Exhibit 99.1
DESIGN WITHIN REACH, INC. REPORTS THIRD QUARTER 2004 RESULTS
Third Quarter Net Sales Increase 46%
SAN FRANCISCO, CA (October 28, 2004) –Design Within Reach, Inc. (NASDAQ: DWRI) today reported financial results for the quarter and thirty-nine weeks ended September 25, 2004.
Net sales for the third quarter of 2004 were $30.1 million, an increase of 46.0% over the $20.6 million recorded in the quarter ended September 27, 2003. Net earnings for the third quarter of 2004 were $906,000, or $0.06 per diluted share, compared to $739,000, or $0.07 per diluted share, in the third quarter of 2003. Included in the third quarter of 2004 results was a non-cash, stock based compensation charge of $149,000. Earnings from operations, which excludes interest, taxes and the deemed preferred stock dividend, was $1.4 million in the third quarter of 2004, compared to $760,000 in the same period last year.
The 2004 and 2003 earnings per diluted share figures reflect the automatic conversion of outstanding preferred stock and exercise of common and preferred stock warrants, which occurred in July 2004 upon the closing of Design Within Reach’s initial public offering of common stock.
For the thirty-nine weeks ended September 25, 2004, net sales increased 44.1% to $80.9 million from $56.1 million in the thirty-nine weeks ended September 27, 2003. For the thirty-nine weeks ended September 25, 2004, net earnings were $2.2 million, or $0.18 per diluted share, compared to a net loss of $156,000, or a loss of $0.05 per diluted share, during the same period in 2003. Results reflect non-cash, stock based compensation charges of $149,000 in each of the second and third quarters of 2004, a non-cash, stock-based compensation charge of $76,000 in the first quarter of 2004, and the deemed preferred stock dividend payment of $1.8 million recorded in the second quarter of 2003. Excluding the non-recurring, deemed preferred stock dividend payment, Design Within Reach would have generated net earnings of $1.6 million, or $0.14 per diluted share, in the first thirty-nine weeks of 2003. For the thirty-nine weeks ended September 25, 2004, earnings from operations, which excludes interest, taxes and the deemed preferred stock dividend, was $3.6 million, compared to $1.6 million in the same thirty-nine week period in 2003.
“Our strong third quarter performance reflects our unique and integrated multi-channel operating platform,” said Wayne Badovinus, President and Chief Executive Officer. “By providing accessibility to modern design products through our catalog, website, and studio locations, Design Within Reach is able to strategically identify and fulfill the growing and underserved market. I am also pleased to report that our positive momentum continued into October as we posted the strongest revenue month in the Company’s history. As we selectively open new studios based on market potential, we expect to further realize the operating leverage from our scalable infrastructure and single common inventory.”
Net sales by distribution channel were as follows:
| • | In-person sales (including sales in studios and by our direct sales force) were $15.1 million in the third quarter of 2004, a 76.4% increase from the same period last year. The increase was largely due to studio sales as Design Within Reach ended the third quarter of 2004 with 29 studios open versus 14 studios at the end of the third quarter of 2003. During the quarter, Design Within Reach opened studios in Denver, Colorado; Boston, Massachusetts; Seattle, Washington; and Philadelphia, Pennsylvania. In addition, the Oakland, California studio was closed as a new studio was previously opened in nearby Berkeley, California. |
| • | Direct sales (including sales through the phone and the Design Within Reach website) increased 18.9% to $12.0 million in the third quarter of 2004 from the same period last year due to the success of new online marketing initiatives, including keyword purchases and affiliate programs. |
Gross profit margin was 46.6% in the third quarter of 2004, compared to 47.4% in the same period last year. The Euro continued to strengthen versus the U.S. dollar, although this was partially offset by increased sales of higher margin products.
For the third quarter of 2004, selling, general and administrative expenses increased to $11.7 million, from $8.5 million in the same period last year, due to costs associated with the opening and operating of new studios. Selling, general and administrative expenses as a percentage of sales decreased to 38.8%, from 41.3% in the same period last year, primarily as the company continues to realize operating leverage from its fully integrated sales channels and common inventory.
Mr. Badovinus concluded, “With over $24 million in cash and investments and an experienced management team in-place, we are well positioned both financially and operationally to continue to execute our strategy to maximize market penetration. By opening additional studios, expanding and refining product offerings and increasing market awareness and appreciation for design products, we expect to continue to increase revenue and profitability and create long-term value for our stockholders.”
Conference Call
Design Within Reach, Inc. will host a conference call today, October 28, 2004 at 2:00 p.m. Pacific (5:00 p.m. Eastern). The call, which will be hosted by Wayne Badovinus, President and Chief Executive Officer, and David Barnard, Chief Financial Officer, will be broadcast live over the Internet and accessible through the Investor Relations section of the Company’s website atwww.dwr.com. The webcast will be archived online within one hour of the completion of the conference call and available atwww.dwr.com.
About Design Within Reach, Inc.
Design Within Reach, Inc., founded in 1998 and headquartered in San Francisco, is an integrated multi-channel provider of distinctive modern design furnishings and accessories. The Company markets and sells its products to both residential and commercial customers nationwide through the DWR catalog, studios, website and direct sales force, and a single common “in stock and ready to ship” inventory.
