GSI Commerce Inc. said its revenue rose 23 percent in the fourth quarter ended Dec. 29, 2007, but that income from operations decreased 49 percent to $4.9 million.


    Fiscal Year 2007 Compared to Fiscal Year 2006



  • Net revenue increased 23 percent to $750.0 million from $609.6 million.
  •  Income from operations decreased 49 percent to $4.9 million from $9.6 million.
  • Non-GAAP income from operations (previously referred to as adjusted EBITDA) increased 36 percent to $52.3 million from $38.5 million.
  •  Net income decreased to $3.0 million or $0.06 per fully diluted share from $53.7 million or $1.10 per fully diluted share.  Fiscal year 2006 net income included an income tax benefit of $43.7 million compared to a benefit of $0.1 million in fiscal year 2007.

Included in income from operations, non-GAAP income from operations and net income was a charge related to a legal matter. The company disclosed the potential for this charge in its pre-release announcement on Jan. 24.


“We are pleased with the strong growth we delivered in fiscal 2007,” said Michael G. Rubin, chairman and CEO of GSI. “The year had many highlights and included significant activity surrounding new business wins and renewals in the U.S. and Europe, the expansion of our fulfillment center network, the acquisitions of Accretive Commerce and Zendor as well as meaningful growth in our marketing services division. We are optimistic about our prospects for growth in 2008 and are excited to have completed the acquisition of e-Dialog today.”



    Key Events Since Oct. 24, 2007
    



  •  GSI today announced that it closed its acquisition of e-Dialog Inc., a Lexington, Mass.-based, market-leading provider of advanced e-mail marketing services and solutions to more than 100 blue-chip companies in the U.S. and Europe.
  •  GSI obtained a $75 million revolving secured line of credit from a bank group led by PNC Capital Markets.
  •  GSI closed its acquisition of Zendor.com Ltd., a Manchester, U.K.-based leading provider of fulfillment, customer care and e-commerce solutions.
  • GSI announced a new e-commerce partnership with the Casual Male Retail Group Inc.to design, develop and operate the online   stores for both the Casual Male XL and Rochester Big & Tall brands in six European countries.
  • GSI extended multiyear e-commerce agreements with three Accretive Commerce partners to provide their combined five online stores with fully integrated e-commerce solutions. All five Web stores are scheduled to launch on GSI's e-commerce platform during 2008.
  • GSI signed a multiyear agreement to provide privately held Spanx®, a women's hosiery and shapewear company, with a full-service, e-commerce solution.
  • GSI signed a multiyear extension to continue to provide customer care services for the direct-to-consumer business of Restoration Hardware, and signed a multiyear contract extension with a global financial services company to continue servicing that company's loyalty program in the U.S.  Both Restoration Hardware and the global financial  services company are Accretive Commerce partners.
  • GSI launched a new Web store for New York-based, Marc Ecko Enterprises, an innovative, global fashion and lifestyle company.
  •  GSI launched a new Web store for Nautica, a leading global lifestyle brand.
  • GSI signed a multiyear agreement to provide customer care services for the online store of Belk Inc., the largest privately owned department store company in the U.S.
  •  GSI has become the new, full-service e-commerce solution provider for  Major League Soccer (MLS) recently re-launching the league's Web store.
  • Lawrence S. Smith was elected by the company's board of directors to serve as a director of the company. Smith served as executive vice president and co-chief financial officer of Comcast Corporation from 1988 to 2007, and also serves on the boards of Air Products and Chemicals Inc., MGM Holdings Inc. and Tyco Electronics Ltd.

    Fiscal Year 2008 and First Quarter Guidance

Beginning with this news release, we will use and provide guidance for the non-GAAP metric of non-GAAP income from operations, which the company previously referred to as adjusted EBITDA. Beginning with the 2008 fiscal first quarter, GSI will no longer provide guidance or actual results for the non-GAAP metric of merchandise sales. We believe that merchandise sales is a less meaningful metric for management and investors to understand growth in the company's overall business. GSI also will no longer provide guidance on net income or non-GAAP net income because we believe that income from operations and non-GAAP income from operations are sufficient to indicate the general direction of profitability for the company.



    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 $3.0 million to $6.0 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), the amount of acquisition-related integration expenses (cash), the amount of stock-based compensation related to e-Dialog employees (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 on income from operations. As a result, the company's actual for 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 $56.0 million (inclusive of amortization from acquisition-related intangibles of  $7.0 million), estimated stock-based compensation of $14.0 million, and acquisition-related integration costs of approximately $7.0 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 First Quarter Guidance
    The company provides the following guidance for fiscal 2008 first quarter:



  •  Net revenue is expected to be approximately $188.0 million to $193.0 million.
  •  Income from operations is expected to range between a loss of $18.0 million and a loss of $19.0 million (a).
  •  Non-GAAP income from operations is expected to range between a loss of $1.0 million and breakeven (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), the amount of acquisition-related integration expenses (cash), the amount of stock-based compensation related to e-Dialog employees (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 on 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 $13.0 million (inclusive of amortization from acquisition-related intangibles of $2.0 million), estimated stock-based compensation of $3.0 million, and acquisition-related integration costs of approximately $2.0 million.