Exhibit 99.1
GSI COMMERCE REPORTS FISCAL 2006 FIRST QUARTER OPERATING RESULTS
KING OF PRUSSIA, Pa., April 26 /PRNewswire-FirstCall/ -- GSI Commerce Inc.
(Nasdaq: GSIC) today announced that for its first fiscal quarter ended April 1,
2006, the company reported net revenues of $114.2 million and a net loss of $4.4
million, or $0.10 per share, compared to net revenues of $91.4 million and a net
loss of $1.6 million, or $0.04 per share, for 2005's fiscal first quarter.
Included in net loss and net loss per share for the first quarter of fiscal
2006 is a non-cash charge of approximately $1.6 million, or $0.04 per share, to
reduce the carrying value of the shares owned by the company in Odimo
Incorporated from $2.9 million to $1.3 million, which represents the market
value of the shares as of April 1, 2006. These shares represent a portion of the
consideration received when the company sold certain assets of Ashford.com to
Odimo in fiscal 2002. GSI Commerce did not include this non- cash charge when it
issued guidance for the first quarter and full year on Feb. 15, 2006.
Other Financial Highlights
- Merchandise sales were $191.0 million in the first quarter of
fiscal 2006, a 40 percent increase compared to $136.2 million in
the same period in fiscal 2005. A definition of merchandise sales
appears later in this news release under "Non-GAAP Financial
Measures."
- Adjusted EBITDA was $2.7 million in the first quarter of fiscal
2006, compared to adjusted EBITDA of $1.2 million in the same
period in 2005, an increase of 126 percent. A definition of
adjusted EBITDA appears later in this news release under
"Non-GAAP Financial Measures."
- Gross profit was $47.2 million in the first quarter of fiscal
2006, an increase of 40 percent compared to $33.8 million in the
same period in 2005.
- Gross margin was 41.3 percent in the first quarter of fiscal
2006, an increase of 430 basis points from 37.0 percent in the
same period in 2005.
- The company's cash, cash equivalents and marketable securities at
the end of the first quarter of fiscal 2006 was $132.1 million
compared to $156.7 million at the end of fiscal year 2005, and
compared to $43.2 million at the end of fiscal 2005's first
quarter.
- Inventory at the end of the first quarter of fiscal 2006
decreased to $31.3 million compared to $34.6 million at the end
of fiscal 2005 and compared to $34.0 million at the end of fiscal
2005's first quarter.
Management Commentary
"We are off to a strong start to the year with net revenue, merchandise
sales and adjusted EBITDA all above our expectations," said Michael G. Rubin,
chairman and CEO of GSI Commerce. "In addition, excluding stock-based
compensation expense, which was impacted by the adoption of SFAS 123(R), and the
non-cash impairment charge for an investment, our net results would have
meaningfully improved from a year ago and would have been above our guidance.
"Based on the momentum of our business, including a strong business
development pipeline, we are increasing our level of investment spending while
we believe we remain on track to achieve our profitability goals for the year of
increasing net income between 85 percent and 178 percent and increasing adjusted
EBITDA between 54 percent and 69 percent," said Rubin. "Areas of incremental
investment include opening a second call center, spending more on technology to
enhance our platform and expanding our in-house product customization efforts
for licensed products. We believe these incremental investments will better
position us for the future."
Fiscal 2006 Second Quarter and Annual Financial Guidance
The following forward-looking statements reflect GSI Commerce's
expectations as of April 26, 2006. Given the risks relating to our business
discussed below and in our public reports, actual results may differ materially.
The company provides the following guidance for the fiscal 2006 second
quarter:
- Net revenues are expected to be in the range of $110 million to
$115 million, or increase between 20 percent and 25 percent.
- Merchandise sales are expected to be in the range of $185 million
to $193 million, or increase between 35 percent and 41 percent.
- Product sales are expected to be in the range of $88 million to
$92 million, or increase between 17 percent and 22 percent.
- Service fees are expected to be in the range of $21 million to
$23 million, or increase between 26 percent and 38 percent.
- Net loss is expected to be in the range of $4.7 million to $5.7
million.
- Adjusted EBITDA is expected to be in the range of $1.0 million to
$2.0 million.
- Depreciation and amortization is expected to be approximately
$4.5 million to $5.0 million, compared to $3.6 million in fiscal
2005's second quarter.
- Stock-based compensation expense is expected to be approximately
$2.0 million to $2.5 million, compared to $1.7 million in fiscal
2005's second quarter, and includes the impact of SFAS 123(R),
which the company adopted in the first quarter of fiscal 2006.
- Net interest income is expected to be approximately $0.5 million
to $0.6 million, compared to $0.1 million in fiscal 2005's second
quarter.
