Nova LifeStyle, Inc. (NASDAQ:NVFY), a U.S. based
fast-growing, innovative designer, manufacturer and distributor of
modern LifeStyle furniture, today announced financial results for
the second quarter ended June 30, 2016.
Second Quarter 2016 Financial
Highlights:
- Second quarter Net Sales were $24.0 million, a decrease of
17.9% compared to $29.2 million in the prior year
period.
- The year over year decline was the result of a 32% decrease in
volume offset by a 22% increase in average selling prices as the
Company intensified its focus on shifting its sales mix to premium
products.
- Second quarter Gross Margin was 13%, compared to 18% in the
prior year period, largely as a result of price increases from the
Company’s suppliers.
- Gross Profit decreased 40.3% to $3.1 million for the three
months ended June 30, 2016 compared to $5.2 million in the prior
year quarter as the increase in average sales prices was not enough
to offset lower sales volume and increased supplier costs.
- Operating expenses in the second quarter of 2016 were $3.6
million, compared to $3.4 million in the second quarter of
2015. As a percentage of sales, operating expenses in the
second quarter of 2016 were 15.0% of sales versus 11.7% a year
ago. On a dollar basis, the year over year increase was due
primarily to a $0.2 million increase in general and administrative
expense.
- Net loss was $0.7 million, or $0.03 per diluted share based on
24.9 million shares outstanding in the second quarter of 2016,
compared to a net loss of $0.1 million or $0.01 per diluted share
based on 22.0 million shares outstanding in the prior year
period.
Management CommentaryJeffrey
Wong, Chief Executive Officer of Nova LifeStyle, stated, "We are
disappointed that second quarter results were not as strong as
hoped for but we are optimistic that we will return to the top line
growth trajectory seen in prior periods. In the quarter, our
Chinese franchise retail sales were not immune to broader weakness
seen throughout our industry. In response, we are taking
aggressive actions to stimulate growth, with focused efforts on
selling to property developers as well as hotels and
apartments. Both of these channels offer opportunities for
larger orders by allowing the Company to sell a complete set of
furnishings and, in many cases, a complete furnishing set may be
ordered for multiple dwelling units.”
Mr. Wong continued, “We are also focused on
expanding our internet channel sales by continuing to add to our
product catalogue. Internet sales provide multiple benefits
for the Company, including broad customer reach along with sales
and marketing scalability. Younger shoppers are particularly
enthusiastic about using online channels either as part of their
furniture buying process or as their total shopping solution.
On the internet we can offer customers the ability to purchase
single furniture pieces or complete furnishing sets. For busy
professionals, the ability to buy a complete furnishings package
online is especially appealing.”
Ms. Tawny Lam, President of Nova LifeStyle,
stated, “We recently attended the Summer 2016 Las Vegas Market
event which is always a highlight of the year. At the event
this year we expanded our marketing efforts by adding a second
showcase, allowing us to feature even more of our latest
products. This summer we have debuted over 60 new items as we
continue to focus on keeping our product catalogue fresh and
diverse. At Las Vegas Market, the Company featured
coordinated design galleries with Contemporary,
Urban Vintage, Motion and
Retro lines, along with in-stock, quick-ship
availability allowing customers maximum ordering convenience.
We enjoyed a very positive response from customers at Las Vegas
Market, with very strong ordering rates and we have also seen that
momentum continue with follow-on orders since we have returned from
the event. I am very excited about the remainder of 2016 for
Nova LifeStyle, especially as we begin to prepare for the 2016
holiday season.”
Operational Overview
Product CategoryNova LifeStyle’s largest selling
product categories in the three months ended June 30, 2016 and 2015
continued to be sofas, cabinets and dining tables, which accounted
for approximately 52%, 13% and 12% of sales, versus 31%, 15% and
16% of sales in the prior year period.
The Company recently introduced over 60 new
products in every product category, many of which were featured at
the recent Las Vegas Market show (www.lasvegasmarket.com).
Examples include:
- New Urban Vintage products, a collection of living room,
bedroom, dining and bistro furniture with a cohesive industrial
vintage aesthetic. These products were developed with
painstaking attention to detail to ensure an authentic vintage
inspired look and feel combining the warmth of weathered pine with
the rugged stability of distressed iron alongside tasteful fabric
selections.
- The Company’s Diamond Sofa brand is making a strong entry into
the recliner space with two brand new models, Duncan and Mason.
Each is available in sofa, loveseat and chair configurations, and
both are available with either power or manual recline to offer
flexible choices for our customers.
Geographic BreakdownNorth AmericaSales to North
America were $12.8 million in the three months ended June 30, 2016,
a decrease of 37% from $20.3 million in the same period of 2015.
