LXR REPORTS FINANCIAL RESULTS FOR Q2 2022

Q2 2022 LTM Total Net Revenue of $21.2 Million.
Q2 2022 Total and E-commerce Net Revenue Up 36% and 30%, Respectively.
Generated Break-even Cash Earnings¹ in Q2 2022.
AOV increased 14% to $1,128.

MONTREAL, Aug. 10, 2022 /CNW/ - LXRandCo, Inc. ("LXR" or the "Company") (TSX: LXR), 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 second quarter ended June 30, 2022 ("Q2 2022").

For the last twelve-month period ("LTM") ending June 30, 2022, total net revenue was $21.2 million, including LTM e-commerce net revenue of $12.9 million, which represented an increase of 48% and 57%, respectively, over the same period last year.

"In Q2, a generally slower quarter in the year for us, we posted a respectable growth rate of over 30% for total and e-commerce net revenue, we drove AOVs higher and we maintained our gross margins at over 35%. For the second time in the last three quarters, Cash Earnings¹ came in at a break-even or better level, with Q2 2022 Cash Earnings coming in at a break-even level as compared to a loss of $0.7 million in Q2 2021." said Cam di Prata, the Company's CEO.

"While we are cautious about the economic prospects for the second half of the year, our total net revenue guidance for 2022 remains unchanged at $25 million to $30 million and it is our current expectation that if the higher end of this revenue range is achieved, adjusted earnings will come in at the break-even to slightly positive range, thus positioning the Company for profitability next year." added Cam di Prata.

Provided below are the financial highlights and a discussion of our financial results for the three–months period ended June 30, 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 Q2 2022, compared to Q2 2021

• In Q2 2022, total net revenue increased 36.1% to $5.5 million from $4.0 million.
• E-commerce net revenue increased 29.6% to $3.3 million, and e-commerce average order value ("AOV") increased 14.1% to $1,128 per transaction. E-commerce net revenue as a proportion of total net revenue ("E-commerce penetration") was 59.6.%.
• Retail net revenue was $2.2 million versus $1.5 million, an increase of 47.2%. At quarter-end, we had nine stores in operation as compared to eight in Q2 2021.
• Gross profit margin was stable at 35.5% compared to 35.7% in Q2 2021.
• Selling, general and administrative ("SG&A") expenses increased by 6.6% to $2.7 million, representing 50.0% of total net revenue, from $2.6 million, or 63.9% of total net revenue. SG&A expenses in Q2 2021 included the benefits of pandemic-related government wage subsidies. Excluding the benefit of these subsidies, Q2 2022 SG&A increased 5.8% versus Q2 2021.
• Adjusted Net loss (a non-IFRS measure) improved to a loss of $0.7 million versus a loss of $1.1 million.
• Adjusted EBITDA (a non-IFRS measure) improved to a loss of $0.5 million versus a loss of $0.9 million.
• Free Cash Flow (a non-IFRS measure) was negative $0.7 million an improvement as compared to negative $1.2 million.
• For the second time in the last three quarters Cash Earnings¹came in at break-even or better, with Q2 2022 Cash Earnings coming in at $778 as compared to a loss of $0.7 million in Q2 2021.
• Cash availability at the end of Q2 2022 was $2.9 million as compared to $3.8 million in Q4 2021, the decline attributed primarily to increased investments in working capital and the partial repayment of debt.

_________________________

 ¹ Cash Earnings (a non IFRS measure) means Net Profit/(Loss) plus non-cash items.

Discussion of the Three-Month Periods Ended June 30, 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.

Total Net Revenue

For Q2 2022, total net revenue increased by 36.1% to $5.5 million from $4.0 million in Q2 2021. During this period, approximately 59.6% of our total net revenue was generated from e-commerce and 40.4% from retail activities (stores and wholesale channels combined), as compared to 62.7% and 37.3%, respectively, in Q2 2021.

During this period, approximately 69.2% of our net revenue was generated in the U.S., with the balance coming from Canada, as compared to 67.3% from the U.S. in Q2 2021.

E-commerce

E-commerce net revenue during Q2 2022 was $3.3 million, an increase of 29.6% compared to the prior period. E-commerce penetration decreased to 59.6% versus 62.7% in Q2 2021. AOV during the period was $1,128, an increase of 14.1% versus the comparable period last year.

Retail

Retail net revenue during Q2 2022 was $2.2 million, an increase of 47.2% compared to $1.5 million in Q2 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 nine stores, of which all were open in Q2 2022, compared to ten stores as at June 30, 2021, of which eight were open. During Q2 2022, we closed 1 store location.

Gross Profit & Gross Profit Margin

Gross profit in Q2 2022 increased 35.4% to $1.9 million as compared to $1.4 million in Q2 2021. The increase in gross profit is attributable to the increase in total net revenue, which grew 36.1%.

Gross margin in Q2 2022, remained consistent at 35.5% compared to 35.7% in Q2 2021, primarily due the ability to maintain effective inventory management and product sourcing.

