Jowell Global Ltd. (“Jowell” or the “Company”) (NASDAQ: JWEL), one
of the leading cosmetics, health and nutritional supplements, and
household products e-commerce platforms in China, today announced
its unaudited financial results for the third quarter ended
September 30, 2022.
The Company cautioned that these financial
results have not been audited or reviewed by the Company’s
independent registered public accounting firm and may have
discrepancies in connection with further reviews by the independent
registered public accounting firm of the Company.
Third Quarter 2022 Financial and Operational
Highlights
● Total
revenues were $51.4 million, an increase of 17.2% from
$43.8 million in the same period of 2021.
● Net
loss was $2.0 million, compared to a net loss of $2.1
million in the same period of 2021.
● Total
GMV (Gross Merchandise Value) transacted in the Company’s
online shopping mall was $66.8 million, an increase of 7.8% from
$61.9 million in the same period of 2021.
● Total VIP
members1 as of September 30, 2022 were 2.4 million, an
increase of 14.4% compared with 2.1 million as of September 30,
2021.
● Total LHH
stores2 as of September 30, 2022 were 26,300, an increase
of 1.6% compared to 25,888 as of September 30, 2021.
Mr. Zhiwei Xu, Chief Executive Officer and
Chairman of Jowell Global Ltd., commented: “Despite the adverse
COVID impact in most of the cities in China, we continued to
deliver another solid quarter with sustained topline growth. GMV in
Q3 were $66.8 million, up 7.8% year over year, while total revenue
grew by 17.2% year over year reaching $51.4 million. We are
confident that our growth strategy plan not only has generated
strong revenue growth but also will provide sustainable profits for
us in the future due to the increased investments in customer
engagement and conversion, enriched product offerings and
partnerships, and the expectation of macro recovery.”
Mr. Xu continued: “Additionally, we remain
committed to collaborate with top global talents and companies to
diversify our product offering and introduce premium international
brands to Chinese consumers. In September, we announced strategic
partnership with Italian based So.Di.Co Group to promote the sales
of its organic and natural personal care products in China. In
October, we announced another cooperative partnership with a
leading European pharmaceutical company STADA,in which Jowell will
be the exclusive distributor to sell its Zoflora products on
Jowell’s e-commerce platform and accelerate its outreach in the
cleaning and consumer products market in China. Looking ahead, we
will continue to execute our growth strategies with a focus on
optimizing our platform through product offerings catered to
consumer needs, as well as acceleration of our partnerships with
leading domestic and international brands.”
Ms. Mei Cai, Chief Financial Officer of the
Company, added: “In the third quarter, we achieved healthy topline
growth through a series of strategic promotional activities. Total
revenue grew by 17.2% year over year to $51.4 million, with sales
of our cosmetic products and household products achieved 24.7% and
89.4% year-over-year growth, respectively. The number of LHH stores
and total number of VIP members continued to see steady growth, up
1.6% and 14.4% year over year respectively. We maintain our
commitment to address our customers’ diverse and growing needs by
further expanding our product offerings with strategic brand
awareness promotions.”
1 “Total VIP
members refers to the total number of members registered on
Jowell’s platform as of September 30, 2022.
2 LHH stores: the
brand name of “Love Home Store”. Authorized retailers may operate
as independent stores or store-in-shop (an integrated store),
selling products they purchased through Jowell’s online platform
LHH Mall under their retailer accounts which provides them with
major discounts.
Impact of COVID-19 Pandemic
Due to the outbreak of Omicron variant in China,
many cities in China have imposed new restrictions, quarantine and
testing requirements and office closures during the first nine
months of 2022, including Shanghai, where the Company’s
headquarters are located. Employees of the VIE in Shanghai office
worked from home from March 30, 2022 to June 1, 2022.
Although COVID-19 has been generally under
control in most parts of China, there are still outbreaks and
controlling measures imposed by local government in various cities.
It is hard to predict the impact of the COVID-19 pandemic on the
business operations and financial results for the remainder of
2022, which is highly dependent on numerous factors beyond the
Company’s control, such as the duration and the spread of the
pandemic, COVID-19 resurgence or new variant outbreak like Omicron,
COVID-19 vaccine efficacy and distribution, and COVID-19
containment actions implemented by government authorities or other
entities and the implementation of zero COVID policy in China,
including restrictions and office closures in Shanghai and other
cities in China, almost all of which are beyond the Company’s
control.
Third Quarter 2022 Financial Results
Total Revenues
Total revenues for the third quarter of 2022
were $51.4 million, representing an increase of 17.2% from $43.8
million in the same period of 2021, primarily due to the increase
in the weighted average unit price of the products sold. The
weighted average unit price was $5.75 per unit for the third
quarter of 2022, which increased by 39.2% from $4.13 per unit for
the same period of 2021. In the third quarter of 2022, the Company
continued to focus on promoting premium brand products with higher
average selling prices, which increased the overall weighted
average selling prices for cosmetics and household products.
|
|
Three Months Ended September 30 |
|
|
% |
|
Revenues |
|
2022 |
|
|
2021 |
|
|
change |
|
(in thousand) |
|
US$ |
|
|
US$ |
|
|
YoY* |
|
Product sales |
|
|
|
|
|
|
|
|
|
● Cosmetic products |
|
|
24,436.6 |
|
|
|
19,602.3 |
|
|
|
24.7 |
% |
● Health and nutritional
supplements |
|
|
9,373.0 |
|
|
|
14,961.4 |
|
|
|
-37.4 |
% |
● Household products |
|
|
17,505.0 |
|
|
|
9,243.7 |
|
|
|
89.4 |
% |
● Others |
|
|
46.7 |
|
|
|
6.5 |
|
|
|
618.5 |
% |
Total |
|
|
51,361.3 |
|
|
|
43,813.9 |
|
|
|
17.2 |
% |
* YoY – year over year
Total Operating Expenses
Total operating expenses were $53.5 million in
the third quarter of 2022, an increase of 16.5% from $45.9 million
in the same period of 2021.
● Cost of revenues were
$48.4 million in the third quarter of 2022, an increase of 20.1%
from $40.3 million in the same period of 2021. The increase was
primarily due to increased weighted average unit cost. The weighted
average unit cost was $4.56 per unit for the third quarter of 2022,
which increased by 20.1% from $3.79 per unit for the same period of
2021. This was because the Company has sold more premium brand
products, which are higher in unit cost than its self-branded and
other generic products. Cost of revenue as a percentage of total
revenues was 94.1%, up from 91.9% in the same period of 2021. The
Company periodically purchases merchandise from a related party
controlled by the Chief Executive Officer and Chairman of the
Company, during the ordinary course of business. For the third
quarter of 2022, products purchased from this related party were
$12.0 million, or 25.3% of the total purchases of the Company.
● Fulfillment expenses
primarily consist of costs related to order fulfillment, including
expenses paid for order preparing, packaging, outbound freight, and
physical storage. Fulfillment expenses were $1.2 million in the
third quarter of 2022, a decrease of 28.2% from $1.6 million in the
same period of 2021. The decrease was primarily due to $0.5 million
decrease in shipping costs. Since more customers elected to
self-pickup purchased products from the Company’s facilities, which
led to decrease in outbound freight costs. Fulfillment expenses as
a percentage of total revenues were 2.3%, down from 3.7% in the
same period of 2021.
● Marketing expenses
primarily consist of targeted online advertising, payroll and
related expenses for personnel engaged in marketing and selling
activities. Marketing expenses were $3.2 million in the third
quarter of 2022, an increase of 27.2% from $2.5 million in the same
period of 2021. The increase was mainly attributable to the
increased costs in advertising and promotional activities. These
increased expenditures were primarily for further enhancing brand
awareness in strategic locations with China. Marketing expense as
percentage of total revenues was 6.2% in the third quarter of 2022,
up from 5.7% in the same period of 2021.
● General and
administrative expenses mainly consist of payroll, depreciation,
office supplies and upkeep expenses. General and administration
expenses were $0.7 million in the third quarter of 2022, a decrease
of 50.9% from $1.5 million in the same period of 2021. The decrease
was primarily due to a decrease in share-based compensation for
services provided by a third-party consultant. General and
administration expenses as percentage of total revenues was 1.4% in
the third quarter of 2022, down from 3.4% in the same period of
2021.
Operating loss
Operating loss was $2.1 million, compared to the
operating loss of $2.1 million in the same period of 2021.
Operating loss was primarily due to the implementation of the
Company’s business expansion plan in increase of its customer and
distributor bases, products and brands promotions, and enhanced GMV
quality, which has significantly increased its cost of revenues and
marketing expenses.
Net loss
Net loss was $2.0 million, compared to net loss of $2.1 million
in the same period of 2021.
Earnings (Loss) per share
The Company computes earnings (loss) per share
(“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC
260”). Each Preferred Share of the Company has voting rights equal
to two Ordinary Shares of the Company and each Preferred Share is
convertible into one Ordinary Share at any time by its holder.
Except for voting rights and conversion rights, the Ordinary Shares
and the Preferred Shares shall rank pari passu with one another and
shall have the same rights, preferences, privileges and
restrictions. For the third quarter ended September 30, 2022 and
2021, the Company had no potential ordinary shares outstanding that
could potentially dilute EPS in the future.
Cash and cash equivalents
As of September 30, 2022, the Company had cash
and restricted cash of $6.1 million, among which $3.1 million
of the cash were held by Shanghai Juhao Information Technology Co.,
Ltd. (“Shanghai Juhao”) with banks and financial institutions
inside China as the Company conducted its operations primarily
through Shanghai Juhao, a consolidated variable interest entity
(“VIE”) of the Company in China.
