Exhibit 99.1
GSI Commerce Reports Fiscal 2004 Second Quarter Operating Results
Company Achieves Record Second Quarter Net Revenues and Reduces Net Loss
KING OF PRUSSIA, Pa., July 28 /PRNewswire-FirstCall/ -- GSI Commerce Inc.
(Nasdaq: GSIC) today announced that for its second fiscal quarter ended
July 3, 2004, the company increased its net revenues 28 percent to
$64.7 million and reported a net loss of $3.1 million, or $0.08 per share,
decreasing the company's net loss by $631,000, or $0.02 per share, compared to
last year's second fiscal quarter. For the same comparable periods, adjusted
EBITDA, a non-GAAP financial measure, improved by approximately $394,000 to a
loss of $535,000, and net merchandise sales, also a non-GAAP financial
measure, rose 63 percent to $89.6 million. Definitions of the non-GAAP
financial measures, adjusted EBITDA and net merchandise sales, a discussion of
why the company uses these measures and a reconciliation of these measures to
the nearest GAAP measures appear later in this news release.
Net Revenues and Net Merchandise Sales
Net revenues were $64.7 million for the second quarter of fiscal 2004,
which was a 28 percent increase compared to net revenues of $50.3 million for
the second quarter of fiscal 2003.
Net revenues from product sales generated by the company's sporting goods
category were $33.6 million for the second quarter of fiscal 2004, which was a
24 percent increase compared to $27.0 million for the second quarter of fiscal
2003. Net revenues from product sales generated by the company's other
merchandise categories were $19.5 million for the second quarter of fiscal
2004, which was a 4.0 percent increase compared to $18.7 million for the
second quarter of fiscal 2003. The company launched the Treo 600 smartphone
from palmOne on the GSI Commerce platform approximately one month later than
planned which, together with a lengthy product availability backlog for this
popular product line, negatively impacted product revenues in the other
merchandise sales category in the quarter.
Service fee revenues increased 150 percent to $11.6 million in the second
quarter of fiscal 2004 compared to $4.6 million in the second quarter of
fiscal 2003.
Net merchandise sales were $89.6 million for the second quarter of fiscal
2004, a 63 percent increase compared to net merchandise sales of $54.8 million
for the second 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 40
percent in the second quarter of fiscal 2004 to $37.9 million compared to
$27.0 million in the second quarter of fiscal 2003. Net merchandise sales
from the company's other merchandise categories increased 86 percent in the
second quarter of fiscal 2004 to $51.7 million from $27.8 million in the
second quarter of fiscal 2003.
Net Loss, EPS and Adjusted EBITDA
The company had a net loss of $3.1 million for the second quarter of
fiscal 2004, which was an improvement of approximately $631,000 compared to
the net loss of $3.8 million for the second quarter of fiscal 2003.
The company showed a $0.02 per share improvement with a net loss per share
of $0.08 for the second quarter of fiscal 2004 compared to a net loss per
share of $0.10 for the second quarter of fiscal 2003.
The company showed a $394,000 improvement in adjusted EBITDA, with an
adjusted EBITDA loss of $535,000 in the second quarter of fiscal 2004 compared
to an adjusted EBITDA loss of $929,000 in the second quarter of fiscal 2003.
The company incurred severance, recruiting and other expenses of approximately
$500,000 related to executive management transitions in the second quarter of
fiscal 2004, which had not been considered in the company's guidance issued in
the fiscal 2004 first quarter operating results news release. 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 47 percent to $25.1 million in the
second quarter of fiscal 2004 compared to a gross profit of $17.0 million in
the second quarter of fiscal 2003. Gross margin improved to 38.8 percent for
the second quarter of fiscal 2004 from 33.8 percent in the second quarter of
fiscal 2003, an increase of 500 basis points.
Total operating expenses were $28.5 million for the second quarter of
fiscal 2004, an increase of 35 percent compared to $21.1 million for the
second quarter of fiscal 2003. Total operating expenses, as a percentage of
net revenues, increased to 44 percent in the second quarter of fiscal 2004
compared to 42 percent in the second quarter of fiscal 2003.
Total operating expenses of $28.5 million, as a percentage of net
merchandise sales of $89.6 million, were 32 percent in the second quarter of
fiscal 2004. This compared to total operating expenses of $21.1 million in
the second quarter of fiscal 2003, which, as a percentage of net merchandise
sales of $54.8 million, were 38 percent.
