GSI Commerce Inc. fiscal 2007 second quarter net revenue increased 10% to $131.3 million from $119.6 million. Merchandise sales increased 52 percent to $316.0 million from $208.0 million. Loss from operations was $9.0 million compared to a loss of $3.8 million. Adjusted EBITDA was $0.7 million compared to $2.9 million. Net loss was $5.0 million or 11 cents per share compared to a net loss of $3.6 million or eight cents per share.

Non-GAAP net loss, which is calculated on a fully taxed basis, was $3.5 million or $0.08 per share compared to a loss of $1.7 million or four cents per share.

“I am pleased with our second quarter performance. We achieved or exceeded our guidance on all of our key financial metrics,” said Michael G. Rubin, chairman, president and CEO of GSI. “Our business development activity is strong with six partners accounting for nine separate online stores signed so far this year. As we had guided previously, we expected to see year-over-year declines in our profitability metrics during the second and third quarters of the fiscal year primarily due to the timing of our investment spending, particularly as it relates to start-up costs associated with our new fulfillment center and launch costs for new partners. The secular trends in the industry remain healthy and we remain focused on strong execution as we continue to manage and invest in the business in ways that support both our growth and contribute to our growing annual profitability. I look forward to continued success during the second half of the year,” Rubin said.

Key Events Since April 25, 2007

  • GSI announced it signed a long-term agreement with the National Basketball Association to provide the NBA with full-service, e-commerce operations. In July, GSI launched the NBA's online store. With the NBA,
  • GSI now has e-commerce agreements to operate the online stores for the major professional sports leagues in the United States including, Major League Baseball, the NFL, the NHL, and NASCAR.
  • GSI successfully launched Gordon's Jewelers, which is the third online store GSI has launched for the Zale Corp.
  • GSI launched the new online store for Charlotte Russe, a women's apparel and accessories partner, which the company signed earlier this year.
  • In July, GSI announced it was selected by the Nautica and Kipling brands of the VF Corporation to provide them with full-service, e-commerce solutions. Web stores for each of these brands are scheduled to launch during 2008.
  • During the second quarter, GSI signed a full-service, e-commerce agreement with a new, unnamed apparel partner, which is a multibillion- dollar, apparel and lifestyle company that manages several global brands. GSI is scheduled to launch the first Web store for this partner in the fall. Two additional Web stores for this partner are scheduled to launch during 2008.
  • GSI extended its multiyear e-commerce agreement with iRobot Corp. in the U.S. and expanded the scope of this relationship to include European e-commerce operations as iRobot establishes a direct-to-consumer business in Europe during 2008.
  • GSI also extended its long-term, multiyear, e-commerce agreement with Linens 'n Things.
  • During the second quarter, GSI signed a new strategic alliance with QVC and the NFL, which created a multichannel marketing opportunity for NFL-licensed products on QVC telecasts and QVC's Web store.
  • In June, GSI opened its new fulfillment center in Richwood, Kentucky. The facility is approximately 540,000 square feet. The company now manages nearly two million square feet of fulfillment center space.
  • In May, GSI hired Scott Hardy, a former BearingPoint executive, as the company's executive vice president of business management. Hardy has responsibility for overseeing partner growth, profitability and satisfaction.
  • In July, GSI completed a $150-million convertible bond offering. GSI expects to use the proceeds for working capital, general corporate purposes and possible acquisitions.

2007 Fiscal Year and Third Quarter Financial Guidance

The following forward-looking statements reflect GSI's expectations as of July 25, 2007. Given the potential changes in general economic conditions and consumer spending, the emerging nature of e-commerce and various other risk factors discussed below and in our public reports, actual results may differ materially.

The company provides the following updated guidance for fiscal year 2007 (dollars in millions):

GAAP Guidance Non-GAAP Guidance
Range Range
Net revenue $721.0 – $751.0 Merchandise sales (a) $1,645.0 – $1,705.0
Income from Adjusted EBITDA (b) $53.0 – $55.0
operations $10.5 – $12.5
Net income $41.3 – $42.5 Non-GAAP net income (c) $15.4-$16.6
(fully taxed)

Capital expenditures for fiscal year 2007 are estimated to be in a range of $50.0 million to $55.0 million.

The company provides the following guidance for fiscal 2007 third quarter (dollars in millions):

GAAP Guidance Non-GAAP Guidance
Range Range
Net revenue $133.0 – $143.0 Merchandise sales (a) $299.0 – $319.0
Loss from Adjusted EBITDA loss (b) $(3.0) – $(2.0)
operations $(14.5) – $(13.5)
Net loss $(8.1) – $(7.5) Non-GAAP net loss (c) $(6.4) – $(5.8)
(fully taxed)