This press release includes forward-looking statements, including statements related to anticipated revenues, expenses, earnings, operating cash flows, the outlook for Design With Reach’s markets and the demand for its products. Factors that could cause Design With Reach’s actual results to differ materially from these forward-looking statements include its ability to effectively market and sell products in diverse market segments, its reliance on a limited number of products and third-party vendors and distributors, its ability to expand studio operations, increases in fulfillment costs, disruptions to information technology systems, unpredictable events and circumstances relating to international suppliers, increased competition, government regulatory action and general economic conditions. Please refer to our reports and filings with the Securities and Exchange Commission, including our S-1 IPO filing, for a further discussion of these risks and uncertainties. We also caution you not to place undue reliance on forward-looking statements, which speak only as of the date they are made. We undertake no obligation to update publicly any forward-looking statements to reflect new information, events or circumstances after the date they were made or to reflect the occurrence of unanticipated events.
“Design Within Reach” is a registered trademark of Design Within Reach, Inc.
| Contact: | David Barnard | |
| Design Within Reach, Inc. | ||
| dbarnard@dwr.com | ||
| (415) 676-6500 | ||
| Andrew Greenebaum/Christine Lumpkins | ||
| Integrated Corporate Relations, Inc. | ||
| agreenebaum@icr-online.com;clumpkins@icr-online.com | ||
| (310) 395-2215 | ||
— Financial Tables Follow —
Design Within Reach, Inc.
Condensed Statements of Earnings
(Unaudited)
(amounts in thousands, except per share data)
| Thirteen weeks ended | Thirty-nine weeks ended | |||||||||||||||
September 25, 2004 | September 27, 2003 | September 25, 2004 | September 27, 2003 | |||||||||||||
Net sales | $ | 30,146 | $ | 20,647 | $ | 80,882 | $ | 56,146 | ||||||||
Cost of sales | 16,096 | 10,852 | 43,294 | 29,918 | ||||||||||||
Gross margin | 14,050 | 9,795 | 37,588 | 26,228 | ||||||||||||
Selling, general and administrative expenses | 11,703 | 8,532 | 31,320 | 23,348 | ||||||||||||
Stock-based compensation | 149 | — | 374 | — | ||||||||||||
Depreciation and amortization | 775 | 475 | 2,060 | 1,225 | ||||||||||||
Facility relocation costs | — | 28 | 198 | 37 | ||||||||||||
Earnings from operations | 1,423 | 760 | 3,636 | 1,618 | ||||||||||||
Interest income (expense) | ||||||||||||||||
Interest income | 58 | — | 58 | 12 | ||||||||||||
Interest expense | (9 | ) | (21 | ) | (92 | ) | (21 | ) | ||||||||
Earnings before income taxes | 1,472 | 739 | 3,602 | 1,609 | ||||||||||||
Income tax expense | 566 | — | 1,387 | — | ||||||||||||
Net earnings | 906 | 739 | 2,215 | 1,609 | ||||||||||||
Deemed preferred stock dividends | — | — | — | (1,765 | ) | |||||||||||
Net earnings (loss) available to common stockholders | $ | 906 | $ | 739 | $ | 2,215 | $ | (156 | ) | |||||||
Net earnings (loss) per share: | ||||||||||||||||
Basic | $ | 0.07 | $ | 0.23 | $ | 0.34 | $ | (0.05 | ) | |||||||
Diluted | $ | 0.06 | $ | 0.07 | $ | 0.18 | $ | (0.05 | ) | |||||||
Weighted average shares used in calculation of net earnings (loss) per share: | ||||||||||||||||
Basic | 12,643 | 3,254 | 6,493 | 3,244 | ||||||||||||
Diluted | 14,636 | 11,078 | 12,556 | 3,244 | ||||||||||||
The accompanying notes are an integral part of these financial statements.
Design Within Reach, Inc.
Condensed Consolidated Balance Sheets
(amounts in thousands)
| September 25, 2004 | December 27, 2003 | |||||
| (unaudited) | ||||||
ASSETS | ||||||
Current assets | ||||||
Cash and cash equivalents | $ | 20,884 | $ | 44 | ||
Accounts receivable | 1,487 | 620 | ||||
Inventory, net | 14,323 | 11,425 | ||||
Other current assets | 5,273 | 2,316 | ||||
Total current assets | 41,967 | 14,405 | ||||
Property and equipment, net | 16,484 | 9,018 | ||||
Other non-current assets | 3,373 | 420 | ||||
Total assets | $ | 61,824 | $ | 23,843 | ||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
Current liabilities | ||||||
Accounts payable | $ | 6,933 | $ | 4,852 | ||
Accrued expenses | 3,296 | 2,714 | ||||
Bank credit facility | — | 3,325 | ||||
Other current liabilities | 3,661 | 1,868 | ||||
Total current liabilities | 13,890 | 12,759 | ||||
Other non-current liabilities | 2,165 | 1,246 | ||||
Total liabilities | 16,055 | 14,005 | ||||
Total stockholders’ equity | 45,769 | 9,838 | ||||
Total liabilities and stockholders’ equity | $ | 61,824 | $ | 23,843 | ||
# # #