Hour Loop Reports First Quarter 2022 Results

May 16, 2022 at 4:05 PM EDT

Demonstrates Strong Execution Despite Challenging Macroeconomic Environment

Provides Full Year 2022 Revenue Guidance Range of $81 million to $90 million

REDMOND, Wash., May 16, 2022 (GLOBE NEWSWIRE) -- Hour Loop, Inc. (NASDAQ: HOUR) (“Hour Loop”), a leading online retailer, announces its financial and operational results for the first quarter ended March 31, 2022.

Financial Highlights for First Quarter 2022:

  • Total revenues increased 32.5% to $12.4 million compared to $9.3 million in the year-ago period;
  • Net loss totaled $0.65 million compared to net income of $0.86 million in the year-ago period;
  • Cash used for operating activities was $7.9 million compared to $1.2 million in the year-ago period.

Management Commentary

“We’re pleased with our first quarter 2022 performance as we reported strong financial and operational results despite the significantly impacted consumer spending environment driven by inflationary and supply chain pressures,” said Sam Lai, CEO of Hour Loop. “Against this backdrop, we further demonstrated our ability to execute on our strategy and drive growth as planned. In fact, following our initial public offering in January, we have rapidly expanded our labor force from 75 employees to over 175 employees, and delivered first quarter 2022 revenues of $12.4 million, up 32.5% compared to the year ago period.

“While we are encouraged by our progress, we are not immune to the challenging macroeconomic environment, which impacted our gross profit percentage as a result of increased operating expenses, FBA fees, and a strong competitive environment. However, despite these challenges, we are frontloading our investments for the year while projecting to show profitability and maintain double digit growth for the full year 2022. We believe our investments are necessary to grow our headcount, rapidly scale, and set a foundation for future success once these headwinds ease, and we are building on our momentum since our IPO. We look forward to continuing to execute, drive growth, and ultimately deliver increased value for our shareholders.”

First Quarter 2022 Financial Results

Total revenues in the first quarter of 2022 were $12.4 million compared to $9.3 million in the year-ago period. The increase was primarily due to continued growth and maturity in our operating model which was enhanced by a favorable e-commerce environment in the beginning of the year.

Gross profit percentage declined 3.8% to 52.3% compared to 56.1% of total revenues in the comparable period a year ago. This decrease was a function of our aggressive growth initiatives and a heightened inflationary environment causing higher cost of goods sold, FBA fees, and strong competition.

Operating expenses increased 65% to $7.2 million compared to $4.4 million in the year- ago period. This was a function of increased platform fees paid to Amazon, a significant increase in our labor force, and increased legal and professional fees due to the Company’s public listing.

Net loss in the first quarter was $0.65 million, or $0.02 per diluted share, compared to net income of $0.86 million, or $0.03 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.

As of March 31, 2022, the Company had $7.7 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 March 31, 2022, were $11.8 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 expects revenue to be in the range of $81 million to $90 million, representing 30% to 45% 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 Relations
Alex Thompson, Greg Robles
Gateway Group, Inc.
(949) 574-3860

As of March 31, 2022 (Unaudited) and December 31, 2021

  March 31,     December 31,  
  2022     2021  
Current assets              
Cash and cash equivalents $ 7,664,095     $ 10,592,572  
Accounts receivable, net   122,535       125,991  
Inventory, net   11,766,733       7,041,864  
Prepaid expenses and other current assets   827,722       965,298  
Total current assets   20,381,085       18,725,725  
Property and equipment   132,739       15,667  
Deferred tax assets   228,021       45,488  
Right-of-use lease assets   467,975       30,111  
TOTAL ASSETS $ 21,209,820     $ 18,816,991  
Current liabilities              
Accounts payable $ 7,608,341     $ 9,539,258  
Accrued expenses and other current liabilities   1,117,551       1,282,161  
Due to related parties   4,274,164       5,214,794  
Income taxes payable   126,333       126,333  
Current operating lease liabilities   257,684       -  
Total current liabilities   13,384,073       16,162,546  
Long-term operating lease liabilities   207,402       -  
Total liabilities   13,591,475       16,162,546  
Commitments and contingencies   -       -  
Stockholders’ equity              
Preferred stock: $0.0001 par value, 10,000,000 shares authorized, none issued and outstanding   -       -  
Common stock: $0.0001 par value, 300,000,000 shares authorized, 35,032,753 and 33,300,000 shares issued and outstanding   3,503       3,330  
Additional paid-in capital   5,615,322       4,291  
Retained earnings   2,009,807       2,654,695  
Accumulated other comprehensive loss   (10,287 )     (7,871 )
Total stockholders’ equity   7,618,345       2,654,445  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 21,209,820     $ 18,816,991  

