LXR REPORTS FINANCIAL RESULTS FOR Q1 2022

Q1 2022 LTM* Total Net Revenue of $19.7 Million.
Total and E-commerce Q1 Net Revenue Up 65% and 100%, Respectively.
E-commerce Penetration was 73% of Total Net Revenue in Q1 2022.
AOV increased 9% to $915.

MONTREAL, May 13, 2022 /CNW/ - LXRandCo, Inc. ("LXR" or the "Company") (TSX: LXR) (TSX: LXR.WT), a North American socially responsible, digital-first omni-channel retailer of authenticated pre-owned handbags and personal accessories, today reported its financial results for the first quarter ended March 31, 2022 ("Q1 2022").

For the last twelve-month period ("LTM") ending March 31, 2022, total net revenue was $19.7 million, including LTM e-commerce net revenue of $12.0 million, which represented an increase of 92% and 140%, respectively, over the same period last year. The Company's full year total net revenue target for 2022 is between $25 million and $30 million.

Provided below are the financial highlights and a discussion of our financial results for the three–months period ended March 31, 2022, which are to be read in conjunction with the Company's unaudited interim condensed consolidated financial statements and the Company's Management's Discussion and Analysis ("MD&A") for the period.

Overview of Results for the Three-Month Period Ended March 31, 2022 ("Q1 2022") as Compared to the Three-Month Period Ended March 31, 2021 ("Q1 2021")

• Total net revenue increased 65.1% to $4.3 million from $2.6 million.
• E-commerce net revenue increased 100.3% to $3.1 million and e-commerce average order value ("AOV") increased 8.5% to $915 per transaction. E-commerce net revenue as a proportion of total net revenue ("E-commerce penetration") increased to 73.3% versus 60.4%.
• Retail net revenue was $1.1 million versus $1.0 million, an increase of 11.3%. At quarter-end, we had ten stores in operation as compared to four in Q1 2021. As at March 31, 2022, all our ten stores were in operation.
• Gross margin increased to 35.3% as compared to 33.0%.
• Selling, general and administrative ("SG&A") expenses increased by 61.3% to $2.0 million, representing 46.6% of net revenue, from $1.2 million, or 47.7% of net revenue. SG&A expenses in Q1 2021 included the benefits of pandemic-related government wage subsidies. Excluding these subsidies, Q1 2022 SG&A increased 43.4% versus Q1 2021.
• Adjusted Net loss (a non-IFRS measure) was $0.8 million versus a loss of $1.0 million.
• Adjusted EBITDA (a non-IFRS measure) was a loss of $0.6 million versus a loss of $0.7 million.
• Free Cash Flow (a non-IFRS measure) was negative $0.5 million as compared to negative $1.6 million.
• Cash availability at the end of Q1 2022 was $3.7 million as compared to $3.8 million in Q4 2021.

_______________________________

* Last twelve months ending March 31, 2022.

Discussion of the Three-Month Periods Ended March 31, 2022 and 2021

Unless otherwise indicated, all amounts are expressed in Canadian dollars. Certain metrics, including those expressed on an adjusted basis, are non-IFRS measures. See "Non-IFRS Measures" further below. For a reconciliation of non-IFRS measures to their most directly comparable measure calculated in accordance with IFRS, see "Select Consolidated Financial Information" further below.

Net Revenue

For the three-month period ended March 31, 2022, total net revenue increased by 65.1% to $4.3 million from $2.6 million in Q1 2021. During this period, approximately 73.3% of our total net revenue was generated from e-commerce and 26.7% from retail activities (stores and wholesale channels combined), as compared to 60.4% and 39.6%, respectively, in Q1 2021.

During this period, approximately 66.5% of our net revenue was generated in the U.S., with the balance coming from Canada, as compared to 74.9% from the U.S. in Q1 2021. This shift in revenue mix is explained primarily by the significant increase in our Canadian e-commerce activities.

E-commerce

E-commerce net revenue during Q1 2022 was $3.1 million, an increase of 100.3% compared to the prior period. E-commerce penetration increased to 73.3% versus 60.4% in Q1 2021. AOV during the period was $915, an increase of 8.5% versus the comparable period last year.

Retail

Retail net revenue during Q1 2022 was $1.1 million, an increase of 11.3% compared to $1.0 million in Q1 2021. The increase reflects the partial recovery of our retail activities from the adverse economic impact of COVID-19 on customer foot traffic and store opening restrictions.

