uSell.com (OTCQB: USEL), the leading US-based reCommerce marketplace that instantly finds cash offers for used smartphones and electronics, announced today record results for the second quarter ended June 30, 2014.
- Revenues of $1,709,250 in the second quarter of 2014, up 40% from revenues of $1,224,340 in the second quarter of 2013
- Gross margins remain above 90%
- Decreased working capital deficit from ($1,269,000) on December 31, 2013 to ($256,000) on June 30, 2014
- Improved stockholders' equity from ($666,000) on December 31, 2013 to $809,000 on June 30, 2014
- Decreased cash used in operations from ($1,222,000) for the six months ended June 30, 2013 to ($964,000) for the six months ended June 30, 2014
- Increased prices offered to sellers, leading to higher conversion rates and throughput
- Increased orders placed by 57% to 230,897 for the six months ended June 30, 2014, compared to the six months ended June 30, 2013
- Increased orders completed by 76% to 109,089 for the six months ended June 30, 2014, compared to the six months ended June 30, 2013
- Processed $5,780,877 in gross merchandise value for the second quarter 2014; a metric not previously tracked
By late March 2014, we completed a material change to our business model. Under the new model, buyers pay us a commission only when they pay the seller for a received device. We began implementing this change in early February, and phased it in over the subsequent six weeks. We believe that this model accomplishes the following:
- lowers risk for our buyers;
- provides buyers with a more competitive device acquisition cost;
- allows buyers to offer higher prices to sellers;
- increases our conversion rates and throughput;
- increases our revenues and cash flows.
The new business model and pricing is designed so that our marketplace business is only successful when our sellers and buyers are successful.
Nik Raman, Chief Operating Officer, stated, "The recent change in our business model is in line with our long term vision to create the number one reverse commerce marketplace in the world. We believe that to nurture liquidity on both sides of our marketplace, we must continue to increase the value that we provide to both buyers and sellers and will ultimately grow the total value of our marketplace."
Second Quarter 2014 Compared to Second Quarter 2013
For the second quarter of 2014, revenues reached a record $1.7 million, a 40 percent increase from $1.2 million in the second quarter of 2013. This increase in revenue is primarily due to our change in business model, which resulted in increased prices, conversion rates and throughput. A gross profit margin of 92% was realized in the second quarter, which is consistent with our past trend of 90%+ gross margins. Operating and net loss for the second quarter of 2014 was $1.3 million, an increase of $0.2 million from $1.1 million in the second quarter of 2013. Of note, the adjusted operating loss, a non GAAP financial measure, for the second quarter was $811,105, an increase of $156,090 from $655,015 in the second quarter of 2013, due to the exclusion of non cash stock-based compensation. The increase in operating loss was primarily due to an increase in marketing cost as a percentage of revenue. Advertising and marketing costs as a percentage of revenue was impacted by the transition of our business model from earning up front lead fees to earning revenue upon payment to the seller. During periods of marketing expansion, the mismatch in timing of marketing expense and revenue recognition increases marketing costs as a percent of revenue. Under the new model, revenue lags marketing expense by 5-6 weeks. The resulting EPS is ($0.22), as compared to ($0.24) a year earlier.
Year-to-Date 2014 Compared to Year-to-Date 2013
For the six months ended June 30, 2014, revenues were $2.7 million, a 20% increase from $2.3 million for the six months ended June 30, 2013. A gross profit margin of 90% was realized in the first half of 2014, which is consistent with our past trend of 90%+ gross margins. Operating loss for the six months ended June 30, 2014 was $2.59 million, a decrease of $0.16 million from $2.75 million in the six months ended June 30, 2013. Net loss for the six months ended June 30, 2014 was $4.2 million, an increase of $1.5 million from $2.7 million in the six months ended June 30, 2013. Of note, the adjusted operating loss, a non GAAP financial measure, for the first half of 2014 was $1.8 million, an increase of $0.5 million from $1.3 million in the first half of 2013, due to the exclusion of non cash stock-based compensation. The resulting EPS is ($0.75), as compared to ($0.65) a year earlier. Net loss and EPS results from the first six months of 2014 include interest expense of $0.9 million and a change in fair value of derivative liability relating to conversion feature of Series A preferred stock of $0.7 million.
