Revenue Increased 16% to a Quarterly Record of $28.9 Million
Gross Merchandise Volume (a non GAAP measure) Increased by 37% to a Quarterly Record of $34.0 Million

NEW YORK, NY / ACCESSWIRE / November 15, 2017 / uSell.com (OTCQB: USEL), a large market maker of used smartphones, today reported financial and operational results for the three-month period ended September 30, 2017.

Key Business Highlights for Third Quarter and First Nine Months of 2017:

  • Launched new platform to enable select buyers to purchase directly through an online portal
  • Continued to invest in warehouse operations in order to increase capacity, decrease processing lead-time, and provide device level traceability to suppliers
  • Largest supplier's share of purchases dropped to 34% for the three months ended September 30, 2017, down from 62% during the same period in 2016
  • Gross Merchandise Volume ("GMV"), a non-GAAP financial measure, which we began reporting for the second quarter, increased by 37% and 30% for the quarter and the nine months ended September 30, 2017, respectively

Key Financial Highlights for Third Quarter 2017:

  • Revenues increased by $4,056,000, or 16%, to $28,873,000 for the three months ended September 30, 2017, from $24,817,000 for the three months ended September 30, 2016
  • Operating loss for the three months ended September 30, 2017 was $288,000, compared to $7,000 for the three months ended September 30, 2016, a change of $281,000
  • Net loss for the three months ended September 30, 2017 was $625,000, compared to $412,000 for the three months ended September 30, 2016
  • Adjusted EBITDA, a non-GAAP financial measure, was $203,000 for the three months ended September 30, 2017, compared to $590,000 for the three months ended September 30, 2016
  • GMV, which is a non-GAAP financial measure, increased by 37% to $34.0 million for the three months ended September 30, 2017, compared to $24.8 million for the three months ended September 30, 2016

Key Financial Highlights for Nine Months Ended September 30, 2017:

  • Revenues increased by $8,043,000, or 11%, to $81,142,000 for the nine months ended September 30, 2017, from $73,099,000 for the nine months ended September 30, 2016
  • Operating loss for the nine months ended September 30, 2017 was $546,000, compared to $1,075,000 for the nine months ended September 30, 2016, an improvement of $529,000, or 49%
  • Net loss for the nine months ended September 30, 2017 was $2,520,000, compared to $2,535,000 for the nine months ended September 30, 2016
  • Adjusted EBITDA, a non-GAAP financial measure, was $909,000 for the nine months ended September 30, 2017, compared to $793,000 for the nine months ended September 30, 2016
  • GMV, a non-GAAP financial measure, increased by 30% to $95.1 million for the nine months ended September 30, 2017, compared to $73.1 million for the nine months ended September 30, 2016

Nik Raman, Chief Executive Officer, commented, "During the quarter we saw continued growth in GMV, which is indicative of our success in expanding new and existing supplier relationships. Over the coming months, we will continue to invest in our online platform to enable our customers to self serve and take advantage of our increasing scale. We believe that these investments, coupled with those that we are making within our warehouse, will differentiate us from our competitors and create value for both our customers and suppliers."

While quarterly revenues increased by 16% from the prior year, uSell saw a 37% increase in GMV for the quarter ended September 30, 2017 and a 30% increase in GMV for the nine months ended September 30, 2016. Gross margins increased from the prior quarter to 5.4% but were down from 8.3% from the prior year. Margins are driven primarily by supply and demand, but can also be impacted by the Company's ability to make opportunistic purchases. Due to these factors, the Company cannot predict margins from quarter to quarter.

See discussions below in regards to non-GAAP Financial Measures - GMV and Adjusted EBITDA

Technology and operational processes continue to play a key role for the Company in limiting its growth of fixed costs while increasing capacity, sales velocity, and average selling prices. The Company continues to invest in its online platform and has steadily transitioned more of its customer interactions online. Beginning in the fourth quarter, a subset of uSell's customers will have the ability to purchase directly through an online portal, rather than by speaking to a sales representative. This new platform, in addition to its previously launched online auction platform, will enable the Company to drive the bulk of its customers online in the coming quarters.

uSell continues to invest resources in optimizing the processes and technology needed to test and grade devices in its warehouse, with the aim of increasing capacity and decreasing processing lead-time, while providing device level traceability to its suppliers. Management believes that these investments are important to make for two reasons: 1) they differentiate uSell from competitors of similar size that are looking to purchase from its suppliers, and 2) management expects the iPhone X launch to drive substantial trade in volume in 2018. By adding more value than its competitors and becoming the partner of choice to its suppliers, uSell believes that it will greatly benefit from industry trends as trade-in continues to increase in importance throughout the mobile ecosystem.