Balance Sheet
The company's cash, cash equivalents, short-term investments and
marketable securities at the end of fiscal 2004's second quarter were
$48.2 million compared to $69.5 million at fiscal 2003 year-end, a decrease of
$21.3 million, which was primarily attributable to the expected seasonality of
working capital and, to a lesser extent, the purchase of a new company
headquarters building. Cash, cash equivalents, short-term investments and
marketable securities at the end of fiscal 2004's second quarter decreased
$1.2 million compared to the $49.4 million at the end of fiscal 2003's second
quarter. During fiscal 2004's second quarter, the company purchased a new
headquarters building in King of Prussia, Pa., for $17 million and secured a
10-year, $13-million mortgage loan.
The company's inventory at the end of fiscal 2004's second quarter was
$22.0 million compared to $22.9 million at fiscal 2003 year-end, a decrease of
$879,000. Comparing inventory at the end of fiscal 2004's second quarter to
the end of fiscal 2003's second quarter, inventory increased $1.7 million to
$22.0 million from $20.3 million.
Management's Commentary
"GSI Commerce has performed well since our last report," said Michael
Rubin, chairman and CEO of GSI Commerce. "We have generated strong growth
from sports and other categories, improved our bottom line, continued our
strategy of meaningfully investing in our business to support our substantial
growth opportunity and added key new partners. We are on track to meet our
guidance and are also positioned well for future growth."
Highlights since April 28, 2004
-- Polo Ralph Lauren and Timberland successfully launched their e-
commerce stores at http://www.polo.com and http://www.timberland.com,
respectively, on GSI Commerce's e-commerce platform.
-- The company signed new partner agreements with two luxury brand
designers and retailers of high-quality apparel, accessories and home
products. The company expects to launch these partners' online
stores on GSI Commerce's e-commerce platform later this year.
-- GSI Commerce secured a multi-year contract extension with palmOne
Inc. (Nasdaq: PLMO). In addition to continuing to operate palmOne's
online stores in the United States and Canada, GSI Commerce will
replace and operate palmOne's Treo(TM) online store, currently
operated in-house by palmOne. The new site will include phone
activation services and credit authorization interfaces with an
expanded list of telecommunication carriers, including AT&T, Sprint,
Cingular, T-Mobile and Verizon.
-- GSI Commerce signed a multi-year extension of its contract to operate
the online retail store for Reebok International Ltd., a leading
worldwide designer, marketer and distributor of sports, fitness and
casual footwear, apparel and equipment.
-- Robert Blyskal was named to the newly created position of co-
president and chief operating officer. Blyskal directly oversees the
business management, technology and information services, and
fulfillment and customer service groups and reports to Michael Rubin.
-- The company's e-commerce platform was selected by more of the Top 300
Web retailers in the United States than any other solution provider's
platform, according to research published in June by Internet
Retailer Magazine in its "2004 Top 300 Guide."
-- GSI Commerce completed the purchase of a new 104,000-square-foot
headquarters building in King of Prussia, Pa. The company intends to
occupy the building in the fourth quarter of fiscal 2004, enabling it
to consolidate its headquarters staff into one facility from the
three facilities it currently occupies.
-- GSI Commerce leased a 400,000-square-foot fulfillment center. This
is GSI Commerce's second fulfillment facility. The lease is
contingent upon receiving certain tax-related incentives from the
state where the facility is located. Provided that the state
incentives are approved, GSI Commerce intends to operate the
facility, which would nearly double fulfillment capacity to 870,000
square feet from 470,000 square feet, beginning in the fourth quarter
of fiscal 2004.
Fiscal 2004 Third Quarter, Fourth Quarter and Annual Financial Guidance
The following forward-looking statements reflect GSI Commerce's
expectations as of July 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 the fiscal 2004 third
quarter:
-- Net revenues are expected to be in the range of $62 million to $67
million.
-- Net merchandise sales are expected to be in the range of $92 million
to $97 million.
-- Net loss is expected to be in the range of $4.9 million to $3.9
million.
-- Adjusted EBITDA loss is expected to be in the range of a $1.5 million
to $500,000.
The company provides the following guidance for the fiscal 2004 fourth
quarter:
-- Net revenues are expected to be in the range of $117 million to $130
million.
-- Net merchandise sales are expected to be in the range of $177.5
million to $190.5 million.
-- Net income is expected to be in the range of $12.1 million to $13.1
million.
-- Adjusted EBITDA is expected to be in the range of $16.6 million to
$17.1 million.
The company also updates its previous guidance for fiscal 2004:
-- Net revenues are expected to be in the range of $310 million to $328
million.
-- Net merchandise sales are expected to be in the range of $445 million
to $463 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. The non-GAAP financial measures
included in this press release have been reconciled to the nearest GAAP
measures as is required under SEC rules.
Second Quarter Conference Call
GSI Commerce has scheduled a conference call on July 28 at 4:45 p.m. EDT
to discuss the company's fiscal 2004 second quarter results and expectations
for future performance. For access to the conference call, please call the
toll-free conference number, 1-800-299-7635, by 4:30 p.m. EDT. The conference
password is "67635289" 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, http://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 at
1-888-286-8010 and remain available through August 27. The password for the
replay is "48453182."
