LXRandCO Reports Financial Results for the First Quarter 2021 - Adjusted Total and E-Commerce Revenue Up 20% and 72%, Respectively

MONTREAL, May 13, 2021 /CNW/ - LXRandCo, Inc. ("LXRandCo" or the "Company") (TSX: LXR) (TSX: LXR.WT), a North American socially responsible, digital-first omni-channel retailer of authenticated pre-owned luxury handbags and personal accessories, today reported its financial results for the first quarter ended March 31, 2021 ("Q1 2021").

"For the first time since the start of the pandemic, we posted a quarter-over-quarter revenue increase in adjusted total revenue, signalling a potential "bottoming" in our revenue declines. In Q1 2021, typically our slowest quarter of the year, we increased our adjusted total revenue by 20% over prior year without compromising on gross margin, which came in slightly higher at 31.5%. Importantly, we also grew our e-commerce revenue and average order value by 72% and 2%, respectively. While the effects of the pandemic are still present, we continue to re-build and grow our revenue across our distribution channels, especially in e-commerce." said Cam di Prata, the Company's interim CEO.

"The second quarter of 2021 is off to a promising start with April month (a typically quiet month) posting record e-commerce net revenue exceeding that of our seasonally high month of December 2020. We remain optimistic about the second half prospects for 2021. In addition to strong e-commerce momentum, we are seeing an increase in wholesale order backlog." added Cam di Prata.

Provided below are the financial highlights and a discussion of the Company's financial results for the three–months ended March 31, 2021, which are to be read in conjunction with the Company's unaudited interim condensed consolidated financial statements and Management's Discussion and Analysis ("MD&A") for the period.

Overview of Results for the Three-Month Period Ended March 31, 2021 ("Q1 2021"), compared to the Three-Month Period Ended March 31, 2020 ("Q1 2020")

• Total net revenue decreased 57.3% to $2.6 million from $6.1 million. Adjusted net revenue, which excludes U.S. Partner Bankruptcies¹, increased 20.1% from $2.2 million.
  
  
• E-commerce net revenue increased 61.2% to $1.6 million, and e-commerce average order value increased 2% to $843 per transaction. E-commerce net revenue as a proportion of total net revenue increased to 60.4% versus 16.0%.
  
  
• Adjusted e-commerce net revenue, which excludes U.S. Partner Bankruptcies, increased 71.6%.
  
  
• Retail net revenue was $1.0 million versus $5.1 million, a decrease of 79.9%. At quarter-end, we had a network of ten stores (of which four were in operation), a reduction of 61 stores versus Q1 2020.
  
  
• Gross profit margin was 31.5% compared to 31.4%.
  
  
• Selling, general and administrative ("SG&A") expenses decreased by 69.6% to $1.2 million, representing 46.2% of net revenue, from $3.9 million, or 64.7% of net revenue.
  
  
• Adjusted Net loss (a non-IFRS measure) was $0.9 million versus a loss of $2.0 million.
  
  
• Adjusted EBITDA (a non-IFRS measure) was a loss of $0.6 million versus a loss of $1.6 million.
  
  
• Free Cash Flow (a non-IFRS measure) was negative $1.6 million as compared to negative $0.2 million, reflecting primarily an increased investment by the company in inventory and receivables.
  
  
• Cash availability at the end of Q1 2021 was $4.7 million as compared to $1.4 million.

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¹ Revenue from U.S Partner Bankruptcies means net revenue pertaining to Stage Stores, Lord & Taylor, Stein Mart Stores and Century 21, all LXR partners that filed for bankruptcy during 2020 due to COVID-19.

Discussion of the Three-Month Periods Ended March 31, 2021 and 2020

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

Due to the adverse impact of COVID-19, which affected our retail store and wholesale channel activities, our total net revenue mix changed materially in 2020 and remains so as at the present date.

For the three-month period ended March 31, 2021, total net revenue decreased by 57.3% to $2.6 million from $6.1 million in Q1 2020. During this period, approximately 60.4% of our total net revenue was generated from e-commerce and 39.6% from retail activities (stores and wholesale channels combined), as compared to 16.0% and 84.0%, respectively, in Q1 2020. During this period, approximately 74.9% of our net revenue was generated in the U.S., with the balance coming from Canada, as compared to 86.7% from the U.S. in Q1 2020. This shift in revenue mix was due to the geographic impact of the U.S. Partner Bankruptcies, which reduced our U.S. business substantially in Q1 2021, and the growth in e-commerce revenue as compared to Q1 2020.

