new releases and willingness of consumers to continue to trade-in
their phones for new phones with minor technical changes. 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, 2016. 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
June 30, December 31, 2017 2016 (unaudited) Assets Current Assets: Cash and cash equivalents $ 613,473 $ 1,657,422 Restricted cash
1,183,479 982,064 Accounts receivable, net 251,715 430,171 Inventory, net 9,652,524 8,874,099 Due from related party 390,675 -
Prepaid expenses and other current assets 145,949 130,141 Total Current Assets 12,237,815 12,073,897 Property and equipment, net
186,900 191,957 Goodwill 8,448,759 8,448,759 Intangible assets, net 3,336,380 3,724,466 Capitalized technology, net 898,128 934,193
Other assets 61,750 124,358 Total Assets $ 25,169,732 $ 25,497,630 Liabilities and Stockholders' Equity Current Liabilities:
Accounts payable $ 4,098,277 $ 4,328,422 Accrued expenses 1,420,214 916,961 Promissory note payable - 673,332 Deferred revenue
249,494 374,098 Capital lease obligations 13,847 10,664 Total Current Liabilities 5,781,832 6,303,477 Promissory note payable, net
of current portion 8,281,879 6,441,000 Capital lease obligations, net of current portion 53,394 47,986 Total Liabilities 14,117,105
12,792,463 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; 20,147,999 and 20,134,999 shares issued
and outstanding, respectively 2,014 2,013 Additional paid in capital 71,332,089 71,089,882 Accumulated deficit (60,281,476 )
(58,386,728 ) Total Stockholders' Equity 11,052,627 12,705,167 Total Liabilities and Stockholders' Equity $ 25,169,732 $ 25,497,630
uSell.com, Inc. and Subsidiaries Consolidated Statements of Operations Three Months Ended June 30, Six Months Ended June 30, 2017
2016 2017 2016 Revenue $ 24,637,472 $ 25,829,187 $ 52,268,971 $ 48,281,335 Cost of Revenue 23,645,261 24,021,565 48,548,519
45,569,316 Gross Profit 992,211 1,807,622 3,720,452 2,712,019 Operating Expenses: Sales and marketing 486,295 413,805 1,084,774
790,900 General and administrative 1,307,633 1,453,403 2,894,497 2,989,238 Total operating expenses 1,793,928 1,867,208 3,979,271
3,780,138 Loss from Operations (801,717 ) (59,586 ) (258,819 ) (1,068,119 ) Other (Expense) Income: Interest expense (346,550 )
(328,082 ) (1,635,929 ) (685,133 ) Change in fair value of placement rights derivative liability - 355,000 - (370,000 ) Total Other
(Expense) Income, Net (346,550 ) 26,918 (1,635,929 ) (1,055,133 ) Net Loss $ (1,148,267 ) $ (32,668 ) $ (1,894,748 ) $ (2,123,252 )
Basic and Diluted Loss per Common Share: Net loss per common share - basic and diluted $ (0.06 ) $ (0.00 ) $ (0.09 ) $ (0.11 )
Weighted average number of common shares outstanding during the period - basic and diluted 20,143,559 20,110,625 20,140,297
19,931,312 uSell.com, Inc. and Subsidiaries Consolidated Statements of Cash Flows Six Months Ended June 30, 2017 2016 CASH FLOWS
FROM OPERATING ACTIVITIES: Net loss $ (1,894,748 ) $ (2,123,252 ) Adjustments to reconcile net loss to net cash and cash
equivalents used in operating activities: Depreciation and amortization 723,191 998,632 Stock based compensation expense 242,208
271,930 Amortization of debt issue costs into interest expense 1,026,656 216,799 Change in fair value of placement rights
derivative liability - 370,000 Recovery of bad debt expense (1,828 ) Changes in operating assets and liabilities: Accounts
receivable 178,456 188,173 Inventory (778,425 ) (1,355,899 ) Due from related party (390,675 ) - Prepaid and other current assets
(15,808 ) 125,440 Other assets 12,608 690 Accounts payable (230,145 ) 803,660 Accrued expenses 503,253 (34,704 ) Lease termination
payable - (5,000 ) Deferred revenues (124,604 ) (389,473 ) Net Cash and Cash Equivalents Used In Operating Activities (748,033 )
(934,832 ) CASH FLOWS FROM INVESTING ACTIVITIES: Website development costs (269,977 ) (267,293 ) Restricted cash (201,415 )
(804,872 ) Cash paid to purchase property and equipment (9,320 ) (4,245 ) Security deposits - 25,875 Net Cash and Cash Equivalents
Used In Investing Activities (480,712 ) (1,050,535 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from note payable 8,572,400
2,000,000 Principal repayments of note payable (8,080,000 ) - Payment of capital lease obligations (6,095 ) - Cash paid for debt
issue costs (301,509 ) (49,551 ) Net Cash and Cash Equivalents Provided By Financing Activities 184,796 1,950,449 Net Decrease in
Cash and Cash Equivalents (1,043,949 ) (34,918 ) Cash and Cash Equivalents - Beginning of Period 1,657,422 1,047,786 Cash and Cash
Equivalents - End of Period $ 613,473 $ 1,012,868 SUPPLEMENTARY CASH FLOW INFORMATION: Cash Paid During the Period for: Interest $
500,602 $ 382,117 Taxes $ 7,177 $ - 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 Purchases of property and
equipment through capital leases $ 14,686 -
SOURCE: uSell.com, Inc.