Our store network consisted of ten stores, of which all were open in Q1 2022, compared to ten stores as at March 31, 2021, of which four were open. During Q1 2022, we did not open or permanently close any store locations. 

Gross Profit & Gross Profit Margin

Gross profit in Q1 2022 increased 76.3% to $1.5 million as compared to $0.9 million in Q1 2021. The increase in gross profit is attributable to the increase in total net revenue, which grew 65.1%, and to a higher gross margin over this period.

Gross margin in Q1 2022, came in at 35.3% compared to 33.0% in Q1 2021, primarily due to a more profitable revenue mix made up of higher e-commerce sales which enjoy typically higher gross margin and to greater efficiencies in inventory management and product sourcing.

SG&A Expenses

In Q1 2022, SG&A expenses increased by 61.3% to $2.0 million, compared to $1.2 million in Q1 2021. This net increase of $0.8 million in expense was primarily growth-related and due to higher advertising and promotion spend which increased 68% to $0.4 million as compared to Q1 2021 and to higher wages and salaries from headcount additions, which increased by 60% to $1.0 million. During Q1 2022, our ten stores were in operation as compared to four stores in operation in Q1 2021 which, in turn, increased store related wages and salaries and licensing fees.

In Q1 2021, the Company recognized approximately $0.2 million in COVID-19 related payroll subsidies from the Federal Government's Canadian Emergency Wage Subsidy program. These subsidies, which were not available in 2022, were recorded as a reduction in the associated personnel costs which the Company incurred, and were recognized as a reduction in wages, salaries and employee benefits expenses. Excluding these subsidies, Q1 2022 SG&A increased 43.4% versus Q1 2021.

Net Loss

Despite an increase in gross profit to $1.5 million, as described above, SG&A expense increased to $2.0 million, which resulted in a reported Net Loss in Q1 2022 of $0.9 million as compared to a Net Loss of $0.9 million in Q1 2021.

Adjusted Net Loss

In Q1 2022, Adjusted Net Loss was $0.8 million as compared to an Adjusted Net Loss of $1.0 million. Adjusted Net Loss as a percent of total net revenue was 18.4% compared to 38.8% in Q1 2021. This $0.2 million improvement was primarily due to lower stock-based compensation expense and the absence of pandemic-related government wage subsidies in the period.

Adjusted EBITDA

In Q1 2022, Adjusted EBITDA improved by 21.9% to a loss of $0.6 million as compared to an Adjusted EBITDA loss of $0.7 million in Q1 2021. This improvement was primarily due to lower stock-based compensation expense and the absence of pandemic-related government wage subsidies in the period.

Free Cash Flow

In Q1 2022, we generated negative Free Cash Flow of $0.5 million as compared to negative Free Cash Flow of $1.6 million in Q1 2021. This $1.1 million improvement was primarily due to a higher relative net change in non-cash working capital of $1.0 million. Capital expenditures, as was the case in Q1 2021, were negligible.

Selected Consolidated Financial Information
The following table summarizes LXR's recent results for the periods indicated:

				For the three-month periods ended March 31, Unaudited
				2022	2021
				$	$
Net revenue				4,295,516	2,602,071
Cost of sales				2,779,805	1,742,287
Gross profit				1,515,711	859,784
Operating expenses
Selling, general and administrative expenses				2,002,452	1,241,274
Depreciation of property and equipment				68,764	72,072
Amortization of intangible assets				4,407	19,728
Results from operating activities				(559,912)	(473,290)
Other income and expenses
Finance costs				141,674	180,642
Foreign exchange loss				222,380	230,102
Net Loss				(923,966)	(884,034)

The following table provides a reconciliation of Net Loss to Adjusted Net Income or Adjusted Net Loss and Net Loss to EBITDA and Adjusted EBITDA for the periods indicated:

		For the three-month periods ended March 31,
		2022	2021
Reconciliation of Net Loss to Adjusted Net Loss		$	$
Net Loss		(923,966)	(884,034)
Adjustments to Net Loss:
Foreign exchange loss		222,380	230,102
Stock-Based Compensation Expense		(88,723)	(200,750)
Government wage subsidy program		-	(154,769)
Adjusted Net Loss		(790,309)	(1,009,451)
		For the three-month periods ended March 31,
		2022	2021
Reconciliation of net loss to Adjusted EBITDA		$	$
Net Loss		(923,966)	(884,034)
Add: Amortization and depreciation expense		73,171	(884,034)
Add: Finance costs		141,674	180,642
EBITDA		(709,121)	(611,592)
Adjustments to EBITDA:
Foreign exchange loss		222,380	230,102
Gain on disposals of property and equipment		—	—
Stock-based compensation expense		(88,723)	(200,750)
Government wage subsidy program		-	(154,769)
Adjusted EBITDA		(575,464)	(737,009)

Selected Quarterly Financial Information

The following table summarizes certain of our financial results for the most recently completed eight quarters for which financial statements have been prepared by us as a reporting issuer. This unaudited quarterly information has been prepared in accordance with IFRS. Due to the impact of COVID-19 and other factors such as seasonality, the results of operations for any quarter are not necessarily indicative of the results of operations for the full year.

($)
Consolidated statements of loss	Q1-2022	Q4-2021	Q3-2021	Q2-2021	Q1-2021	Q4-2020	Q3-2020	Q2-2020
Total net revenue	4,295,516	6,415,527	4,987,628	4,026,028	2,602,071	3,391,813	2,857,718	1,430,284
E-commerce revenue	3,149,395	3,958,670	2,506,850	2,522,682	1,572,640	1,715,804	880,373	807,954
E-commerce revenue % of total net revenue	73.3%	61.7%	50.3%	62.7%	60.4%	50.6%	30.8%	56.5%
Gross margin	35.3%	37.3%	35.2%	32.8%	33.0%	32.7%	28.2%	33.6%
Adjusted Net (Loss) Income	(790,309)	123,230	(363,117)	(912,914)	(1,009,452)	(887,070)	(746,691)	(934,116)
Adjusted EBITDA	(575,464)	298,025	(166,851)	(684,741)	(737,010)	(708,579)	(372,369)	(643,919)
Adjusted EBITDA % of total net revenue	(13.4%)	4.6%	(3.3%)	(17.0%)	(28.3%)	(20.9%)	(13.0%)	(45.0%)
Run rate metrics and growth:
Total net revenue – last 12 months revenue run-rate	19,724,699	18,031,254	15,007,540	12,877,630	10,281,886	13,777,419	24,825,779	30,282,676
E-commerce revenue – last 12 months revenue run-rate	12,137,597	10,560,842	8,317,976	6,691,499	4,976,771	4,379,723	3,839,571	3,944,486
Free Cash Flow:
Net loss	(923,966)	(492,803)	59,223	(1,580,635)	(884,034)	(2,208,618)	(2,786,350)	(1,741,391)
Add: non-cash items	(11,095)	724,391	(412,761)	889,543	(94,643)	137,960	1,135,973	24,825
Add: Net change in non-cash working capital	393,568	1,221,311	(1,821,998)	(531,266)	(628,959)	1,435,622	1,712,028	994,985
Cash flows provided/(used) in operating activities	(541,493)	1,452,899	(2,175,536)	(1,222,358)	(1,607,636)	(635,036)	61,651	(721,581)
Less: acquisition of property and equipment	(4,435)	(4,283)	(15,436)	(9,998)	(14,593)	(4,171)	0	0
Free Cash Flow	(545,928)	1,448,616	(2,190,972)	(1,232,356)	(1,622,229)	(639,207)	61,651	(721,581)
Liquidity:
Cash availability	3,662,768	3,810,767	2,640,169	4,481,560	4,775,470	7,334,425	1,213,542	2,567,913
Working capital	6,833,114	7,052,502	7,083,280	7,033,183	7,133,717	8,949,997	2,877,864	4,523,360
Capitalization:
Shares outstanding	92,783,155	92,783,155	92,783,155	92,783,155	92,783,155	92,783,155	32,783,145	32,783,145
Closing share price	0.11	0.14	0.10	0.13	0.12	0.25	0.20	0.25
Market capitalization	10,206,147	12,989,642	9,278,316	12,061,810	11,133,979	22,731,873	6,556,629	8,195,786
Add: Total debt	6,526,453	5,999,440	6,272,286	5,758,443	4,814,459	5,733,129	5,173,259	5,438,870
Less: Cash	3,570,681	3,695,677	2,603,395	4,315,918	4,653,792	7,289,957	501,033	797,777
Enterprise value (EV)	13,161,919	15,293,405	12,947,207	13,504,335	11,294,646	21,175,045	11,228,855	12,836,879
Multiple of EV/Last 12 months revenue	0.67x	0.85x	0.86x	1.05x	1.10x	1.54x	0.45x	0.42x

