NEW YORK, Aug. 01, 2019 (GLOBE NEWSWIRE) -- Mohawk Group Holdings, Inc. (NASDAQ:MWK) ("Mohawk") today announced results for the second quarter ended June 30, 2019.

• Net revenue grew 108.2% to $30.4 million, compared to $14.6 million in the second quarter of 2018 driven by direct sales growth of 123.2%
• Gross margin increased to 38.7%, compared to 25.9% in the second quarter of 2018 and 37.4% in the first quarter of 2019
• Net loss for the second quarter of 2019 was $(7.6) million compared to $(8.9) million in the second quarter of 2018 and $(8.4) million in first quarter of 2019
• Adjusted EBITDA improved to $(3.7) million, compared to $(8.2) million in the second quarter of 2018 and $(5.6) million in the first quarter of 2019
• Cash used in operating activities was $(4.4) million, compared to $(11.9) million in the first quarter of 2019
• Total cash balance at June 30, 2019 was $39.5 million

Yaniv Sarig, Co-Founder and Chief Executive Officer, commented, "We are very pleased with our second quarter performance, which was highlighted by strong sales growth, significant margin improvement, and the launch of 7 new products. Our recent results demonstrate our belief that our tech enabled business model driven by data, automation and artificial intelligence is well positioned to disrupt the consumer products industry and to capitalize on the growing shift to digital commerce. As shoppers increase their reliance on data and peer sentiment to decide which product to buy, our proprietary software platform AIMEE continues to evolve to help us meet their needs by creating the best value products as defined by the customers themselves. Additionally, as online marketing becomes more competitive, our automated machine learning management of media buying is allowing us to grow our top-line at a faster pace than operating costs and drive significant leverage and enhanced profitability over time. In an environment where consumers have more information and can make better buying choices, we believe that Mohawk is positioned to gain market share in existing categories and new categories by infusing cutting edge technology through the value chain of CPG. "

Mr. Sarig continued, "Having co-founded Mohawk in 2014, it was incredibly rewarding to reach another major milestone with the recent completion of our initial public offering. I'm very excited to begin the next chapter in the company's history."

Second Quarter 2019 Review

Second quarter 2019 net revenue increased 108.2% to $30.4 million, compared to $14.6 million in the second quarter of 2018. The increase was driven by direct sales growth of 123.2% from existing products as well as prior quarter product launches, partially offset by a decline in non-core wholesale sales related to occasional product liquidation.

Gross margin for the second quarter of 2019 was 38.7%, compared to 25.9% in the year ago period and 37.4% in the first quarter of 2019. The year-over-year improvement is primarily attributable to the growth in direct sales, which carry higher margins than wholesale sales and improved product unit economics.  In addition to changes in channel mix, gross margins are impacted on a quarterly basis by product mix, particularly the number of products in the sustain or launch phase.

Sales and distribution expenses as a percentage of net revenue decreased to 38.9% from 56.0% in the same period last year and 52.0% in first quarter of 2019. The change was attributable to a higher percentage of sales fulfilled through our third-party logistics partners instead of through e-commerce platform service providers while fixed costs remained essentially flat due to the Company's AIMEE automation.

Research and development expenses increased to $1.9 million from $0.9 million in the year ago period due to an increase in the number of developers to support growth and $0.4 million in higher stock-based compensation expense. General and administrative expenses increased to $4.4 million compared to $3.1 million in the year ago period due primarily to a $1.5 million increase in stock-based compensation expense.

Net loss for the second quarter of 2019 was $(7.6) million compared to $(8.9) million in the second quarter of 2018 and $(8.4) million in the first quarter of 2019.

Adjusted EBITDA for the second quarter of 2019 was $(3.7) million compared to $(8.2) million in the second quarter of 2018 and $(5.6) million in the first quarter of 2019.

Balance Sheet and Cash Flow

Cash used in operating activities was $(4.4) million, compared to $(11.9) million in the first quarter of 2019.  Overall, the cash burn improved for the quarter to $(4.3) million compared to $(7.1) million in first quarter 2019. 

Initial Public Offering

On June 14, 2019, Mohawk successfully completed its initial public offering, selling 3,600,000 shares of common stock at $10.00 per share. The Company received approximately $29.6 million in net proceeds after deducting legal, underwriting and other initial public offering related expenses.

Non-GAAP Financial Measures

For more information on our non-GAAP financial measures and a reconciliation of GAAP to non-GAAP measures, please see the "Non-GAAP Financial Measures and Reconciliations" section below.

Webcast and Conference Call Information

Forward Looking Statements

Investor Contact:
Brendon Frey, ICR
[email protected]
203-682-8200

MOHAWK GROUP HOLDINGS, INC.
Condensed Consolidated Statements of Operations
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(in thousands, except share and per share data)

MOHAWK GROUP HOLDINGS, INC.
Condensed Consolidated Balance Sheets
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(in thousands, except share and per share data)

MOHAWK GROUP HOLDINGS, INC. 
Condensed Consolidated Statements of Cash Flows 
(Unaudited) 
(in thousands)

Non-GAAP Financial Measures and Reconciliations

Therefore, investors should consider non-GAAP financial measures in addition to, and not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. The non-GAAP financial measures presented by the Company may be different from the non-GAAP financial measures used by other companies.

The Company has presented the following non-GAAP measures to assist investors in understanding the Company's core net operating results on an on-going basis: (i) Adjusted EBITDA and (ii) cash burn. These non-GAAP financial measures may also assist investors in making comparisons of the Company's core operating results with those of other companies.

As used herein, EBITDA represents net loss plus depreciation and amortization, interest expense, net and income tax expense. As used herein, Adjusted EBITDA represents EBITDA plus stock-based compensation and other expense, net. EBITDA and Adjusted EBITDA do not represent and should not be considered as alternatives to net loss, as determined under GAAP.

We recognize that both EBITDA and Adjusted EBITDA have limitations as analytical financial measures. For example, neither EBITDA nor Adjusted EBITDA reflects:

Additionally, Adjusted EBITDA excludes non-cash stock-based compensation expense, which is and will remain a key element of our overall long-term incentive compensation package.

The following table provides a reconciliation of EBITDA and Adjusted EBITDA to net loss, which is the most directly comparable financial measure presented in accordance with GAAP:

Quarterly Condensed Statement of Cash Flows Information

The following table provides summarized quarterly information from our condensed statement of cash flows for 2019:

As used herein, cash burn represents the change of the net change in cash balance at each of the balance sheet period adjusted for certain one-time items like the initial public offering and excluding changes in restricted cash. The following table provides a reconciliation of cash burn to the net change in cash and restricted cash for period, which is the most directly comparable financial measure presented in accordance with GAAP: