UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
OF THE SECURITIES EXCHANGE ACT OF 1934
For the month of August, 2018
Commission File Number 001-38055
NETSHOES (CAYMAN) LIMITED
(Exact name of registrant as specified in its charter)
| The Cayman Islands | 98-1007784 | |
| (State of incorporation or organization) | (I.R.S. Employer Identification No.) |
Rua Vergueiro 961, Liberdade
01504-001 São Paulo, São Paulo, Brazil
+55 11 3028-3528
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form20-F or Form40-F:
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form6-K in paper as permitted by RegulationS-T Rule 101(b)(1):
Yes ☐ No ☒
Indicate by check mark if the registrant is submitting the Form6-K in paper as permitted by RegulationS-T Rule 101(b)(7):
Yes ☐ No ☒
Netshoes Limited Announces Second Quarter 2018 Results
São Paulo, Brazil – August 9, 2018 – Netshoes (Cayman) Ltd. (NYSE:NETS) (“Netshoes”), Latin America’s leading online retailer of sporting and lifestyle goods, today reported unaudited consolidated financial results for the three andsix-month period ended June 30, 2018. The results are stated in Brazilian Reais (“R$”) and prepared in accordance with International Accounting Standard 34, “Interim Financial Reporting”.
Second Quarter 2018 Key Highlights
| • | Net sales of R$449.8 million, down 2.5% year-over-year, impacted by trucker’s strike and warmer winter |
| • | GMV of R$630.0 million, up 2.0% year-over-year (FX neutral), with Marketplace GMV up 72.7% year-over-year, accounting for 11% of total GMV (+5 p.p. YoY) |
| • | Adjusted EBITDA of R$0.2 million, with positive EBITDA margin, 1.1 percentage points (p.p.) higher year-over-year |
| • | Net loss of R$38.1 million, with negative 8.5% net margin |
| • | Total net working capital cycle reduction of 16 days to 46 days over1Q-2018, with B2C net working capital reduction of 13 days to 16 days |
| • | Operating cash flow generation of R$70 million, with cash equivalents of R$75 million |
Subsequent Events
| • | Debt restructuring completed: R$107.7 million deferred with twelve months grace period andone-year term extension |
| • | Agreement to sell Netshoes Mexico to Grupo Sierra Capital |
Operating and Financial Metrics Highlights
| Change% | Change% | |||||||||||||||||||||||||||||||
Operating Data | 2Q-2017 | 2Q-2018 | YoY | YoY FX Neutral | 1H- 2017 | 1H- 2018 | YoY | YoY FX Neutral | ||||||||||||||||||||||||
Registered Members (in thousands) | 19,972 | 23,964 | 20.0 | % | 19,972 | 23,964 | 20.0 | % | ||||||||||||||||||||||||
Active Customers (in thousands) | 5,946 | 6,829 | 14.9 | % | 5,946 | 6,829 | 14.9 | % | ||||||||||||||||||||||||
Invoiced Orders (in thousands) | 2,866 | 2,925 | 2.0 | % | 5,362 | 5,740 | 7.1 | % | ||||||||||||||||||||||||
Orders Placed from Mobile Device % | 42.9 | % | 54.1 | % | +11.2p.p. | 41.0 | % | 53.3 | % | +12.3p.p. | ||||||||||||||||||||||
Average Basket Size (in R$) | 209.0 | 213.4 | 2.1 | % | 4.2 | % | 205.4 | 204.7 | (0.3 | )% | 1.4 | % | ||||||||||||||||||||
GMV (in millions) | 630.7 | 630.0 | (0.1 | )% | 2.0 | % | 1,161.9 | 1,188.6 | 2.3 | % | 4.0 | % | ||||||||||||||||||||
GMV—B2C (in millions) | 599.1 | 624.2 | 4.2 | % | 6.4 | % | 1,101.1 | 1,175.3 | 6.7 | % | 8.5 | % | ||||||||||||||||||||
Marketplace GMV (as % of total GMV) | 6.4 | % | 11.1 | % | +4.7p.p. | 5.9 | % | 11.3 | % | +5.4p.p. | ||||||||||||||||||||||
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| Change% | Change% | |||||||||||||||||||||||||||||||
Financial Data (In R$ Millions) | 2Q-2017 | 2Q-2018 | YoY | YoY FX Neutral | 1H- 2017 | 1H- 2018 | YoY | YoY FX Neutral | ||||||||||||||||||||||||
Net Sales | 461.3 | 449.8 | (2.5 | )% | (0.4 | )% | 857.6 | 849.1 | (1.0 | )% | 0.7 | % | ||||||||||||||||||||
Net Sales—Brazil | 407.5 | 400.5 | (1.7 | )% | 763.0 | 760.8 | (0.3 | )% | ||||||||||||||||||||||||
Net Sales—International | 53.8 | 49.3 | (8.3 | )% | 9.5 | % | 94.5 | 88.3 | (6.6 | )% | 8.4 | % | ||||||||||||||||||||
Gross Margin % | 33.1 | % | 30.6 | % | (2.5 | )p.p. | 33.0 | % | 30.4 | % | (2.5 | )p.p. | ||||||||||||||||||||
Adjusted EBITDA Margin % | (1.0 | )% | 0.0 | % | +1.1p.p. | (0.1 | )% | (3.4 | )% | (3.3 | )p.p. | |||||||||||||||||||||
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| (1) | For a reconciliation of net sales to GMV, see page 10 below. |
| (2) | For a reconciliation of net loss to Adjusted EBITDA Margin, see page 11 below |
1
Message from the Founder and CEO, Marcio Kumruian:
During2Q-2018 we made important progress on several fronts of the business as we continue to pursue a more moderate growth strategy in our B2C online operation to focus on achieving profitability.
Our B2C online operation grew 6.4%year-over-year on an FX neutral basis, impacted along with the rest of the retail and fashion industry in Brazil by the truckers’ strike in May and a warmer winter season. These events not only affected sales, but also margins during the quarter. In this environment we acted quickly to increase efficiency of our marketing spend while we benefited from lowered technology maintenance costs due to the implementation of our new IT platform. Additionally, we took further steps to rationalize other general and administrative expenses. A combination of these actions resulted in an improvement of our operating results during the quarter.
We have a concrete action plan in place aimed at improving our business economics. We are already seeing initial traction, including a reduction in the inventory cycle by 17 days as compared to1Q-2018, contributing significantly to the R$70 million operating cash generation. Importantly, we have also restructured of the Company’s bank debt, deferring R$108 million in principal amortization through atwelve-month grace period and a one-year term extension. These changes are providing more financial comfort during the time our operations need to respond to the changes we are implementing in the short-term.
Looking ahead we continue to work hard to strengthen the foundation for long-term sustainable growth. As part of our deep dive into our business, we have engaged a top tier external consultancy firm to work alongside our team to assess our entire product portfolio, the mix shift from 1P to 3P, and our pricing strategy and inventory management, optimizing gross margins and further reducing working capital needs.
We are focused on streamlining SG&A expenses and are preparing to execute aZero-Base Budget to eliminate inefficiencies. In addition, we continue to reduce losses from our international operations. During2Q-2018, we managed to improve the international operation’s EBITDA margin by 8.1 p.p. and 5.8 p.p. during the first half of the year.