The following presents a reconciliation of Adjusted Operating Loss to Operating Loss, a GAAP financial measure:
Three Months Ended June 30, 2014
- Operating Loss $ (1,306,055)
- Stock-Based Compensation $ 494,950
- Adjusted Operating Loss $ (811,105)
Three Months Ended June 30, 2013
- Operating Loss $ (1,135,942)
- Stock-Based Compensation $ 480,927
- Adjusted Operating Loss $ (655,015)
Six Months Ended June 30, 2014
- Operating Loss $ (2,589,338)
- Stock-Based Compensation $ 811,897
- Adjusted Operating Loss $ (1,777,441)
Six Months Ended June 30, 2013
- Operating Loss $ (2,747,109)
- Stock-Based Compensation $ 1,419,678
- Adjusted Operating Loss $ (1,327,431)
Balance Sheet as of June 30, 2014
As of June 30, 2014, the Company had $1.0 million in cash, compared to $0.5 million at December 31, 2013. During the first half of 2014, the Company has decreased its working capital deficit from ($1,269,000) on December 31, 2013 to ($256,000) on June 30, 2014 and improved its stockholders' equity from ($666,000) on December 31, 2013 to $809,000 on June 30, 2014.
About uSell.com, Inc.
uSell.com is a reCommerce marketplace that helps individuals turn unused items into cash. uSell ensures that customers get the highest payouts with the least amount of hassle by facilitating risk-free transactions with professional buyers. For uSell's buyers, uSell offers a scalable technology, marketing, logistics, and analytics solution that provides a high volume of inventory at a low acquisition cost. Visit www.uSell.com
Non-GAAP - Financial Measure
This press release includes both financial measures in accordance with Generally Accepted Accounting Principles, or GAAP, as well as a non-GAAP financial measure. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position or cash flows that either excludes or includes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures should be viewed as supplemental to, and should not be considered as alternatives to net income, operating income, and cash flow from operating activities, liquidity or any other financial measures. They may not be indicative of the historical operating results of uSell nor are they intended to be predictive of potential future results. Investors should not consider non-GAAP financial measures in isolation or as substitutes for performance measures calculated in accordance with GAAP.
Our management uses and relies on Adjusted Operating Loss, which is a non-GAAP financial measure. We believe that both management and shareholders benefit from referring to this non-GAAP financial measures in planning, forecasting and analyzing future periods. Our management uses this non-GAAP financial measure in evaluating its financial and operational decision making and as a means to evaluate period-to-period comparison. Our management recognizes that the non-GAAP financial measure has inherent limitations because of the excluded items described below.
uSell defines Adjusted Operating Loss as the operating loss, less stock based competition. uSell excludes the charges from stock-based because it is non-cash in nature.
Adjusted Operating Loss is an important measure of our operating performance because it allows management, investors and analysts to evaluate and assess our core operating results from period-to-period after removing the impact of items of a non-operational nature that affect comparability.
We have included a reconciliation of our non-GAAP financial measure to the most comparable financial measure calculated in accordance with GAAP. We believe that providing the non-GAAP financial measure, together with the reconciliation to GAAP, helps investors make comparisons between uSell and other companies. In making any comparisons to other companies, investors need to be aware that companies use different non-GAAP measures to evaluate their financial performance. Investors should pay close attention to the specific definition being used and to the reconciliation between such measure and the corresponding GAAP measure provided by each company under applicable SEC rules.
This press release includes forward-looking statements including statements regarding growing the value of the uSell marketplace. 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 providing consumers with a sufficient number of partners that furnish offers on our site, competition from large retail stores and wireless operators, the effectiveness of our advertising campaigns, success of the new offerings on our site, and the willingness of people to use us to help them monetize and recycle their small consumer electronic items and other new offering. Further information on our risk factors is contained in our filings with the SEC, including our Annual Report on Form 10-K. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise.