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Hour Loop Reports Third Quarter 2022 Results

Hour Loop, Inc.
Hour Loop, Inc.

Demonstrates Strong Execution Despite Challenging Macroeconomic Environment and Unfavorable e-Commerce Environment

Raises Full Year 2022 Revenue Guidance Range of $91 million to $100 million

REDMOND, Wash., Nov. 14, 2022 (GLOBE NEWSWIRE) -- Hour Loop, Inc. (NASDAQ: HOUR) (“Hour Loop”), a leading online retailer, announces its financial and operational results for the third quarter ended September 30, 2022.

Financial Highlights for Third Quarter 2022:

  • Total revenues increased 68.4% and 18.6% to $17.6 million, compared to $10.4 million in the year-ago period and $14.8 million for the second quarter of 2022, respectively.

  • Net income totaled $0.15 million, compared to $0.30 million in the year-ago period and net loss of $0.31 million for the second quarter of 2022.

  • Cash used in operating activities for the nine months ended September 30, 2022, was $14.5 million, compared to cash provided by operating activities $1.6 million in the year-ago period.

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Management Commentary

“We are pleased to report our strong third quarter results, in which we saw accelerated revenue growth and a return to profitability,” said Sam Lai, CEO of Hour Loop, “We take the long term view on growth, which is why we strategically front loaded our investment in the first half of the year. Our headcount grew from 67 to 191 and our inventories grew from $7 million to $21 million. This put tremendous pressure on our bottom line in a very challenging year for e-commerce. Nevertheless, we executed well and continue to position the business for long-term growth and value creation.”

Third Quarter 2022 Financial Results

Total revenues in the third quarter of 2022 were $17.6 million compared to $10.4 million in the year-ago period and $14.8 million for the second quarter of 2022, respectively. The increase was primarily due to continued growth and maturity in our operating model, despite a continuation in overall e-commerce traffic slowdown.

Gross profit percentage increased 1.58% to 54.43%, compared to 52.85% of total revenues in the comparable period a year ago but decreased from 56.46% for the second quarter of 2022. The quarter-over-quarter increase was a function of our aggressive growth initiatives and a heightened inflationary environment causing higher cost of goods sold, increased FBA fees, and strong competition.

Operating expenses increased 78.8% to $9.5 million compared to $5.3 million in the year- ago period. This was a function of increased platform fees paid to Amazon, and a significant increase in our labor force.

Net income in the third quarter was $0.15 million, or $0.005 per diluted share, compared to $0.30 million, or $0.009 per diluted share, in the comparable year-ago period. The decrease was driven by increased costs and expenses as a result of the reasons mentioned above. Nevertheless, the Company was able to quickly bounce back to profitability after net loss for consecutive two quarters.

As of September 30, 2022, the Company had $1.7 million in cash and cash equivalents, compared to $10.6 million as of December 31, 2021. This decrease was driven by the growth of inventory and labor force.

Inventories as of September 30, 2022, were $21.4 million compared to $7.0 million as of December 31, 2021. The Company intentionally invested heavily in inventories for strategic reasons.

Full Year 2022 Financial Outlook

For the full year 2022, the Company is raising its guidance for gross revenue to be in the range of $91 million to $100 million, representing 36% to 50% year-over-year growth.

About Hour Loop, Inc.
Hour Loop is an online retailer engaged in e-commerce retailing in the U.S. market. It has operated as a third-party seller on www.amazon.com and has sold merchandise on its website at www.hourloop.com since 2013. The Company expanded its operations to www.walmart.com in October 2020. To date, the Company has generated practically all of its revenue as a third-party seller on www.amazon.com and only a negligible amount of revenue from its own website and Walmart. Hour Loop manages more than 100,000 stock-keeping units (“SKUs”). Product categories include home/garden décor, toys, kitchenware, apparels, and electronics. The Company's primary strategy is to bring most of its vendors product selections to the customers. It has advanced software that assists the Company in identifying product gaps so it can keep such products in stock year-round including the entirety of the last quarter (holiday season) of the calendar year. In upcoming years, Hour Loop plans to expand its business rapidly by increasing the number of business managers, vendors and SKUs.

Forward-Looking Statements
This press release contains statements that constitute "forward-looking statements" including with respect to the Company's business strategy, product development and industry trends. Forward-looking statements are subject to numerous conditions, many of which are beyond the control of the Company. While the Company believes these forward-looking statements are reasonable, undue reliance should not be placed on any such forward-looking statements, which are based on information available to the Company on the date of this release. These forward-looking statements are based upon current estimates and assumptions and are subject to various risks and uncertainties, including, without limitation, those set forth in the Company's filings with the Securities and Exchange Commission, as the same may be updated from time to time. Thus, actual results could be materially different. The Company undertakes no obligation to update these statements whether as a result of new information, future events or otherwise, after the date of this release, except as required by law.

Investor Contact
Finance Department
finance@hourloop.com


HOUR LOOP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
As of Sep 30, 2022 (Unaudited) and December 31, 2021

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

 

(unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,704,106

 

 

$

10,592,572

 

Accounts receivable, net

 

 

263,425

 

 

 

125,991

 

Inventory, net

 

 

21,358,386

 

 

 

7,041,864

 

Prepaid expenses and other current assets

 

 

856,543

 

 

 

965,298

 

Total current assets

 

 

24,182,460

 

 

 

18,725,725

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

238,403

 

 

 

15,667

 

Deferred tax assets

 

 

312,197

 

 

 

45,488

 

Right-of-use lease assets

 

 

518,575

 

 

 

30,111

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

25,251,635

 

 

$

18,816,991

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Short-term debt

 

$

630,915

 

 

$

-

 

Accounts payable

 

 

11,013,769

 

 

 

9,539,258

 

Accrued expenses and other current liabilities

 

 

1,129,555

 

 

 

1,282,161

 

Due to related parties

 

 

4,316,211

 

 

 

5,214,794

 

Income taxes payable

 

 

126,333

 

 

 

126,333

 

Current operating lease liabilities

 

 

372,579

 

 

 

-

 

Total current liabilities

 

 

17,589,362

 

 

 

16,162,546

 

 

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

 

Long-term operating lease liabilities

 

 

151,314

 

 

 

-

 

Total liabilities

 

 

17,740,676

 

 

 

16,162,546

 

Commitments and contingencies

 

 

 

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

Preferred stock: $0.0001 par value, 10,000,000 shares authorized, none issued and outstanding as of September 30, 2022 and December 31, 2021

 

 

-

 

 

 

-

 

Common stock: $0.0001 par value, 300,000,000 shares authorized, 35,047,828 and 33,300,000 shares issued and outstanding   as of September 30, 2022 and December 31, 2021, respectively

 

 

3,505

 

 

 

3,330

 

Additional paid-in capital

 

 

5,660,321

 

 

 

4,291

 

Retained earnings

 

 

1,846,605

 

 

 

2,654,695

 

Accumulated other comprehensive income (loss)

 

 

528

 

 

 

(7,871

)

Total stockholders’ equity

 

 

7,510,959

 

 

 

2,654,445

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

25,251,635

 

 

$

18,816,991

 

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.



HOUR LOOP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
For the Periods Ended September 30, 2022 and 2021
(Unaudited)

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues, net

 

$

17,556,053

 

 

$

10,425,111

 

 

$

44,710,554

 

 

$

31,391,254

 

Cost of revenues

 

 

(7,999,769

)

 

 

(4,915,116

)

 

 

(20,340,948

)

 

 

(13,855,109

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

9,556,284

 

 

 

5,509,995

 

 

 

24,369,606

 

 

 

17,536,145

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing

 

 

7,779,145

 

 

 

4,427,774

 

 

 

19,785,872

 

 

 

13,058,566

 

General and administrative

 

 

1,740,427

 

 

 

896,993

 

 

 

5,692,033

 

 

 

2,359,500

 

Total operating expenses

 

 

9,519,572

 

 

 

5,324,767

 

 

 

25,477,905

 

 

 

15,418,066

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

 

36,712

 

 

 

185,228

 

 

 

(1,108,299

)

 

 

2,118,079

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other (expenses) income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other expense

 

 

(6,651

)

 

 

(877

)

 

 

(16,045

)

 

 

(5,501

)

Interest expense

 

 

(22,876

)

 

 

(20,005

)

 

 

(127,001

)

 

 

(30,333

)

Other income

 

 

155,983

 

 

 

106,990

 

 

 

176,676

 

 

 

161,494

 

Total other income (expenses), net

 

 

126,456

 

 

 

86,108

 

 

 

33,630

 

 

 

125,660

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

 

163,168

 

 

 

271,336

 

 

 

(1,074,669

)

 

 

2,243,739

 

Income tax (expense) benefit

 

 

(12,963

)

 

 

24,770

 

 

 

266,579

 

 

 

24,770

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

150,205

 

 

 

296,106

 

 

 

(808,090

)

 

 

2,268,509

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

12,441

 

 

 

(6,750

)

 

 

8,399

 

 

 

(6,301

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income (loss)

 

$

162,646

 

 

$

289,356

 

 

$

(799,691

)

 

 

2,262,208

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted income (loss) per common share

 

$

0.01

 

 

$

0.01

 

 

$

(0.02

)

 

 

0.07

 

Weighted-average number of common shares outstanding

 

 

33,300,058

 

 

 

33,300,000

 

 

 

34,973,580

 

 

 

33,300,000

 

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.



HOUR LOOP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2022 and 2021
(Unaudited)

 

 

Nine Months Ended
September 30,

 

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(808,090

)

 

$

2,268,509

 

Reconciliation of net (loss) income to net cash (used in) provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation expenses

 

 

39,993

 

 

 

-

 

Noncash lease expenses

 

 

212,126

 

 

 

52,668

 

Distribution to director and supervisor

 

 

76,013

 

 

 

-

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(137,434

)

 

 

68,422

 

Inventory

 

 

(14,316,522

)

 

 

(1,146,755

)

Prepaid expenses and other current assets

 

 

(734,121

)

 

 

(167,231

)

Accounts payable

 

 

1,474,511

 

 

 

1,132,211

 

Accrued expenses and other current liabilities

 

 

(152,606

)

 

 

(598,828

)

Operating lease liabilities

 

 

(179,701

)

 

 

(34,532

)

Net cash (used in) provided by operating activities

 

 

(14,525,831

)

 

 

1,574,464

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(268,342

)

 

 

-

 

Net cash used in investing activities

 

 

(268,342

)

 

 

-

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Net advances from related parties

 

 

(898,583

)

 

 

67,291

 

Capital contribution

 

 

-

 

 

 

2,800

 

Distribution to stockholders

 

 

-

 

 

 

(2,132,000

)

Issuance of shares

 

 

5,580,192

 

 

 

-

 

Prepaid expenses

 

 

576,168

 

 

 

-

 

Net change in line of credit

 

 

630,915

 

 

 

(27,012

)

Net cash provided by (used in) financing activities

 

 

5,888,692

 

 

 

(2,088,921

)

 

 

 

 

 

 

 

 

 

Effect of changes in foreign currency exchange rates

 

 

17,015

 

 

 

(134

)

 

 

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

 

(8,888,466

)

 

 

(514,591

)

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of year

 

 

10,592,572

 

 

 

4,968,064

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of year

 

$

1,704,106

 

 

$

4,453,473

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

-

 

 

$

-

 

Cash paid for income tax

 

$

-

 

 

$

-

 

Noncash investing and financing activities:

 

 

 

 

 

 

 

 

Right-of-use of assets and operating lease liabilities recognized

 

$

688,440

 

 

$

-

 

Noncash distribution to stockholders

 

$

76,013

 

 

$

-

 

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.