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 THIRD QUARTER FISCAL 2003 RESULTS
KING OF PRUSSIA, PENNSYLVANIA, October 29, 2003 – GSI COMMERCE, INC. (NASDAQ: GSIC), today announced financial results for its third fiscal quarter ended September 27, 2003.
Net revenue was $47.5 million in the third quarter of fiscal 2003, compared with net revenue of $32.3 million in the third quarter of fiscal 2002, an increase of 46.9%.
Net loss was $5.5 million in the third quarter of fiscal 2003, compared with net loss of $8.6 million in the third quarter of fiscal 2002. Net loss per share was $0.14 in the third quarter of fiscal 2003, compared with net loss per share of $0.22 in the third quarter of fiscal 2002.
EBITDA loss was $2.0 million in the third quarter of fiscal 2003, compared to EBITDA loss of $5.9 million in the third 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 GAAP net loss is contained later in this release.
“GSI Commerce continued its trend of strong performance in the third quarter of 2003, with excellent sales growth and reductions in EBITDA loss and net loss compared to the prior year period. Our year to date results demonstrate solid execution and a growing market opportunity. We are reiterating our previously issued fourth quarter guidance and continue to expect to achieve EBITDA and GAAP profitability in fiscal 2004,” said Michael Rubin, Chairman and CEO of GSI Commerce.
Highlights Since July 30, 2003
• | Net merchandise sales* increased 51% over the prior year quarter, including a 49% increase in sporting goods, a 98% decrease attributable to the Ashford.com business, which GSI Commerce sold in December 2002, and a 108% increase in other categories. |
• | Sales and marketing, product development and general and administrative expenses, collectively, increased 1.8% over the prior year quarter, and declined, collectively, to 39.4% of net revenue from 56.9% of net revenue. |
• | Inventory declined to $22.4 million from $32.4 million a year ago. |
• | GSI completed the launch of Linens-n-Things, including an in-store associate assisted ordering system and an integrated online/offline wedding registry. |
• | GSI’s wholly owned subsidiary Global-QVC Solutions implemented a new business relationship with PBS Businesses, which includes providing support for its e-commerce, catalog and direct response television platforms. |
*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 Commerce platform, whether or not GSI Commerce 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 GAAP net revenue is contained later in this release.
Financial Guidance
The following forward-looking statements reflect GSI Commerce’s expectations as of October 29, 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 $228-$234 million. |
• | Net merchandise sales is expected to be in the range of $269-$275 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-$2.0 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.
Third Quarter Conference Call
A conference call to discuss GSI Commerce’s third quarter 2003 financial results will be held at 4:45 p.m. EST on October 29, 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 November 11, 2003. To access the recording, call 1-800-879-5507.
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 third 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 develop and 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 | September 27, 2003 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 61,004 | $ | 36,505 | ||||
Short-term investments | 2,280 | — | ||||||
