GSI Commerce Announces Lower Guidance
GSI COMMERCE, INC. (NASDAQ: GSIC), today announced lower guidance for its fiscal second quarter of 2002 and for its full fiscal year of 2002 and provided initial guidance for its fiscal third quarter of 2002, fiscal fourth quarter of 2002 and its full fiscal year of 2003. The company is providing guidance for net revenues, net income and EBITDA for these periods in comparison to its previous practice of providing guidance for net revenues and pro forma income/loss. EBITDA represents earnings (or loss) before interest income/expense, taxes, depreciation and amortization and stock based compensation. The company expects to report fiscal second quarter results on July 24, 2002.
The company indicated that several factors contributed to the revised guidance including greater than planned near-term investments in technology, personnel and infrastructure, the decision to remove estimated results of potential new partners from the company’s projections and to provide guidance only based on partners with whom the company has signed contracts, and lower than expected sales from Ashford.com, which the company acquired on March 14, 2002.
For the fiscal second quarter of 2002, the company expects net revenue to be in the range of $32-$34 million, net loss to be in the range of $5-$6 million and EBITDA loss to be in the range of $3-$4 million. This compares to net revenue of $17.0 million, net loss of $7.8 million and EBITDA loss of $6.2 million in the fiscal second quarter of 2001.
For the fiscal third quarter of 2002, the company expects net revenue to be in the range of $33-$35 million, net loss to be in the range of $8-$9 million and EBITDA loss to be in the range of $5-$6 million. This compares to net revenue of $18.1 million, net loss of $14.6 million and EBITDA loss of $5.9 million in the fiscal third quarter of 2001.
For the fiscal fourth quarter of 2002, the company expects net revenue of approximately $80 million, net loss to be in the range of $1-$3 million and EBITDA earnings to be in the range of $1-$3 million. This compares to net revenue of $51.4 million, net income of $0.3 million and EBITDA of $2.2 million in the fiscal fourth quarter of 2001.
For the full fiscal year of 2002, the company expects net revenue to be in the range of $177-$180 million, net loss to be in the range of $19-$23 million and EBITDA loss to be in the range of $8-$12 million. This compares to net revenue of $102.6 million, net loss of $30.6 million and EBITDA loss of $16.6 million for the full fiscal year of 2001 and net revenue of $42.8 million, net loss of $58.0 million and EBITDA loss of $40.5 million for the full fiscal year of 2000.
For the full fiscal year of 2003, the company expects net revenue of $250 million, net loss of approximately $12 million and EBITDA of approximately $5 million.
GSI Commerce, Inc., also announced that its Board of Directors has authorized the company to repurchase up to $10,000,000 of the company’s outstanding common stock. The company has also been advised by certain of its major investors, directors and executives that they may from time to time purchase shares of the company’s outstanding common stock after the company has completed its repurchases. Shares purchased by the company or others may be purchased from time to time on the open market at prevailing market prices or in privately negotiated transactions.
Michael Rubin, Chairman and CEO of GSI Commerce, commented on today’s announcement, saying, “While it is disappointing to issue lower guidance, our underlying business is showing excellent growth. Notably, our total revenues should almost double in the second quarter of 2002 with same store sales increasing more than 25%. The same store sales acceleration from 9% in the first quarter of 2002 is offset by a planned reduction in direct response revenue. Furthermore, our business development pipeline remains strong, and we believe that we remain the leading choice for a complete outsourced e-commerce solution. At the close of the fiscal second quarter, which ended on June 29, 2002, GSI had cash, cash equivalents, short term investments and marketable securities of approximately $69 million. I am pleased that we have a strong balance sheet. Our strong financial position enables us to make investments that can strengthen the quality of our service offering, expand our capacity and increase long-term shareholder value.”
The company highlighted several key technology and infrastructure projects, including:
· The purchase and expansion of its fulfillment center, increasing capacity by more than 50% to 470,000 square feet from 300,000 square feet.
