GSI Commerce Inc. increased third quarter net revenues 44% to $68.6 million and reported a net loss of $3.0 million, or 7 cents per share, versus a loss of $5.5 million in the year-ago period.

For the same comparable periods, adjusted EBITDA, a non-GAAP financial measure, improved by approximately $1.9 million to a loss of $103,000, and net merchandise sales, also a non-GAAP financial measure, rose 90 percent to $100.2 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 were $68.6 million for the third quarter of fiscal 2004, which was a 44% increase compared to net revenues of $47.5 million for the third quarter of fiscal 2003.

Net merchandise sales were $100.2 million for the third quarter of fiscal 2004, a 90% increase compared to net merchandise sales of $52.8 million for the third 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 revenues from product sales generated by the company's sporting goods category were $30.7 million for the third quarter of fiscal 2004, which was a 23% increase compared to $25.0 million for the third quarter of fiscal 2003. Net merchandise sales from the sporting goods category increased 45% in the third quarter of fiscal 2004 to $36.1 million compared to $25.0 million in the third quarter of fiscal 2003.

Net revenues from product sales generated by the company's other merchandise categories were $25.2 million for the third quarter of fiscal 2004, which was a 44% increase compared to $17.5 million for the third quarter of fiscal 2003. Net merchandise sales from the company's other merchandise categories increased 131% in the third quarter of fiscal 2004 to $64.1 million from $27.8 million in the third quarter of fiscal 2003.


Service fee revenues increased 156% to $12.7 million in the third quarter of fiscal 2004 compared to $5.0 million in the third quarter of fiscal 2003.

The company had a net loss of $3.0 million for the third quarter of fiscal 2004, which was an improvement of approximately $2.5 million compared to the net loss of $5.5 million for the third quarter of fiscal 2003.

The company showed a $0.07 per share improvement with a net loss per share of $0.07 for the third quarter of fiscal 2004 compared to a net loss per share of $0.14 for the third quarter of fiscal 2003.

The company showed a $1.9 million improvement in adjusted EBITDA, with an adjusted EBITDA loss of $103,000 in the third quarter of fiscal 2004 compared to an adjusted EBITDA loss of $2.0 million in the third quarter of fiscal 2003. Adjusted EBITDA represents earnings (or losses) before interest income/expense, taxes, depreciation, amortization, and stock-based compensation.

The company's gross profit improved 58 percent to $26.4 million in the third quarter of fiscal 2004 compared to a gross profit of $16.7 million in the third quarter of fiscal 2003. Gross margin improved to 38.5 percent for the third quarter of fiscal 2004 from 35.2 percent in the third quarter of fiscal 2003, an increase of 330 basis points.

Total operating expenses were $29.6 million for the third quarter of fiscal 2004, an increase of 32 percent compared to $22.5 million for the third quarter of fiscal 2003. Total operating expenses, as a percentage of net revenues, decreased to 43 percent in the third quarter of fiscal 2004 compared to 47 percent in the third quarter of fiscal 2003.

Total operating expenses of $29.6 million, as a percentage of net merchandise sales of $100.2 million, were 30 percent in the third quarter of fiscal 2004. This compared to total operating expenses of $22.5 million in the third quarter of fiscal 2003, which as a percentage of net merchandise sales of $52.8 million, was 43 percent.

The company's cash, cash equivalents, short-term investments and marketable securities at the end of fiscal 2004's third quarter were $45.5 million compared to $69.5 million at fiscal 2003 year-end, a decrease of $24.0 million, which was primarily attributable to the expected seasonality of working capital. Cash, cash equivalents, short-term investments and marketable securities at the end of fiscal 2004's third quarter decreased $1.0 million compared to the $46.5 million at the end of fiscal 2003's third quarter.

The company's inventory at the end of fiscal 2004's third quarter was $27.3 million compared to $22.9 million at fiscal 2003 year-end, an increase of $4.4 million. Comparing inventory at the end of fiscal 2004's third quarter to the end of fiscal 2003's third quarter, inventory increased $4.9 million to $27.3 million from $22.4 million.

The company provided the following guidance for the fiscal 2004 fourth quarter:

  • Net revenues are expected to be in the range of $110.5 million to $128.5 million.
  • Net merchandise sales are expected to be in the range of $169 million to $187 million.
  • Net income is expected to be in the range of $10.5 million to $12 million.
  • Adjusted EBITDA is expected to be in the range of $15 million to $17 million.

The company provides the following 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 $2.0 million.
  • Adjusted EBITDA is expected to be in the range of $13.5 million to $15 million 
                    GSI COMMERCE, INC. AND SUBSIDIARIES
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In thousands, except per share data)
                                 (Unaudited)

                                      Three Months Ended  Nine Months Ended
                                      Sept. 27, Oct. 2,  Sept. 27,  Oct. 2,
                                        2003     2004      2003      2004

  Revenues:
       Net revenues from product sales $42,521  $55,873  $132,416  $165,882
       Service fee revenues              4,962   12,715    14,294    33,663

            Net revenues                47,483   68,588   146,710   199,545
  Cost of revenues from product sales   30,778   42,171    95,938   123,243

            Gross profit                16,705   26,417    50,772    76,302

  Operating expenses:
       Sales and marketing, exclusive
        of $419, $388, $927 and $1,077
        reported below as stock-based
        compensation, respectively      12,107   16,818    36,326    51,054
       Product development, exclusive
        of $38, $1, $38 and $3 reported
        below as stock-based
        compensation, respectively       3,542    5,137    10,659    14,118
       General and administrative,
        exclusive of $171, $1, $355
        and $90 reported below as
        stock-based compensation,
        respectively                     3,078    4,499     9,616    12,794
       Restructuring costs related to
        Ashford.com                         19      -          19       -
       Stock-based compensation            628      390     1,320     1,170
       Depreciation and amortization     3,119    2,733     8,551     7,978

            Total operating expenses    22,493   29,577    66,491    87,114

  Other (income) expense:
       Other expense                       -         66       -          66
       Interest expense                    -        244       -         298
       Interest income                    (243)    (423)     (914)     (955)

           Total other (income) expense   (243)    (113)     (914)     (591)

  Net loss                             $(5,545) $(3,047) $(14,805) $(10,221)

  Losses per share - basic and diluted:
       Net loss                         $(0.14)  $(0.07)   $(0.38)   $(0.25)