About LXR

LXR is a socially responsible, digital-first omni-channel retailer of authenticated pre-owned handbags and personal accessories. Since 2010, we have been providing consumers with authenticated branded luxury products from Hermès, Louis Vuitton, Gucci, Prada and Chanel, among other high-quality brands, by promoting their reuse and providing an environmentally responsible way for consumers to purchase luxury products. We achieve this through our digital-first strategy by selling directly to consumers through our website at www.lxrco.com and indirectly by powering the e-commerce and other platforms of key channel partners. Our omni-channel model is also supported by retail "shop-in-shop" experience centers and by wholesale activities with select retail partners across North America.

Non-IFRS Measures

This press release refers to certain non-IFRS measures. These measures are not recognized under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement IFRS measures by providing further understanding of LXR's performance and results of operations from management's perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of LXR's financial information reported under IFRS. Management uses non-IFRS measures including: "EBITDA," "Adjusted EBITDA," "Adjusted Net Loss", "Free Cash Flow", "LTM Total Net Revenue", "LTM E-commerce Net Revenue" and "Inventory Turns". These non-IFRS measures are used to provide investors with supplemental measures of LXR's operating performance and thus highlight trends in LXR's business that may not otherwise be apparent when relying solely on IFRS measures. Management believes that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of company performance. Management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of management compensation. For a definition of EBITDA, Adjusted EBITDA, and Adjusted Net Loss, and a reconciliation of these non-IFRS measures to IFRS measures, see the above tables presented.

Caution Regarding Forward-Looking Statements

Certain statements in this press release are prospective in nature and constitute forward-looking information or forward-looking statements within the meaning of applicable securities laws (collectively, "forward-looking statements"). Forward-looking statements generally, but not always, can be identified by the use of forward-looking terminology such as "outlook", "objective", "may", "could", "would", "will", "expect", "intend", "estimate", "forecasts", "project", "seek", "anticipate", "believes", "should", "plans" or "continue", or similar expressions suggesting future outcomes or events and the negative of any of these terms. Forward-looking statements in this news release include, but are not limited to, statements concerning future objectives and strategies to achieve those objectives, including, without limitation, store openings and closures, as well as other statements with respect to management's beliefs, plans, estimates and intentions, and similar statements concerning anticipated future events, results, outlook, circumstances, performance or expectations that are not historical facts. Forward-looking statements reflect management's current beliefs, expectations and assumptions and are based on information currently available to management, which includes assumptions about continued revenues based on historical past performance, management's historical experience, perception of trends and current business conditions, expected future developments, including the Company's capacity to secure additional financing, and other factors which management considers appropriate. With respect to the forward-looking statements included in this press release, management has made certain assumptions with respect to, among other things, the Company's ability to meet its future objectives and strategies, the Company's ability to achieve its future projects and plans and that such projects and plans will proceed as anticipated, the expected growth of the Company's e-commerce revenue, the expected number and timing of store openings, entering into new and/or expanded retail partnerships, the Company's ability to source products, the Company's competitive position in the vintage luxury industry, and beliefs and intentions regarding the ownership of material trademarks and domain names used in connection with the marketing, distribution and sale of the Company's products as well as assumptions concerning general economic and market growth rates, currency exchange and interest rates and competitive intensity, notably in the context of the current COVID-19 outbreak.

Readers are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the future circumstances, outcomes or results anticipated or implied by such forward-looking statements will occur or that plans, intentions or expectations upon which the forward-looking statements are based will occur.

All forward-looking statements included in and incorporated into this press release are qualified by these cautionary statements. Unless otherwise indicated, the forward-looking statements contained herein are made as of the date of this press release, and except as required by applicable law, the Company does not undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Readers are cautioned that the actual results achieved will vary from the information provided herein and that such variations may be material. Consequently, there are no representations by LXR that actual results achieved will be the same in whole or in part as those set out in the forward-looking statements.

SOURCE LXRandCo, Inc.

Nadine Eap, Chief Financial and Administrative Officer, LXRandCo, Inc., [phone] ext: 037, [email protected]