Exhibit 99.1
Contact:
Jordan M. Copland
Executive Vice President and Chief Financial Officer
GSI Commerce, Inc.
(610) 491-7000
coplandj@gsicommerce.com
FOR IMMEDIATE RELEASE
GSI COMMERCE REPORTS SECOND QUARTER FISCAL 2003 RESULTS
KING OF PRUSSIA, PENNSYLVANIA, July 30, 2003—GSI COMMERCE, INC. (NASDAQ: GSIC), today announced financial results for its second fiscal quarter ended June 28, 2003.
Net revenue was $50.3 million in the second quarter of fiscal 2003, compared with net revenue of $33.1 million in the second quarter of fiscal 2002, an increase of 52.3%.
Net loss was $3.8 million in the second quarter of fiscal 2003, compared with net loss of $5.2 million in the second quarter of fiscal 2002. Net loss per share was $0.10 in the second quarter of fiscal 2003, compared with net loss per share of $0.13 in the second quarter of fiscal 2002.
EBITDA loss was $0.9 million in the second quarter of fiscal 2003, compared to EBITDA loss of $3.9 million in the second quarter of fiscal 2002. EBITDA represents earnings (or loss) before interest income/expense, taxes, depreciation and amortization and stock-based compensation. A reconciliation of EBITDA to net loss is contained later in this release.
“GSI Commerce reported excellent second quarter results and completed a strong first half of fiscal 2003. While GSI is clearly benefiting from the growth of e-commerce and the growth of business process outsourcing, our more than 50% increase in net revenue and more than 80% increase in net merchandise sales* in the second quarter as compared to the same period in the prior year demonstrates that we are delivering a compelling value proposition to our partners and executing at a high level. Based on the momentum in our business to date, we are raising our guidance for fiscal 2003 and we expect to achieve EBITDA and GAAP net income profitability in fiscal 2004,” said Michael Rubin, Chairman and CEO of GSI Commerce.
*Net merchandise sales represents the retail value of all sales transactions, inclusive of freight charges and net of allowances for returns and discounts, which flow through the GSI platform, whether or not GSI is the seller of the merchandise or records the full amount of such sales on its financial statements. A reconciliation of net merchandise sales to net revenue is contained later in this release.
Highlights Since March 28, 2003
• | Net merchandise sales increased 83.9%, including a 43.3% increase in sporting goods, a 97.1% decrease in Ashford and a 432.7% increase in other categories. |
• | Sales and marketing, product development and general and administrative expenses, collectively, increased 8.5%, and declined, collectively, to 35.7% of net revenue from 50.1% of net revenue. |
• | Stock-based compensation expense was $0.4 million in the quarter compared to a credit of $0.8 million in the year ago period, resulting in a $1.2 million or $0.03 per share non-cash negative swing in net loss. |
• | Inventory declined to $20.3 million from $26.9 million a year ago and $25.1 million at the end of the first quarter of fiscal 2003. |
• | GSI’s wholly owned subsidiary, Global-QVC Solutions, announced that they were selected by the Public Broadcasting Service (PBS) to develop and operate a new technology, customer service and fulfillment platform for its consumer and education products, including: the shopPBS.com Web site; the PBS Home Video catalog; on-air offers and business-to-business distribution. |
• | GSI Commerce issued 1.65 million shares of GSI Commerce common stock to Interactive Technology Holdings, LLC (ITH), a joint venture company owned by Comcast Corporation and QVC, Inc. in exchange for warrants held by ITH to purchase 4.5 million shares of GSI Commerce common stock. |
Financial Guidance
The following forward-looking statements reflect GSI Commerce’s expectations as of July 30, 2003. 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.
