KING OF PRUSSIA, Pa., April 23 /PRNewswire-FirstCall/ — GSI Commerce Inc. today announced its financial results for its fiscal 2008 first quarter ended March 29, 2008.
Fiscal 2008 First Quarter Compared to Fiscal 2007 First Quarter
— Net revenue increased 34 percent to $195.5 million from $146.3 million.
— Loss from operations was $17.8 million compared to a loss of $4.8
million.
— Non-GAAP income from operations was $0.7 million compared to non-GAAP
income from operations of $3.8 million.
— Net loss was $9.6 million or $0.20 per share compared to $2.3 million
or $0.05 per share.
A definition of non-GAAP income from operations, a non-GAAP measure, and a discussion of the importance of this financial metric to GSI’s business can be found under “Non-GAAP Financial Measures” provided later in this news release.
“GSI enjoyed a strong first fiscal quarter of 2008, including non-GAAP income from operations that exceeded our guidance range and exceptional growth in net revenue,” said Michael G. Rubin, chairman, president and CEO of GSI. “Our performance illustrates solid execution and the underlying strength of the multichannel e-commerce and interactive marketing industries. We are pleased with the momentum of our business, the performance of our three acquisitions and the strength of our prospective new business pipeline. We remain optimistic regarding our outlook going forward.”
Key Events Since Feb. 13
— GSI launched four new Web stores as part of full-service, e-commerce
agreements, including Kipling (), the second
VF Corp brand to launch with GSI; Spanx(R), () a
women’s hosiery and shapewear company; Christopher & Banks
() and C.J. Banks
(). GSI also began providing customer care
services for Martin Osa (), an American Eagle
Outfitters’ brand targeting 28- to 40-year-old customers.
— GSI signed a multiyear agreement to provide a full-service e-commerce
solution (technology, fulfillment, and customer care) for one of the
world’s leading men’s and women’s fashion design companies. The new Web
store, which is expected to launch during the second half of 2008, will
feature the unnamed company’s apparel, accessories and shoes as well a
wide range of other products marketed under the company’s many brands
and lifestyle offerings.
— During the quarter, Kenneth Cole Productions Inc., signed an agreement
to migrate its Web store to GSI’s technology platform. With this
agreement, all of the companies that had signed on with Accretive
Commerce for front-end technology using a non-GSI platform have now
agreed to operate on the GSI front-end platform. Kenneth Cole is
scheduled to launch on the GSI platform in early summer.
— e-Dialog Inc., GSI’s wholly owned e-mail marketing subsidiary, signed
four new client engagements during the first quarter including MLB.com
(Major League Baseball Advanced Media), Levenger, LimogesJewelry.com
and a national credit card and payment network.
— Nick Pahade, a recognized pioneer in the digital marketing arena,
joined the company as president of gsi interactive(sm), the company’s
interactive marketing agency.
Fiscal Year 2008 and Second Quarter Guidance
The following forward-looking statements reflect GSI’s expectations as of April 23, 2008. Given the potential changes in general economic conditions and consumer spending, the growth rate of e-commerce and various other risk factors discussed in our forward-looking statement and in our public reports, actual results may differ materially.
Fiscal Year 2008 Guidance
The company provides the following guidance for fiscal year 2008:
— Net revenue is expected to be approximately $1.0 billion.
— Income from operations is expected to be in a range of a loss of $1.5
million to income of $1.5 million (a).
— Non-GAAP income from operations is expected to be in a range of $80.0
million to $83.0 million (b).
(a) At this time, the company has not completed estimates for the
following primarily non-cash items related to the e-Dialog
acquisition: the amount of amortization from acquisition-related
intangibles (non cash) and the amount of incremental depreciation
that may result from the step-up of the value of fixed assets (non
cash). Because these items have not been estimated at this time,
they have been excluded from our guidance for income from
operations. As a result, the company’s actual income from operations
could decrease materially. The change from our previously issued
guidance for income from operations is due to the inclusion of
estimated stock-based compensation and integration expenses for
e-Dialog as well as moderately higher depreciation due to the
step-up in value for the fixed assets of Accretive Commerce. These
changes did not impact guidance for non-GAAP income from operations.