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

For the Three Months Ended March 31, 2022 and 2021

  Three Months     Three Months  
  Ended     Ended  
  March 31,     March 31,  
  2022     2021  
Revenues, net $ 12,353,983     $ 9,322,913  
Cost of revenues   (5,897,269 )     (4,094,552 )
Gross profit   6,456,714       5,228,361  
Operating expenses              
Selling and marketing   5,526,102       3,827,194  
General and administrative   1,675,964       536,809  
Total operating expenses   7,202,066       4,364,003  
(Loss) income from operations   (745,352 )     864,358  
Other income (expenses)              
Other expense   (5,450 )     (870 )
Interest expense   (83,558 )     -  
Other (expense) income   6,939       2,406  
Total other income, net   (82,069 )     1,536  
(Loss) income before income taxes   (827,421 )     865,894  
Provision for income taxes   182,533       -  
Net (loss) income   (644,888 )     865,894  
Other comprehensive loss              
Foreign currency translation adjustments   (2,416 )     (1,222 )
TOTAL COMPREHENSIVE (LOSS) INCOME $ (647,304 )   $ 864,672  
Basic and diluted (loss) income per common share $ (0.02 )   $ 0.03  
Weighted-average number of common shares outstanding   35,032,753       33,300,000  

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

For the Three Months Ended March 31, 2022 and 2021

  Three Months     Three Months  
  Ended     Ended  
  March 31,     March 31,  
  2022     2021  
Cash flows from operating activities              
Net (loss) income $ (644,888 )   $ 865,894  
Reconciliation of net income to net cash provided by operating activities:              
Depreciation expenses   8,396       -  
Noncash lease expenses   57,186       17,274  
Prepaid expenses -IPO cost   (576,167 )     -  
Distribution to director and supervisor   31,012       -  
Interest expense -due to related party   83,558       -  
Changes in operating assets and liabilities:              
Accounts receivable   3,456       (94,500 )
Inventory   (4,724,869 )     (2,971,952 )
Prepaid expenses and other current assets   17,699       (86,413 )
Accounts payable   (1,930,917 )     1,688,236  
Accrued expenses and other current liabilities   (218,344 )     (575,357 )
Operating lease liabilities   (30,593 )     853  
Net cash used in operating activities   (7,924,471 )     (1,155,965 )
Cash flows from investing activities:              
Purchases of property and equipment   (125,468 )     -  
Net cash used in investing activities   (125,468 )     -  
Cash flows from financing activities:              
Net advances from related parties   (1,024,188 )     (45,877 )
Capital contribution   -       2,800  
Cash capital increase   6,156,360       -  
Net cash provided by (used in) financing activities   5,132,172       (43,077 )
Effect of changes in foreign currency exchange rates   (10,710 )     (641 )
Net change in cash and cash equivalents   (2,928,477 )     (1,199,683 )
Cash and cash equivalents at beginning of year   10,592,572       4,968,064  
Cash and cash equivalents at end of year $ 7,664,095     $ 3,768,381  
Supplemental disclosures of cash flow information:              
Cash paid for interest $ -     $ -  
Cash paid for income tax $ -     $ -  
Non-cash investing and financing activities:              
Right-of-use of assets and operating lease liabilities recognized $ 503,577     $ -  
Non-cash distribution to stockholders $ -     $ -  
Non-cash short-term debt from related parties $ -     $ -  

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Source: Hour Loop, Inc.