LXR REPORTS FINANCIAL RESULTS FOR Q2 2023 AND YTD 2023

MONTREAL, Aug. 11, 2023 /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, 2023 ("Q2 2023").

"In Q2 2023, a seasonally slower quarter in the year for us, we continued to experience the effects of a weakening economy and its impact on higher AOV discretionary consumer products, which began in Q4 2022. This resulted in a 32% decline in total net revenue for the quarter relative to last year. On a year-to-date basis, LXR is running 24% behind last year's very strong first half revenue performance. Despite these headwinds, our continued focus on cost measures allowed us to increase our gross margin and generate positive Free Cash Flow of $0.3 million in Q2 2023, an improvement of $0.9 million versus last year", said Nadine Eap, Co-Chief Executive Officer and Chief Financial Officer. 

"While the second quarter resulted in net revenue decline against our strongest quarter of growth in 2022, we remain optimistic about growing our revenue to offset our Q2 shortfall, given our current B2B order backlog and momentum in our e-commerce channels. We will also continue to manage our costs to improve our profitability as we enter the second half of the year", said Laura Swan, Co-Chief Executive Officer and Chief Revenue Officer. 

This press release should be read in conjunction with the unaudited interim condensed consolidated financial statements of LXR and the accompanying notes thereto for the three-month and six-month periods ended June 30, 2023, as well as the Company's management's discussion and analysis ("MD&A") dated August 11, 2023 and its most recent AIF (all incorporated by reference herein).

Overview of Results for the Three-Month Period Ended June 30, 2023 ("Q2 2023") as Compared to the Three-Month Period Ended June 30, 2022 ("Q2 2022")

Selected financial highlights include the following:

• In Q2 2023, total net revenue decreased 32.0% to $3.7 million from $5.5 million.
• E-commerce net revenue decreased 14.4% to $2.8 million, and e-commerce average order value ("AOV") decreased 29.3% to $810 per transaction as consumers opted for lower priced merchandise. E-commerce net revenue as a proportion of total net revenue ("E-commerce penetration") was 75%.
• Retail net revenue was $0.9 million versus $2.2 million, a decrease of 57.8%. At quarter-end, we had eight stores in operation as compared to nine in Q2 2022.
• Gross profit margin increased to 36.9% compared to 35.5% in Q2 2022.
• Selling, general and administrative ("SG&A") expenses increased by 12.1% to $3.1 million, representing 82.4% of total net revenue, from $2.7 million, or 50% of total net revenue. Excluding stock-based compensation expense, SG&A decreased by 14.2%, representing 57.3% of total net revenue.
• Adjusted Net loss (a non-IFRS measure) was $1.0 million versus a loss of $0.7 million.
• Adjusted EBITDA loss (a non-IFRS measure) was $0.8 million versus a loss of $0.5 million.
• Free Cash Flow (a non-IFRS measure) was positive $0.3 million, an improvement as compared to negative $0.7 million.
• Cash Earnings (a non-IFRS measure) was negative $1.2 million compared to nil in Q2 2022.

Overview of Results for the Six-Month Period Ended June 30, 2023 ("YTD 2023"), compared to the Six-Month Period Ended June 30, 2022 ("YTD 2022")

During the first half of this year, we experienced a sales decline when compared to the relatively strong first half of the prior year. In the face of this, to the extent possible we have been managing our cost base which has led to improvements in Free Cash Flow.