(b) The following is a reconciliation of GAAP income from operations to
non-GAAP income from operations: add to projected GAAP income from
operations estimated depreciation and amortization of $57.5 million
(inclusive of amortization from acquisition-related intangibles of
$6.9 million from Accretive Commerce), estimated stock-based
compensation of $17.5 million, and acquisition-related integration
costs of approximately $6.5 million.
Capital expenditures for fiscal year 2008 are estimated to be approximately $70.0 million including acquisition-related integration capital expenditures of approximately $11.0 million.
Fiscal 2008 Second Quarter Guidance
The company provides the following guidance for fiscal 2008 second quarter:
— Net revenue is expected to be approximately $179.0 million to $184.0
million.
— Income from operations is expected to range between a loss of $19.0
million and a loss of $20.0 million (a).
— Non-GAAP income from operations is expected to be in a range of $ 1.0
million and $2.0 million (b).
(a) At this time, the company has not completed estimates for the
following primarily non-cash items related to the e-Dialog
acquisition: the amount of amortization from acquisition-related
intangibles (non cash) and the amount of incremental depreciation
that may result from the step-up of the value of fixed assets (non
cash). Because these items have not been estimated at this time,
they have been excluded from our guidance for income from
operations. As a result, the company’s actual income from operations
could decrease materially.
(b) The following is a reconciliation of GAAP income from operations to
non-GAAP income from operations: add to projected GAAP income from
operations estimated depreciation and amortization of $14.0 million
(inclusive of amortization from acquisition-related intangibles of
$1.7 million from Accretive Commerce), estimated stock-based
compensation of $4.5 million, and acquisition-related integration
costs of approximately $2.5 million.
Conference Call Today
GSI has scheduled a conference call for 4:45 p.m. EDT today to discuss the company’s 2008 fiscal first quarter operating results and its 2008 fiscal year and second quarter guidance.
Live Conference Access:
— Phone - Dial 1-800-510-9834, passcode 13872877 by 4:30 p.m. EDT on
April 23.
— Web - Go to , and click on the Webcast tab
provided on the home page, or go to ,
where the conference call will be broadcast live. Please allow at
least 15 minutes to register, download and install any necessary
audio software.
Conference Replays:
— Web - Go to , and click on the Webcast tab
provided on the home page. Access will remain available through May
30.
Non-GAAP Financial Measures
GSI’s consolidated financial statements are prepared and presented in accordance with GAAP. To supplement our consolidated financial statements, in this release and on the conference call, we use the non-GAAP financial measures of non-GAAP income from operations and free cash flow. We also discuss certain ratios that use those measures. The non-GAAP measures and ratios presented are not intended to be considered in isolation of, as a substitute for, or superior to our GAAP financial information. We have included reconciliations later in this release of the non-GAAP measures to the nearest GAAP measure.
We use these non-GAAP financial measures for financial and operational decision making and as a means to evaluate our performance. In our opinion, these non-GAAP measures provide meaningful supplemental information regarding our performance. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to our historical performance and liquidity as well as to the operating results of comparable companies. We believe these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision making and (2) they are used by institutional investors and the analyst community to help them analyze the health of our business.
Non-GAAP income from operations. We define non-GAAP income from operations, formerly referred to as adjusted EBITDA, as income from operations excluding stock-based compensation, depreciation and amortization expenses and acquisition-related integration expenses. We consider non-GAAP income from operations to be a useful metric for management and investors because it excludes certain non-cash and non-operating items. Because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use when valuing equity awards under SFAS 123R, we believe that viewing income from operations excluding stock-based compensation expense allows investors to make meaningful comparisons between our operating performance and those of other businesses. Because we are growing rapidly and operate in an emerging and rapidly changing industry, we believe that our level of capital expenditures and consequently the level of depreciation and amortization expense relative to our revenues could be meaningfully greater today than it will be over time. As a result, we believe it is useful supplemental information to view income from operations excluding depreciation and amortization expense as it provides a potential indicator of the future operating margin potential of the business. We believe the exclusion of acquisition-related integration expenses permits evaluation and a comparison of results for on-going business operations, and it is on this basis that management internally assesses the company’s performance.