Marketable securities | 11,543 | 10,028 | ||||||
Accounts receivable, net of allowance of $1,533 and $1,293, respectively | 3,974 | 3,634 | ||||||
Inventory | 24,306 | 22,352 | ||||||
Prepaid expenses and other current assets | 2,078 | 1,872 | ||||||
Total current assets | 105,185 | 74,391 | ||||||
Property and equipment, net | 48,669 | 45,278 | ||||||
Goodwill, net | 13,453 | 13,453 | ||||||
Notes receivable | 4,423 | 3,911 | ||||||
Other equity investments | 2,159 | 2,159 | ||||||
Other assets, net of accumulated amortization of $1,250 and $2,042, respectively | 13,684 | 12,873 | ||||||
Total assets | $ | 187,573 | $ | 152,065 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 31,664 | $ | 15,368 | ||||
Accrued expenses and other | 20,283 | 13,805 | ||||||
Deferred revenue | 15,025 | 15,832 | ||||||
Current portion – capital lease obligations | 78 | — | ||||||
Total current liabilities | 67,050 | 45,005 | ||||||
Mandatorily redeemable preferred stock, Series A, $0.01 par value, 10,000 shares authorized; 200 and 0 shares issued as of December 28, 2002 and September 27, 2003, respectively; 0 shares outstanding as of December 28, 2002 and September 27, 2003, respectively | — | — | ||||||
Commitments and contingencies | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock, $0.01 par value, 4,990,000 shares authorized; 0 shares issued and outstanding as of December 28, 2002 and September 27, 2003, respectively | — | — | ||||||
Common stock, $0.01 par value, 90,000,000 shares authorized; 38,857,855 and 40,636,675 shares issued as of December 28, 2002 and September 27, 2003, respectively; 38,783,645 and 40,635,465 shares outstanding as of December 28, 2002 and September 27, 2003, respectively | 389 | 406 | ||||||
Additional paid in capital | 285,625 | 286,979 | ||||||
Accumulated other comprehensive income | 57 | 27 | ||||||
Accumulated deficit | (165,547 | ) | (180,352 | ) | ||||
120,524 | 107,060 | |||||||
Less: Treasury stock, at par | 1 | — | ||||||
Total stockholders’ equity | 120,523 | 107,060 | ||||||
Total liabilities and stockholders’ equity | $ | 187,573 | $ | 152,065 | ||||
GSI COMMERCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 28, 2002 | September 27, 2003 | September 28, 2002 | September 27, 2003 | |||||||||||||
Revenues: | ||||||||||||||||
Net revenues from product sales | $ | 27,778 | $ | 42,521 | $ | 85,721 | $ | 132,416 | ||||||||
Service fee revenues | 4,545 | 4,962 | 11,596 | 14,294 | ||||||||||||
Net revenues | 32,323 | 47,483 | 97,317 | 146,710 | ||||||||||||
Cost of revenues from product sales | 20,257 | 30,778 | 61,011 | 95,938 | ||||||||||||
Gross profit | 12,066 | 16,705 | 36,306 | 50,772 | ||||||||||||
Operating expenses: | ||||||||||||||||
Sales and marketing, exclusive of $154, $419, $155 and $927 reported below as stock-based compensation, respectively | 11,362 | 11,789 | 30,297 | 35,335 | ||||||||||||
Product development, exclusive of $0, $38, $(44) and $38 reported below as stock-based compensation, respectively | 3,317 | 3,860 | 8,720 | 11,553 | ||||||||||||
General and administrative, exclusive of $27, $171, $(148) and $355 reported below as stock-based compensation, respectively | 3,708 | 3,078 | 10,757 | 9,713 | ||||||||||||
Restructuring costs related to Ashford | — | 19 | — | 19 | ||||||||||||
Gain on sale of Ashford assets | (379 | ) | — | (379 | ) | — | ||||||||||
Stock-based compensation | 181 | 628 | (37 | ) | 1,320 | |||||||||||
Depreciation and amortization | 2,585 | 3,119 | 6,692 | 8,551 | ||||||||||||
Total operating expenses | 20,774 | 22,493 | 56,050 | 66,491 | ||||||||||||