The Company is aggressively expanding sales and marketing efforts
in North America while also transitioning its product mix to favor
higher retail-priced, premium products. As part of this
initiative, the Company offered promotional discounts during the
course of the second quarter, which also weighed on aggregate
dollar sales.
China In China, overall sales decreased by 12% to $4.2 million
in the three months ended June 30, 2016, as compared to $4.8
million in the same period of 2015, as wholesale sector sales were
soft.
Europe Sales to Europe were $3.9 million in the three
months ended June 30, 2016, an increase of 25% from $3.1 million in
the same period of 2015 as European economies continued to
improve.
Geographical distribution of sales is set out as follows:
|
|
|
(US$ in millions) |
|
For three
months ended June 30, |
|
|
|
2016 |
|
|
2015 |
|
|
|
Sales |
% of Total |
Sales |
% of Total |
China* |
|
$ |
4.2 |
|
|
18 |
% |
$ |
4.8 |
|
|
16 |
% |
North America |
|
|
12.8 |
|
|
53 |
% |
|
20.3 |
|
|
70 |
% |
Asia** |
|
|
1.4 |
|
|
6 |
% |
|
0.7 |
|
|
2 |
% |
Europe |
|
|
3.9 |
|
|
16 |
% |
|
3.1 |
|
|
11 |
% |
Australia |
|
|
1.3 |
|
|
5 |
% |
|
0.2 |
|
|
1 |
% |
Hong Kong |
|
|
0.3 |
|
|
1 |
% |
|
0.0 |
|
|
0 |
% |
Other countries |
|
|
0.1 |
|
|
1 |
% |
|
0.0 |
|
|
0 |
% |
|
|
$ |
24.0 |
|
|
100 |
% |
$ |
29.2 |
|
|
100 |
% |
|
* excluding Hong Kong |
** excluding China |
|
Balance Sheet and Cash Flow
Highlights
- Cash and cash equivalents were $0.6 million at June 30, 2016,
as compared to $1.0 million as of December 31, 2015.
- Working capital at June 30, 2016 was $50.9 million, as compared
to $50.0 million at March 31, 2016 and $48.6 million at December
31, 2015.
The following is a summary of cash provided by or used in each
of the indicated types of activities during the six months ended
June 30, 2016 and 2015:
|
|
2016 |
|
|
2015 |
|
Cash (used in) provided
by: |
|
|
|
|
|
|
Operating
activities |
|
$ |
(1,244,869 |
) |
|
$ |
(4,122,012 |
) |
Investing
activities |
|
|
(85,271 |
) |
|
|
(1,063,304 |
) |
Financing
activities |
|
|
993,287 |
|
|
|
5,290,923 |
|
Net cash used in operating activities was $1.2
million in the six months ended June 30, 2016, a decrease of cash
outflow of $2.9 million from $4.1 million of cash used in operating
activities in the same period of 2015.
Investor InquiriesAn open line
of communication with investors and analysts remains a top priority
of the Company and management is readily available for discussions
with investors on a one on one basis. Investors and analysts
wishing to speak with management are urged to contact the Company’s
investor relations representatives at The Equity Group at +1 212
836 9600 or aprior@equityny.com.
About Nova LifeStyleNova
LifeStyle, Inc., a NASDAQ Global Markets Exchange listed company
headquartered in California, is a fast growing, innovative
designer, manufacturer and distributor of modern LifeStyle
furniture; primarily sofas, dining rooms, cabinets, office
furniture and related components, bedrooms, and various accessories
in matching collections. Nova's products are made in the US,
Europe, and Asia and include LifeStyle brands such as Diamond Sofa,
Colorful World, Giorgio Mobili, Nova QwiK, and Bright Swallow
International. Nova's products feature urban contemporary styles
that integrate comfort and functionality incorporating upscale
luxury designs appealing to LifeStyle-conscious middle and upper
middle-income consumers in the U.S., China, Europe, and elsewhere
in the world. To learn more about Nova LifeStyle, Inc., please
visit our website at www.NovaLifeStyle.com.