As announced, in early August we entered into an agreement with Grupo Sierra Capital, a private equity fund that invests in Mexico, Central America and Caribbean, to sell the entirety of our operations in Mexico. This divestment is in line with our strategy of focusing on and expanding those markets with the greatest near to medium term e-commerce growth potential to increase consolidated profitability and create long-term value to shareholders.
The changes we have been implementing throughout the organization are meaningful and we expect them to translate to a more positive result and performance going forward. We are confident that we are building a better, more sustainable business. While the environment has been challenging, we remain convinced that there is significant medium tolong-term upside for Netshoes in our markets. We are grateful for your continued support.
2
Overview of Second Quarter 2018 Results
| Change% | Change% | |||||||||||||||||||||||||||||||
Consolidated P&L (In R$ Millions) | 2Q-2017 | 2Q-2018 | YoY | FX Neutral | 1H-2017 | 1H-2018 | YoY | FX Neutral | ||||||||||||||||||||||||
GMV ¹ | 630.7 | 630.0 | (0.1 | )% | 2.0 | % | 1,161.9 | 1,188.6 | 2.3 | % | 4.0 | % | ||||||||||||||||||||
Net Sales—Brazil | 407.5 | 400.5 | (1.7 | )% | 763.0 | 760.8 | (0.3 | )% | ||||||||||||||||||||||||
Net Sales—International | 53.8 | 49.3 | (8.3 | )% | 9.5 | % | 94.5 | 88.3 | (6.6 | )% | 8.4 | % | ||||||||||||||||||||
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Net Sales | 461.3 | 449.8 | (2.5 | )% | (0.4 | )% | 857.6 | 849.1 | (1.0 | )% | 0.7 | % | ||||||||||||||||||||
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Cost of Sales | (308.5 | ) | (312.0 | ) | 1.1 | % | (575.0 | ) | (590.7 | ) | 2.7 | % | ||||||||||||||||||||
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Gross Profit | 152.8 | 137.8 | (9.8 | )% | 282.6 | 258.4 | (8.6 | )% | ||||||||||||||||||||||||
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% Gross Margin | 33.1 | % | 30.6 | % | -2.5p.p. | 33.0 | % | 30.4 | % | -2.5p.p. | ||||||||||||||||||||||
Operating Expenses | (157.5 | ) | (137.6 | ) | (12.6 | )% | (283.6 | ) | (287.1 | ) | 1.2 | % | ||||||||||||||||||||
% of Sales | (34.1 | )% | (30.6 | )% | -3.5p.p. | (33.1 | )% | (33.8 | )% | 0.7p.p. | ||||||||||||||||||||||
Selling and Marketing Expenses(ex-A&D)² | (119.8 | ) | (108.5 | ) | (9.5 | )% | (220.5 | ) | (217.4 | ) | (1.4 | )% | ||||||||||||||||||||
% of Sales | (26.0 | )% | (24.1 | )% | -1.9p.p. | (25.7 | )% | (25.6 | )% | -0.1p.p. | ||||||||||||||||||||||
General and Administrative Expenses(ex-A&D)² | (36.6 | ) | (28.1 | ) | (23.1 | )% | (61.0 | ) | (67.7 | ) | 11.0 | % | ||||||||||||||||||||
% of Sales | (7.9 | )% | (6.3 | )% | -1.7p.p. | (7.1 | )% | (8.0 | )% | 0.9p.p. | ||||||||||||||||||||||
Other Operating Expenses | (1.0 | ) | (1.0 | ) | (5.7 | )% | (2.1 | ) | (2.1 | ) | (1.6 | )% | ||||||||||||||||||||
% of Sales | (0.2 | )% | (0.2 | )% | -0.0p.p. | (0.2 | )% | (0.2 | )% | -0.0p.p. | ||||||||||||||||||||||
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ADJUSTED EBITDA | (4.6 | ) | 0.2 | 104.5 | % | (1.0 | ) | (28.7 | ) | (2717 | )% | |||||||||||||||||||||
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% of Sales | (1.0 | )% | 0.0 | % | 1.1p.p. | (0.1 | )% | (3.4 | )% | -3.3p.p. | ||||||||||||||||||||||
Certain Other Net Financial Result | (4.3 | ) | (5.8 | ) | 36.2 | % | (4.8 | ) | (8.1 | ) | 69.1 | % | ||||||||||||||||||||
% of Sales | (0.9 | )% | (1.3 | )% | 0.4p.p. | (0.6 | )% | (1.0 | )% | 0.4p.p. | ||||||||||||||||||||||
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EBITDA | (8.9 | ) | (5.6 | ) | 37.0 | % | (5.8 | ) | (36.9 | ) | (533.7 | )% | ||||||||||||||||||||
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% of Sales | (1.9 | )% | (1.2 | )% | 0.7p.p. | (0.7 | )% | (4.3 | )% | -3.7p.p. | ||||||||||||||||||||||
Amortization and Depreciation | (7.6 | ) | (18.1 | ) | 139.3 | % | (15.7 | ) | (34.0 | ) | 117.1 | % | ||||||||||||||||||||
% of Sales | (1.6 | )% | (4.0 | )% | 2.4p.p. | (1.8 | )% | (4.0 | )% | 2.2p.p. | ||||||||||||||||||||||
Net Adjusted Financial Result ³ | (18.7 | ) | (14.4 | ) | (23.0 | )% | (51.4 | ) | (27.6 | ) | (46.3 | )% | ||||||||||||||||||||
% of Sales | (4.0 | )% | (3.2 | )% | -0.9p.p. | (6.0 | )% | (3.2 | )% | -2.7p.p. | ||||||||||||||||||||||
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Income/(Loss) Before Income Tax | (35.2 | ) | (38.1 | ) | (8.4 | )% | (72.9 | ) | (98.4 | ) | 35.1 | % | ||||||||||||||||||||
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% of Sales | (7.6 | )% | (8.5 | )% | -0.9p.p. | (8.5 | )% | (11.6 | )% | -3.1p.p. | ||||||||||||||||||||||
Current Income Tax | — | — | — | — | ||||||||||||||||||||||||||||
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Net Income/(Loss) | (35.2 | ) | (38.1 | ) | (8.4 | )% | (72.9 | ) | (98.4 | ) | (35.1 | )% | ||||||||||||||||||||
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% of Sales | (7.6 | )% | (8.5 | )% | -0.9p.p. | (8.5 | )% | (11.6 | )% | -3.1p.p. | ||||||||||||||||||||||
| (1) | For a reconciliation of net sales to GMV, see page 10 below. |
| (2) | For a reconciliation of EBITDA and Adjusted EBITDA, please see page 11 below. |
| (3) | For a reconciliation of financial income/expense to Certain Other Net Financial Result and Net Adjusted Financial Result, see page 10 below. |
Operating Metrics
The Company’s business is organized into two segments: (1) Brazil, which consists of the B2Ce-commerce operations of Netshoes (sporting goods) and Zattini (fashion), and thebusiness-to-business (B2B) operation mainly comprised of supplements sales; and (2) International, which includes Argentina and Mexico B2Ce-commerce operations.