Other (income) expense: | ||||||||||||||||
Interest expense | 127 | — | 389 | — | ||||||||||||
Interest income | (270 | ) | (243 | ) | (1,096 | ) | (914 | ) | ||||||||
Total other (income) expense | (143 | ) | (243 | ) | (707 | ) | (914 | ) | ||||||||
Net loss | $ | (8,565 | ) | $ | (5,545 | ) | $ | (19,037 | ) | $ | (14,805 | ) | ||||
Losses per share - basic and diluted: | ||||||||||||||||
Net loss | $ | (0.22 | ) | $ | (0.14 | ) | $ | (0.49 | ) | $ | (0.38 | ) | ||||
Weighted average shares outstanding: | ||||||||||||||||
basic and diluted | 38,769 | 40,109 | 38,497 | 39,243 | ||||||||||||
GSI COMMERCE, INC. AND SUBSIDIARIES
EBITDA AND RECONCILIATION TO GAAP RESULTS
(in thousands, expect per share data)
(unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 28, 2002 | September 27, 2003 | September 28, 2002 | September 27, 2003 | |||||||||||||
EBITDA: | ||||||||||||||||
Net loss excluding interest income and expense taxes and charges for stock-based compensation and depreciation and amortization | $ | (5,942 | ) | $ | (2,041 | ) | $ | (13,089 | ) | $ | (5,848 | ) | ||||
Net loss excluding interest income and expense taxes and charges for stock-based compensation and depreciation and amortization, per share: | ||||||||||||||||
basic and diluted | $ | (0.15 | ) | $ | (0.05 | ) | $ | (0.34 | ) | $ | (0.15 | ) | ||||
Reconciliation of EBITDA to GAAP results: | ||||||||||||||||
EBITDA | $ | (5,942 | ) | $ | (2,041 | ) | $ | (13,089 | ) | $ | (5,848 | ) | ||||
Interest expense | 127 | — | 389 | — | ||||||||||||
Interest income | (270 | ) | (243 | ) | (1,096 | ) | (914 | ) | ||||||||
Taxes | — | — | — | — | ||||||||||||
Stock-based compensation | 181 | 628 | (37 | ) | 1,320 | |||||||||||
Depreciation and amortization | 2,585 | 3,119 | 6,692 | 8,551 | ||||||||||||
Net loss | $ | (8,565 | ) | $ | (5,545 | ) | $ | (19,037 | ) | $ | (14,805 | ) | ||||
GSI COMMERCE, INC. AND SUBSIDIARIES
NET MERCHANDISE SALES(1) AND RECONCILIATION TO GAAP RESULTS
(dollars in thousands)
(unaudited)
Three Months Ended | Variance | ||||||||||||||
September 28, 2002 | September 27, 2003 | ||||||||||||||
Amount | % | ||||||||||||||
Net merchandise sales(1) – (a non-GAAP financial measure): | |||||||||||||||
Category: | |||||||||||||||
Sporting goods | $ | 16,776 | $ | 24,991 | $ | 8,215 | 49 | % | |||||||
Ashford | 4,919 | 91 | (4,828 | ) | -98 | % | |||||||||
Other | 13,331 | 27,679 | 14,348 | 108 | % | ||||||||||
Total net merchandise sales(1) – (a non-GAAP financial measure) | $ | 35,026 | $ | 52,761 | $ | 17,735 | 51 | % | |||||||
Net revenues – (GAAP basis): | |||||||||||||||
Net revenues from product sales: | |||||||||||||||
Category: | |||||||||||||||
Sporting goods | $ | 16,776 | $ | 24,987 | $ | 8,211 | 49 | % | |||||||
Ashford | 4,919 | 91 | (4,828 | ) | -98 | % | |||||||||
Other | 6,083 | 17,443 | 11,360 | 187 | % | ||||||||||
Total net revenues from product sales | 27,778 | 42,521 | 14,743 | 53 | % | ||||||||||
Service fee revenues | 4,545 | 4,962 | 417 | 9 | % | ||||||||||
Total net revenues – (GAAP basis) | $ | 32,323 | $ | 47,483 | $ | 15,160 | 47 | % | |||||||
Reconciliation of net merchandise sales(1) to net revenues: | |||||||||||||||
Net merchandise sales(1) – (a non-GAAP financial measure): | |||||||||||||||
Category: | |||||||||||||||
Sporting goods | $ | 16,776 | $ | 24,991 | $ | 8,215 | 49 | % | |||||||
Ashford | 4,919 | 91 | (4,828 | ) | -98 | % | |||||||||
Other | 13,331 | 27,679 | 14,348 | 108 | % | ||||||||||
Total net merchandise sales(1) – (a non-GAAP financial measure) | 35,026 | 52,761 | 17,735 | 51 | % | ||||||||||