Selected financial highlights include the following:

• YTD 2023 total net revenue decreased 23.8% to $7.4 million from $9.8 million.
• E-commerce net revenue decreased 13.4% to 5.6 million, and e-commerce average order value ("AOV") decreased by 19.2% to $848 per transaction. E-commerce net revenue as a proportion of total net revenue ("E-commerce penetration") was 74.7%.
• Retail net revenue was $1.9 million versus $3.4 million, a decrease of 43.8%. At quarter-end, we had eight stores in operation as compared to nine in YTD 2022.
• Gross profit margin increased to 36.4% compared to 35.4% in YTD 2022.
• Selling, general and administrative ("SG&A") expenses decreased by 5.0% to $4.5 million, representing 60.5% of total net revenue, from $4.7 million, or 48.5% of total net revenue. Excluding stock-based compensation expense, SG&A decreased by 11.1%, representing 54.7% of total net revenue.
• Adjusted Net loss (a non-IFRS measure) was $1.9 million versus a loss of $1.5 million.
• Adjusted EBITDA loss (a non-IFRS measure) was $1.4 million versus a loss of $1.1 million.
• Free Cash Flow (a non-IFRS measure) was negative $0.1 million an improvement as compared to negative $1.2 million in YTD 2022.
• Cash Earnings (a non-IFRS measure) was negative $1.9 million compared to negative $0.9 million in YTD 2022.
• Cash availability at the end of Q2 2023 was $2.1 million as compared to $2.9 million in Q4 2022, due primarily to the partial repayment of debt.

Selected Consolidated Financial Information

The following table summarizes LXR's recent results for the periods indicated:

LXR
Consolidated statements of loss and comprehensive loss
(in Canadian dollars)

	For the three-months ended June 30,			For the six-months ended June 30,
	2023	2022		2023	2022
Net revenue	3,729,896	5,481,267		7,445,063	9,776,783
Cost of sales	2,354,825	3,537,665		4,736,090	6,317,470
Gross profit	1,375,071	1,943,602		2,708,973	3,459,313
Operating expenses
Selling, general and administrative expenses	3,073,951	2,743,075		4,507,473	4,745,527
Depreciation of property and equipment	79,022	81,702		158,860	150,466
Amortization of intangible assets	1,092	4,407		3,126	8,814
Loss from operating activities	(1,778,994)	(885,582)		(1,960,486)	(1,445,494)
Other income and expenses
Finance costs	185,929	116,745		321,779	258,419
Foreign exchange loss (gain)	327,790	(656,101)		347,834	(433,721)
Loss before income taxes	(2,292,713)	(346,226)		(2,630,099)	(1,270,192)
Income tax expense
Current	17,676	7,326		17,676	7,326
Net loss	(2,310,389)	(353,552)		(2,647,775)	(1,277,518)

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,
	2023	2022		2023	2022
Reconciliation of Net Loss to Adjusted Net Loss
Net Loss	(2,310,389)	(353,552)		(2,647,775)	(1,277,518)
Adjustments to Net Loss:
Foreign exchange loss (gain)	327,790	(656,101)		347,834	(433,721)
Stock-based compensation expense	934,942	250,750		432,413	162,027
Information technology expense	—	62,479		—	62,479
Adjusted Net Loss	(1,047,657)	(696,424)		(1,867,528)	(1,486,733)
	For the three-months ended June 30,			For the six-months ended June 30,
	2023	2022		2023	2022
Reconciliation of Net Loss to Adjusted EBITDA
Net Loss	(2,310,389)	(353,552)		(2,647,775)	(1,277,518)
Adjustments to Net Loss:
Amortization and depreciation expenses	80,114	86,109		161,986	159,280
Finance costs	185,929	116,745		321,779	258,419
Income Tax Expense	17,676	7,326		17,676	7,326
EBITDA	(2,026,670)	(143,372)		(2,146,334)	(852,493)
Adjustments to EBITDA:
Foreign exchange loss (gain)	327,790	(656,101)		347,834	(433,721)
Stock-based compensation	934,942	250,750		432,413	162,027
Information technology expense	—	62,479		—	62,479
Adjusted EBITDA	(763,938)	(486,244)		(1,366,087)	(1,061,708)

The following tables provide a reconciliation of Net Profit or Loss to Cash Earnings and Free Cash Flow for the periods indicated:

