GSI Commerce Reports Fiscal 2004 First Quarter Operating Results
Company Achieves Record First Quarter Net Revenues and Reduces Net Loss
KING OF PRUSSIA, Pa., April 28, 2004 – GSI Commerce Inc. (Nasdaq: GSIC) today announced that for its first fiscal quarter ended April 3, 2004, the company increased its net revenues 36 percent to $66.3 million and reported a net loss of $4.0 million, or $0.10 per share, decreasing the company’s net loss by $1.5 million, or $0.04 per share, compared to last year’s first fiscal quarter. For the same comparable periods, adjusted EBITDA, a non-GAAP financial measure, improved by approximately $1.8 million to a loss of $1.1 million, and net merchandise sales, also a non-GAAP financial measure, rose 59 percent to $85.9 million. Definitions of the non-GAAP financial measures, adjusted EBITDA and net merchandise sales, and a discussion of why the company uses these measures, appear later in this news release.
Net Revenues and Net Merchandise Sales
Net revenues were $66.3 million for the first quarter of fiscal 2004, which was a 36 percent increase compared to net revenues of $48.9 million for the first quarter of fiscal 2003.
Net revenues from product sales generated by the company’s sporting goods category were $33.5 million for the first quarter of fiscal 2004, which was a 37 percent increase compared to $24.4 million for the first quarter of fiscal 2003. Net revenues from product sales generated by the company’s other merchandise categories were $23.3 million for the first quarter of fiscal 2004, which was an 18 percent increase compared to $19.8 million for the first quarter of fiscal 2003.
Service fee revenues increased 100 percent to $9.4 million in the first quarter of fiscal 2004 compared to $4.7 million in the first quarter of fiscal 2003.
Net merchandise sales were $85.9 million for the first quarter of fiscal 2004, a 59 percent increase compared to net merchandise sales of $54.2 million for the first quarter of fiscal 2003. Net merchandise sales represent the retail value of all sales transactions, inclusive of freight charges and net of allowances for returns and discounts, which flow through the GSI Commerce platform, whether or not the company is the seller of the merchandise or records the full amount of such sales on its financial statements.
Net merchandise sales from the sporting goods category increased 44 percent in the first quarter of fiscal 2004 to $35.1 million compared to $24.4 million in the first quarter of fiscal 2003. Net merchandise sales from the company’s other merchandise categories increased 71 percent in the first quarter of fiscal 2004 to $50.8 million from $29.8 million in the first quarter of fiscal 2003. Net merchandise sales and net revenues from product sales for the company’s other merchandise categories included $735,000 and $8,000 for the first quarter of fiscal 2003 and first quarter of fiscal 2004, respectively, related to the jewelry business of Ashford.com, which the company sold in December 2002.
Net Loss, EPS and Adjusted EBITDA
The company had a net loss of $4.0 million for the first quarter of fiscal 2004, which was an improvement of approximately $1.5 million compared to the net loss of $5.5 million for the first quarter of fiscal 2003.
The company showed a $0.04 per share improvement with a net loss per share of $0.10 for the first quarter of fiscal 2004 compared to net loss per share of $0.14 for the first quarter of fiscal 2003.
The company showed a $1.8 million improvement in adjusted EBITDA, with an adjusted EBITDA loss of $1.1 million in the first quarter of fiscal 2004 versus an adjusted EBITDA loss of $2.9 million in the first quarter of fiscal 2003. Adjusted EBITDA represents earnings (or losses) before interest income/expense, taxes, depreciation, amortization, and stock-based compensation.
Gross Profit and Operating Expenses
The company’s gross profit improved 45 percent with $24.8 million in the first quarter of fiscal 2004 compared to a gross profit of $17.0 million in the first quarter of fiscal 2003. Gross margin improved to 37.4 percent for the first quarter of fiscal 2004 from 34.8 percent in the first quarter of fiscal 2003, an increase of 260 basis points.
Total operating expenses were $29.1 million for the first quarter of fiscal 2004, an increase of 27 percent compared to $22.9 million for the first quarter of fiscal 2003. Total operating expenses, as a percentage of net revenues, decreased to 44 percent in the first quarter of fiscal 2004 compared to 47 percent in the first quarter of fiscal 2003.
In addition, total operating expenses of $29.1 million, as a percentage of net merchandise sales of $85.9 million, decreased to 34 percent in the first quarter of fiscal 2004 compared to total operating expenses of $22.9 million, as a percentage of net merchandise sales of $54.2 million, which was 42 percent in the first quarter of fiscal 2003.
Balance Sheet
The company’s cash, cash equivalents, short-term investments and marketable securities at the end of fiscal 2004’s first quarter were $51.9 million compared to $69.5 million at fiscal 2003 year end, a decrease of $17.6 million, which was attributable to the expected seasonality of working capital. Cash, cash equivalents, short-term investments and marketable securities at the end of fiscal 2004’s first quarter increased $623,000 compared to the $51.9 million at the end of fiscal 2003’s first quarter.
The company’s inventory at the end of fiscal 2004’s first quarter was $21.1 million compared to $22.9 million at fiscal 2003 year end, a decrease of $1.9 million. Comparing inventory at the end of fiscal 2004’s first quarter to the end of fiscal 2003’s first quarter, inventory decreased $4.0 million to $21.1 million from $25.1 million.
Management’s Commentary
“GSI Commerce had an excellent first quarter of fiscal 2004,” said Michael Rubin, chairman and CEO of GSI Commerce. “We generated substantial revenue growth and added meaningful improvement to the bottom line. The revenue growth exceeded our guidance, and we delivered bottom line results that came in at the high-end of our guidance, as we continued to focus strategically on investing to build a foundation for the planned growth of our business. We remain confident in our financial outlook for the year and, more importantly, with our long term prospects.”
Highlights since Feb. 18, 2004
Liz Claiborne Inc. launched its new e-commerce store at www.LizClaiborne.com on the GSI Commerce e-commerce platform.
MLB Advanced Media, LP (MLBAM), the interactive media and Internet company of Major League Baseball, launched its new e-commerce store located at shop.mlb.com, on the GSI Commerce e-commerce platform.
GSI Commerce has partnered with Wilsons Leather Direct, Inc., the e-commerce arm of Wilsons The Leather Experts Inc. (Nasdaq: WLSN), the leading specialty retailer of leather outerwear, accessories and apparel in the United States, to provide a single-sourced, e-commerce solution for Wilsons Leather online store.
James Flanagan, an HR executive with more than 18 years experience, was hired to fill the company’s newly created post of senior vice president of human resources. Flanagan’s leadership will support the company’s evolving growth, which will require the company to invest in attracting, developing, rewarding and retaining the industry’s top talent.
Fiscal 2004 Second Quarter and Annual Financial Guidance
The following forward-looking statements reflect GSI Commerce’s expectations as of April 28, 2004. GSI Commerce provides guidance for its business based only on signed agreements. Given the potential changes in general economic conditions and consumer spending, the emerging nature of e-commerce, and various other risk factors discussed below, actual results may differ materially.
The company provides the following guidance for fiscal 2004 second quarter:
· Net revenues are expected to be in the range of $63 million to $67 million.
· Net merchandise sales are expected to be in the range of $90 million to $94 million.
· Net loss is expected to be in the range of $3 million to $4 million.
· Adjusted EBITDA is expected to be in the range of a loss of $500,000 to an adjusted EBITDA profit of $500,000.
The company also raised its guidance for fiscal 2004:
· Net revenues are expected to be in the range of $300 million to $320 million.
· Net merchandise sales are expected to be in the range of $440 million to $460 million.
· Net income is expected to be in the range of $0 to $2 million.
· Adjusted EBITDA is expected to be in the range of $13.5 million to $15 million.
Non-GAAP Financial Measures
This press release contains adjusted EBITDA, net merchandise sales and certain ratios that use net merchandise sales. GSI Commerce uses adjusted EBITDA as a means to evaluate its performance period to period without taking into account certain expenses, particularly stock-based compensation expense, which may fluctuate materially due to fluctuations in the price of GSI Commerce’s common stock both on a quarterly and annual basis, and does not consistently reflect GSI Commerce’s results from its core business activities. GSI Commerce also uses net merchandise sales as a metric for operating its business. Variable costs such as fulfillment and customer service labor expense, order processing costs such as credit card and bank processing fees and business management costs such as marketing department staffing levels are related to the amount of sales made through GSI Commerce’s platform, whether or not GSI Commerce records the revenue from such sales. GSI Commerce believes that investors will have a more thorough understanding of its historical expenses and expense trends if they have visibility to both GAAP net revenue as well as the non-GAAP financial measure net merchandise sales and the percentages that such expenses bear to net revenues and net merchandise sales. These financial measures should be considered in addition to, and not as a substitute for, or superior to, other measures of financial performance prepared in accordance with GAAP. These financial measures included in this press release have been reconciled to the nearest GAAP measure as is required under SEC rules.
First Quarter Conference Call
GSI Commerce has scheduled a conference call on April 28 at 4:45 p.m. EDT to discuss the company’s fiscal 2004 first quarter results and expectations for future performance. For access to the conference call, please call the toll-free conference number, 1-888-928-9510, by 4:30 p.m. EDT. The conference password is “commerce” and the leader’s name is “Michael Rubin.” Alternatively, to listen to the call live on the Web, go to the GSI Commerce Web site, www.gsicommerce.com, and click on the link provided on the home page. Please do this at least 15 minutes prior to the call (4:30 p.m. EDT) to register, download and install any necessary audio software. For those who cannot listen to the Web broadcast, a telephone replay of the conference call will be available one hour after the completion of the call and remain available through May 12.
About GSI Commerce
GSI Commerce provides an e-commerce solution enabling retailers, branded manufacturers, entertainment companies and professional sports organizations to operate e-commerce businesses. The company’s e-commerce solution includes Web site design, e-commerce technology, managed hosting, order fulfillment, customer service, merchandising and order management, online merchandising, customer relationship management, content development and online marketing. The company operates either all or a portion of the e-commerce businesses for more than 40 partners.
Forward-Looking Statements
All statements made in this release and to be made in GSI Commerce’s fiscal 2004 first quarter conference call, including those in the tape recording, live audio and live Webcast of the call, other than statements of historical fact, are or will be forward-looking statements. The words “anticipate,”, “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “will,” “would,” “should,” “guidance,” “potential,” “continue,” “project,” “forecast,” “confident,” “prospects,” 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 industries and markets in which GSI Commerce 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 financial markets and the industries in which GSI Commerce and its partners operate, changes affecting the Internet and e-commerce, the ability of GSI Commerce to develop and maintain relationships with strategic partners and suppliers, the ability of GSI Commerce to timely and successfully develop, maintain and protect its technology and product and service offerings and execute operationally, the ability of GSI Commerce to attract and retain qualified personnel, the ability of GSI Commerce to successfully integrate its acquisitions of other businesses, if any, and the performance of acquired 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.
Click here for First Quarter 2004 Financial Statements (.pdf)
Contact:
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Michael Conn
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