Included in total net revenue for Q1 2020 is non-recurring net revenue from retail partners affected by the U.S. Partner Bankruptcies of $3.9. million. Excluding the impact of U.S. Partner Bankruptcies, total net revenue in Q1 2021 increased by 20.1% versus Q1 2020.

E-commerce

E-commerce net revenue as a percentage of total net revenue increased to 60.4% versus 16.0% in Q1 2020. E-commerce net revenue during Q1 2021 was $1.6 million, an increase of 61.2% compared to prior period. Included in e-commerce net revenue for Q1 2020 is non-recurring net revenue from retail partners affected by the U.S. Partner Bankruptcies of $0.1 million. Excluding the impact of the U.S. Partner Bankruptcies, e-commerce net revenue in Q1 2021 increased by 71.6% versus Q1 2020.

E-commerce AOV was $843, an increase of 2.0% versus the comparable period last year. 

The following table provides an overview of historical e-commerce revenue on a quarterly and LTM basis. As indicated below, our LTM compound annual growth rate ("CAGR") in e-commerce revenue over the last nine quarters was 47.3%.

E-commerce LTM net revenue history

	E-commerce Revenue
($)	Quarterly	LTM
Q1 2019	604,023	2,294,094
Q2 2019	959,525	2,654,334
Q3 2019	985,288	3,057,856
Q4 2019	1,175,652	3,724,488
Q1 2020	975,592	4,096,057
Q2 2020	802,658	3,939,190
Q3 2020	885,669	3,839,571
Q4 2020	1,715,804	4,379,723
Q1 2021	1,572,640	4,976,771
CAGR		47.3%

Retail

For the three-month period ended March 31, 2021, retail net revenue (which includes net revenue from stores and wholesale channels) decreased 79.9% to $1.0 million as compared to $5.1 million in Q1 2020. The decrease reflects the continued adverse economic impact of COVID-19 on our and our channel partner's retail activities, as well as permanent store closures relating to the U.S. Partner Bankruptcies. As at March 31, 2021, our retail store network consisted of ten stores, of which only four were open as compared to 71 stores open as at March 31, 2020. During Q1 2021, we did not open or close any stores (Q1 2020 – nine closures).

Discontinued Net Revenue from U.S. Partner Bankruptcies

In Q1 2021, we generated no revenue from partners affected by the U.S. Partner Bankruptcies (2020—$3.9 million total net revenue and $0.1 million e-commerce net revenue, respectively). As these partners have permanently ceased their operations, we are actively working to replace this lost revenue through a combination of increased e-commerce activity and the addition of other retail channel partners.

To facilitate greater comparability, the financial table "Revenue by Channel (Excluding Impact of the U.S. Partner Bankruptcies)" provided below sets forth the net revenue by channel excluding the impact of U.S. Partner Bankruptcies.

Revenue by Channel (Excluding Impact of U.S. Partner Bankruptcies)

		For the three-months ended March 31
($)		2021	2020	Increase/ (Decrease)
Total net revenue		2,602,071	6,097,604	(57.3%)
Less: Revenue from U.S. Bankrupt Partners		—	3,931,359	n/a
Adjusted Total net revenue		2,602,071	2,166,245	20.1%
E-commerce net revenue		1,572,640	975,592	61.2%
Less: Revenue from U.S. Bankrupt Partners		—	58,905	n/a
Adjusted e-commerce net revenue		1,572,640	916,687	71.6%

Gross Profit and Gross Margin

Gross profit in Q1 2021 decreased by 57.2% to $0.8 million as compared to $1.9 million in Q1 2020. The decrease in gross profit is attributable to the decline in total net revenue discussed above, which decreased by 57.3%.

Gross profit margin in Q1 2021, however, was 31.5% compared to 31.4% in Q1 2020. Despite cost pressures brought about from the pandemic on our operations and the increasingly competitive supply environment, our gross profit margin remained stable with the level achieved in prior quarter.

SG&A Expenses

Given the significant loss in net revenue from the pandemic, we have been proactive in reducing SG&A costs and in restructuring operations. In Q1 2021, SG&A expenses decreased by 69.6% to $1.2 million, compared to $3.9 million in Q1 2020. This decrease was primarily due to a materially reduced retail store network and the partial furloughing of store employees, all as a result of the COVID-19 pandemic. On March 31, 2021, we employed 51 people across our ten retail stores, and our two office locations in Montreal, Canada and Tokyo, Japan. At the end of Q1 2020, our employee headcount was 152 (or 256 people if retail partner employees under our direct supervision (and on our payroll) are included). This decrease in headcount is mainly the result of a streamlined retail salesforce resulting from store closures, U.S Partner Bankruptcies and other terminations.