Registered members increased 20.0% year-over-year to 24.0 million in2Q-2018, of which 6.8 million, or 28.5%, were active customers (up 14.9% year-over-year).
The Company continued migration of consumer purchasing habits to mobile devices, with 54.1% of total orders placed from mobile devices in2Q-2018, a 11.2 p.p. increase over2Q-2017.
3
GMV from the B2C operation grew 6.4% year-over-year on an FX neutral basis in2Q-2018 (4.2% on as reported basis), driven by a 4.1% year-over-year increase in Netshoes Brazil GMV, a 14.2% year-over-year increase in Zattini’ s GMV, and an 8.0% year-over-year increase in Netshoes International GMV.
| • | During the quarter, the11-day truckers’ strike (May 2018) severely disrupted Brazil’s supply and logistical activities, negatively impacting B2C GMV year-over-year growth. Based on the reduction in demand during the period, the Company estimates the impact of the strike was approximately 5.0 p.p. |
| • | Zattini’s fashion collection in Brazil was negatively affected by a warm winter season. |
| • | International GMV growth was mainly driven by an increase of 11.3% in Argentina’s GMV on a local currency basis which was partially offset by Mexico’s 1.4% GMV decrease. |
| • | In2Q-2018, invoiced orders increased 2.0% year-over-year while average basket size increased 4.2% on an FX neutral basis. |
GMV for the B2B operation amounted to R$5.9 million in2Q-2018, accounting for 0.9% of total consolidated GMV, down 81.4% year-over-year, impacting the consolidated Company’s growth by 4.3 p.p.
As a result, total consolidated GMV in2Q-2018 was R$630.0 million, a 2.0% increase on an FX neutral basis and in line with2Q-2017 on an as reported basis.
Marketplace GMV (Netshoes & Zattini in Brazil) amounted to R$70.2 million and accounted for 11.1% of total consolidated GMV (12.4% of GMV Brazil), an increase of 72.7% or 4.7 p.p. year-over-year. As of June 30, 2018, the Company’s total vendor base was comprised of 900 qualified third-party B2C vendors, an increase of 395 vendors year-over-year and an increase of 10.0% over1Q-2018.
The Company’s private label collection brands and licensing products continue to grow as a proportion of GMV, reflecting increased sales of the existing portfolio and new licensed products. Sales of products in these categories in2Q-2018 represented 11.0% of consolidated GMV (12.3% of GMV in Brazil) representing a 1.2 p.p. increase year-over-year.
Revenue
Consolidated net sales were R$449.8 million in2Q-2018, a 2.5% decrease year-over-year(-0.4% on an FX neutral basis). Consolidated net sales considering only the B2C operation was down 0.7% (+1.4% on an FX neutral basis).
| • | Net sales for Brazil decreased 1.7% year-over-year to R$400.5 million. Considering only the B2C operation, net sales were flat with the same period last year mainly due to the above-mentioned effects caused by the truckers’ strike and the warm winter season. |
| • | Net sales for the International business in2Q-2018 was R$49.3 million, an 8.3% decrease year-over-year on an as reported basis and up 9.5% on an FX neutral basis. This reflects the Company’s strategy to moderate sales in Mexico while focusing on profitability and was supported by growth in Argentina. |
4
Gross Profit
Gross profit in2Q-2018 was R$137.8 million, a 9.8% decrease year-over-year. Gross margin was 30.6% in2Q-2018, a 2.5 p.p. decrease when compared to same period last year. During the quarter, the ongoing revenue mix shift to marketplace and the other margin enhancing initiatives positively impacted gross margin in 1.8 p.p., more than offsetting the negative 1.7 p.p. impact from changes in thee-commerce taxation regime in Brazil (EC 87, in place since 2016). Other impacts, however, have negatively affected gross margin such as:
| • | Accounts payable Adjustment to Present Value (APV) accounting on cost negatively impacted gross margin by 1.4 p.p. This was a direct result of the Company’s adjustments in procurement activities to reduce inventory levels, improving quality and decreasing future short-term working capital investments. |
| • | The B2B operation negatively impacted gross margin by 0.9 p.p. The Company increased its efforts to lower the inventory level of supplement products by commencing additional sales through Netshoes B2C online channel. |
| • | The warmer than expected winter season impact on Zattini’s fashion collection in Brazil negatively impacted gross margin by 0.3 p.p. according to Company estimates. |
Operating Expenses
Operating expenses, net of depreciation and amortization, were R$137.6 million in2Q-2018, 12.6% lower than2Q-2017. As a percentage of net sales, operating expenses were 30.6%, compared to 34.1% in2Q-2017.
Selling and marketing expenses, net of depreciation and amortization, decreased 9.5% year-over-year in2Q-2018 to R$108.5 million, representing 24.1% of net sales compared to 26.0% of net sales in2Q-2017. This decrease was mainly attributed to lower expenses in branding campaigns, driving marketing investments down 0.7 p.p., and lower chargeback expenses.
General and administrative expenses, net of depreciation and amortization, were R$28.1 million in2Q-2018, 23.1% lower in comparison to2Q-2017, representing 6.3% of net sales, versus 7.9% of net sales in2Q-2017. This reduction is mainly related to the rationalization of administrative expenses and lower IT expenses.
Adjusted EBITDA & Net Loss
Consolidated Adjusted EBITDA was R$0.2 million in2Q-2018 (0.0% Adj. EBITDA margin) compared to negative R$4.6 million in2Q-2017(-1.0% Adj. EBITDA margin). In2Q-2018, the negative impact from B2B operations amounted to R$4.2 million, compared to a positive contribution of R$1.4 million in2Q-2017.
| • | Adjusted EBITDA for the Brazilian operation in2Q-2018 was R$8.0 million (2.0% Adj. EBITDA margin), which includes a R$4.2 million negative impact from the B2B operation. This compares to positive R$9.8 million Adj. EBITDA (2.4% Adj. EBITDA margin) in2Q-2017, which was positively impacted by R$1.4 million from the B2B operation. |
| • | Adjusted EBITDA loss for the International operations in2Q-2018 was R$6.4 million(-12.9% Adj. EBITDA margin), compared to a R$11.3 million loss in2Q-2017(-21.0% Adj. EBITDA margin). |
Consolidated net loss was R$38.1 million in2Q-2018(-8.5% net margin), compared to net loss of R$35.2 million(-7.6% net margin) in2Q-2017. Despite the better EBITDA and higher efficiency in financial results, in2Q-2018 depreciation and amortization expenses increased by R$10.5 million year-over-year mainly due to the accelerated depreciation of the Company’s formere-commercefront-end system following the implementation of the new proprietary system in February 2018.
Balance Sheet and Cash Flow
In2Q-2018, the Company generated R$69.6 million in net cash flow from operating activities versus a use of cash of R$28.3 million in2Q-2017. The R$97.9 million year-over-year improvement was mainly a result of a R$46.4 million inventory reduction, R$39.0 million of recoverable taxes and judicial deposits, and a R$22.6 million higher contribution from factoring arrangements. Factoring arrangements contributed to a cash generation of R$61.0 million in2Q-2018 compared to R$38.5 million in2Q-2017.