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 and development, 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 approximately 45 partners.
Forward-Looking Statements
All statements made in this release and to be made in GSI Commerce's
fiscal 2004 second 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, and the timing of its establishment or
extension of its relationships with strategic partners, 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.
palmOne and Treo are among the trademarks or registered trademarks owned
by or licensed to palmOne Inc. or its subsidiaries.
GSI COMMERCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
January 3, July 3,
2004 2004
ASSETS
Current assets:
Cash and cash equivalents $57,558 $32,975
Marketable securities 11,912 15,268
Accounts receivable, net of
allowance of $709 and $718,
respectively 4,898 7,283
Inventory 22,910 22,031
Current portion - notes receivable 1,377 900
Prepaid expenses and other
current assets 1,848 1,502
Total current assets 100,503 79,959
Property and equipment, net 44,840 63,269
Goodwill, net 13,453 13,453
Notes receivable 2,356 1,293
Other equity investments 2,159 2,847
Other assets, net of accumulated
amortization of $2,644 and $3,352,
respectively 12,272 11,745
Total assets $175,583 $172,566
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $27,677 $22,215
Accrued expenses and other 22,538 21,344
Deferred revenue 14,998 11,769
Current portion - note payable - 150
Total current liabilities 65,213 55,478
Note payable - 12,850
Mandatorily redeemable preferred stock,
Series A, $0.01 par value, 10,000 shares
authorized; 0 shares issued and
outstanding as of January 3, 2004 and
July 3, 2004, respectively - -
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value,
4,990,000 shares authorized; 0 shares
issued and outstanding as of
January 3, 2004 and July 3, 2004,
respectively - -
Common stock, $0.01 par value,
90,000,000 shares authorized;
40,781,036 and 41,011,620 shares
issued as of January 3, 2004 and
July 3, 2004, respectively;
40,779,826 and 41,010,410 shares
outstanding as of January 3, 2004
and July 3, 2004, respectively 408 410
Additional paid in capital 287,571 288,708
Accumulated other comprehensive loss - (97)
Accumulated deficit (177,609) (184,783)
110,370 104,238
Less: Treasury stock, at par - -
Total stockholders' equity 110,370 104,238
Total liabilities and
stockholders' equity $175,583 $172,566
GSI COMMERCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 28, July 3, June 28, July 3,
2003 2004 2003 2004
Revenues:
Net revenues from product sales $45,722 $53,131 $89,895 $110,009
Service fee revenues 4,626 11,558 9,332 20,948
Net revenues 50,348 64,689 99,227 130,957
Cost of revenues from product sales 33,307 39,564 65,160 81,072
Gross profit 17,041 25,125 34,067 49,885
Operating expenses:
Sales and marketing, exclusive
of $279, $195, $508 and $689
reported below as stock-based
compensation, respectively 11,095 16,787 24,219 34,236
Product development, exclusive
of $0, $(47), $0 and $2
reported below as stock-based
compensation, respectively 3,418 4,498 7,117 8,981
General and administrative,
exclusive of $125, $5, $184 and
$89 reported below as stock-based
compensation, respectively 3,457 4,375 6,538 8,295
Stock-based compensation 404 153 692 780
Depreciation and amortization 2,734 2,646 5,432 5,245
Total operating expenses 21,108 28,459 43,998 57,537
Other (income) expense:
Interest expense - 54 - 54
Interest income (290) (242) (671) (532)
Total other (income) expense (290) (188) (671) (478)
Net loss $(3,777) $(3,146) $(9,260) $(7,174)
Losses per share - basic and diluted:
Net loss $(0.10) $(0.08) $(0.24) $(0.18)
Weighted average shares outstanding:
basic and diluted 38,838 40,991 38,811 40,930
GSI COMMERCE, INC. AND SUBSIDIARIES
ADJUSTED EBITDA AND RECONCILIATION TO GAAP RESULTS
(In thousands)
(Unaudited)
Three Months Ended Six Months Ended
June 28, July 3, June 28, July 3,
2003 2004 2003 2004
Adjusted EBITDA:
Net loss excluding interest income
and expense, taxes and charges
for stock-based compensation and
depreciation and amortization $(929) $(535) $(3,807) $(1,627)
Reconciliation of Adjusted EBITDA to