- Consistent with second quarter of fiscal 2005, the company does
not intend to record a provision for income taxes in the second
quarter of fiscal 2006.
The company provides the following updated guidance for fiscal year 2006:
- Net revenues are expected to be in the range of $559 million to
$579 million, or an increase of between 27 percent and 31
percent.
- Merchandise sales are expected to be in the range of $923 million
to $973 million, or an increase of between 35 percent and 43
percent.
- Product sales are expected to be the range of $450 million to
$463 million, or an increase of between 27 percent and 30
percent.
- Service fees are expected to be the range of $109 million to $116
million, or an increase of between 28 percent and 35 percent.
- Net income is expected to be in the range of $5.0 million to $7.5
million, or an increase of between 85 percent and 178 percent.
Net income guidance includes the $1.6 million impairment charge
disclosed above in this news release.
- Adjusted EBITDA is expected to be in the range of $32 million to
$35 million, or an increase of between 54 percent and 69 percent.
- Depreciation and amortization is expected to be approximately $20
million.
- Stock-based compensation is expected to be approximately $8.0
million and includes the impact of the adoption of SFAS 123(R).
- Net interest income is expected to be approximately $2.5 million.
- A provision for income tax is expected to be in a range of 5
percent to 10 percent of pre-tax income.
- Capital expenditures are expected to be in the range of $28
million to $30 million.
Key Events Since Feb. 15, 2006
- In early April, after signing a multiyear agreement with the
National Football League (NFL) to manage and operate NFL Shop and
the NFL's official catalog, the company launched the league's
e-commerce site at http://www.shopnfl.com. Revenues from this
sporting goods partner will be recorded as product sales.
- In April, the company signed a multiyear agreement with an
unnamed apparel partner. The partner is expected to launch its
e-commerce operations late in the third quarter or early in the
fourth quarter of this year. Revenues from the partner will be
recorded as service fees. The solution includes technology,
fulfillment and customer care. This is the second apparel partner
the company has signed in 2006.
- In March, the company signed a multiyear agreement to provide
Iomega International S.A. with an e-commerce solution for Iomega
Data Storage Solutions in more than 47 countries. GSI Commerce
will provide the e- commerce technology platform and will
integrate it with Iomega's third- party fulfillment and customer
care providers. The store launches are scheduled for the second
quarter. Revenues from Iomega will be recorded as service fees.
- In April, the company announced it made an equity investment in
WebCollage Inc., a privately held, online content syndication
company headquartered in New York. The two companies also agreed
to provide content syndication solutions to the e-commerce
partners of GSI Commerce.
- In March, the company announced it had received grants totaling
approximately $3.75 million from the Commonwealth of Pennsylvania
for economic development and employee job training.
Non-GAAP Financial Measures
This news release contains, and our scheduled conference call will present,
the non-GAAP measures merchandise sales, adjusted EBITDA and certain ratios that
use those measures. 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. GSI Commerce uses 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 organizational costs such as business management 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 GAAP net revenue as well as the
non-GAAP financial measure merchandise sales and the percentages that such
expenses bear to net revenues and merchandise sales.
GSI Commerce also uses adjusted EBITDA, which represents earnings (or
losses) before interest income/expense, impairment on investment, income taxes,
depreciation and amortization, cumulative effect of change in accounting
principle related to the adoption of SFAS 123(R) and stock-based compensation.
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 historically has been materially impacted by
fluctuations in the price of GSI Commerce's common stock both on a quarterly and
annual basis, and is now materially impacted by the adoption of SFAS 123(R), and
does not consistently reflect GSI Commerce's results from its core business
activities.
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 required under
Securities and Exchange Commission rules and are contained elsewhere in this
release.
Fiscal First Quarter 2006 Conference Call
GSI Commerce has scheduled a conference call for today at 4:45 p.m. EDT to
review its fiscal 2006 first quarter operating results and to discuss the
company's expectations for future performance. For access to the conference
call, please call the toll-free conference number, 1-866-202-4683, by 4:30 p.m.
EDT, on April 26. The conference passcode is "98114428." 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. The conference call
also will be broadcast live on the Web through CCBN StreetEvents
(http://www.streetevents.com). For those who cannot listen to the live Webcast,
a telephone replay of the conference call will be available one hour after the
completion of the call and remain available through May 26. Access to a
recording of the conference call can be made by calling toll-free,
1-888-286-8010. The telephone replay passcode is "97266248." In addition, access
to an audio replay of the conference call's Webcast can be found on the home
page of the GSI Commerce Web site. Access to the audio replay of the Webcast
also will remain available through May 26.