Cash used in investing activities amounted to R$20.4 million in2Q-2018 and was mainly related to the development of the Company’s information technology infrastructure and regular maintenance capex of the Company’s distribution centers. In2Q-2017, cash used in investing activities amounted to R$24.2 million.
5
Cash used in financing activities amounted to R$35.4 million in2Q-2018 and was mainly related to principal amortization and interest payments on financial debt, while in2Q-2017, the Company generated R$380.7 million in cash related to proceeds from its IPO, net from the period’s financial expenses and debt amortization.
Due to the above, change in cash and cash equivalents was R$14.6 million in2Q-2018 compared to R$335.4 million in2Q-2017. Cash and cash equivalent as of June 30, 2018 were R$75.3 million, compared to R$419.9 million as of June 30, 2017.
Cash Flow Statement (In R$ Millions) | 2Q-2017 | 2Q-2018 | 1H-2017 | 1H-2018 | ||||||||||||
Net loss | (35.2 | ) | (38.1 | ) | (72.9 | ) | (98.4 | ) | ||||||||
Depreciation and amortization | 7.6 | 18.1 | 15.7 | 34.0 | ||||||||||||
Interest expense, net | 27.3 | 16.0 | 61.9 | 32.4 | ||||||||||||
Others | 2.5 | 5.5 | (1.8 | ) | 19.1 | |||||||||||
Adjusted Net Loss | 2.3 | 1.5 | 2.9 | (13.0 | ) | |||||||||||
Trade accounts receivable | 18.0 | 7.4 | 84.9 | 4.8 | ||||||||||||
Inventories | (1.9 | ) | 44.5 | (40.8 | ) | 27.0 | ||||||||||
Trade accounts payable / Reverse Factoring | (2.8 | ) | (8.9 | ) | (51.2 | ) | (188.7 | ) | ||||||||
Changes in Working Capital | 13.3 | 43.0 | (7.1 | ) | (157.0 | ) | ||||||||||
Restricted Cash | (0.2 | ) | 0.5 | 3.1 | (2.2 | ) | ||||||||||
Recoverable taxes | (19.1 | ) | 10.2 | (34.7 | ) | 7.8 | ||||||||||
Judicial deposits | (12.8 | ) | (3.0 | ) | (23.6 | ) | (6.0 | ) | ||||||||
Accrued expenses | 6.5 | 11.7 | (31.4 | ) | (15.2 | ) | ||||||||||
Others | (18.3 | ) | 5.7 | (16.0 | ) | (5.3 | ) | |||||||||
Total Changes in Assets and Liabilities | (43.9 | ) | 25.1 | (102.5 | ) | (21.0 | ) | |||||||||
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Net Cash Provided by (Used In) Operating Activities | (28.3 | ) | 69.6 | (106.8 | ) | (190.9 | ) | |||||||||
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Capex | (14.1 | ) | (24.1 | ) | (27.3 | ) | (51.5 | ) | ||||||||
Interest received on installment sales | (9.8 | ) | 0.2 | 0.2 | 1.1 | |||||||||||
Restricted cash | (0.2 | ) | 3.5 | 0.6 | 1.3 | |||||||||||
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Net Cash Provided by (Used in) Investing Activities | (24.2 | ) | (20.4 | ) | (26.4 | ) | (49.1 | ) | ||||||||
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Proceeds / Payment of debt | (26.9 | ) | (20.3 | ) | 71.0 | (48.2 | ) | |||||||||
Payments of interest | (16.9 | ) | (15.1 | ) | (61.0 | ) | (32.7 | ) | ||||||||
Proceeds from issuance of common stock | 424.5 | 0.0 | 424.5 | 0.0 | ||||||||||||
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Net Cash Provided by (Used in) Financing Activities | 380.7 | (35.4 | ) | 434.5 | (80.9 | ) | ||||||||||
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Effect of exchange rate changes on cash and cash equivalents | 7.1 | 0.8 | 7.3 | 0.2 | ||||||||||||
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Change in Cash and Cash Equivalents | 335.4 | 14.6 | 308.6 | (320.7 | ) | |||||||||||
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Cash and cash equivalents, beginning of period | 84.6 | 60.7 | 111.3 | 396.0 | ||||||||||||
Cash and cash equivalents, end of period | 419.9 | 75.3 | 419.9 | 75.3 | ||||||||||||
In2Q-2018, the Company’s net working capital cycle was 46 days, 16 days lower than1Q-2018 and in line with2Q-2017. The B2C business net working capital cycle decreased 13 days from1Q-2018 to 16 days.
Trade accounts receivable cycle decreased by 3 days year-over-year to 17 days in2Q-2018 mainly due to lower volume of outstanding receivables from the B2B operation. Trade accounts receivable cycle from the B2C operation was 13 days, in line with same period last year.
Inventory cycle increased 3 days when compared to2Q-2017 mainly impacted by the corrective actions taken during the second half of 2017 in the B2B business. The inventory cycle from the B2C operation was 104 days in2Q-2018, 10 days lower when compared to 114 days in2Q-2017 and 11 days lower than1Q-2018.
Trade accounts payable cycle was 101 days, in line with2Q-2017, and 2 days lower than1Q-2018.
6
In Days | 2Q-2017 | 4Q-2017 | 1Q-2018 | 2Q-2018 | ||||||||||||
Trade Accounts Receivable | 20 | 18 | 18 | 17 | ||||||||||||
Inventories | 127 | 144 | 147 | 130 | ||||||||||||
Trade Accounts Payable / Reverse Factoring | 101 | 156 | 103 | 101 | ||||||||||||
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Cash Conversion Cycle | 46 | 7 | 62 | 46 | ||||||||||||
In2Q-2018 the net debt position was R$128.4 million, a R$29.3 million reduction from1Q-2018. When compared to the net cash of R$94.3 million in2Q-2017, net debt increased R$222.7 million.
In the year-over-year comparison, total debt was reduced from R$365.1 million in2Q-2017 to R$239.1 million in2Q-2018 as a result of (i) the regular debt amortization schedule and (ii) the accelerated amortization of R$65.1 million in3Q-2017, partially offset by the R$26.7 million FINEP new credit line.
DEBT (In R$ Millions) | 2Q-2017 | 4Q-2017 | 1Q-2018 | 2Q-2018 | ||||||||||||
Working Capital | 260.9 | 175.0 | 157.1 | 147.9 | ||||||||||||
Short-term | 76.0 | 68.3 | 66.1 | 72.7 | ||||||||||||
Long-term | 185.0 | 106.7 | 91.0 | 75.2 | ||||||||||||
Debenture | 103.2 | 84.2 | 74.9 | 65.5 | ||||||||||||
Short-term | 38.1 | 37.7 | 37.7 | 37.6 | ||||||||||||
Long-term | 65.1 | 46.5 | 37.2 | 27.9 | ||||||||||||
Other | 1.0 | 26.7 | 25.9 | 25.7 | ||||||||||||
Short-term | 0.9 | 0.5 | 0.3 | 0.1 | ||||||||||||
Long-term | 0.1 | 26.2 | 25.5 | 25.6 | ||||||||||||
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| |||||||||
TOTAL DEBT (R$) | 365.1 | 286.0 | 257.8 | 239.1 | ||||||||||||
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| |||||||||
Short-term (%) | 31 | % | 37 | % | 40 | % | 46 | % | ||||||||
Long-term (%) | 69 | % | 63 | % | 60 | % | 54 | % | ||||||||
(-) Total Cash | (459.4 | ) | (430.4 | ) | (100.1 | ) | (110.7 | ) | ||||||||
Cash and cash equivalents | (419.9 | ) | (396.0 | ) | (60.7 | ) | (75.3 | ) | ||||||||
Restricted cash | (39.5 | ) | (34.4 | ) | (39.5 | ) | (35.4 | ) | ||||||||
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| |||||||||
NET DEBT (R$) | (94.3 | ) | (144.4 | ) | 157.7 | 128.4 | ||||||||||
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Subsequent Events:
Debt Restructuring
The Company successfully completed the renegotiation of its working capital and debenture credit lines, increasing the original maturity of the contracts by one year to 2021 and establishing a 12 months grace period on principal amortization. This renegotiation eliminates R$107.7 million in debt amortization during the next year, with no changes to the costs of both credit lines.
Divestment of Netshoes Mexico Operation
In early August the Company’s subsidiaries (NS2.COM INTERNET S.A. and NS5 PARTICIPAÇÕES LTDA.) have signed an agreement with Grupo Sierra Capital, a private equity fund that invests in Mexico, Central America and Caribbean, to sell the entirety of its operations in Mexico.
This transaction is expected to close in the third quarter of 2018 and is subject to customary (a) closing conditions, and (b) purchase price adjustment mechanisms.
Share Option Pool
On August 7, 2018, the board of directors approved the increase of the size of the Company’s share option pool from 956,470 to 1,296,470 of its common shares, which represents 4.0% of the Company’s total equity on a fully diluted basis.
7
2Q-2018 Earnings Conference Call
A conference call with live webcast will be held tomorrow, August 10, 2018 at 8:30 am (Eastern Time).
Investors and other interested participants can access the call by dialing1-877-883-0383 in the U.S. and1-412-902-6506 internationally. The entry number for the conference line is 8137264. An archived webcast will be available on our IR website. For more information visit: http://investor.netshoes.com.
About Netshoes
Founded in 2000, Netshoes is the leading sports and lifestyle online retailer in Latin America and one of the largest online retailers in the region, with operations in Brazil, Argentina, and Mexico. Through the websites Netshoes, Zattini and Shoestock, as well as through partner-branded store sites the Company manages, it offers customers a wide selection of products and services for sports, fashion and beauty.
Core to the Company’s success has been a relentless focus on delivering a superior customer experience. As one of the first companies in Latin America to provide online retail offerings, Netshoes benefits from its early mover advantage, which has allowed the Company to capture significant market share and achieve a leadership position in a large and expanding addressable market. For more information, visit: http://investor.netshoes.com
Investor Relations Contact
Otavio Lyra, Investor Relations Officer
São Paulo, Brazil
Phone: +55 11 3028-3528
Email: ir@netshoes.com
http://investor.netshoes.com
8
Forward-Looking Statements
This press release, prepared by Netshoes (Cayman) Limited (the “Company”), contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1993, as amended, and Section 21E of the Securities Exchange of 1934, as amended. Statements contained herein that are not clearly historical in nature, including statements about the Company’s strategies and business plans, are forward-looking, and the words “anticipate,” “believe,” “continues,” “expect,” “estimate,” “intend,” ”strategy,” “project” and similar expressions and future or conditional verbs such as “will,” “would,” “should,” “could,” “might,” “can,” “may,” or similar expressions are generally intended to identify forward-looking statements. The Company may also make forward-looking statements in its periodic reports filed with the U.S. Securities and Exchange Commission (the “SEC”), in press releases and other written materials and in oral statements made by its officers and directors. These forward-looking statements speak only as of the date they are made and are based on the Company’s current plans and expectations and are subject to a number of known and unknown uncertainties and risks, many of which are beyond the Company’s control. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: Company’s goals and strategies; Company’s future business development; Company’s ability to maintain sufficient working capital, the continued growth ofe-Commerce in Latin America, the Company’s ability to predict and react to changes in consumer demand or shopping patterns, Company’s ability to retain or increase engagement of consumers, Company’s ability to maintain or grow its net sales or business, general economic and political conditions in the countries where it operates. Further information regarding these and other risks is included in the Company’s filings with the SEC. As a consequence, current plans, anticipated actions and future financial position and results of operations may differ significantly from those expressed in any forward-looking statements in this announcement. You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented as there is no guarantee that expected events, trends or results will actually occur. We undertake no obligation to update any forward-looking statements, whether as a result of new information or future events or for any other reason.
This press release may also contain estimates and other information concerning our industry that are based on industry publications, surveys and forecasts. This information involves a number of assumptions and limitations, and have not independently verified the accuracy or completeness of the information.
Non-IFRS Financial Measures
The Company presentsnon-IFRS measures when it believes that the additional information is useful and meaningful to investors.Non-IFRS financial measures do not have any standardized meaning and are therefore unlikely to be comparable to similar measures presented by other companies. The presentation ofnon-IFRS financial measures is not intended to be a substitute for, and should not be considered in isolation from, the financial measures reported in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board.
This press release includes unauditednon-IFRS financial measures, including GMV, Adjusted Selling and Marketing Expenses, Adjusted General and Administrative Expenses, Net Adjusted Financial Result, Certain Other Net Financial Result, Adjusted Operating Expenses, EBITDA, EBITDA Margin, EBITDA Brazil and EBITDA International.