Net Loss

In Q1 2021, despite a 57.3% decline in net revenue, net loss improved to $0.9 million from a reported net loss of $1.0 million in Q1 2020. This was primarily due to the decrease in SG&A costs discussed above and a decrease in amortization and depreciation expense in the period as compared to Q1 2020.

Adjusted Net Loss

In Q1 2021, Adjusted Net Loss improved to $0.9 million as compared to an Adjusted Net Loss of $2.0 million in Q1 2020. This improvement was primarily due to adjustments pertaining to foreign exchange and stock-based compensation. The financial table on page 7 sets forth the reconciliation of Net Loss to Adjusted Net Loss.

Adjusted EBITDA

In Q1 2021, Adjusted EBITDA improved to a loss of $0.6 million as compared to an Adjusted EBITDA loss of $1.6 million in Q1 2020. This increase was primarily attributable to lower amortization and depreciation expense and adjustments pertaining to foreign exchange and stock-based compensation. The financial table on page 7 sets forth the reconciliation of Net Loss to Adjusted EBITDA.

Free Cash Flow

In Q1 2021, Free Cash Flow was negative $1.6 million as compared to a deficit of $0.2 million in Q1 2020. The negative variance of $1.5 million resulted from a reduction in non-cash charges of $0.7 million due to lower stock-based compensation ($0.6 million) and lower depreciation and amortization expenses ($0.1 million), and an increase in non-cash working capital of $0.8 million due primarily to increased inventory purchases and increased receivables over the period. The table below sets forth the computation of Free Cash Flow.

	For the three-months ended March 31
($)	2021	2020	Increase (decrease)
Net loss from continuing operations	(884,034)	(974,146)	90,112
Non-cash items:
Depreciation and amortization expenses	98,846	220,676	(121,830)
Stock-based compensation expense	(200,750)	440,382	(641,132)
Unrealized foreign exchange loss/(gain)	7,261	(18,892)	26,153
	(94,643)	642,166	(736,809)
	(978,677)	(331,980)	(646,697)
Net change in non-cash working capital balances	(628,959)	177,852	(806,811)
Cash flows used in operating activities	(1,607,636)	(154,128)	(1,453,508)
Less: Acquisitions of property and equipment	(14,593)	(1,337)	(13,256)
Free cash flow	(1,622,229)	(155,465)	(1,466,764)

Consolidated Financial Statements and Management's Discussion and Analysis

The Company's unaudited interim condensed consolidated financial statements for the three-months ended March 31, 2021, and MD&A thereon are available on the Company's web site at http://investors.lxrco.com/financials-reports-information and under the Company's profile on SEDAR at www.sedar.com.

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

LXRandCo, Inc. Consolidated statements of loss and comprehensive loss (in Canadian dollars)
				For the three-months ended March 31
				2021	2020
Net revenue				2,602,071	6,097,604
Cost of sales				1,782,053	4,181,254
Gross profit				820,018	1,916,350
Operating expenses
Selling, general and administrative expenses				1,201,508	3,947,192
Amortization and depreciation expenses				91,800	220,676
Loss from operating activities				(473,290)	(2,251,518)
Other income and expenses
Finance costs				180,642	167,057
Foreign exchange loss (gain)				230,102	(1,444,429)
Loss on investment in preferred shares				—	—
Loss before income taxes				(884,034)	(974,146)
Income tax expense (recovery)
Current				—	—
				—	—
Net loss				(884,034)	(974,146)

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

		For the three-months ended March 31
		2021	2020
Reconciliation of Net Loss to Adjusted Net Loss
Net Loss		(884,034)	(974,146)
Adjustments to Net Income:
Foreign exchange loss (gain)		230,102	(1,444,429)
Stock-based compensation		(200,751)	440,382
Store closing costs		—	10,485
Adjusted Net Loss		(854,683)	(1,967,708)
		For the three-months ended March 31
		2021	2020
Reconciliation of Net Loss to Adjusted EBITDA
Net Loss		(884,034)	(974,146)
Add: Amortization and depreciation expenses		91,800	220,676
Add: Finance costs		180,642	167,057
EBITDA		(611,592)	(586,413)
Adjustments to EBITDA:
Foreign exchange loss (gain)		230,102	(1,444,429)
Stock-based compensation		(200,751)	400,382
Store closing costs		—	10,485
Adjusted EBITDA		(582,241)	(1,579,975)