About GSI Commerce
GSI Commerce is a leading provider of e-commerce solutions that enable
retailers, branded manufacturers, entertainment companies and professional
sports organizations to operate e-commerce businesses. We provide solutions for
our partners through our integrated e-commerce platform, which is comprised of
three components: technology, logistics and customer care and marketing
services. We provide e-commerce solutions for more than 50 partners.
Forward-Looking Statements
All statements made in this release and to be made in GSI Commerce's fiscal
2006 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," "schedule" 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. 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, extension or termination of its relationships with
strategic partners, the ability of GSI Commerce to timely and successfully
develop, maintain and protect its technology, confidential and proprietary
information, 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, the performance of acquired businesses and the impact of SFAS 123(R).
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 SEC. GSI Commerce expressly disclaims any intent
or obligation to update these forward-looking statements.
GSI COMMERCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
December 31, April 1,
2005 2006
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 48,361 $ 32,418
Marketable securities 108,298 99,716
Accounts receivable, net of
allowance of $727 and $601,
respectively 24,288 19,119
Inventory 34,601 31,329
Prepaid expenses and other
current assets 3,135 3,357
Total current assets 218,683 185,939
Property and equipment, net 87,851 83,595
Goodwill 13,932 17,786
Equity investments and other 1,210 3,799
Other assets, net of accumulated
amortization of $7,885 and $9,186
respectively 10,970 9,653
Total assets $ 332,646 $ 300,772
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 58,720 $ 34,400
Accrued expenses and other 42,949 34,772
Deferred revenue 6,573 6,043
Current portion - long-term debt
and other 637 656
Total current liabilities 108,879 75,871
Convertible notes 57,500 57,500
Long-term debt and other 13,094 12,907
Total liabilities 179,473 146,278
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value,
4,990,000 shares authorized;
0 shares issued and outstanding
as of December 31, 2005 and
April 1, 2006 - -
Common stock, $0.01 par value,
90,000,000 shares authorized; 44,469,969
and 44,865,751 shares issued
as of December 31, 2005 and April 1, 2006,
respectively; 44,469,766 and 44,865,548
shares outstanding as of December 31,
2005 and April 1, 2006, respectively 445 448
Additional paid in capital 329,103 332,935
Accumulated other comprehensive
loss (2,344) (487)
Accumulated deficit (174,031) (178,402)
Total stockholders' equity 153,173 154,494
Total liabilities and
stockholders' equity $ 332,646 $ 300,772
GSI COMMERCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended
---------------------------
April 2, April 1,
2005 2006
------------ ------------
Revenues:
Net revenues from product sales $ 76,652 $ 91,657
Service fee revenues 14,706 22,586
Net revenues 91,358 114,243
Cost of revenues from product sales 57,587 67,066
Gross profit 33,771 47,177
Operating expenses:
Sales and marketing, exclusive
of $183 and $1,309 reported
below as stock-based
compensation, respectively 20,859 29,404
Product development, exclusive
of ($30) and $192 reported
below as stock-based
compensation, respectively 6,589 8,211
General and administrative,
exclusive of ($397) and $422
reported below as stock-based
compensation, respectively 5,225 6,975
Stock-based compensation (245) 1,923
Depreciation and amortization 3,122 4,516
Total operating expenses 35,550 51,029
Other (income) expense:
Interest expense 233 778
Interest income (343) (1,490)
Other (income) expense (115) (150)
Impairment on investment - 1,647
Total other (income) expense (225) 785
Loss before income taxes and
cumulative effect of change in
accounting principle (1,554) (4,637)
Provision for income taxes - 2
Net loss before cumulative effect of
change in accounting principle (1,554) (4,639)
Cumulative effect of change in
accounting principle - (268)
Net loss $ (1,554) $ (4,371)
Basic and diluted loss per share:
Prior to cumulative effect of
change in accounting principle $ (0.04) $ (0.11)
Cumulative effect of change in
accounting principle $ - $ 0.01
Net loss $ (0.04) $ (0.10)
Weighted average shares outstanding -
basic and diluted 41,662 44,680
GSI COMMERCE, INC. AND SUBSIDIARIES
ADJUSTED EBITDA AND RECONCILIATION TO GAAP RESULTS