| (1): | “GMV” is defined as the sum of net sales, returns, GMV from marketplace and net sales taxes, less marketplace and NCard activation commission fees; |
| (2) | “Net Adjusted Financial Result” is defined as the sum of financial income and financial expenses less “Certain Other Net Financial Result“; |
| (3) | “Certain Other Net Financial Result” is defined as the sum of foreign exchange gains/losses, derivative financial instruments gains/losses, bank charges and other financial income/expenses; |
9
| (4) | “Adjusted EBITDA” is defined as net income/loss, less net financial result, less income tax, less depreciation and amortization expenses; |
| (5) | “Adjusted EBITDA Brazil” or “EBITDA Brazil” is defined as Adjusted EBITDA or EBITDA for our operation in Brazil; |
| (6) | “Adjusted EBITDA International” or “EBITDA International” is defined as Adjusted EBITDA or EBITDA for our operations in Argentina and Mexico; |
| (7) | “EBITDA” is defined as Adjusted EBITDA plus Certain Other Net Financial Result; |
| (8) | “Adjusted EBITDA Margin” or “EBITDA Margin” is defined as Adjusted EBITDA or EBITDA divided by net sales for the relevant period, expressed as a percentage. |
The following table shows the reconciliation for GMV, as described above:
GMV—Reconciliation (In R$ Millions) | 2Q-2017 | 2Q-2018 | 1H-2017 | 1H-2018 | ||||||||||||
Net sales | 461.3 | 449.8 | 857.6 | 849.1 | ||||||||||||
Add (subtract): | ||||||||||||||||
Sales taxes, net | 84.1 | 89.5 | 154.1 | 169.1 | ||||||||||||
Returns | 53.6 | 35.4 | 95.8 | 64.1 | ||||||||||||
Marketplace commission fees | (8.7 | ) | (14.3 | ) | (13.6 | ) | (27.1 | ) | ||||||||
NCard activation commission fees | (0.4 | ) | (0.6 | ) | (0.7 | ) | (1.1 | ) | ||||||||
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Sub-Total: | 590.0 | 559.8 | 1,093.2 | 1,054.0 | ||||||||||||
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GMV from marketplace | 40.7 | 70.2 | 68.7 | 134.6 | ||||||||||||
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GMV | 630.7 | 630.0 | 1,161.9 | 1,188.6 | ||||||||||||
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The following table shows the reconciliation for Net Adjusted Financial Result and Certain Other Net Financial Result as described above:
Net Financial Result Reconciliation (In R$ Millions) | 2Q-2017 | 2Q-2018 | 1H-2017 | 1H-2018 | ||||||||||||
Financial Income | 10.2 | 2.9 | 15.2 | 7.5 | ||||||||||||
Financial Expenses | (33.1 | ) | (23.1 | ) | (71.4 | ) | (43.2 | ) | ||||||||
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Net Financial Result | (23.0 | ) | (20.2 | ) | (56.2 | ) | (35.7 | ) | ||||||||
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Subtract Certain Other Net Financial Result: |
| |||||||||||||||
Certain Other Financial Income: | ||||||||||||||||
Foreign exchange gain | (0.3 | ) | (0.5 | ) | (0.7 | ) | (1.0 | ) | ||||||||
Derivative financial instruments gain | (0.0 | ) | 0.0 | (0.8 | ) | 0.0 | ||||||||||
Other Financial Income | (0.0 | ) | (0.1 | ) | (0.0 | ) | (0.2 | ) | ||||||||
Certain Other Financial Expenses: | ||||||||||||||||
Foreign exchange loss | 1.8 | 4.6 | 1.8 | 5.0 | ||||||||||||
Derivative financial instruments loss | 0.0 | 0.0 | 0.0 | 0.0 | ||||||||||||
Bank charges | 2.5 | 1.1 | 4.0 | 2.3 | ||||||||||||
Other Financial Expenses | 0.3 | 0.8 | 0.5 | 2.1 | ||||||||||||
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Net Adjusted Financial Result | (18.7 | ) | (14.4 | ) | (51.4 | ) | (27.6 | ) | ||||||||
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| 1) | Net Financial Result:consists ofInterest income/expenses, Imputed interest on installment sales, Imputed interest on credit purchases, Debt issuance costs, Foreign exchange gains/loss, Derivative financial instruments gains/loss, Bank charges and Other financial income/expenses. |
10
The following table shows the reconciliation for EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA margin as described above:
Consolidated EBITDA Reconciliation (In R$ Millions) | 2Q-2017 | 2Q-2018 | 1H-2017 | 1H-2018 | ||||||||||||
Net loss | (35.2 | ) | (38.1 | ) | (72.9 | ) | (98.4 | ) | ||||||||
Add (subtract): | ||||||||||||||||
(-) Income tax expense | 0.0 | 0.0 | 0.0 | 0.0 | ||||||||||||
(-) Net Financial Result | 23.0 | 20.2 | 56.2 | 35.7 | ||||||||||||
(-) Depreciation and Amortization | 7.6 | 18.1 | 15.7 | 34.0 | ||||||||||||
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Adjusted EBITDA | (4.6 | ) | 0.2 | (1.0 | ) | (28.7 | ) | |||||||||
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(+) Certain Other Net Financial Result | (4.3 | ) | (5.8 | ) | (4.8 | ) | (8.1 | ) | ||||||||
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EBITDA | (8.9 | ) | (5.6 | ) | (5.8 | ) | (36.9 | ) | ||||||||
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Net Sales | 461.3 | 449.8 | 857.6 | 849.1 | ||||||||||||
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Adjusted EBITDA Margin % | (1.0 | )% | 0.0 | % | (0.1 | )% | (3.4 | )% | ||||||||
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EBITDA Margin % | (1.9 | )% | (1.2 | )% | (0.7 | )% | (4.3 | )% | ||||||||
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| (1) | Consolidated EBITDA includes Corporate/Holding expenses not included in EBITDA Brazil and EBITDA International. |
EBITDA Brazil Reconciliation (In R$ Millions) | 2Q-2017 | 2Q-2018 | 1H-2017 | 1H-2018 | ||||||||||||
Net loss | (16.1 | ) | (18.3 | ) | (39.6 | ) | (58.8 | ) | ||||||||
Add (subtract): | ||||||||||||||||
(-) Income tax expense | 0.0 | 0.0 | 0.0 | (0.0 | ) | |||||||||||
(-) Net Financial Result | 19.5 | 16.3 | 49.7 | 29.5 | ||||||||||||
(-) Depreciation and Amortization | 6.4 | 10.0 | 13.7 | 19.0 | ||||||||||||
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Adjusted EBITDA | 9.8 | 8.0 | 23.8 | (10.3 | ) | |||||||||||
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(+) Certain Other Net Financial Result | (3.8 | ) | (4.5 | ) | (4.9 | ) | (6.4 | ) | ||||||||
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EBITDA | 6.0 | 3.5 | 19.0 | (16.7 | ) | |||||||||||
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Net Sales | 407.5 | 400.5 | 763.0 | 760.8 | ||||||||||||
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Adjusted EBITDA Margin % | 2.4 | % | 2.0 | % | 3.1 | % | (1.3 | )% | ||||||||
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EBITDA Margin % | 1.5 | % | 0.9 | % | 2.5 | % | (2.2 | )% | ||||||||
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EBITDA International Reconciliation (In R$ Millions) | 2Q-2017 | 2Q-2018 | 1H-2017 | 1H-2018 | ||||||||||||
Net loss | (14.6 | ) | (10.5 | ) | (25.6 | ) | (20.1 | ) | ||||||||
Add (subtract): | ||||||||||||||||
(-) Income tax expense | 0.0 | 0.0 | 0.0 | 0.0 | ||||||||||||
(-) Net Financial Result | 3.0 | 4.0 | 5.2 | 6.3 | ||||||||||||
(-) Depreciation and Amortization | 0.3 | 0.2 | 0.5 | 0.4 | ||||||||||||
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Adjusted EBITDA | (11.3 | ) | (6.4 | ) | (19.9 | ) | (13.5 | ) | ||||||||
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(+) Certain Other Net Financial Result | (0.5 | ) | (1.4 | ) | (0.7 | ) | (1.7 | ) | ||||||||
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EBITDA | (11.8 | ) | (7.7 | ) | (20.6 | ) | (15.2 | ) | ||||||||
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Net Sales | 53.8 | 49.3 | 94.5 | 88.3 | ||||||||||||
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| |||||||||
Adjusted EBITDA Margin % | (21.0 | )% | (12.9 | )% | (21.0 | )% | (15.2 | )% | ||||||||
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| |||||||||
EBITDA Margin % | (21.9 | )% | (15.6 | )% | (21.8 | )% | (17.2 | )% | ||||||||
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11
Certain Definitions:
Registered members
The sum of all people that have completed the registration form in all the Company’s websites.