Fiscal 2003 Expectations
• | Net revenue is expected to be in the range of $223-$232 million. |
• | Net merchandise sales is expected to be in the range of $264-$274 million. |
• | Net loss is expected to be in the range of $12-$14 million. |
• | EBITDA loss is expected to be in the range of $0-$2.5 million. |
Fiscal Third Quarter 2003 Expectations
• | Net revenue is expected to be in the range of $42-$45 million. |
• | Net merchandise sales is expected to be in the range of $48-$52 million. |
• | Net loss is expected to be in the range of $5.5-$6.5 million. |
• | EBITDA loss is expected to be in the range of $2.25-$3.0 million. |
Fiscal Fourth Quarter 2003 Expectations
• | Net revenue is expected to be in the range of $82-$88 million. |
• | Net merchandise sales is expected to be in the range of $107-$113 million. |
• | Net income is expected to be in the range of $1.5-$3.0 million. |
• | EBITDA is expected to be in the range of $4.5-$6 million. |
Non-GAAP Financial Measures
This press release contains the non-GAAP financial measures EBITDA and net merchandise sales. GSI Commerce uses 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 basis and on an annual basis and does not consistently reflect GSI Commerce’s results from its core business activities. In addition, GSI Commerce 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 expense trends if they have visibility to both GAAP revenue as well as the non-GAAP financial measure net merchandise sales. These non-GAAP 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 non-GAAP measures included in this press release have been reconciled to the nearest GAAP measure as is now required under new SEC rules regarding the use of non-GAAP financial measures.
As used herein, “GAAP” refers to accounting principles generally accepted in the United States of America.
Second Quarter Conference Call
A conference call to discuss GSI Commerce’s second quarter 2003 financial results will be held at 4:45 p.m. EST on July 30, 2003. For access to the conference call, call 1-888-928-9510 by 4:30 p.m. EST. The password is “Commerce” and the leader’s name is “Michael Rubin.” A tape recording of the conference call will be available, starting one hour after completion of the call, until the end of business August 8, 2003. To access the recording, call 1-888-568-0531.
A live Webcast of the conference call will also be available atwww.gsicommerce.com orwww.streetevents.com. A replay of the Webcast will be available for a limited time.
About GSI Commerce, Inc.
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 and to be made in GSI Commerce’s second quarter 2003 conference call, including those in the recordings and live audio 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 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 and e-commerce, 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, the ability of the company to successfully integrate its acquisitions of other businesses 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 those forward-looking statements, except as otherwise specifically stated by GSI Commerce.
# # #
GSI COMMERCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
December 28, 2002 | June 28, 2003 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 61,004 | $ | 36,550 | ||||
Short-term investments | 2,280 | 1,389 | ||||||
Marketable securities | 11,543 | 11,494 | ||||||
Accounts receivable, net of allowance of $1,533 and $1,338, respectively | 3,974 | 3,602 | ||||||