	For the three-months ended June 30,
($)	2023	2022	Increase (decrease)
Net loss from continuing operations	(2,310,389)	(353,552)	(1,956,837)
Non-cash items:
Depreciation of property and equipment	79,022	81,702	(2,680)
Amortization of intangible assets	1,092	4,407	(3,315)
Amortization of deferred financing costs	31,344	7,126	24,218
Stock-based compensation expense	934,942	250,750	684,192
Unrealized foreign exchange loss	96,792	10,355	86,437
	1,143,192	354,340	788,852
Cash Earnings	(1,167,197)	788	(1,167,985)
Net change in non-cash working capital balances	1,426,919	(646,138)	2,073,057
Cash flows generated (used) in operating activities	259,722	(645,350)	905,072
Less: Acquisitions of property and equipment	—	(6,062)	6,062
Free cash flow	259,722	(651,412)	911,134

	For the six-months ended June 30,
($)	2023	2022	Increase (decrease)
Net loss from continuing operations	(2,647,775)	(1,277,518)	(1,370,257)
Non-cash items:
Depreciation of property and equipment	158,860	150,466	8,394
Amortization of intangible assets	3,126	8,814	(5,688)
Amortization of deferred financing costs	38,389	14,171	24,218
Stock-based compensation expense	432,413	162,027	270,386
Unrealized foreign exchange loss	84,170	7,767	76,403
	716,958	343,245	373,713
Cash Earnings	(1,930,817)	(934,273)	(996,544)
Net change in non-cash working capital balances	1,836,217	(252,570)	2,088,787
Cash flows used in operating activities	(94,600)	(1,186,843)	1,092,243
Less: Acquisitions of property and equipment	(972)	(10,497)	9,525
Free cash flow	(95,572)	(1,197,340)	1,101,768

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	Q2-2023	Q1-2023	Q4-2022	Q3-2022	Q2-2022	Q1-2022	Q4-2021	Q3-2021
Total net revenue	3,729,896	3,715,167	5,223,973	5,006,612	5,481,267	4,295,516	6,415,527	4,987,628
E-commerce revenue	2,796,830	2,761,264	3,028,134	2,669,366	3,268,570	3,149,395	3,958,670	2,506,850
E-commerce revenue % of total net revenue	75.0 %	74.3 %	58.0 %	53.9 %	59.6 %	73.3 %	61.7 %	50.3 %
Gross margin	36.9 %	35.9 %	44.0 %	37.5 %	35.5 %	35.3 %	40.0 %	38.4 %
Adjusted Net (Loss) Income	(1,047,657)	(819,871)	(317,620)	(562,799)	(696,424)	(790,309)	123,230	(367,455)
Adjusted EBITDA	(763,938)	(602,149)	(50,159)	(317,434)	(486,244)	(575,464)	298,025	(171,149)
Adjusted EBITDA % of total net revenue	(20.5 %)	(16.2 %)	(1.0 %)	(6.3 %)	(8.9 %)	(13.4 %)	4.6 %	(3.4 %)
Run rate metrics and growth:
Total net revenue – last 12 months revenue run-rate	17,675,648	19,427,019	20,007,368	21,198,922	21,179,938	19,724,699	18,031,254	15,007,540
E-commerce revenue – last 12 months revenue run-rate	11,285,594	11,757,334	12,145,465	13,076,001	12,883,485	12,137,597	10,560,842	8,317,976
Free Cash Flow:
Net loss	(2,310,389)	(337,386)	(739,531)	370,210	(353,552)	(923,966)	(492,803)	59,223
Add: non-cash items	1,143,192	(426,234)	228,056	346,803	354,340	(11,095)	724,391	87,287
Cash Earnings	(1,167,197)	(763,620)	(511,475)	717,013	788	(935,061)	231,588	146,510
Add: Net change in non-cash working capital	1,426,919	409,298	500,609	470,826	(646,138)	393,568	1,221,311	(2,322,046)
Cash flows provided/(used) in operating activities	259,722	(354,322)	(10,866)	1,187,839	(645,350)	(541,493)	1,452,899	(2,175,536)
Less: acquisition of property and equipment	-	(972)	(2,150)	(4,050)	(6,062)	(4,435)	(4,283)	(15,436)
Free Cash Flow	259,722	(355,294)	(13,016)	1,183,789	(651,412)	(545,928)	1,448,616	(2,190,972)
Liquidity:
Cash availability	2,074,391	3,001,298	2,868,350	2,231,325	2,934,437	3,662,768	3,810,767	2,640,169
Working capital	1,526,092	(805,319)	(949,149)	(551,302)	(59,214)	6,833,114	7,052,502	7,083,280
Capitalization:
Shares outstanding	91,425,499	91,425,499	91,425,499	91,425,499	91,425,499	92,783,155	92,783,155	92,783,155
Closing share price	0.10	0.07	0.105	0.11	0.11	0.11	0.14	0.10
Market capitalization	9,142,550	6,399,785	9,599,677	10,056,805	10,056,805	10,206,147	12,989,642	9,278,316
Add: Total debt	4,698,114	5,973,393	5,252,143	4,645,115	6,619,796	6,526,453	5,999,440	6,272,286
Less: Cash	1,869,187	2,909,786	2,586,237	2,007,396	2,884,427	3,570,681	3,695,677	2,603,395
Enterprise value (EV)	11,971,477	9,463,392	12,265,583	12,694,524	13,792,174	13,161,919	15,293,405	12,947,207
Multiple of EV/Last 12 months revenue	0.68x	0.49x	0.61x	0.60x	0.65x	0.67x	0.85x	0.86x