Active customers
Customers who made purchases online with the Company during the preceding twelve months as of the relevant dates.
Repeat customers
The sum of orders placed by customers who have previously purchased from the Company as of the relevant dates.
Invoiced orders
The total number of orders invoiced to active customers during the relevant period (online and offline sales)
Orders placed from mobile devices
The sum of total orders placed by active customers through the Company’s mobile site and applications as a percentage of total orders placed by active customers for the relevant period.
Average basket size
The sum of invoiced order value in connection with a product sale (online and offline), including shipping fees and taxes, divided by the number of total invoiced orders for the relevant period. Excludes B2B and NCard operations.
Gross merchandise volume (“GMV”)
The sum of net sales, returns, GMV from marketplace and net sales taxes. Excludes marketplace and NCard activation commission fees.
Net Working Capital Cycle
The sum of the balances of (a) Trade accounts receivable and (b) Inventories, less (c) the balance of Trade accounts payable, plus the balance of (d) Reverse factoring.
Partner-branded stores
All partner-branded online stores that the Company manages.
Foreign Exchange Neutral (“FX Neutral”)
Growth rate shown on constant local currency basis, in order to demonstrate what the results would have been had exchange rates in Mexico and Argentina remained constant during the period comparison.
12
NETSHOES (CAYMAN) LIMITED AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Financial Position
As of December 31, 2017 and June 30, 2018
(Reais and Dollars in thousands)
| December 31, | June 30, | |||||||||||
| Assets | 2017 | 2018 | 2018 | |||||||||
Current assets: | BRL | BRL | USD | |||||||||
Cash and cash equivalents | 395,962 | 75,281 | 19,524 | |||||||||
Restricted cash | 19,397 | 21,636 | 5,611 | |||||||||
Trade accounts receivables, net | 113,168 | 102,699 | 26,635 | |||||||||
Inventories, net | 456,632 | 415,891 | 107,861 | |||||||||
Recoverable taxes | 80,047 | 69,894 | 18,127 | |||||||||
Other current assets | 48,352 | 50,078 | 12,988 | |||||||||
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|
|
| |||||||
Total current assets | 1,113,558 | 735,479 | 190,746 | |||||||||
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| |||||||
Non-current assets: | ||||||||||||
Restricted cash | 15,048 | 13,752 | 3,567 | |||||||||
Judicial deposits | 106,914 | 112,932 | 29,289 | |||||||||
Recoverable taxes | 70,765 | 70,721 | 18,341 | |||||||||
Other assets | 1,950 | 1,950 | 506 | |||||||||
Due from related parties | 12 | 9 | 2 | |||||||||
Property and equipment, net | 73,039 | 81,344 | 21,097 | |||||||||
Intangible assets, net | 115,839 | 125,392 | 32,520 | |||||||||
|
|
|
|
|
| |||||||
Totalnon-current assets | 383,567 | 406,100 | 105,322 | |||||||||
|
|
|
|
|
| |||||||
Total assets | 1,497,125 | 1,141,579 | 296,068 | |||||||||
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|
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13
NETSHOES (CAYMAN) LIMITED AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Financial PositionAs of December 31, 2017 and June 30, 2018
(Reais and Dollars in thousands)
| December 31, | June 30, | |||||||||||
Liabilities and Shareholders’ Equity | 2017 | 2018 | 2018 | |||||||||
Current liabilities: | BRL | BRL | USD | |||||||||
Trade accounts payable | 365,835 | 230,567 | 59,797 | |||||||||
Reverse factoring | 148,928 | 91,671 | 23,775 | |||||||||
Current portion of long-term debt | 106,577 | 110,428 | 28,639 | |||||||||
Taxes and contributions payable | 19,875 | 19,325 | 5,012 | |||||||||
Deferred revenue | 3,732 | 4,016 | 1,042 | |||||||||
Accrued expenses | 120,366 | 103,199 | 26,765 | |||||||||
Other current liabilities | 31,017 | 30,215 | 7,838 | |||||||||
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|
|
|
| |||||||
Total current liabilities | 796,330 | 589,421 | 152,868 | |||||||||
|
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|
|
|
| |||||||
Non-current liabilities: | ||||||||||||
Long-term debt, net of current portion | 179,394 | 128,692 | 33,376 | |||||||||
Provision for labor, civil and tax risks | 12,523 | 14,769 | 3,830 | |||||||||
Deferred revenue | 25,502 | 24,101 | 6,251 | |||||||||
Othernon-current liabilities | 27 | 40 | 10 | |||||||||
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|
|
|
| |||||||
Totalnon-current liabilities | 217,446 | 167,602 | 43,467 | |||||||||
|
|
|
|
|
| |||||||
Total liabilities | 1,013,776 | 757,023 | 196,335 | |||||||||
|
|
|
|
|
| |||||||
Shareholders’ equity: | ||||||||||||
Share capital | 244 | 244 | 63 | |||||||||
Additional-paid in capital | 1,345,507 | 1,348,201 | 349,655 | |||||||||
Treasury shares | (1,533 | ) | (1,533 | ) | (398 | ) | ||||||
Accumulated other comprehensive loss | (13,664 | ) | (14,954 | ) | (3,878 | ) | ||||||
Accumulated losses | (847,125 | ) | (947,195 | ) | (245,655 | ) | ||||||
|
|
|
|
|
| |||||||
Equity attributable to owners of the parent | 483,429 | 384,763 | 99,787 | |||||||||
|
|
|
|
|
| |||||||
Equity attributable tonon-controlling interests | (80 | ) | (207 | ) | (54 | ) | ||||||
|
|
|
|
|
| |||||||
Total shareholders’ equity | 483,349 | 384,556 | 99,733 | |||||||||
|
|
|
|
|
| |||||||
Total liabilities and shareholders’ equity | 1,497,125 | 1,141,579 | 296,068 | |||||||||
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| |||||||
14
NETSHOES (CAYMAN) LIMITED AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Profit or Loss
For the six and three months ended June 30, 2017 and 2018
(Reais and Dollars in thousands, except loss per share)
| For the six months ended June 30, | For the three months ended June 30, | |||||||||||||||||||||||
| 2017 | 2018 | 2018 | 2017 | 2018 | 2018 | |||||||||||||||||||
| BRL | BRL | USD | BRL | BRL | USD | |||||||||||||||||||
Net Sales | 857,559 | 849,090 | 220,211 | 461,331 | 449,797 | 116,655 | ||||||||||||||||||
