GSI Commerce Q1 Revenues Show Slight Increase

GSI Commerce Inc. reported that net revenues for the first quarter ended April 4 increased slightly to $196.5 million from $195.5 million in the year-ago period. Non-GAAP net revenues increased 14% to $106.3 million from $93.3 million Q1 last year.  The loss from operations was $13.0 million compared to a loss from operations of $17.8 million in Q1 last year, and significantly better than the company’s guidance range of a loss of $20 million to $21 million.

 

This improvement over guidance was primarily driven by higher-than-planned non-GAAP income from operations and modestly lower-than-planned depreciation and amortization and stock-based compensation.


CFO Michael Conn commented that the company expected the decline in product revenue based on the change in structure of GSIC’s relationship with Dick's Sporting Goods, and that was the largest driver of the year-over-year decline. A softer trend from the professional sports league category and continued weakness in electronics also negatively impacted product revenue results. Service fees increased 25% year-over-year, to $90.3 million from $72.4 million from last year.

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GSI Commerce Q1 Revenues Show Slight Increase

GSI Commerce Inc. said net revenues for the first quarter ended April 4, 2009 increased slightly to $196.5 million from $195.5 million. Non-GAAP net revenues increased 14% to $106.3 million from $93.3 million. Loss from operations was $13.0 million compared to a loss from operations of $17.8 million.


Non-GAAP income from operations was $9.3 million compared to $0.7 million. Net loss was $11.1 million or 23 cents per share compared to a net loss $10.8 million or 23 cents per share. Trailing 12 month free cash flow was $16.7 million compared to a negative $0.4 million.

“I'm very pleased with our first quarter performance,” said Michael G. Rubin, chairman, president and CEO of GSI. “We delivered excellent results with net revenues, loss from operations and non-GAAP income from operations all exceeding the high-end of our guidance ranges. This is also the first time that we generated non-GAAP income from operations in excess of capital expenditures in a quarter other than a fourth quarter. We have produced a strong start to the year and believe we are well-positioned to continue delivering solid results.”


Fiscal 2009 Second Quarter Guidance


The company provides the following guidance for fiscal 2009 second quarter:


Net revenues are expected to be in a range of $177.0 million to $182.0 million. Loss from operations is expected to be in a range of $17.0 million to $19.0 million. Non-GAAP income from operations is expected to be in a range of $3.0 million to $5.0 million.


The following is a reconciliation of GAAP loss from operations to non-GAAP income from operations: add to projected GAAP loss from operations estimated depreciation, amortization of $15.9 million (inclusive of amortization from acquisition-related intangibles of $2.5 million), estimated stock-based compensation of $6.0 million and estimated acquisition-related integration, transaction and due diligence expenses of $0.1 million.

                        GSI COMMERCE, INC. AND SUBSIDIARIES
                            CONSOLIDATED BALANCE SHEETS
                         (In thousands, except share data)
                                    (Unaudited)

                                                   January 3,    April 4,
                                                    2009 (1)       2009
                                                   ———-    ——–

                       ASSETS
    Current assets:
      Cash and cash equivalents                     $130,315     $48,105
      Accounts receivable, less allowance for
       doubtful accounts of $2,747 and $1,727         78,544      61,712
      Inventory                                       42,856      39,373
      Deferred tax assets                             18,125      17,742
      Prepaid expenses and other current assets       11,229      11,840
                                                      ——      ——
        Total current assets                         281,069     178,772

    Property and equipment, net                      164,833     159,153
    Goodwill                                         194,996     194,888
    Intangible assets, net of accumulated
     amortization of $18,340 and $20,788              46,663      44,254
    Long-term deferred tax assets                     10,505      17,747
    Other assets, net of accumulated amortization
     of $16,384 and $17,010                           17,168      15,448
                                                      ——      ——
        Total assets                                $715,234    $610,262
                                                    ========    ========

             LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
      Accounts payable                               $98,100     $47,664
      Accrued expenses                               116,747      68,993
      Deferred revenue                                20,397      17,375
      Current portion – long-term debt                 4,887       4,898
                                                       —–       —–
        Total current liabilities                    240,131     138,930

    Convertible notes                                161,951     164,497
    Long-term debt                                    32,609      31,356
    Deferred revenue and other long-term
     liabilities                                       6,838       7,645
                                                       —–       —–
        Total liabilities                            441,529     342,428

    Commitments and contingencies

    Stockholders' equity:
      Preferred stock, $0.01 par value, 5,000,000
       shares authorized; 0 shares issued and
       outstanding as of January 3, 2009 and
       April 4, 2009                                       –           –
      Common stock, $0.01 par value, 90,000,000
       shares authorized; 47,630,824 and 48,534,843
       shares issued as of January 3, 2009 and
       April 4, 2009, respectively; 47,630,621 and
       48,534,640 shares outstanding as of
       January 3, 2009 and April 4, 2009,
       respectively                                      476         485
      Additional paid in capital                     428,852     434,115
      Accumulated other comprehensive loss            (2,327)     (2,389)
      Accumulated deficit                           (153,296)   (164,377)
                                                    ——–    ——–
        Total stockholders' equity                   273,705     267,834
                                                     ——-     ——-

        Total liabilities and stockholders'
         equity                                     $715,234    $610,262
                                                    ========    ========


    (1) On January 4, 2009 the Company adopted Financial Accounting
        Standards Board Staff Position No. APB 14-1, “Accounting
        for Convertible Debt Instruments That May Be Settled in Cash upon
        Conversion (Including Partial Cash Settlement).” The impact
        of this adoption has been retrospectively applied to prior period
        results.

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