For the third quarter of 2022, the Company
reported a net loss of $2.0 million and a negative operating cash
flows of $3.98 million. Since the Company went public in March
2021, it has focused on implementation of its business expansion
plan, which has significantly increased its cost of revenues,
marketing expenses and general and administrative
expenses.
Presently, the Company’s principal sources of
liquidity are from its operations, proceeds from its recent private
placements of $6.3 million, proceeds from its recent registered
direct offering of $3.6 million and the bank loan. With the
uncertainty of the current market and the impact of the COVID-19
pandemic, management believes it is necessary to enhance the
collection of its accounts receivable, control of its expenses, and
be cautious on operational decisions and project selections.
Based on the latest business plan of the
Company, Shanghai Juhao has reduced its promotion efforts and
expenditures since the second half of 2022, which will reduce its
cash flow used in operating activities. Therefore, management
believes that the above-mentioned measures, as well as existing
cash and restricted cash on hand of approximately
$6.1 million, will collectively provide sufficient liquidity
for the Company to meet its future liquidity and capital
requirements for at least next twelve months from the date this
announcement.
About Jowell Global Ltd.
Jowell Global Ltd. (the “Company”) is one of the
leading cosmetics, health and nutritional supplements and household
products e-commerce platforms in China. The Company offers its own
brand products to customers; also sells and distributes health and
nutritional supplements, cosmetic products and certain household
products from other companies on its platform. In addition, the
Company allows third parties to open their own stores on its
platform for a service fee based upon sale revenues generated from
their online stores. The Company provides them with its unique and
valuable information about market needs, enabling them to better
manage their sales effort, as well as an effective platform to
promote their brands. In addition, the Company sells its products
through authorized retail stores all across China, which operates
under the brand names of “Love Home Store” or “LHH Store” and
“Juhao Best Choice Store”. For more information, please
visit http://ir.1juhao.com/ .
Exchange Rate
The Company’s financial information is presented
in U.S. dollars (“USD”). The functional currency of the Company is
the Chinese Yuan, Renminbi (“RMB”), the currency of the PRC. Any
transactions which are denominated in currencies other than RMB are
translated into RMB at the exchange rate quoted by the People’s
Bank of China prevailing at the dates of the transactions, and
exchange gains and losses are included in the statements of
operations as foreign currency transaction gain or loss. The
consolidated financial statements of the Company have been
translated into U.S. dollars in accordance with ASC 830, “Foreign
Currency Matters”.
This press release contains translations of
certain RMB amounts into U.S. dollars (“USD” or “$”) at specified
rates solely for the convenience of the reader. The exchange rates
in effect as of September 30, 2022 and December 31, 2021 were RMB1
for $0.1406 and $0.1572, respectively. The average exchange rates
for the three months ended September 30, 2022 and 2021 were RMB1
for $0.1461 and $0.1546, respectively.
Safe Harbor Statement
This press release contains forward-looking
statements. These statements are made under the “safe harbor”
provisions of the U.S. Private Securities Litigation Reform Act of
1995. Statements that are not historical facts, including
statements about the Company’s beliefs and expectations, are
forward-looking statements. Forward-looking statements involve
inherent risks and uncertainties, and a number of factors could
cause actual results to differ materially from those contained in
any forward-looking statement. In some cases, forward-looking
statements can be identified by words or phrases such as “may,”
“will,” “expect,” “anticipate,” “target,” “aim,” “estimate,”
“intend,” “plan,” “believe,” “potential,” “continue,” “is/are
likely to” or other similar expressions. The Company may also make
written or oral forward-looking statements in its reports filed
with, or furnished to, the U.S. Securities and Exchange Commission,
in its annual reports to shareholders, in press releases and other
written materials and in oral statements made by its officers,
directors or employees to third parties. These statements are
subject to uncertainties and risks including, but not limited to,
the following: the Company’s goals and strategies; the Company’s
future business development; financial condition and results of
operations; product and service demand and acceptance; reputation
and brand; the impact of competition and pricing; changes in
technology; government regulations; fluctuations in general
economic and business conditions in China and assumptions
underlying or related to any of the foregoing and other risks
contained in reports filed by the Company with the SEC. For these
reasons, among others, investors are cautioned not to place undue
reliance upon any forward-looking statements in this press release.
Additional factors are discussed in the Company’s filings with the
SEC, which are available for review at www.sec.gov. The Company
undertakes no obligation to publicly revise these forward-looking
statements to reflect events or circumstances that arise after the
date hereof.
For investor and media inquiries, please
contact:
In China: Jowell Global Ltd. Ms. Jessie Zhao Email:
IR@1juhao.com
Seaquant Consulting Mr. Roye Zhang Email: roye@sea-quant.com
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