Inventory | 24,306 | 20,277 | ||||||
Prepaid expenses and other current assets | 2,078 | 2,208 | ||||||
Total current assets | 105,185 | 75,520 | ||||||
Property and equipment, net | 48,669 | 45,482 | ||||||
Goodwill, net | 13,453 | 13,453 | ||||||
Notes receivable | 4,423 | 4,086 | ||||||
Other equity investments | 2,159 | 2,159 | ||||||
Other assets, net of accumulated amortization of $1,250 and $1,751, respectively | 13,684 | 13,164 | ||||||
Total assets | $ | 187,573 | $ | 153,864 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 31,664 | $ | 12,133 | ||||
Accrued expenses and other | 20,283 | 13,124 | ||||||
Deferred revenue | 15,025 | 16,857 | ||||||
Current portion—capital lease obligations | 78 | — | ||||||
Total current liabilities | 67,050 | 42,114 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock, Series A, $0.01 par value, 5,000,000 shares authorized; 200 shares issued as mandatorily redeemable preferred stock as of December 28, 2002 and June 28, 2003, respectively; 0 shares outstanding as of December 28, 2002 and June 28, 2003, respectively | — | — | ||||||
Common stock, $0.01 par value, 90,000,000 shares authorized; 38,857,855 and 38,959,400 shares issued as of December 28, 2002 and June 28, 2003, respectively; 38,783,645 and 38,885,190 shares outstanding as of December 28, 2002 and June 28, 2003, respectively | 389 | 390 | ||||||
Additional paid in capital | 285,625 | 286,133 | ||||||
Accumulated other comprehensive income | 57 | 35 | ||||||
Accumulated deficit | (165,547 | ) | (174,807 | ) | ||||
120,524 | 111,751 | |||||||
Less: Treasury stock, at par | 1 | 1 | ||||||
Total stockholders’ equity | 120,523 | 111,750 | ||||||
Total liabilities and stockholders’ equity | $ | 187,573 | $ | 153,864 | ||||
GSI COMMERCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||
June 29, 2002 | June 28, 2003 | June 29, 2002 | June 28, 2003 | |||||||||||||
Revenues: | ||||||||||||||||
Net revenues from product sales | $ | 28,293 | $ | 45,722 | $ | 57,943 | $ | 89,895 | ||||||||
Service fee revenues | 4,776 | 4,626 | 7,051 | 9,332 | ||||||||||||
Net revenues | 33,069 | 50,348 | 64,994 | 99,227 | ||||||||||||
Cost of revenues from product sales | 20,399 | 33,307 | 40,754 | 65,160 | ||||||||||||
Gross profit | 12,670 | 17,041 | 24,240 | 34,067 | ||||||||||||
Operating expenses: | ||||||||||||||||
Sales and marketing, exclusive of $(251), $279, $1 and $508 reported below as stock-based compensation, respectively | 9,743 | 10,825 | 18,935 | 23,546 | ||||||||||||
Product development, exclusive of $(118), $0, $(44) and $0 reported below as stock-based compensation, respectively | 3,067 | 3,688 | 5,403 | 7,693 | ||||||||||||
General and administrative, exclusive of $(381), $125, $(175) and $184 reported below as stock-based compensation, respectively | 3,747 | 3,457 | 7,049 | 6,635 | ||||||||||||
Stock-based compensation | (750 | ) | 404 | (218 | ) | 692 | ||||||||||
Depreciation and amortization | 2,272 | 2,734 | 4,107 | 5,432 | ||||||||||||
Total operating expenses | 18,079 | 21,108 | 35,276 | 43,998 | ||||||||||||
Other (income) expense: | ||||||||||||||||
Interest expense | 130 | — | 262 | — | ||||||||||||
Interest income | (372 | ) | (290 | ) | (826 | ) | (671 | ) | ||||||||
Total other (income) expense | (242 | ) | (290 | ) | (564 | ) | (671 | ) | ||||||||
Net loss | $ | (5,167 | ) | $ | (3,777 | ) | $ | (10,472 | ) | $ | (9,260 | ) | ||||
Losses per share—basic and diluted: | ||||||||||||||||
Net loss | $ | (0.13 | ) | $ | (0.10 | ) | $ | (0.27 | ) | $ | (0.24 | ) | ||||
