Nova LifeStyle Reports Second Quarter 2015 Financial Results

LOS ANGELES, Aug. 12, 2015 /PRNewswire/ -- 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 and six months ended June 30, 2015.

Second Quarter 2015 Corporate and Financial Highlights:

• Net sales were $29.2 million, an increase of 13% compared to the prior year period.
• Gross profit was $5.2 million, an increase of 4% compared to the prior year period.
• Gross margin was 18%, compared to 19% in the prior year period.
• The Company reported a change in fair value of warrant liability of ($1.7 million), which impacted net income for the second quarter despite a 14.0% increase in operating income.
• Net loss was $0.1 million, or $0.01 per diluted share based on 22.0 million shares outstanding, compared to net income of $3.4 million or $0.16 per diluted share based on 20.5 million shares outstanding in the prior year period.
• Adjusted net income, which excludes the change in fair value of warrant liability, increased to $1.6 million, or adjusted diluted EPS of $0.07 per share, compared to $1.1 million, or adjusted diluted EPS of $0.06 per share, in the prior year period.
• In April 2015, the Company completed a $4.0 million registered direct placement of common stock.

Management Commentary

Jeffrey Wong, CEO of Nova LifeStyle, stated, "We were pleased to report double-digit percentage increases in sales during the period, largely as a result of accelerating demand for our products in North America.  The sales and marketing efforts that we have implemented over the past three years have continued to drive awareness in the industry, and we are exploring new potential wholesale markets.  We also were pleased to report favorable growth in our China market, where we continue to roll out a larger brand recognition initiative that will take time to develop.  While these enhanced marketing efforts have affected our margin in the interim, we believe they will lead to continued strong growth in the quarters to come.  We opened additional franchise stores during the period and as we enter the second half of the year are embracing new methods of technology to improve our customers' overall experience.  Our goal remains to be at the forefront of both quality and innovation in our design and service, which we feel helps to define our competitive advantage over other multi-national peers in the home furnishing industry."

Mr. Wong concluded, "We continue to maintain a strong financial position during a period of robust expansion.  Our recent financing simplified our capital structure, and we remain focused on properly utilizing our capital to grow in a sustainable manner, improving our receivables, and maintaining a lean operating infrastructure.  We made progress in this regard during the second quarter and expect continued improvements throughout the second half of 2015."

Operational Overview

Product Category

Nova LifeStyle's largest selling product categories in the three months ended June 30, 2015 and 2014 were sofas, cabinets and dining tables, which accounted for approximately 31%, 15% and 16% of sales, respectively, for the three months ended June 30, 2015.

In the next several months, the Company intends to enrich its product lines to include a bedroom series, which would include beds, bed side tables, mattresses (which could be imported or purchased in China) and bedding sets including bed sheets, pillowcases, quilt covers, and other items (which can be purchased within China).

Geographic Breakdown

North America

Sales to North America were $20.3 million in the three months ended June 30, 2015, an increase of 38% from $14.7 million in the same period of 2014, driven by increased marketing efforts in the U.S. markets.  As a percentage of total revenue, North American sales remain the largest for Nova LifeStyle at 69.1%.

China

In China, overall sales increased by 3% to $4.8 million in the three months ended June 30, 2015, as compared to $4.7 million in the same period of 2014.  

Europe  

Sales to Europe were $3.1 million in the three months ended June 30, 2015, a decrease of 5% from $3.3 million in the same period of 2014 as a result of the slow European economy.

Geographical distribution of sales is set out as follows:

Financial Results for the Second Quarter Ended June 30, 2015

• Net sales for the three months ended June 30, 2015, were $29.2 million, an increase of 13% from $25.9 million in the same period of 2014; this increase in net sales resulted primarily from a 13% increase in average selling price with a 2% increase in sales volume.
• Gross profit increased 4% to $5.2 million in the three months ended June 30, 2015, compared to $5.0 million in the same period of 2014. The increase in gross profit resulted primarily from increase of net sales. Gross margin as a percent of net sales was 18% compared to 19% in the same period in 2014.
• Operating income was $1.8 million, an increase of 14% from to $1.5 million in the same period of 2014.
• Total other loss, net, was $1.8 million in the three months ended June 30, 2015, compared with total other income, net of $2.3 million in the same period of 2014. The decrease in other income was due primarily to a negative change in fair value of warrant liability of ($1.7 million) in the three months ended June 30, 2015 compared to a positive change of $2.2 million in the prior year period.
• As a result of this change in fair value of warrant liability, the Company reported a net loss for the period of $0.1 million, or $0.01 per diluted earnings per share, in the three months ended June 30, 2015, compared to net income of $3.4 million, or $0.16 per diluted earnings per share for the same period of 2014.
• Adjusted net income, which excludes the change in fair value of warrant liability, increased to $1.6 million, or adjusted diluted EPS of $0.07 per share, compared to $1.1 million, or adjusted diluted EPS of $0.06 per share, in the prior year period. A full table reconciling adjusted net income, a non-GAAP (Generally Accepted Accounting Principles) financial measure, to the appropriate GAAP measure is included with the Company's financial information below.

Balance Sheet and Cash Flow Highlights

• Cash and cash equivalents were $1.3 million at June 30, 2015, as compared to $1.2 million as of December 31, 2014.
• Working capital at June 30, 2015 was $42.6 million, as compared to $34.5 million at December 31, 2014.

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, 2015 and 2014:

Net cash used in operating activities was $4.1 million in the six months ended June 30, 2015, a decrease of cash outflow of $1.9 million from $6.1 million of cash used in operating activities in the same period of 2014.

The decrease in cash outflow was attributable primarily to improved timely collection on accounts receivables. 

Conference Call Details

Webcast

To listen to the live webcast, please go to at www.NovaLifeStyle.com and click on the conference call link, or click: Nova LifeStyle 2015 Second Quarter Webcast. This webcast will be archived and accessible through the Company's website for approximately 30 days following the call.

About Nova LifeStyle

Nova 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 or download the NVFY IRapp from the investor page.

Use of Non-GAAP Measures

The Company has supplemented its reported GAAP (generally accepted accounting principles) financial information with non-GAAP measures. Non-GAAP (adjusted) net income excludes change in fair value of warrant liability. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with U.S. GAAP. The Company believes these non-GAAP measures are useful to investors as they provide a basis for evaluating the Company's operating results in the ordinary course of its operations.

These non-GAAP measures are not based on any comprehensive set of accounting rules or principles. The Company believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with its results of operations as determined in accordance with U.S. GAAP and that these measures should only be used to evaluate the Company's results of operations in conjunction with, and not in lieu of, the corresponding GAAP measures. These non-GAAP financial measures are reconciled in the accompanying tables to the most directly comparable measures as reported in accordance with GAAP.

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.

Company Contact:Investor Relations:The Equity Group Inc.In U.S.Adam Prior, Senior Vice President+1 (212) 836-9606[email protected]

In ChinaKatherine Yao, Senior Associate+86-10-6587-6435[email protected]

 

 

 

 

 

 

 

 

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SOURCE Nova LifeStyle, Inc.