Free cash flow. We define free cash flow as net cash provided by operating activities minus cash paid for fixed assets, including capitalized software development. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that, after the acquisition of property and equipment, including information technology infrastructure, can be used for strategic opportunities, including investing in the business, making strategic acquisitions and strengthening the balance sheet. Analysis of free cash flow also facilitates management’s comparisons of our operating results to the operating results of comparable companies. A limitation of using free cash flow as a means for evaluating our performance is that free cash flow reflects changes in working capital which is impacted by short-term changes in cash flow and the seasonality of our business which may not be indicative of long-term performance. Another limitation of free cash flow is that it excludes fixed assets purchased and placed in service, but not paid for during the applicable period. Our management compensates for this limitation by providing supplemental information about capital expenditures accrued, but not paid for during the applicable periods on the face of the cash flow statement in our Forms 10-K and 10-Q.
About GSI Commerce
GSI Commerce(R) () is a leading provider of services that enable e-commerce, multichannel retailing and interactive marketing for large, business-to-consumer (b2c) enterprises in the U.S. and internationally. We deliver customized e-commerce solutions through an e-commerce platform, which is comprised of technology, fulfillment and customer care. We offer each of the platform’s components on a modular basis, or as part of an integrated, end-to-end solution. We also offer a full suite of interactive marketing services through two divisions, gsi interactive(sm) and e-Dialog ().
Forward-Looking Statements
This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements made in this release, other than statements of historical fact, are forward-looking statements. The words “look forward to,”"anticipate,”"believe,”"estimate,”"expect,”"intend,”"may,”"plan,”"will,”"would,”"should,”"could,”"guidance,”"potential,”"opportunity,”"continue,”"project,”"forecast,”"confident,”"prospects,”"schedule,”"designed,”"future,”"discussions,”"if” 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 the 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, 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 SEC. GSI Commerce expressly disclaims any intent or obligation to update these forward-looking statements.
Contact:
GSI Commerce, Inc.
Corporate Marketing
610.491.7474
Fax: 610.265.2866
GSI COMMERCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
December 29, March 29,
2007 2008
ASSETS
Current assets:
Cash and cash equivalents $231,511 $42,750
Accounts receivable, net of
allowance of $1,833 and $1,795 64,285 53,484
Inventory 47,293 46,054
Deferred tax assets 14,114 14,114
Prepaid expenses and other current
assets 12,459 11,959
Total current assets 369,662 168,361
Property and equipment, net 156,774 167,012
Goodwill 82,757 221,425
Intangible assets, net of
accumulated amortization of $4,972
and $6,857 16,476 14,456
Equity investments 6,202 6,508
Long-term deferred tax assets 45,234 54,879
Other assets, net of accumulated
amortization of $14,545 and $15,302 16,535 15,017
Total assets $693,640 $647,658
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $85,667 $49,385
Accrued expenses 98,179 75,095
Deferred revenue 17,588 22,109
Current portion - long-term debt 2,406 2,823
Total current liabilities 203,840 149,412
Convertible notes 207,500 207,500
Long-term debt 27,245 41,966
Deferred revenue and other long-term
liabilities 5,634 5,350
Total liabilities 444,219 404,228
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value,
5,000,000 shares authorized; 0
shares issued and outstanding as of
December 29, 2007 and March 29, 2008 - -
Common stock, $0.01 par value,
90,000,000 shares authorized;
46,847,919 and 47,328,556 shares
issued as of December 29, 2007 and
March 29, 2008, respectively; 46,847,716