Weighted average shares outstanding: | ||||||||||||||||
basic and diluted | 38,674 | 38,838 | 38,362 | 38,811 | ||||||||||||
GSI COMMERCE, INC. AND SUBSIDIARIES
EBITDA AND RECONCILIATION TO GAAP RESULTS
(in thousands, expect per share data)
(unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||
June 29, 2002 | June 28, 2003 | June 29, 2002 | June 28, 2003 | |||||||||||||
EBITDA: | ||||||||||||||||
Net loss excluding interest income and expense taxes and charges for stock-based compensation and depreciation and amortization | $ | (3,887 | ) | $ | (929 | ) | $ | (7,147 | ) | $ | (3,807 | ) | ||||
Net loss excluding interest income and expense taxes and charges for stock-based compensation and depreciation and amortization, per share: | ||||||||||||||||
basic and diluted | $ | (0.10 | ) | $ | (0.02 | ) | $ | (0.19 | ) | $ | (0.10 | ) | ||||
Reconciliation of EBITDA to GAAP results: | ||||||||||||||||
EBITDA | $ | (3,887 | ) | $ | (929 | ) | $ | (7,147 | ) | $ | (3,807 | ) | ||||
Interest expense | 130 | — | 262 | — | ||||||||||||
Interest income | (372 | ) | (290 | ) | (826 | ) | (671 | ) | ||||||||
Taxes | — | — | — | — | ||||||||||||
Stock-based compensation | (750 | ) | 404 | (218 | ) | 692 | ||||||||||
Depreciation and amortization | 2,272 | 2,734 | 4,107 | 5,432 | ||||||||||||
Net loss | $ | (5,167 | ) | $ | (3,777 | ) | $ | (10,472 | ) | $ | (9,260 | ) | ||||
GSI COMMERCE, INC. AND SUBSIDIARIES
NET MERCHANDISE SALES(1) AND RECONCILIATION TO GAAP RESULTS
(dollars in thousands)
(unaudited)
Three Months Ended | Variance | ||||||||||||||
June 29, 2002 | June 28, 2003 | Amount | % | ||||||||||||
Net merchandise sales(1)—(a non-GAAP financial measure): | |||||||||||||||
Category: | |||||||||||||||
Sporting goods | $ | 18,843 | $ | 27,011 | $ | 8,168 | 43 | % | |||||||
Ashford | 5,775 | 167 | (5,608 | ) | -97 | % | |||||||||
Other | 5,192 | 27,657 | 22,465 | 433 | % | ||||||||||
Total net merchandise sales(1)—(a non-GAAP financial measure) | $ | 29,810 | $ | 54,835 | $ | 25,025 | 84 | % | |||||||
Net revenues—(GAAP basis): | |||||||||||||||
Net revenues from product sales: | |||||||||||||||
Category: | |||||||||||||||
Sporting goods | $ | 18,843 | $ | 27,011 | $ | 8,168 | 43 | % | |||||||
Ashford | 5,775 | 167 | (5,608 | ) | -97 | % | |||||||||
Other | 3,675 | 18,544 | 14,869 | 405 | % | ||||||||||
Total net revenues from product sales | 28,293 | 45,722 | 17,429 | 62 | % | ||||||||||
Service fee revenues | 4,776 | 4,626 | (150 | ) | -3 | % | |||||||||
Total net revenues—(GAAP basis) | $ | 33,069 | $ | 50,348 | $ | 17,279 | 52 | % | |||||||
Reconciliation of net merchandise sales(1) to net revenues: | |||||||||||||||
Net merchandise sales(1)—(a non-GAAP financial measure): | |||||||||||||||
Category: | |||||||||||||||
Sporting goods | $ | 18,843 | $ | 27,011 | $ | 8,168 | 43 | % | |||||||
Ashford | 5,775 | 167 | (5,608 | ) | -97 | % | |||||||||
Other | 5,192 | 27,657 | 22,465 | 433 | % | ||||||||||
Total net merchandise sales(1)—(a non-GAAP financial measure) | 29,810 | 54,835 | 25,025 | 84 | % | ||||||||||
Less: | |||||||||||||||
Sales by partners(2): | |||||||||||||||
Category: | |||||||||||||||
Sporting goods | — | — | — | — | |||||||||||
Ashford | — | — | — | — | |||||||||||
Other | (1,517 | ) | (9,113 | ) | (7,596 | ) | 501 | % | |||||||
Total sales by partners(2) | (1,517 | ) | (9,113 | ) | (7,596 | ) | 501 | % | |||||||
Add: | |||||||||||||||
Service fee revenues | 4,776 | 4,626 | (150 | ) | -3 | % | |||||||||