Cost of sales | (574,954 | ) | (590,712 | ) | (153,201 | ) | (308,492 | ) | (312,009 | ) | (80,919 | ) | ||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Gross Profit | 282,605 | 258,378 | 67,010 | 152,839 | 137,788 | 35,736 | ||||||||||||||||||
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|
|
|
|
|
| |||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Selling and marketing expenses | (222,526 | ) | (220,845 | ) | (57,277 | ) | (121,000 | ) | (110,247 | ) | (28,593 | ) | ||||||||||||
General and administrative expenses | (74,647 | ) | (98,204 | ) | (25,469 | ) | (43,020 | ) | (44,485 | ) | (11,536 | ) | ||||||||||||
Other operating expenses, net | (2,116 | ) | (2,082 | ) | (541 | ) | (1,024 | ) | (965 | ) | (249 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total operating expenses | (299,289 | ) | (321,131 | ) | (83,287 | ) | (165,044 | ) | (155,697 | ) | (40,378 | ) | ||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Operating loss | (16,684 | ) | (62,753 | ) | (16,277 | ) | (12,205 | ) | (17,909 | ) | (4,642 | ) | ||||||||||||
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|
|
|
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|
|
|
|
|
| |||||||||||||
Financial income | 15,195 | 7,519 | 1,951 | 10,166 | 2,935 | 761 | ||||||||||||||||||
Financial expenses | (71,383 | ) | (43,213 | ) | (11,207 | ) | (33,116 | ) | (23,136 | ) | (6,000 | ) | ||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Loss before income tax | (72,872 | ) | (98,447 | ) | (25,533 | ) | (35,155 | ) | (38,110 | ) | (9,881 | ) | ||||||||||||
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|
|
|
|
|
|
|
|
|
| |||||||||||||
Income tax expense | (2 | ) | 0 | 0 | (2 | ) | 0 | 0 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net Loss | (72,874 | ) | (98,447 | ) | (25,533 | ) | (35,157 | ) | (38,110 | ) | (9,881 | ) | ||||||||||||
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|
|
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| |||||||||||||
Net loss attributable to: | ||||||||||||||||||||||||
Owners of the Parent | (72,499 | ) | (98,216 | ) | (25,473 | ) | (34,991 | ) | (37,997 | ) | (9,855 | ) | ||||||||||||
Non-controlling interests | (375 | ) | (231 | ) | (60 | ) | (166 | ) | (113 | ) | (29 | ) | ||||||||||||
Loss per share attributable to owners of the Parent | ||||||||||||||||||||||||
Basic and diluted | (3.09 | ) | (3.16 | ) | (0.82 | ) | (1.49 | ) | (1.22 | ) | (0.32 | ) | ||||||||||||
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15
NETSHOES (CAYMAN) LIMITED AND SUBSIDIARIES
Unaudited Condensed Consolidated Statements of Cash Flows
For the six months ended June 30, 2017 and 2018
(Reais and Dollars in thousands)
| Six months ended June 30, | ||||||||||||
| 2017 | 2018 | 2018 | ||||||||||
| BRL | BRL | USD | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net loss | (72,874 | ) | (98,447 | ) | (25,533 | ) | ||||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
Allowance for doubtful accounts | 6,262 | 3,852 | 999 | |||||||||
Depreciation and amortization | 15,663 | 34,009 | 8,820 | |||||||||
Loss on disposal of property and equipment, and intangible assets | 170 | 307 | 80 | |||||||||
Share-based payment | (13,469 | ) | 2,145 | 556 | ||||||||
Deferred taxes | 2 | 0 | ||||||||||
Provision for contingent liabilities | 4,595 | 4,067 | 1,055 | |||||||||
Interest expense, net | 61,892 | 32,393 | 8,401 | |||||||||
Provision for inventory losses | 464 | 8,710 | 2,259 | |||||||||
Other | 179 | 3 | 1 | |||||||||
Changes in operating assets and liabilities: | ||||||||||||
(Increase) decrease in: | ||||||||||||
Restricted cash | 3,089 | (2,240 | ) | (581 | ) | |||||||
Trade accounts receivable | 84,879 | 4,799 | 1,245 | |||||||||
Inventories | (40,822 | ) | 26,966 | 6,994 | ||||||||
Recoverable taxes | (34,696 | ) | 7,804 | 2,024 | ||||||||
Judicial deposits | (23,615 | ) | (6,018 | ) | (1,561 | ) | ||||||
Other assets | (11,832 | ) | (1,562 | ) | (405 | ) | ||||||
Increase (decrease) in: | ||||||||||||
Derivative financial instruments | (186 | ) | 0 | 0 | ||||||||
Trade accounts payable | (52,674 | ) | (131,475 | ) | (34,098 | ) | ||||||
Reverse factoring | 1,489 | (57,258 | ) | (14,850 | ) | |||||||
Taxes and contributions payable | 212 | 416 | 108 | |||||||||
Deferred revenue | (1,449 | ) | (1,117 | ) | (290 | ) | ||||||
Accrued expenses | (31,354 | ) | (15,167 | ) | (3,934 | ) | ||||||
Share-based payment | (2,141 | ) | (431 | ) | (112 | ) | ||||||
Other liabilities | (568 | ) | (2,652 | ) | (688 | ) | ||||||
|
|
|
|
|
| |||||||
Net cash provided by (used in) operating activities | (106,784 | ) | (190,896 | ) | (49,510 | ) | ||||||
|
|
|
|
|
| |||||||
Cash flows from investing activities: | ||||||||||||
Purchase of property and equipment | (4,487 | ) | (14,313 | ) | (3,712 | ) | ||||||
Purchase of intangible assets | (22,770 | ) | (37,163 | ) | (9,638 | ) | ||||||
Interest received on installment sales | 197 | 1,121 | 291 | |||||||||
Restricted cash | 631 | 1,296 | 336 | |||||||||
|
|
|
|
|
| |||||||
Net cash provided by (used in) investing activities | (26,429 | ) | (49,059 | ) | (12,723 | ) | ||||||
|
|
|
|
|
| |||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from debt | 123,936 | 18,654 | 4,838 | |||||||||
Payments of debt | (52,973 | ) | (66,886 | ) | (17,347 | ) | ||||||
Payments of interest | (60,960 | ) | (32,696 | ) | (8,480 | ) | ||||||
Proceeds from issuance of common shares | 424,533 | 0 | 0 | |||||||||
|
|
|
|
|
| |||||||
Net cash provided by (used in) financing activities | 434,536 | (80,928 | ) | (20,989 | ) | |||||||
|
|
|
|
|
| |||||||
Effect of exchange rate changes on cash and cash equivalents | 7,322 | 202 | 52 | |||||||||
|
|
|
|
|
| |||||||
Change in cash and cash equivalents | 308,645 | (320,681 | ) | (83,170 | ) | |||||||
|
|
|
|
|
| |||||||
Cash and cash equivalents, beginning of period | 111,304 | 395,962 | 102,694 | |||||||||
Cash and cash equivalents, end of period | 419,949 | 75,281 | 19,524 | �� | ||||||||
16
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereto duly authorized.
| Netshoes (Cayman) Limited | ||
| By: | /s/ Marcio Kumruian | |
| Name: | Marcio Kumruian | |
| Title: | Chief Executive Officer | |
Date: August 9, 2018