Breaking News: Xspand Products Lab, Inc. Provides Second Quarter 2018 Corporate Update and Financial Results

Xspand Products Lab, Inc. (NASDAQ: XSPL), a full-service product development company, today provided a corporate update and reported its financial results for the second quarter ended June 30, 2018.

Recent Operational Highlights:

  • Announced the intent to acquire Edison Nation, LLC (Edison Nation), a current strategic partner, providing Xspand with an engine for product innovation and a strong pipeline of micro-brand opportunities.
  • Engaged with Church & Dwight, BLACK + DECKER, and Worthington Industries to launch innovation searches in product categories of each companies’ respective area of interest, aggregating relevant submissions through the Company’s Edison Nation platform.
  • Launched a new Crowdfunding tool by which Xspand will cover development and crowdfunding campaign-related costs for select, high-potential ideas, allowing products to reach the market at lightening-speed to maximize sales and reduce total R&D costs.
  • Signed with Great Wolf Lodge as a customer, an operator of 18 water park resorts, to create a line of customized traditional and interactive products.
  • Announced development of an innovative new line of interactive light-up consumer products for theme park and entertainment venue markets.
  • Announced an exclusive two-year manufacturing agreement with a leading children’s sleep products brand with sales in North America, Europe, Asia, and Australia.
  • Signed a micro-brand licensing deal with Culinary Kraft, LLC to launch the Wi-Fi ready, remote controlled MasterSous 8?in?1 multi?cooker with autonomous magnetic stirring.
  • Signed a letter of intent to build a new 80,000 square foot production facility in Alpha, New Jersey to supplement the Company’s 30,000 square foot current facility. The Company plans to consolidate all of its U.S. subsidiaries to the new facility, which will reduce overhead expenses and increase product-level gross margins.
  • Successfully completed an initial public offering in May 2018, selling an aggregate of 1,307,120 shares of its common stock at a public offering price of $5.00 per share, resulting in gross proceeds of approximately $6.5 million.

Management Commentary
“During our first quarter as a public company, we reported dramatic growth in our work-in-process which reached $1.2 million during the second quarter. This growth was driven by orders from many of our OEM customers and doesn’t include backlog from additional orders we received during the second quarter,” said Chris Ferguson, Chief Executive Officer of Xspand Products Lab. “In the quarter we also signed deals with several significant new customers including Church & Dwight, BLACK + DECKER, Worthington Industries and Great Wolf Lodge. We expect revenue from these new customers, and others, to contribute to our growth in the second half of the year.”

“Subsequent to the end of the second quarter, we announced the acquisition of our strategic partner, Edison Nation. The acquisition is expected to close in the near future and will be immediately accretive to our business. Edison Nation has been a great strategic partner and now, as part of Xspand, they will serve as our engine for product innovation and provide a strong pipeline of micro-brand opportunities for us to leverage. We believe that this acquisition, combined with Xspand’s growing customer base of blue chip clients and the proceeds of our successful IPO, positions us well for future growth,” concluded Mr. Ferguson.

Second Quarter 2018 Financial Results
Revenue in the second quarter of 2018 totaled $4.4 million, compared to $4.5 million in the second quarter of 2017.

Work in process related to firm commitment purchase orders received from Xspand’s customers totaled $1.2 million as set forth on the balance sheet in the second quarter of 2018, compared to $64,000 in the same year-ago quarter. Collectively, these work in process orders and revenues increased 21% to $5.6 million in the second quarter, compared to $4.6 million the the same year-ago quarter. A majority of the work in process order received in the second quarter of 2018 is expected to be delivered and recognized in the third quarter of 2018.

Gross profit totaled $1.3 million in the second quarter of 2018, compared to $1.2 million in the second quarter of 2017. Gross profit margin as a percentage of revenue increased to 28.8% in the second quarter of 2018, compared to 27.6% in the second quarter of 2017. The increase in gross profit margin as a percentage of revenues was primarily due to lower per unit fixed costs resulting from the increase in revenues.