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", "Cash Earnings", "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 core 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 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, Cash Earnings, Free Cash Flow, 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 include, but are not limited to, statements concerning the financial results and condition of the Company, expectations regarding market trends, overall market growth rates and the Company's growth rates, future objectives and strategies to achieve those objectives, including, without limitation, e-commerce growth and penetration, the state of wholesale demand, new store openings, store productivity, margin improvements, and future acquisitions, 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 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", "continue" or similar expressions suggesting future outcomes or events and the negative of any of these terms.

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 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 renew successfully the line of credit and the long-term debt facilities, 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 or closings in North America, entering into new or expanded retail partnerships in North America, the ability of the Company to continue to expand its wholesale activities, the Company's ability to source products, the Company's competitive position in the pre-owned 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 activity and market growth rates, currency exchange and interest rates and competitive intensity.

Given the recent rise in global interest rates and inflationary expectations, our results in the future may be materially affected by the overall state of economic growth, customer demand and spending (including the impact of recessionary fears), the level of inflation, interest rates, regional labor market and global supply chain constraints, world events, the rate of growth of online commerce, and cloud services, and various other related factors.

Generally, and especially given this unprecedented period of uncertainty brought about by the geo-political events or acts of terrorism (such as the military conflict between Russia and Ukraine and the political tensions arising from such conflict between Russia, the United States and countries in Europe and elsewhere), 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. By their nature, forward-looking statements involve known and unknown risks and uncertainties and other factors that could cause actual results to differ materially from those contemplated by such statements. Factors that could cause such differences include, but are not limited to, those factors described under the headings "Risk Factors" and "Management's Discussion and Analysis of LXR – Risk Factors" in LXR's annual information form (the "Annual Information Form"), and as described from time to time in the reports and disclosure documents filed by the Company with the Canadian securities regulatory agencies and commissions. Such list of risk factors is not exhaustive of the factors that may impact the forward-looking statements. These and other factors should be considered carefully, and readers should not place undue reliance on any of the forward-looking statements in this press release. As a result of the foregoing and other factors, there can be no assurance that actual results will be consistent with these forward-looking statements.

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.

SOURCE LXRandCo, Inc.

LXRandCo, Inc., Ms. Nadine Eap, Co-CEO and Chief Financial Officer, [phone] ext: 037, [email protected]