Less: | |||||||||||||||
Sales by partners (2): | |||||||||||||||
Category: | |||||||||||||||
Sporting goods | �� | — | (4 | ) | (4 | ) | — | ||||||||
Ashford | — | — | — | — | |||||||||||
Other | (7,248 | ) | (10,236 | ) | (2,988 | ) | 41 | % | |||||||
Total sales by partners(2) | (7,248 | ) | (10,240 | ) | (2,992 | ) | 41 | % | |||||||
Add: | |||||||||||||||
Service fee revenues | 4,545 | 4,962 | 417 | 9 | % | ||||||||||
Net revenues – (GAAP basis) | $ | 32,323 | $ | 47,483 | $ | 15,160 | 47 | % | |||||||
(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 Commerce platform, whether or not GSI Commerce 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 Commerce platform where the inventory is owned by the partner and the partner is the seller of the merchandise. GSI Commerce 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)
Nine Months Ended | Variance | ||||||||||||||
September 28, 2002 | September 27, 2003 | ||||||||||||||
Amount | % | ||||||||||||||
Net merchandise sales(1) – (a non-GAAP financial measure): | |||||||||||||||
Category: | |||||||||||||||
Sporting goods | $ | 62,742 | (3) | $ | 76,409 | $ | 13,667 | 22 | % | ||||||
Ashford | 12,298 | 993 | (11,305 | ) | -92 | % | |||||||||
Other | 21,049 | 84,370 | 63,321 | 301 | % | ||||||||||
Total net merchandise sales(1) – (a non-GAAP financial measure) | $ | 96,089 | $ | 161,772 | $ | 65,683 | 68 | % | |||||||
Net revenues – (GAAP basis): | |||||||||||||||
Net revenues from product sales: | |||||||||||||||
Category: | |||||||||||||||
Sporting goods | $ | 62,742 | (3) | $ | 76,405 | $ | 13,663 | 22 | % | ||||||
Ashford | 12,298 | 993 | (11,305 | ) | -92 | % | |||||||||
Other | 10,681 | 55,018 | 44,337 | 415 | % | ||||||||||
Total net revenues from product sales | 85,721 | 132,416 | 46,695 | 54 | % | ||||||||||
Service fee revenues | 11,596 | 14,294 | 2,698 | 23 | % | ||||||||||
Total net revenues – (GAAP basis) | $ | 97,317 | $ | 146,710 | $ | 49,393 | 51 | % | |||||||
Reconciliation of net merchandise sales(1) to net revenues: | |||||||||||||||
Net merchandise sales(1) – (a non-GAAP financial measure): | |||||||||||||||
Category: | |||||||||||||||
Sporting goods | $ | 62,742 | (3) | $ | 76,409 | $ | 13,667 | 22 | % | ||||||
Ashford | 12,298 | 993 | (11,305 | ) | -92 | % | |||||||||
Other | 21,049 | 84,370 | 63,321 | 301 | % | ||||||||||
Total net merchandise sales(1) – (a non-GAAP financial measure) | 96,089 | 161,772 | 65,683 | 68 | % | ||||||||||
Less: | |||||||||||||||
Sales by partners (2): | |||||||||||||||
Category: | |||||||||||||||
Sporting goods | — | (4 | ) | (4 | ) | — | |||||||||
Ashford | — | — | — | — | |||||||||||
Other | (10,368 | ) | (29,352 | ) | (18,984 | ) | 183 | % | |||||||
Total sales by partners(2) | (10,368 | ) | (29,356 | ) | (18,988 | ) | 183 | % | |||||||
Add: | |||||||||||||||
Service fee revenues | 11,596 | 14,294 | 2,698 | 23 | % | ||||||||||
Net revenues – (GAAP basis) | $ | 97,317 | $ | 146,710 | $ | 49,393 | 51 | % | |||||||
(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 Commerce platform, whether or not GSI Commerce 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 Commerce platform where the inventory is owned by the partner and the partner is the seller of the merchandise. GSI Commerce records service fee revenues on these sales. |
(3) | Includes $8.3 million from sales of one of GSI Commerce’s partner’s products sold primarily through its direct response television campaigns in addition to Web site and toll-free number sales. |