Nova LifeStyle, Inc. Reports Second Quarter 2014 Results

LOS ANGELES, Aug. 11, 2014 /PRNewswire/ -- Nova LifeStyle, Inc. (NASDAQ-GM: 'NVFY'), a U.S.-based fast growing, innovative designer, manufacturer and distributor of modern LifeStyle furniture, today announced financial results for the second quarter ended June 30, 2014.

Recent Progress on Growth Initiatives

The Company also announced further progress on its e-Commerce and digital initiatives, as well as its objectives to expand global sales and distribution:

• The Company has received a commitment from The Hong Kong Furniture Association and The Dongguan Furniture Association to promote Nova LifeStyle's e-Commerce platform to its membership base.  As previously announced, the Company had secured letters of intent from over 100 quality furniture brands, signaling their intention to make their brands and products available on Nova LifeStyle's dedicated e-Commerce website, which will exclusively offer furniture and home furnishings to consumers in China. The Company is on track to complete the e-Commerce platform by the fourth quarter of 2014.
• As previously announced, the Company plans to launch a new Mobile Device Application in the fourth quarter of 2014. The mobile app will provide China-based consumers and the Company's China-based franchisees with a new digital and user-friendly way to complete transactions.  Consumers will also be able to download the app and review Nova LifeStyle products from home.
• The Company has begun production for IKEA under its supply agreement to manufacture products for sale in China and Asia, with the first delivery completed in early August 2014.

Results for the second quarter ended June 30, 2014:

• Net sales were $25.9 million, an increase of 35.3% compared to the prior year period. Growth was primarily driven by a 43% increase in sales in North America, which included $2.7 million in sales from the Company's subsidiary, Bright Swallow, which was acquired in April, 2013. Sales to China increased 11% primarily due to higher sales to non-franchisees, with sales in Asia, excluding China, up more than threefold.  This was offset by a decline in sales in Europe.  The Company anticipates increasing sales and marketing to the European market as the region's economic outlook improves.
• Gross profit was $5.0 million, an increase of 29% compared to the prior year period. Gross margin was 19.2% compared to 20.1% in the prior year period, which is primarily due to strategic changes in our sales and marketing plans as we increased sourcing from third party vendors to supply our growing distribution as we increase our market share.
• Operating income was $1.5 million compared to $1.5 million in the prior year period, primarily reflecting higher general and administrative expenses including research and development expenses to advance our growth initiatives and amortization associated with the acquisition of Bright Swallow. This was partially offset by a 100 basis point improvement in selling expenses as a percentage of net sales. Overall SG&A expenses as a percentage of net sales declined by 170 basis points.
• Net income was $3.4 million, or $0.16 per diluted share, based on a weighted average diluted share count of 20.5 million shares, and included a non-cash, pre-tax gain of $2.2 million, due to the change in the fair value of warrant liability. This compares to net income of $1.2 million, or $0.06 per diluted share, on 19.1 million weighted average shares outstanding in the prior year period. The increase in the number of shares versus the prior year reflects the sale of 1.32 million shares of common stock on April 14, 2014.

Results for the first six months ended June 30, 2014:

• Net sales were $43.8 million, an increase of 28.3% compared to the prior year period. Growth was primarily driven by a 43% increase in sales in North America, which included $4.4 million in sales from the Company's subsidiary, Bright Swallow, which was acquired in April, 2013. Sales to China increased 5% primarily due to higher sales to non-franchisees, with sales in Asia, excluding China, up 144%.  This was offset by a decline in sales in Europe.
• Gross profit was $8.2 million, an increase of 15.9% compared to the prior year period. Gross margin was 18.8% compared to 20.8% in the prior year period, which is primarily due to strategic changes in our sales and marketing plans as we increased sourcing from third party vendors to supply our growing distribution as we increase our market share.
• Operating income was $2.1 million compared to $3.0 million in the prior year period, primarily reflecting higher general and administrative expenses including research and development expenses to advance our growth initiatives, higher depreciation, as well as public company costs associated with our NASDAQ listing in January, 2014. This was partially offset by a 90 basis point improvement in selling expenses as a percentage of net sales.
• Net income was $3.7 million, or $0.18 per diluted share, based on a weighted average diluted share count of 20.0 million shares, and included a non-cash, pre-tax gain of $2.2 million in the second quarter of fiscal 2014, due to the change in the fair value of warrant liability. This compares to net income of $2.4 million, or $0.13 per diluted share, on 18.9 million weighted average shares outstanding in the prior year period. The increase in the number of shares versus the prior year reflects the sale of 1.32 million shares of common stock on April 14, 2014.

"The second quarter was another strong quarter for us as we achieved sales growth of over 35% reflecting solid execution on our growth initiatives to increase distribution in key global markets.  We also achieved higher operating profitability, with our operating income margin up 70 basis points year-over-year as we continue to tightly control costs even as we invest in the growth of our business," stated Tawny Lam, President of Nova LifeStyle, Inc.  "We are making further progress on our growth initiatives including our e-Commerce platform and digital initiatives and are thrilled with the support we have received from leading furniture brands and organizations targeting the China market.  We continue to build our capabilities to allow consumers to shop how, when and where they want and believe our platform will become an online destination for furniture and home furnishings in China.  We also further expanded our global reach as we shipped our first IKEA delivery under that supply agreement.   We continue to expect these initiatives to contribute significantly to both our sales and profitability in the current and next fiscal year, and to increase our net income in fiscal year 2014 over last year."

About Nova LifeStyle, Inc.

Nova LifeStyle, Inc., a NASDAQ Global Markets Exchange listed company headquartered in California, is a fast growing, innovative designer, manufacturer and distributor of modern LifeStyle furniture; primarily sofas, dining rooms, cabinets, office furniture and related components, bedrooms, and various accessories in matching collections. Nova's products are made in the US, Europe, and Asia and include LifeStyle brands such as Diamond Sofa, Colorful World, Giorgio Mobili, Nova QwiK, and Bright Swallow International. Nova's products feature urban contemporary styles that integrate comfort and functionality incorporating upscale luxury designs appealing to LifeStyle-conscious middle and upper middle-income consumers in the U.S., China, Europe, and elsewhere in the world. To learn more about Nova LifeStyle, Inc., please visit our website at www.NovaLifeStyle.com.

Safe Harbor Statement

All statements in this press release that are not historical are forward-looking statements made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. There can be no assurance that actual results will not differ from the company's expectations. You are cautioned not to place undue reliance on any forward-looking statements in this press release as they reflect Nova's current expectations with respect to future events and are subject to risks and uncertainties that may cause actual results to differ materially from those contemplated. Potential risks and uncertainties include, but are not limited to, the risks described in Nova's filings with the Securities and Exchange Commission.

Investor Contact:

ICR, Inc.
Anne Rakunas
Tel: (310) 954-1113
[email protected]

SOURCE Nova LifeStyle, Inc.