Net revenues—(GAAP basis) | $ | 33,069 | $ | 50,348 | $ | 17,279 | 52 | % | |||||||
(1) | Net merchandise sales represents the retail value of all sales transactions, inclusive of freight charges and net of allowances for returns and discounts, which flow through the GSI platform, whether or not GSI is the seller of the merchandise or records the full amount of such sales on its financial statements. |
(2) | Represents the retail value of all product sales through the GSI platform where the inventory is owned by the partner and the partner is the seller of the merchandise. GSI records service fee revenues on these sales. |
GSI COMMERCE, INC. AND SUBSIDIARIES
NET MERCHANDISE SALES (1)AND RECONCILIATION TO GAAP RESULTS
(dollars in thousands)
(unaudited)
Six Months Ended | Variance | ||||||||||||||
June 29, 2002 | June 28, 2003 | Amount | % | ||||||||||||
Net merchandise sales(1)—(a non-GAAP financial measure): | |||||||||||||||
Category: | |||||||||||||||
Sporting goods | $ | 45,966 | (3) | $ | 51,418 | $ | 5,452 | 12 | % | ||||||
Ashford | 7,379 | 902 | (6,477 | ) | -88 | % | |||||||||
Other | 7,718 | 56,691 | 48,973 | 635 | % | ||||||||||
Total net merchandise sales(1)—(a non-GAAP financial measure) | $ | 61,063 | $ | 109,011 | $ | 47,948 | 79 | % | |||||||
Net revenues—(GAAP basis): | |||||||||||||||
Net revenues from product sales: | |||||||||||||||
Category: | |||||||||||||||
Sporting goods | $ | 45,966 | (3) | $ | 51,418 | $ | 5,452 | 12 | % | ||||||
Ashford | 7,379 | 902 | (6,477 | ) | -88 | % | |||||||||
Other | 4,598 | 37,575 | 32,977 | 717 | % | ||||||||||
Total net revenues from product sales | 57,943 | 89,895 | 31,952 | 55 | % | ||||||||||
Service fee revenues | 7,051 | 9,332 | 2,281 | 32 | % | ||||||||||
Total net revenues—(GAAP basis) | $ | 64,994 | $ | 99,227 | $ | 34,233 | 53 | % | |||||||
Reconciliation of net merchandise sales(1) to net revenues: | |||||||||||||||
Net merchandise sales(1)—(a non-GAAP financial measure): | |||||||||||||||
Category: | |||||||||||||||
Sporting goods | $ | 45,966 | (3) | $ | 51,418 | $ | 5,452 | 12 | % | ||||||
Ashford | 7,379 | 902 | (6,477 | ) | -88 | % | |||||||||
Other | 7,718 | 56,691 | 48,973 | 635 | % | ||||||||||
Total net merchandise sales(1)—(a non-GAAP financial measure) | 61,063 | 109,011 | 47,948 | 79 | % | ||||||||||
Less: | |||||||||||||||
Sales by partners(2): | |||||||||||||||
Category: | |||||||||||||||
Sporting goods | — | — | — | — | |||||||||||
Ashford | — | — | — | — | |||||||||||
Other | (3,120 | ) | (19,116 | ) | (15,996 | ) | 513 | % | |||||||
Total sales by partners(2) | (3,120 | ) | (19,116 | ) | (15,996 | ) | 513 | % | |||||||
Add: | |||||||||||||||
Service fee revenues | 7,051 | 9,332 | 2,281 | 32 | % | ||||||||||
Net revenues—(GAAP basis) | $ | 64,994 | $ | 99,227 | $ | 34,233 | 53 | % | |||||||
(1) | Net merchandise sales represents the retail value of all sales transactions, inclusive of freight charges and net of allowances for returns and discounts, which flow through the GSI platform, whether or not GSI is the seller of the merchandise or records the full amount of such sales on its financial statements. |
(2) | Represents the retail value of all product sales through the GSI platform where the inventory is owned by the partner and the partner is the seller of the merchandise. GSI records service fee revenues on these sales. |
(3) | Includes $8.3 million from sales of one of GSI’s partner’s products sold primarily through its direct response television campaigns in addition to Web site and toll-free number sales. |