SG&A Expenses

In Q2 2022, SG&A expenses increased by 6.6% to $2.7 million, compared to $2.6 million in Q2 2021. This net increase of $0.1 million in expense was primarily growth-related and due to higher wages and salaries from headcount additions, offset by lower marketing spend. During Q2 2022, nine stores were in operation as compared to eight stores in operation in Q2 2021 which, in turn, increased store related wages and salaries and licensing fees. In Q2-2022, wages and salaries included a reformed commission structure and retroactive adjustments to January 1, 2022. In Q1 2021, SG&A expenses included the benefits of pandemic-related government wage subsidies in the amount of $18,255. Excluding the benefit of these subsidies, Q2 2022 SG&A increased by 5.8% versus Q2 2021.

On June 30, 2022, we employed 61 people across our nine retail stores, and our two office locations in Montreal, Canada and Tokyo, Japan. At the end of Q2 2021, our employee headcount was 54.

Net Loss

Despite an increase in gross profit to $1.9 million, as described above, SG&A expense increased to $2.7 million offset by foreign exchange gain of 0.7 million, which resulted in a reported Net Loss in Q2 2022 of $0.4 million as compared to a Net Loss of $1.6 million in Q2 2021.

Adjusted Net Loss

In Q2 2022, Adjusted Net Loss was $0.7 million as compared to an Adjusted Net Loss of $1.1 million. Adjusted Net Loss as a percent of total net revenue was 12.7% compared to 27.0% in Q2 2021. This $0.4 million improvement was primarily due to a higher gross profit during Q2 2022 combined with a favorable foreign exchange position.

Adjusted EBITDA

In Q2 2022, Adjusted EBITDA improved by 43.3% to a loss of $0.5 million as compared to an Adjusted EBITDA loss of $0.9 million in Q2 2021. This improvement was primarily due to a higher gross profit during Q2 2022 combined with a favorable foreign exchange position.

Cash earnings and Free Cash Flow

As set forth below, for the second time in the last three quarters, Cash Earnings (or net cash generated before changes in non-cash working capital) for Q2 2022 came in at a significantly improved break-even level ($788) compared to a loss of $1,189,931 in Q2 2021. 

($000s)	Net profit / (loss)	Add: Non-cash charges	Cash Earnings (or net cash generated before changes in non-cash working capital)	Add: Changes in non-cash working capital	Less: Capital expenditures	Free cash flow
Q3-2020	(2,786)	1,136	(1,650)	1,712	-	62
Q4-2020	(2,209)	138	(2,071)	1,436	(17)	(652)
Q1-2021	(884)	(95)	(979)	(629)	(15)	(1,623)
Q2-2021	(1,581)	391	(1,190)	(32)	(10)	(1,232)
Q3-2021	59	87	146	(2,322)	(15)	(2,191)
Q4-2021	(493)	724	231	1,221	(4)	1,448
Q1-2022	(924)	(11)	(935)	394	(4)	(545)
Q2-2022	(354)	354	-	(646)	(6)	(652)

In Q2 2022, we generated negative Free Cash Flow of $0.7 million, a significant improvement as compared to negative Free Cash Flow of $1.2 million in Q2 2021. This $0.6 million improvement was primarily due to superior results from continuing operations resulting in a lower net profit or loss compared to prior period. Capital expenditures, as was the case in Q2 2021, were negligible.

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

	For the three-months ended June 30,			For the six-months ended June 30,
	2022	2021		2022	2021
Net revenue	5,481,267	4,026,028		9,776,783	6,628,099
Cost of sales	3,537,665	2,590,265		6,317,470	4,332,552
Gross profit	1,943,602	1,435,763		3,459,313	2,295,547
Operating expenses
Selling, general and administrative expenses	2,743,075	2,574,011		4,745,527	3,815,285
Depreciation of property and equipment	81,702	63,865		150,466	135,937
Amortization of intangible assets	4,407	12,142		8,814	31,870
Loss from operating activities	(885,582)	(1,214,255)		(1,445,494)	(1,687,545
Other income and expenses
Finance costs	116,745	133,596		258,419	314,238
Foreign exchange loss (gain)	(656,101)	214,214		(433,721)	444,316
Loss before income taxes	(346,226)	(1,562,065)		(1,270,192)	(2,446,099)
Income tax expense
Current	7,326	18,570		7,326	18,570
Net loss	(353,552)	(1,580,635)		(1,277,518)	(2,464,669)