On the supply side, the Company has continued to diversify its supplier base, with its largest supplier's share of purchases representing just 34% for the three months ended September 30, 2017, down from 62% during the same period in 2016. Management views supplier diversification, as well as expanding its relationships with existing suppliers, as long term initiatives, and is optimistic about its prospects over the next year.

Deloitte Global estimates that the global smartphone market was worth $17 billion in 2016, representing 50% growth over 2015. Furthermore, it forecasts that the growth rate of the used smartphone market is 4-5 times higher than the overall smartphone market and that it will likely accelerate through 2020 as both consumers and suppliers increasingly embrace the practice of selling or acquiring second-hand smartphones.

Financial Results for the Third Quarter Ended September 30, 2017:

Revenue was $28.9 million for the three months ended September 30, 2017, a 16% increase from $24.8 million for the three months ended September 30, 2016.

During the three months ended September 30, 2017 and 2016, 62% and 65% of the Company's revenues, respectively, were originated in the United States, 19% and 24%, respectively, were originated in Europe and 13% and 8%, respectively, were originated in Hong Kong.

Gross profit decreased to 5.4% to $1.6 million for the three months ended September 30, 2017, compared to 8.3% for the three months ended September 30, 2016.

Sales and marketing expense increased $64,000, or 14%, from $469,000 during the three months ended September 30, 2016 to $533,000 during the three months ended September 30, 2017. The increase is primarily attributable to the higher fees paid as a result of the increased eBay sales during the three months ended September 30, 2017, compared to the three months ended September 30, 2016. With the We Sell Cellular acquisition and the Company's newfound ability to source devices directly from the carriers, retailers, and manufacturers, uSell's primary sales and marketing expenses have shifted from consumer marketing to paying out sales commissions and selling fees. Because the vast majority of uSell's sales and marketing expenses are now paid to third party selling platforms, such as eBay and Amazon, any increases or decreases in these expenses are directly tied to sales for the period.

Operating loss for the three months ended September 30, 2017 was $288,000, an increase of $281,000 from a $7,000 operating loss for the three months ended September 30, 2016.

Net loss for the three months ended September 30, 2017 was $625,000, an increase of $213,000 from a $412,000 net loss for the three months ended September 30, 2016. The resulting EPS increased to ($0.03), as compared to ($0.02) for the prior year ago quarter.

Adjusted EBITDA, a non-GAAP financial measure, for the three months ended September 30, 2017 was a $203,000 income, a decrease of $387,000 from a $590,000 Adjusted EBITDA income for the three months ended September 30, 2016.

At September 30, 2017, uSell.com had $0.5 million of cash and cash equivalents, $3.4 million of restricted cash, $7.7 million of inventory and 20.2 million shares issued and outstanding.

Financial Results for the Nine Months Ended September 30, 2017:

Revenue was $81.1 million for the nine months ended September 30, 2017, an 11% increase from $73.1 million for the nine months ended September 30, 2016.

During the nine months ended September 30, 2017 and 2016, 67% and 65% of the Company's revenues, respectively, were originated in the United States, 16% and 20%, respectively, were originated in Europe and 12% and 13%, respectively, were originated in Hong Kong.

Gross profit increased to 6.5% to $5.3 million for the nine months ended September 30, 2017, compared to 6.5% for the nine months ended September 30, 2016.

Sales and marketing expense increased $358,000, or 28%, from $1,260,000 during the nine months ended September 30, 2016 to $1,618,000 during the nine months ended September 30, 2017. The increase is primarily attributable to the higher fees paid as a result of the increased eBay sales during the nine months ended September 30, 2017, compared to the nine months ended September 30, 2016.