Operating expenses were $1.7 million in the second quarter of 2018, compared to $0.7 million in the second quarter of 2017. The increase was primarily attributable to certain one-time indirect costs incurred related to the IPO, as well as increased salaries related to the hiring of Xspand employees and executives during second quarter of 2018.

Net loss totaled $0.7 million, or ($0.18) per basic and diluted share, in the second quarter of 2018, compared to net income of $0.6 million, or $0.19 per basic and diluted share, in the second quarter of 2017. The decrease in net income was primarily due to the aforementioned increase in operating expenses, of which $0.3 million were non-cash stock compensation expenses.

Adjusted EBITDA totaled $0.2 million after one-time and non-cash charges in the second quarter of 2018, compared to $0.7 million in the second quarter of 2017. See below under the heading, “Use of Non-GAAP Financial Information” for a discussion of Adjusted EBITDA and a reconciliation of such measure to the most comparable measure calculated under U.S. generally accepted accounting principles (“GAAP”).

Cash and cash equivalents at June 30, 2018 totaled $3.9 million, as compared to $1.1 million at March 31, 2018. In April 2018, Xspand successfully completed a public offering, selling an aggregate of 1,307,120 shares of its common stock at a public offering price of $5.00 per share, resulting in approximately $6.5 million in gross proceeds. The Company believes it currently has sufficient funds to meet its working capital, debt service and capital expenditure requirements for at least the next 12 months.

Further details about Xspand’s results in the second quarter of 2018 are available in its Quarterly Report on Form 10-Q, accessible in the investor relations section of the Company’s website at www.xspandproductslab.com and through the U.S. Securities and Exchange Commission’s website.

More Information On Xspand Product Labs and Edison Nation
Edison Nation (www.EdisonNation.com) is an open innovation platform that enables inventors from around the world to submit ideas for potential consumer and medical products. On average, Edison Nation’s online platform receives 50-75 submissions per day. Using this business model, Edison Nation offers a capital-lite, high-reward process that accelerates product development timelines and significantly reduces research and development expenses.

Click here for a brief video interview discussing the recently proposed acquisition with Chris Ferguson, Founder and CEO of Xspand Products Lab, and Louis Foreman, Founder and CEO of Edison Nation.

Since inception, Edison Nation has received over 100,000 idea submissions, with products selling in excess of $250 million at retail through the management of over 300 campaigns in their marketplace for clients. These clients include many of the largest manufacturers and retailers in the world such as Amazon, Bed Bath and Beyond, HSN, Rite Aid, P&G, Jarden and more.

New Crowdfunding Opportunity
Together with Xspand, Edison Nation is rolling out its new Crowdfunding tool, which was introduced to drive higher success potential for ideas to be commercialized. Investors submit their ideas through the Edison Nation website, and for all ideas chosen from the Crowdfunding search, Edison Nation will handle the costs to develop the products and run their respective crowdfunding campaigns. Successful campaigns will provide a stronger position for products to be commercialized, either directly by Edison Nation and Xspand, or through traditional licensing agreements.

Chris Ferguson, added: “Utilizing the efficient and effective opportunities that exist with crowdfunding, we are able to identify proprietary products through idea submission, find the ‘best of the best’, and launch them into the market quickly. Together, we are able to not only source these great ideas, but assist with everything from manufacturing and product development, to fulfillment and logistics and sales and marketing. This de-risked business model provides both the inventor and our companies a significant opportunity to grow quickly, while realizing maximum sales potential for a given product.”

Edison Nation’s proprietary platform ensures privacy of intellectual property through binding agreements and it streamlines communication and negotiations with innovators. For over 10 years, Edison Nation has been and continues to be the trusted destination for innovators, partners and consumers alike and the trusted leader for quality innovation.

 

Sponsored Content Release. Click for Full Disclosure

 

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