(In thousands)
(Unaudited)
Three Months Ended
---------------------------
April 2, April 1,
2005 2006
------------ ------------
Adjusted EBITDA:
Net gain (loss) excluding
interest income and expense,
income taxes, impairment and
charges for stock-based
compensation and depreciation
and amortization $ 1,213 $ 2,737
Reconciliation of Adjusted EBITDA to GAAP results:
Adjusted EBITDA $ 1,213 $ 2,737
Interest expense 233 778
Interest income (343) (1,490)
Impairment on Investment - 1,647
Income Taxes - 2
Stock-based compensation (245) 1,923
Depreciation and amortization 3,122 4,516
Cumulative effect of change in
accounting principle - (268)
Net loss $ (1,554) $ (4,371)
GSI COMMERCE, INC. AND SUBSIDIARIES
MERCHANDISE SALES (1) AND RECONCILIATION TO GAAP RESULTS
(Dollars in thousands)
(Unaudited)
Three Months Ended Variance
------------------------ ------------------------
April 2, April 1,
2005 2006 Amount %
---------- ---------- ---------- ----------
Merchandise sales (1) -
(a non-GAAP financial measure):
Category:
Sporting goods $ 47,497 $ 67,448 $ 19,951 42%
Other 88,745 123,502 34,757 39%
Total merchandise sales
(1) - (a non-GAAP
financial measure) $ 136,242 $ 190,950 $ 54,708 40%
Net revenues - (GAAP basis):
Net revenues from product sales:
Category:
Sporting goods $ 39,787 $ 55,837 $ 16,050 40%
Other 36,865 35,820 (1,045) -3%
Total net revenues from
product sales 76,652 91,657 15,005 20%
Service fee revenues 14,706 22,586 7,880 54%
Total net revenues -
(GAAP basis) $ 91,358 $ 114,243 $ 22,885 25%
Reconciliation of merchandise sales (1) to net revenues:
Merchandise sales (1) - (a non-GAAP financial measure):
Category:
Sporting goods $ 47,497 $ 67,448 $ 19,951 42%
Other 88,745 123,502 34,757 39%
Total merchandise sales
(1) - (a non-GAAP
financial measure) 136,242 190,950 54,708 40%
Less:
Sales by partners (2):
Category:
Sporting goods (7,710) (11,611) (3,901) 51%
Other (51,880) (87,682) (35,802) 69%
Total sales by partners (2) (59,590) (99,293) (39,703) 67%
Add:
Service fee revenues 14,706 22,586 7,880 54%
Net revenues - (GAAP
basis) $ 91,358 $ 114,243 $ 22,885 25%
(1) 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. It also includes product sales
related to Aspherio.
(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
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except per share data)
(Unaudited)
Three Months Ended
---------------------------
April 2, April 1,
2005 2006
------------ ------------
Cash Flows from Operating Activities:
Net loss $ (1,554) $ (4,371)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 3,122 4,516
Stock-based compensation (245) 1,923
Investment impairment - 1,647
Loss on disposal of equipment - 55
Cumulative effect of change in
accounting principle - (268)
Changes in operating assets and
liabilities:
Accounts receivable, net 5,438 5,182
Inventory 3,760 3,272
Prepaid expenses and other
current assets 189 (222)
Other assets, net 9 146
Accounts payable and accrued
expenses and other (35,546) (32,016)
Deferred revenue (691) (412)
Net cash used in operating
activities (25,518) (20,548)
Cash Flows from Investing Activities:
Acquisition of a controlling
interest of a business, net of
cash acquired - (2,629)
Cash paid for property and
equipment (6,761) (3,721)
Proceeds from government grant for
building - 2,925
Other deferred cost (247) 41
Cash paid for equity investments (136) (2,408)
Purchases of marketable securities (9,177) (63,405)
Sales of marketable securities 32,000 71,975
Net cash provided by investing
activities 15,679 2,778
Cash Flows from Financing Activities
Repayments of loan (339) -
Repayments of capital lease
obligations (160) (152)
Repayments of mortgage note (38) (55)
Common stock repurchases (154)
Deferred costs paid (199) -
Proceeds from exercise of common
stock options 1,247 2,183
Net cash provided by financing
activities 511 1,822
Effect of exchange rate changes on
cash and cash equivalents - 5
Net decrease in cash and cash
equivalents (9,328) (15,943)
Cash and cash equivalents, beginning
of period 20,064 48,361
Cash and cash equivalents, end of
period $ 10,736 $ 32,418
Contacts:
Michael Conn Greg Ryan
Chief Financial Officer Director, Corp. Communications
tel: 610-491-7002 tel: 610-491-7294
e-mail: connm@gsicommerce.com e-mail: ryang@gsicommerce.com
SOURCE GSI Commerce, Inc.
-0- 04/26/2006
/CONTACT: Michael Conn, Chief Financial Officer, +1-610-491-7002, or
connm@gsicommerce.com, or Greg Ryan, Director, Corp. Communications,
+1-610-491-7294, or ryang@gsicommerce.com, both of GSI Commerce, Inc./
/Web site: http://www.gsicommerce.com /