Operating loss for the nine months ended September 30, 2017 was $546,000, an improvement of $529,000 from a $1,075,000 operating loss for the nine months ended September 30, 2016.

Net loss for the nine months ended September 30, 2017 was $2,519,000, an improvement of $16,000 from a $2,535,000 net loss for the nine months ended September 30, 2016. The resulting EPS remained at ($0.13), as compared to ($0.13) for the prior year ago quarter.

Adjusted EBITDA, a non-GAAP financial measure, for the nine months ended September 30, 2017 was a $909,000 income, an improvement of $503,000 from a $793,000 Adjusted EBITDA income for the nine months ended September 30, 2016.

Non-GAAP Financial Measures

This press release contains two measures of financial performance not calculated in accordance with accounting principles generally accepted in the United States ("GAAP"), GMV and Adjusted Earnings, Before Interest, Taxes, Depreciation and Amoritization ("EBITDA").

GMV

The Company defines GMV as the total of uSell revenue plus revenue from the Special Purpose Entity ("SPE"). GMV is a non-GAAP financial measure because it includes SPE revenue which is not reportable in uSell's financial statements nor is it in accordance with GAAP. See immediately below for a reconciliation between our revenue under GAAP and GMV.

Three Months Ended
September 30,
Percentage
2017
2016
Change
uSell Revenue - GAAP as Reported
$
28,873,000
$
24,817,000
16
%
SPE Revenue - non-GAAP
5,142,000
-
100
%
Gross Merchandise Volume - non-GAAP
$
34,015,000
$
24,817,000
37
%

Nine Months Ended
September 30,
Percentage
2017
2016
Change
uSell Revenue - GAAP as Reported
$
81,142,000
$
73,099,000
11
%
SPE Revenue - non-GAAP
13,946,000
-
100
%
Gross Merchandise Volume - non-GAAP
$
95,088,000
$
73,099,000
30
%

As mentioned above, the Company makes reference to "GMV," a measure of performance not calculated in accordance with GAAP. Our management believes GMV is useful in evaluating uSell's overall volume of transactions and in evaluating the SPE's performance. Since all SPE revenue is generated by uSell's management team and employees, our management believes it demonstrates how effective uSell's business model is and its potential if it had additional capital. Investors should recognize that uSell will not receive all of the profits from the SPE assuming profitability; uSell receives a minority percentage of any distributions until the investor receives an agreed upon preference at which time the profit sharing shifts to uSell receiving a majority of the distributions.

Adjusted EBITDA

The Company makes reference to "Adjusted EBITDA". Management has included Adjusted EBITDA because it believes that investors may find it useful to review our financial results as adjusted to exclude items as determined by management. Reconciliations of this non-GAAP financial measure to the most directly comparable GAAP financial measure, net loss, to the extent available without unreasonable effort, are set forth below. The Company defines Adjusted EBITDA as earnings or (loss) from continuing operations before the items noted in the table below.

The following table presents Adjusted EBITDA, a non-GAAP financial measure, and provides a reconciliation of Adjusted EBITDA to the directly comparable GAAP measure reported in the Company's consolidated financial statements:

Three Months Ended
September 30,
Nine Months Ended
September 30,
2017
2016
2017
2016
Net loss
$
(625,000
)
$
(412,000
)
$
(2,520,000
)
$
(2,535,000
)
Stock-based compensation expense
132,000
92,000
374,000
364,000
Depreciation and amortization
359,000
505,000
1,082,000
1,504,000
Interest expense
337,000
405,000
1,973,000
1,090,000
Change in fair value of derivative liability
-
-
-
370,000
Adjusted EBITDA
$
203,000
$
590,000
$
909,000
$
793,000

Management believes Adjusted EBITDA provides a meaningful representation of the Company's operating performance that provides useful information to investors regarding our financial condition and results of operations. Adjusted EBITDA is commonly used by financial analysts and others to measure operating performance. Furthermore, management believes that this non-GAAP financial measure may provide investors with additional meaningful comparisons between current results and results of prior periods as they are expected to be reflective of the Company's core ongoing business. However, while management considers Adjusted EBITDA to be an important measure of operating performance, Adjusted EBITDA and other non-GAAP financial measures have limitations, and investors should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. Further, Adjusted EBITDA, as we define it, may not be comparable to EBITDA, or similarly titled measures, as defined by other companies.