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 our recent change in strategy, 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:	Q1-2021				Q4-2020	Q3-2020	Q2-2020	Q1-2020		Q4-2019	Q3-2019	Q2-2019
Total net revenue	2,602,071				3,391,813	2,857,718	1,430,284	6,097,604		14,440,173	8,314,615	8,558,435
E-commerce revenue	1,572,640				1,715,804	885,669	802,658	975,592		1,175,652	985,288	959,525
E-commerce revenue % of total net revenue	60.4%				50.60%	31.00%	56.10%	16.00%		8.10%	11.90%	11.20%
Gross margin	31.5%				32.7%	28.2%	33.6%	31.4%		32.8%	31.4%	33.4%
Adjusted Net Loss	(854,683)				(886,691)	(1,156,584)	(934,116)	(1,967,708)		(522,182)	(1,790,769)	(1,596,709)
Adjusted EBITDA	(582,241)				(708,200)	(782,262)	(643,919)	(1,579,975)		(73,941)	(1,404,384)	(1,186,171)
Adjusted EBITDA % of total net revenue	(22.4%)				(20.9%)	(27.4%)	(45.0%)	(25.9%)		(0.5%)	(16.9%)	(13.9%)
LTM metrics and growth:
LTM Total net revenue	10,281,886				13,777,419	24,825,779	30,282,676	37,410,827		40,069,286	36,493,740	38,254,627
LTM E-commerce revenue	4,976,771				4,379,723	3,839,571	3,939,190	4,096,057		3,724,488	3,057,856	2,654,334
E-commerce revenue – period over period growth	61.2%				45.9%	-10.1%	-16.3%	61.5%		131.0%	69.4%	60.1%
Free Cash Flow:
Net loss	(884,034)				(2,208,618)	(2,786,350)	(1,741,391)	(974,146)		(1,685,777)	(2,310,790)	(2,178,657)
Add: non-cash items	(94,643)				97,883	1,135,973	24,825	642,166		976,914	1,092,204	398,334
Add: Net change in non-cash working capital	(628,959)				1,475,699	1,712,028	994,985	177,852		1,525,191	(1,527,515)	(557,302)
Cash flows provided/(used) in operating activities	(1,607,636)				(635,036)	61,651	(721,581)	(154,128)		816,328	(2,746,101)	(2,337,625)
Less: acquisition of property and equipment	(14,593)				(4,171)	—	—	(1,337)		(6,770)	2,204	(3,085)
Free Cash Flow	(1,622,229)				(639,207)	61,651	(721,581)	(155,465)		809,558	(2,743,897)	(2,340,710)
Liquidity:
Cash availability	4,653,792				7,289,957	501,033	797,777	1,393,351		3,498,824	2,004,827	3,528,437
Working capital	7,133,717				8,949,997	2,877,864	4,523,360	-584,103		1,332,673	9,125,764	9,373,667
Capitalization:
Shares outstanding	92,783,155				92,783,155	32,783,145	32,783,145	28,176,012		28,176,012	28,176,012	28,176,012
Closing share price	0.120				0.245	0.200	0.250	0.280		0.205	0.220	0.285
Market capitalization	11,133,979				22,731,873	6,556,629	8,195,786	7,889,283		5,776,082	6,198,723	8,030,163
Add: Total debt*	4,814,459				5,733,129	5,173,259	5,438,870	6,009,844		8,044,331	7,078,735	5,860,611
Less: Cash	4,653,792				7,289,957	501,033	797,777	1,393,351		3,498,824	2,004,827	3,528,437
Enterprise value (EV)	11,404,730				21,175,045	11,228,855	12,836,879	12,505,776		10,321,589	11,272,631	10,362,337
Multiple of EV/Last 12 months revenue	1.10x				1.54x	0.45x	0.42x	0.33x		0.26x	0.31x	0.27x
* Total debt includes the Line of Credit and the BCAP loan

About LXRandCo

LXRandCo is a socially responsible, digital-first omni-channel retailer of authenticated pre-owned luxury handbags and personal accessories. We provide consumers with branded 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 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 LXRandCo'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 LXRandCo's financial information reported under IFRS. Management uses non-IFRS measures including: "LTM", "EBITDA," "Adjusted EBITDA," and "Adjusted Net Loss". These non-IFRS measures are used to provide investors with supplemental measures of LXRandCo's operating performance and thus highlight trends in LXRandCo'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 LXRandCo 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 Officer, LXRandCo. Inc., [phone] ext: 037, [email protected]