Safe Harbor Statement All statements in this
press release that are not historical are forward-looking
statements made pursuant to the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. There can be no
assurance that actual results will not differ from the company's
expectations. You are cautioned not to place undue reliance on any
forward-looking statements in this press release as they reflect
Nova's current expectations with respect to future events and are
subject to risks and uncertainties that may cause actual results to
differ materially from those contemplated. Potential risks and
uncertainties include, but are not limited to, the risks described
in Nova's filings with the Securities and Exchange Commission.
|
NOVA LIFESTYLE, INC. AND
SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME |
FOR THE THREE MONTHS ENDED JUNE 30, 2016 AND
2015 |
|
|
|
Six Months Ended June 30, |
|
Three Months Ended June 30, |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited) |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
Net Sales |
|
$ |
51,052,266 |
|
|
$ |
51,210,707 |
|
|
$ |
23,968,179 |
|
|
$ |
29,178,229 |
|
|
|
|
|
|
|
|
|
|
Cost of Sales |
|
|
43,812,420 |
|
|
|
41,952,403 |
|
|
|
20,871,147 |
|
|
|
23,991,956 |
|
|
|
|
|
|
|
|
|
|
Gross Profit |
|
|
7,239,846 |
|
|
|
9,258,304 |
|
|
|
3,097,032 |
|
|
|
5,186,273 |
|
|
|
|
|
|
|
|
|
|
Operating Expenses |
|
|
|
|
|
|
|
|
Selling
Expenses |
|
|
2,922,271 |
|
|
|
2,320,636 |
|
|
|
1,042,763 |
|
|
|
1,054,780 |
|
General and
Administrative Expenses |
|
|
4,422,328 |
|
|
|
4,281,517 |
|
|
|
2,545,538 |
|
|
|
2,370,629 |
|
|
|
|
|
|
|
|
|
|
Total Operating
Expenses |
|
|
7,344,599 |
|
|
|
6,602,153 |
|
|
|
3,588,301 |
|
|
|
3,425,409 |
|
|
|
|
|
|
|
|
|
|
(Loss) Income from
Operations |
|
|
(104,753 |
) |
|
|
2,656,151 |
|
|
|
(491,269 |
) |
|
|
1,760,864 |
|
|
|
|
|
|
|
|
|
|
Other Income
(Expenses) |
|
|
|
|
|
|
|
|
Non-operating income (expense), net |
|
|
25,864 |
|
|
|
25,155 |
|
|
|
45,646 |
|
|
|
(4,421 |
) |
Foreign
exchange transaction gain |
|
|
2,865 |
|
|
|
34,065 |
|
|
|
555 |
|
|
|
4,383 |
|
Loss on
change in fair value and extinguishment of warrant liability |
|
|
- |
|
|
|
(749,452 |
) |
|
|
- |
|
|
|
(1,722,097 |
) |
Interest
expense |
|
|
(232,941 |
) |
|
|
(190,520 |
) |
|
|
(117,838 |
) |
|
|
(99,610 |
) |
Financial
expense |
|
|
(55,923 |
) |
|
|
(30,537 |
) |
|
|
(26,344 |
) |
|
|
(15,329 |
) |
|
|
|
|
|
|
|
|
|
Total Other Expenses,
Net |
|
|
(260,135 |
) |
|
|
(911,289 |
) |
|
|
(97,981 |
) |
|
|
(1,837,074 |
) |
|
|
|
|
|
|
|
|
|
(Loss) Income Before
Income Tax |
|
|
(364,888 |
) |
|
|
1,744,862 |
|
|
|
(589,250 |
) |
|
|
(76,210 |
) |
|
|
|
|
|
|
|
|
|
Income Tax Expense |
|
|
223,755 |
|
|
|
259,528 |
|
|
|
96,522 |
|
|
|
63,319 |
|
|
|
|
|
|
|
|
|
|
Net (Loss) Income |
|
|
(588,643 |
) |
|
|
1,485,334 |
|
|
|
(685,772 |
) |
|
|
(139,529 |
) |
|
|
|
|
|
|
|
|
|
Other Comprehensive (Loss)
Income |
|
|
|
|
|
|
|
|
Foreign
currency translation |
|
|
(322,114 |
) |
|
|
13,553 |
|
|
|
(397,742 |
) |
|
|
82,211 |
|
|
|
|
|
|
|
|
|
|
Comprehensive (Loss)
Income |
|
$ |
(910,757 |
) |
|
$ |
1,498,887 |
|
|
$ |
(1,083,514 |
) |
|
$ |
(57,318 |
) |
|
|
|
|
|
|
|
|
|
Basic weighted average
shares outstanding |
|
|
24,662,887 |
|
|
|
21,456,546 |
|
|
|
24,911,803 |
|
|
|
21,995,008 |
|
Diluted weighted average