About uSell.com, Inc.

uSell.com, Inc. is a large market maker of used smartphones. uSell acquires products from both individual consumers, on its website, uSell.com, and from major carriers, big box retailers, and manufacturers through its subsidiary, We Sell Cellular, LLC. The Company maximizes the value of these devices by reclassifying them, adding value to them, and moving them throughout the world to those who want them most. In order to serve its global and highly diverse customer base, uSell leverages both a traditional sales force and an online marketplace where professional buyers of used smartphones can buy inventory on-demand. Through participation on uSell's online platform and through interaction with uSell's salesforce, buyers can acquire high volumes of inventory in a cost effective manner, while minimizing risk.

For more information, please visit www.uSell.com and http://wesellcellular.com.

Forward-Looking Statements

This press release includes forward-looking statements including statements regarding our investments in our online platform and in our warehouse and the impact expected from these investments, the future growth of our online platform, future supplier diversification, and the expectations from the new iPhone launch. The words "believe," "may," "estimate," "continue," "anticipate," "intend," "should," "plan," "could," "target," "potential," "is likely," "will," "expect" and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. The results anticipated by any or all of these forward-looking statements might not occur. Important factors that could cause actual results to differ from those in the forward-looking statements include competition from large retail stores and wireless operators, our continued success in reducing dependence on a few suppliers, our ability to react quickly and the availability of sufficient capital when supply of smartphones increases, the expected growth and usage of our technology platform, the security of our online platform, our ability to further or maintain our relationships with large wholesalers, favorable reviews of new iPhones and other new releases and willingness of consumers to continue to trade-in their phones for expensive new phones with minor technical changes. Further information on our risk factors is contained in our filings with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2016. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise.

Contact Information

Nik Raman
Chief Executive Officer
p212-213-6805
nik@usell.com

uSell.com, Inc. and Subsidiaries
Consolidated Balance Sheets

September 30,
December 31,
2017
2016
(unaudited)
Assets
Current Assets:
Cash and cash equivalents
$ 477,610 $ 1,657,422
Restricted cash
3,440,837 982,064
Accounts receivable, net
396,186 430,171
Inventory, net
7,658,053 8,874,099
Prepaid expenses and other current assets
94,834 130,141
Total Current Assets
12,067,520 12,073,897
Property and equipment, net
181,921 191,957
Goodwill
8,448,759 8,448,759
Intangible assets, net
3,142,337 3,724,466
Capitalized technology, net
884,424 934,193
Other assets
61,750 124,358
Total Assets
$ 24,786,711 $ 25,497,630
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable
$ 4,208,200 $ 4,328,422
Accrued expenses
1,366,616 916,961
Due to related party
48,991 -
Promissory note payable
- 673,332
Deferred revenue
229,152 374,098
Capital lease obligations
14,029 10,664
Total Current Liabilities
5,866,988 6,303,477
Promissory note payable, net of current portion
8,310,148 6,441,000
Capital lease obligations, net of current portion
49,851 47,986
Total Liabilities
14,226,987 12,792,463
Stockholders' Equity:
Convertible Series A preferred stock; $0.0001 par value; 325,000 shares authorized; no shares issued and outstanding
- -
Convertible Series B preferred stock; $0.0001 value per share; 4,000,000 shares authorized; no shares issued and outstanding
- -
Convertible Series C preferred stock; $0.0001 value per share; 146,667 shares authorized; no shares issued and outstanding
- -
Convertible Series E preferred stock; $0.0001 value per share; 103,232 shares authorized; no shares issued and outstanding
- -
Common stock; $0.0001 par value; 43,333,333 shares authorized; 20,154,999 and 20,134,999 shares issued and outstanding, respectively
2,015 2,013
Additional paid in capital
71,464,215 71,089,882
Accumulated deficit
(60,906,506 ) (58,386,728 )
Total Stockholders' Equity
10,559,724 12,705,167
Total Liabilities and Stockholders' Equity
$ 24,786,711 $ 25,497,630