and 47,328,353 shares outstanding as
of December 29, 2007 and March 29, 2008,
respectively 468 473
Additional paid in capital 366,400 369,923
Accumulated other comprehensive loss (156) (110)
Accumulated deficit (117,291) (126,856)
Total stockholders’ equity 249,421 243,430
Total liabilities and stockholders’
equity $693,640 $647,658
GSI COMMERCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended
March 31, March 29,
2007 2008
Revenues:
Net revenues from product sales $108,750 $123,120
Service fee revenues 37,533 72,423
Net revenues 146,283 195,543
Costs and expenses:
Cost of revenues from product sales 76,802 85,417
Sales and marketing, inclusive of
$557 and $1,134 of stock-based
compensation 44,174 75,986
Product development, inclusive of
$288 and $426 of stock-based
compensation 13,738 22,436
General and administrative, inclusive
of $752 and $2,061 of stock-based
compensation 9,411 15,724
Depreciation and amortization 6,924 13,809
Total costs and expenses 151,049 213,372
Loss from operations (4,766) (17,829)
Other (income) expense:
Interest expense 842 2,177
Interest income (1,944) (1,039)
Other expense, net 15 145
Total other (income) expense (1,087) 1,283
Net loss before income taxes (3,679) (19,112)
Benefit for income taxes (1,334) (9,547)
Net loss $(2,345) $(9,565)
Basic and diluted loss per share $(0.05) $(0.20)
Weighted average shares outstanding
- basic and diluted 45,999 46,924
GSI COMMERCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
March 31, March 29,
2007 2008
Cash Flows from Operating
Activities:
Net loss $(2,345) $(9,565)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation 6,522 11,910
Amortization 402 1,899
Stock-based compensation 1,597 3,621
Loss on disposal of equipment 46 -
Deferred income taxes (1,402) (9,547)
Changes in operating assets and
liabilities:
Accounts receivable, net 12,393 18,750
Inventory 4,855 1,239
Prepaid expenses and other
current assets 815 1,121
Other assets, net 303 1,777
Accounts payable and accrued
expenses and other (68,826) (65,295)
Deferred revenue 1,567 3,640
Net cash used in operating
activities (44,073) (40,450)
Cash Flows from Investing
Activities:
Payments for acquisitions of
businesses, net of cash acquired - (145,001)
Cash paid for property and
equipment, including internal use
software (9,556) (17,482)
Purchases of marketable securities (56,279) -
Sales of marketable securities 60,950 -
Net cash used in investing
activities (4,885) (162,483)
Cash Flows from Financing
Activities:
Borrowings on revolving credit loan - 15,000
Debt issuance costs paid - (454)
Repayments of capital lease
obligations (123) (468)
Repayments of mortgage note (47) (68)
Proceeds from exercise of common
stock options 3,402 158
Net cash provided by financing
activities 3,232 14,168
Effect of exchange rate changes on
cash and cash equivalents 15 4
Net decrease in cash and cash
equivalents (45,711) (188,761)
Cash and cash equivalents, beginning
of period 71,382 231,511
Cash and cash equivalents, end of
period $25,671 $42,750
GSI COMMERCE, INC. AND SUBSIDIARIES
NON-GAAP INCOME FROM OPERATIONS AND RECONCILIATION TO GAAP RESULTS
(In thousands)
(Unaudited)
Three Months Ended
March 31, March 29,
2007 2008
Reconciliation of GAAP loss from
operations to non-GAAP income from
operations:
GAAP loss from operations $(4,766) $(17,829)
Acquisition related integration
expenses - 1,115
Stock-based compensation 1,597 3,621
Depreciation and amortization (1) 6,924 13,809
Non-GAAP income from operations $3,755 $716
(1) Includes amortization expense of acquisition related intangibles of
$1,634 for the three-months ended March 29, 2008 and $391 for the
three-months ended March 31, 2007.
GSI COMMERCE, INC. AND SUBSIDIARIES
FREE CASH FLOW AND RECONCILIATION TO GAAP OPERATING CASH FLOW
(In thousands)
(Unaudited)
Twelve Months Ended
March 31, March 29,
2007 2008
Reconciliation of GAAP operating cash
flow to free cash flow:
GAAP cash flow from operating
activities $42,552 $61,757
Cash paid for fixed assets, including
capitalized software development (48,456) (62,122)
Free cash flow $(5,904) $(365)
GSI Commerce Inc.