shares outstanding |
|
|
24,662,887 |
|
|
|
21,456,546 |
|
|
|
24,911,803 |
|
|
|
21,995,008 |
|
NOVA LIFESTYLE, INC. AND SUBSIDIARIES |
CONDENSED CONSOLIDATED BALANCE SHEETS |
|
|
|
June 30, |
|
|
December 31, |
|
|
2016 |
|
|
2015 |
|
|
(Unaudited) |
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
Current
Assets |
|
|
|
|
|
Cash and
cash equivalents |
$ |
649,430 |
|
$ |
988,029 |
Accounts
receivable, net |
|
49,870,406 |
|
|
50,451,665 |
Advance to
suppliers |
|
14,957,311 |
|
|
7,958,870 |
Inventories |
|
5,339,201 |
|
|
5,254,029 |
Prepaid
expenses and other receivables |
|
1,207,200 |
|
|
1,180,452 |
Taxes
receivable |
|
22,685 |
|
|
- |
|
|
|
|
|
|
Total Current
Assets |
|
72,046,233 |
|
|
65,833,045 |
|
|
|
|
|
|
Noncurrent
Assets |
|
|
|
|
|
Heritage and
cultural assets |
|
122,277 |
|
|
124,868 |
Plant,
property and equipment, net |
|
14,285,128 |
|
|
15,201,395 |
Lease
deposit |
|
93,177 |
|
|
94,235 |
Deposits for
equipment and factory construction |
|
102,822 |
|
|
143,758 |
Goodwill |
|
218,606 |
|
|
218,606 |
Intangible
assets, net |
|
7,753,067 |
|
|
8,062,649 |
Deferred tax
asset |
|
61,754 |
|
|
69,451 |
|
|
|
|
|
|
Total Noncurrent
Assets |
|
22,636,831 |
|
|
23,914.962 |
|
|
|
|
|
|
Total
Assets |
$ |
94,683,064 |
|
$ |
89,748,007 |
|
|
|
|
|
|
NOVA LIFESTYLE, INC. AND SUBSIDIARIES |
CONDENSED CONSOLIDATED BALANCE SHEETS |
|
|
|
June 30, |
|
December 31, |
|
|
2016 |
|
2015 |
|
|
(Unaudited) |
|
|
|
|
|
|
|
Liabilities and
Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
Current
Liabilities |
|
|
|
|
Accounts
payable |
$ |
13,010,524 |
$ |
9,822,857 |
Line of
credit |
|
4,864,045 |
|
4,604,560 |
Advance from
customers |
|
1,185,425 |
|
187,359 |
Accrued
liabilities and other payables |
|
2,046,044 |
|
2,584,622 |
Taxes
payable |
|
- |
|
5,773 |
|
|
|
|
|
Total Current
Liabilities |
|
21,106,038 |
|
17,205,171 |
|
|
|
|
|
Noncurrent
Liabilities |
|
|
|
|
Line of
credit |
|
6,331,066 |
|
5,659,357 |
Deferred
rent payable |
|
97,184 |
|
89,904 |
Income tax
payable |
|
6,936,254 |
|
6,801,893 |
|
|
|
|
|
Total Noncurrent
Liabilities |
|
13,364,504 |
|
12,551,154 |
|
|
|
|
|
Total
Liabilities |
|
34,470,542 |
|
29,756,325 |
|
|
|
|
|
Contingencies and
Commitments |
|
|
|
|
|
|
|
|
|
Stockholders’
Equity |
|
|
|
|
Common
stock, $0.001 par value; 75,000,000 shares authorized, |
|
|
|
|
25,525,725
and 24,254,160 shares issued and outstanding; |
|
|
|
|
As of June
30, 2016 and December 31, 2015, respectively |
|
25,526 |
|
24,254 |
Additional
paid-in capital |
|
32,892,308 |
|
31,761,983 |
Statutory
reserves |
|
6,241 |
|
6,241 |
Accumulated
other comprehensive income |
|
1,248,420 |
|
1,570,534 |
Retained
earnings |
|
26,040,027 |
|
26,628,670 |
|
|
|
|
|
Total
Stockholders’ Equity |
|
60,212,522 |
|
59,991,682 |
|
|
|
|
|
Total Liabilities
and Stockholders’ Equity |
$ |
94,683,064 |
$ |
89,748,007 |
NOVA LIFESTYLE, INC. AND SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
FOR THE SIX MONTHS ENDED JUNE 30, 2016 AND
2015 |
|
|
|
Six Months Ended June 30, |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
(Unaudited) |
|
|
|
|
|
Cash Flows From
Operating Activities |
|
|
|
|
Net (loss)
income |
|
$ |
(588,643 |
) |
|
$ |
1,485,334 |
|
Adjustments
to reconcile net (loss) income to net cash |
|
|
|
|
Used in
operating activities: |
|
|
|
|
Depreciation