uSell.com, Inc. and Subsidiaries
Consolidated Statements of Operations

Three Months Ended
September 30,
Nine Months Ended
September 30,
2017
2016
2017
2016
Revenue
$
28,872,702
$
24,817,307
$
81,141,673
$
73,098,642
Cost of Revenue
27,314,910
22,750,001
75,863,429
68,319,317
Gross Profit
1,557,792
2,067,306
5,278,244
4,779,325
Operating Expenses:
Sales and marketing
532,757
468,624
1,617,531
1,259,524
General and administrative
1,312,713
1,605,398
4,207,210
4,594,637
Total operating expenses
1,845,470
2,074,022
5,824,741
5,854,161
Loss from Operations
(287,678
)
(6,716
)
(546,497
)
(1,074,836
)
Other (Expense) Income:
Interest income
-
429
-
429
Interest expense
(337,352
)
(405,192
)
(1,973,281
)
(1,090,325
)
Change in fair value of placement rights derivative liability
-
-
-
(370,000
)
Total Other Expense, Net
(337,352
)
(404,763
)
(1,973,281
)
(1,459,896
)
Net Loss
$
(625,030
)
$
(411,479
)
$
(2,519,778
)
$
(2,534,732
)
Basic and Diluted Loss per Common Share:
Net loss per common share - basic and diluted
$
(0.03
)
$
(0.02
)
$
(0.13
)
$
(0.13
)
Weighted average number of common shares outstanding during the period - basic and diluted
20,150,640
20,123,042
20,143,783
19,995,689

uSell.com, Inc. and Subsidiaries
Consolidated Statements of Cash Flows

Nine Months Ended September 30,
2017
2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
$
(2,519,778
)
$
(2,534,732
)
Adjustments to reconcile net loss to net cash and cash equivalents provided by operating activities:
Depreciation and amortization
1,082,093
1,504,049
Stock based compensation expense
374,335
363,604
Amortization of debt issue costs into interest expense
1,063,545
348,393
Loss on disposal of property and equipment
-
112,284
Change in fair value of placement rights derivative liability
-
370,000
Recovery of bad debt expense
-
(1,876
)
Changes in operating assets and liabilities:
Accounts receivable
33,985
237,545
Inventory
1,216,046
2,003,507
Prepaid and other current assets
35,307
142,396
Other assets
12,608
11,912
Accounts payable
(120,222
)
257,615
Accrued expenses
449,655
(54,647
)
Due to related party
48,991
-
Lease termination payable
-
(5,000
)
Deferred revenues
(144,946
)
(524,324
)
Net Cash and Cash Equivalents Provided by Operating Activities
1,531,619
2,230,726
CASH FLOWS FROM INVESTING ACTIVITIES:
Website development costs
(406,703
)
(435,116
)
Restricted cash
(2,458,773
)
(3,528,073
)
Cash paid to purchase property and equipment
(18,770
)
(69,019
)
Security deposits
-
(8,435
)
Net Cash and Cash Equivalents Used in Investing Activities
(2,884,246
)
(4,040,643
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable
8,572,400
2,000,000
Principal repayments of note payable
(8,080,000
)
-
Payment of capital lease obligations
(9,456
)
-
Cash paid for debt issue costs
(310,129
)
(49,551
)
Net Cash and Cash Equivalents Provided by Financing Activities
172,815
1,950,449
Net (Decrease) Increase in Cash and Cash Equivalents
(1,179,812
)
140,532
Cash and Cash Equivalents - Beginning of Period
1,657,422
1,047,786
Cash and Cash Equivalents - End of Period
$
477,610
$
1,188,318
SUPPLEMENTARY CASH FLOW INFORMATION:
Cash Paid During the Period for:
Interest
$
806,059
$
744,931
Taxes
$
18,193
$
-
SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Adjustment to goodwill for inventory valuation
$
-
$
42,198
Common stock issued in connection with note payable
$
-
$
402,500
Purchases of property and equipment through capital leases
$
14,686
$
55,129
Elimination of Placement Rights Derivative Liability
$
-
$
1,500,000

SOURCE: uSell.com, Inc.