· The addition of a new 75,000 square feet 500-seat call center that significantly increases the company’s customer service capacity and enhances its overall capabilities in this area. The physical assets for this center were acquired in an asset purchase agreement while the real estate is being leased.
· The addition of a second data center, providing increased hosting capacity and greater web site reliability.
· The implementation of a new CRM software solution that should enhance the company’s ability to manage its customer service and marketing functions.
· The implementation of new search engine, fraud detection, merchandise planning, financial management and enterprise planning software solutions.
· Upgrades and additions to server, storage and telecommunications hardware.
· Personnel additions in several departments including increasing the size of the technology team to more than 100 professionals from only 50 at the beginning of fiscal 2002 as well as increases to the creative services, business management, business operations and finance teams.
Jordan Copland, Chief Financial Officer of GSI Commerce, said, “Beginning with this release, we are providing guidance for our business based only on deals that we have already signed. In the past we had also included an assumption for estimated contribution from deals that had not been signed. Going forward we expect to continue to update this guidance in quarterly earnings releases based on newly signed partners and then current business trends. We would note that our guidance provided in this release includes the estimated contribution from certain signed deals that have not been announced. In addition, we are no longer providing guidance based on pro forma adjustments but instead are communicating expectations for results using the measures of net revenue and net income as defined by generally accepted accounting principles and EBITDA. We believe that these changes will provide investors with greater visibility and understanding of our expected operating results.”
Mr. Rubin, concluded, “GSI Commerce started in 1999 operating five web sites, generating only $5 million in sales and being devoted exclusively to the sporting goods category. In 2002, we expect to finish the year operating over 40 web sites, generate between $177-$180 million in revenue and operate in the sporting goods, jewelry, electronics, beauty, media, footwear and general merchandise categories. The investments we are making reflect confidence in our future and recognition of a growing market demand for our unique service offering. I am proud of the progress we have made to date, and I am confident that we have the organization and talent in place to continue our progress.”
About GSI Commerce
GSI Commerce is a leading outsource solution provider for e-commerce. The company develops and operates e-commerce businesses for retailers, branded manufacturers, media companies, television networks and professional sports organizations. The GSI Commerce platform includes Web site design and development, e-commerce technology, customer service, fulfillment, merchandising, content development and management, and online and database marketing.
Forward-Looking Statements
All statements made in this release, other than statements of historical fact, are forward-looking statements. The words “anticipate”, “believe”, “estimate”, “expect”, “intend”, “may”, “plan”, “will”, “would”, “should”, “guidance”, “potential”, “continue”, “project”, “forecast” and similar expressions typically are used to identify forward-looking statements. Forward-looking statements are based on the then-current expectations, beliefs, assumptions, estimates and forecasts about the business of GSI Commerce and the industry and markets in which the company operates. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or implied by these forward- looking statements. Factors which may affect GSI Commerce’s business, financial condition and operating results include the effects of changes in the economy, consumer spending, the stock market and the industries in which GSI Commerce operates, changes affecting the Internet, e-commerce and direct response marketing, the ability of the company to maintain relationships with strategic partners and suppliers, the ability of the company to timely and successfully develop, maintain and protect its technology and product and service offerings and execute operationally, the ability of the company to attract and retain qualified personnel and the ability of the company to successfully launch new businesses and integrate acquisitions of other businesses. More information about potential factors that could affect GSI Commerce can be found in its most recent Form 10-K, Form 10-Q and other reports and statements filed by GSI Commerce with the Securities and Exchange Commission. GSI Commerce expressly disclaims any intent or obligation to update these forward-looking statements, except as otherwise specifically stated by GSI Commerce.
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Contact:
Investor Contact:
Jordan M. Copland
Executive Vice President and Chief Financial Officer
GSI Commerce, Inc.
(610) 491-7000
coplandj@gsicommerce.com
Media Contact:
Patricia Henderson
Corporate Communications
GSI Commerce, Inc.
(610) 491-7000
hendersonp@gsicommerce.com