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-months ended June 30,			For the six-months ended June 30,
	2022	2021		2022	2021
Reconciliation of Net Loss to Adjusted Net Loss
Net Loss	(353,552)	(1,580,635)		(1,277,518)	(2,464,669)
Adjustments to Net Loss:
Foreign exchange loss (gain)	(656,101)	214,214		(433,721)	444,316
Government wage subsidy program	—	(18,254)			(173,023)
Gain on disposal of property and equipment	—	(1,250)		—	(1,250)
Stock-based compensation expense	250,750	299,988		162,027	99,237
Information technology non-recurring expense	62,479	—		62,479	—
Adjusted Net Loss	(696,424)	(1,085,937)		(1,486,733)	(2,095,389)
	For the three-months ended June 30,			For the six-months ended June 30,
	2022	2021		2022	2021
Reconciliation of Net Loss to Adjusted EBITDA
Net Loss	(353,552)	(1,580,635)		(1,277,518)	(2,464,669)
Adjustments to Net Loss:
Amortization and depreciation expenses	86,109	76,007		159,280	167,807
Finance costs	116,745	133,596		258,419	314,238
Income Tax Expense	7,326	18,570		7,326	18,570
EBITDA	(143,372)	(1,352,462)		(852,493)	(1,964,054)
Adjustments to EBITDA:
Foreign exchange loss (gain)	(656,101)	214,214		(433,721)	444,316
Government wage subsidy program	—	(18,254)			(173,023)
Gain on disposal of property and equipment	—	(1,250)		—	(1,250)
Stock-based compensation	250,750	299,988		162,027	99,237
Information technology non-recurring expense	62,479	—		62,479	—
Adjusted EBITDA	(486,244)	(857,764)		(1,061,708)	(1,594,774)

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	Q2-2022	Q1-2022	Q4-2021	Q3-2021	Q2-2021	Q1-2021	Q4-2020	Q3-2020
Total net revenue	5,481,267	4,295,516	6,415,527	4,987,628	4,026,028	2,602,071	3,391,813	2,857,718
E-commerce revenue	3,268,570	3,149,395	3,958,670	2,506,850	2,522,682	1,572,640	1,715,804	880,373
E-commerce revenue % of total net revenue	59.6 %	73.3 %	61.7 %	50.3 %	62.7 %	60.4 %	50.6 %	30.8 %
Gross margin	35.5 %	35.3 %	37.3 %	35.2 %	35.7 %	33.0 %	32.7 %	28.2 %
Adjusted Net (Loss) Income	(696,424)	(790,309)	123,230	(190,094)	(1,085,937)	(1,009,452)	(886,788)	(746,691)
Adjusted EBITDA	(486,244)	(575,464)	298,025	6,172	(857,764)	(737,010)	(708,297)	(372,369)
Adjusted EBITDA % of total net revenue	(8.9 %)	(13.4 %)	4.6 %	0.1 %	(21.3 %)	(28.3 %)	(20.9 %)	(13.0 %)
Run rate metrics and growth:
Total net revenue – last 12 months revenue run-rate	21,179,938	19,724,699	18,031,254	15,007,540	12,877,630	10,281,886	13,777,419	24,825,779
E-commerce revenue – last 12 months revenue run-rate	12,883,485	12,137,597	10,560,842	8,317,976	6,691,499	4,976,771	4,379,723	3,839,571
Free Cash Flow:
Net loss	(353,552)	(923,966)	(492,803)	59,223	(1,580,635)	(884,034)	(2,208,618)	(2,786,350)
Add: non-cash items	354,340	(11,095)	724,391	87,287	390,704	(94,643)	137,960	1,135,973
Cash Earnings	788	(935,061)	231,588	146,510	(1,189,931)	(978,677)	(2,070,658)	(1,650,377)
Add: Net change in non-cash working capital	(646,138)	393,568	1,221,311	(2,322,046)	(32,427)	(628,959)	1,435,622	1,712,028
Cash flows provided/(used) in operating activities	(645,350)	(541,493)	1,452,899	(2,175,536)	(1,222,358)	(1,607,636)	(635,036)	61,651
Less: acquisition of property and equipment	(6,062)	(4,435)	(4,283)	(15,436)	(9,998)	(14,593)	(17,273)	-
Free Cash Flow	(651,412)	(545,928)	1,448,616	(2,190,972)	(1,232,356)	(1,622,229)	(652,309)	61,651
Liquidity:
Cash availability	2,934,437	3,662,768	3,810,767	2,640,169	4,481,560	4,775,470	7,334,425	1,213,542
Working capital	(59,214)	6,833,114	7,052,502	7,083,280	7,033,183	7,133,717	8,949,997	2,877,864
Capitalization:
Shares outstanding	91,425,499	92,783,155	92,783,155	92,783,155	92,783,155	92,783,155	92,783,155	32,783,145
Closing share price	0.11	0.11	0.14	0.10	0.13	0.12	0.25	0.20
Market capitalization	10,056,805	10,206,147	12,989,642	9,278,316	12,061,810	11,133,979	22,731,873	6,556,629
Add: Total debt	6,619,796	6,526,453	5,999,440	6,272,286	5,758,443	4,814,459	5,733,129	5,173,259
Less: Cash	2,884,427	3,570,681	3,695,677	2,603,395	4,315,918	4,653,792	7,289,957	501,033
Enterprise value (EV)	13,792,174	13,161,919	15,293,405	12,947,207	13,504,335	11,294,646	21,175,045	11,228,855
Multiple of EV/Last 12 months revenue	0.65x	0.67x	0.85x	0.86x	1.05x	1.10x	1.54x	0.45x

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]