GAAP results:
Adjusted EBITDA $(929) $(535) $(3,807) $(1,627)
Interest expense - 54 - 54
Interest income (290) (242) (671) (532)
Taxes - - - -
Stock-based compensation 404 153 692 780
Depreciation and amortization 2,734 2,646 5,432 5,245
Net loss $(3,777) $(3,146) $(9,260) $(7,174)
GSI COMMERCE, INC. AND SUBSIDIARIES
NET MERCHANDISE SALES (1) AND RECONCILIATION TO GAAP RESULTS
(Dollars in thousands)
(Unaudited)
Three Months Ended
June 28, July 3, Variance
2003 2004 Amount %
Net merchandise sales (1) -
(a non-GAAP financial measure):
Category:
Sporting goods $27,011 $37,912 $10,901 40%
Other (2) 27,824 51,669 23,845 86%
Total net merchandise
sales (1) - (a non-GAAP
financial measure) $54,835 $89,581 $34,746 63%
Net revenues - (GAAP basis):
Net revenues from product sales:
Category:
Sporting goods $27,011 $33,586 $6,575 24%
Other (2) 18,711 19,545 834 4%
Total net revenues
from product sales 45,722 53,131 7,409 16%
Service fee revenues 4,626 11,558 6,932 150%
Total net revenues -
(GAAP basis) $50,348 $64,689 $14,341 28%
Reconciliation of net merchandise
sales (1) to net revenues:
Net merchandise sales (1) - (a
non-GAAP financial measure):
Category:
Sporting goods $27,011 $37,912 $10,901 40%
Other (2) 27,824 51,669 23,845 86%
Total net merchandise
sales (1) - (a non-GAAP
financial measure) 54,835 89,581 34,746 63%
Less:
Sales by partners (3):
Category:
Sporting goods - (4,326) (4,326) -
Other (9,113) (32,124) (23,011) 253%
Total sales by
partners (3) (9,113) (36,450) (27,337) 300%
Add:
Service fee revenues 4,626 11,558 6,932 150%
Net revenues - (GAAP
basis) $50,348 $64,689 $14,341 28%
(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) The "Other" categories of both net merchandise sales and net revenues
from product sales include $167,000 and $1,000 for the three-month
periods ended June 28, 2003 and July 3, 2004, respectively, related
to Ashford.com.
(3) 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)
Six Months Ended
June 28, July 3, Variance
2003 2004 Amount %
Net merchandise sales (1) -
(a non-GAAP financial measure):
Category:
Sporting goods $51,418 $72,998 $21,580 42%
Other (2) 57,593 102,470 44,877 78%
Total net merchandise
sales (1) - (a non-GAAP
financial measure) $109,011 $175,468 $66,457 61%
Net revenues - (GAAP basis):
Net revenues from product sales:
Category:
Sporting goods $51,418 $67,124 $15,706 31%
Other (2) 38,477 42,885 4,408 11%
Total net revenues from
product sales 89,895 110,009 20,114 22%
Service fee revenues 9,332 20,948 11,616 124%
Total net revenues -
(GAAP basis) $99,227 $130,957 $31,730 32%
Reconciliation of net merchandise sales (1)
to net revenues:
Net merchandise sales (1) - (a non-GAAP
financial measure):
Category:
Sporting goods $51,418 $72,998 $21,580 42%
Other (2) 57,593 102,470 44,877 78%
Total net merchandise
sales (1) - (a non-GAAP
financial measure) 109,011 175,468 66,457 61%
Less:
Sales by partners (3):
Category:
Sporting goods - (5,874) (5,874) -
Other (19,116) (59,585) (40,469) 212%
Total sales by
partners (3) (19,116) (65,459) (46,343) 242%
Add:
Service fee revenues 9,332 20,948 11,616 124%
Net revenues - (GAAP
basis) $99,227 $130,957 $31,730 32%
(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) The "Other" categories of both net merchandise sales and net revenues
from product sales include $902,000 and $9,000 for the six-month
periods ended June 28, 2003 and July 3, 2004, respectively, related
to Ashford.com.
(3) 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.
Contacts:
Michael Conn Greg Ryan
Senior Vice President Director, Corporate Communications
tel: 610-491-7002 tel: 610-491-7294
fax: 610-491-7302 fax: 610-265-2866
e-mail: connm@gsicommerce.com e-mail: ryang@gsicommerce.com
SOURCE GSI Commerce, Inc.
-0- 07/28/2004
/CONTACT: Michael Conn, Senior Vice President, +1-610-491-7002, or fax,
+1-610-491-7302, connm@gsicommerce.com, or Greg Ryan, Director, Corporate
Communications, +1-610-491-7294, or fax, +1-610-265-2866,
ryang@gsicommerce.com, both of GSI Commerce/
/Web site: http://www.gsicommerce.com /
(GSIC PLMO)
CO: GSI Commerce, Inc.
ST: Pennsylvania
IN: ECM CPR MLM REA SPT
SU: ERN CCA MAV PER CON AWD ERP RLE