and amortization |
|
|
1,009,514 |
|
|
|
933,786 |
|
Stock
compensation expense |
|
|
938,501 |
|
|
|
800,540 |
|
Change in
fair value and extinguishment of warrant liability |
|
|
- |
|
|
|
749,452 |
|
Changes in
bad debt expenses |
|
|
(5,192 |
) |
|
|
37,698 |
|
Changes in
operating assets and liabilities: |
|
|
|
|
Accounts
receivable |
|
|
401,468 |
|
|
|
(3,252,276 |
) |
Advance to
suppliers |
|
|
(7,000,050 |
) |
|
|
1,789,622 |
|
Inventories |
|
|
(143,053 |
) |
|
|
(3,718,252 |
) |
Other
current assets |
|
|
152,421 |
|
|
|
(933,145 |
) |
Accounts
payable |
|
|
3,284,234 |
|
|
|
(2,089,218 |
) |
Advance from
customers |
|
|
1,001,780 |
|
|
|
14,954 |
|
Accrued
expenses and other payables |
|
|
(516,041 |
) |
|
|
(138,425 |
) |
Deferred
rent payable |
|
|
9,287 |
|
|
|
419 |
|
Taxes
payable |
|
|
210,905 |
|
|
|
197,499 |
|
|
|
|
|
|
Net Cash Used in
Operating Activities |
|
|
(1,244,869 |
) |
|
|
(4,122,012 |
) |
|
|
|
|
|
Cash Flows From
Investing Activities |
|
|
|
|
Payment for
land compensation fee and occupancy tax |
|
|
- |
|
|
|
(193,501 |
) |
Payment for
land cultivated and reclamation fees |
|
|
(35,965 |
) |
|
|
- |
|
Purchase of
property and equipment |
|
|
(49,306 |
) |
|
|
(423,020 |
) |
Deposits for
equipment |
|
|
- |
|
|
|
(46,144 |
) |
Construction
in progress |
|
|
- |
|
|
|
(400,639 |
) |
|
|
|
|
|
Net Cash Used in
Investing Activities |
|
|
(85,271 |
) |
|
|
(1,063,304 |
) |
|
|
|
|
|
Cash Flows From
Financing Activities |
|
|
|
|
Proceeds
from line of credit and bank loan |
|
|
20,079,652 |
|
|
|
20,023,719 |
|
Repayment to
line of credit and bank loan |
|
|
(19,086,365 |
) |
|
|
(18,377,798 |
) |
Proceeds
from equity financing, net of expenses of $355,000 |
|
|
- |
|
|
|
3,645,002 |
|
|
|
|
|
|
Net Cash Provided
by Financing Activities |
|
$ |
933,287 |
|
|
$ |
5,290,923 |
|
NOVA LIFESTYLE, INC. AND SUBSIDIARIES |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED) |
FOR THE SIX MONTHS ENDED JUNE 30, 2016 AND
2015 |
(UNAUDITED) |
|
|
|
Six Months Ended June 30, |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
(Unaudited) |
|
|
|
|
|
Effect of Exchange
Rate Changes on |
|
|
|
|
Cash
and Cash Equivalents |
|
$ |
(1,746 |
) |
|
$ |
(166 |
) |
|
|
|
|
|
Net (decrease)
increase in cash and cash equivalents |
|
|
(338,599 |
) |
|
|
105,441 |
|
|
|
|
|
|
Cash and cash
equivalents, beginning of period |
|
|
988,029 |
|
|
|
1,244,308 |
|
|
|
|
|
|
Cash and cash
equivalents, ending of period |
|
$ |
649,430 |
|
|
$ |
1,349,749 |
|
|
|
|
|
|
Supplemental
Disclosure of Cash Flow Information |
|
|
|
|
|
|
|
|
|
Cash paid
during the period for: |
|
|
|
|
Income tax
payments |
|
$ |
7,200 |
|
|
$ |
62,000 |
|
Interest
expense |
|
$ |
230,832 |
|
|
$ |
146,783 |
|
|
|
|
|
|
Supplemental
Disclosure of Non-Cash Investing and Financing
Activities |
|
|
|
|
|
|
|
|
|
Deposit on
plant construction and website design transfer to construction in
progress |
|
$ |
- |
|
|
$ |
862,726 |
|
Issuance of
common stock in exchange of surrender and termination of
warrants |
|
$ |
- |
|
|
$ |
2,212,707 |
|
Company Contact:
Investor Relations:
The Equity Group Inc.
In U.S.
Adam Prior, Senior Vice President
+1 (212) 836-9606
aprior@equityny.com
In China
Katherine Yao, Senior Associate
+86-10-6587-6435
kyao@equityny.com
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