GSI Commerce Inc. saw net revenues for the third quarter increase 39.6% to $118.5 million from $84.9 million during the same period last year. The company posted a net loss of $6.2 million, or 14 cents per share, widening from a net loss of $4.5 million, or 10 cents per share, for 2005's fiscal third quarter.
Included in net loss and net loss per share for the fiscal third quarter of 2006 is a non-cash charge of approximately $0.7 million, to reduce the carrying value of the shares owned by the company in Odimo Incorporated from $0.9 million to approximately $0.1 million, which represents the market value of the shares as of Sept. 30. These shares represent a portion of the consideration received when the company sold certain assets of Ashford.com to Odimo in fiscal 2002. In addition, the company incurred cash and non-cash charges totaling $0.7 million related to the retirement of its former president and chief operating officer. These two items, which were not included in the company's financial guidance, impacted net loss for the quarter by $1.4 million or 3 cents per share.
Merchandise sales were $233.0 million in the fiscal third quarter of
2006, an 84% increase compared to $126.6 million in the same
period in fiscal 2005.
Adjusted EBITDA was $1.4 million in the fiscal third quarter of 2006,
compared to adjusted EBITDA of $12,000 in the same period in 2005.
Gross profit was $57.7 million in the fiscal third quarter of 2006, an
increase of 69% compared to $34.2 million in the same period in
2005. Gross margin was 48.7% in the fiscal third quarter of 2006, an
increase of 840 basis points from 40.3% in the same period in
2005.
The company's cash, cash equivalents and marketable securities at the
end of the fiscal third quarter of 2006 was $103.5 million compared to
$156.7 million at the end of fiscal year 2005, and compared to $112.2
million at the end of 2005's fiscal third quarter.
“We had a successful third quarter highlighted by strong revenue growth and a smaller-than-planned net loss,” said Michael G. Rubin, chairman and chief executive officer of GSI Commerce. “In addition, with nine new partner deals signed so far in fiscal 2006 and four partner renewals signed during the fiscal third quarter, we feel good about our new business activity and our visibility into continued strong growth. We are also pleased with the progress we are making on meaningful infrastructure expansion and improvement efforts, including the opening of a new call center this quarter, the securing of a location for a new fulfillment center to be opened in fiscal 2007 and the significant investments we are making to enhance our technology platform. We remain encouraged that we can continue to demonstrate positive results while investing in our growing leadership position in this industry.”
Fiscal Fourth Quarter 2006 and Annual Financial Guidance
For the fouth quarter, net revenues are expected to be in the range of $235 million to $245
million, or increase between 36% and 42%.
Merchandise sales are expected to be in the range of $500 million to
$536 million, or increase between 77% and 90%.
Product sales are expected to be in the range of $177 million to $182
million, or increase between 31% and 35%.
Service fees are expected to be in the range of $57 million to $62
million, or increase between 53% and 67%.
Net income is expected to be in the range of $19.5 million to $20.5
million, or increase between 67% and 75%.
Adjusted EBITDA is expected to be in the range of $27 million to $28
million, or increase between 57% and 63%.
Depreciation and amortization is expected to be approximately $6.5
million, compared to $4.2 million in the fiscal fourth quarter of 2005.
Stock-based compensation expense is expected to be approximately $1.4
million, compared to $1.2 million in fiscal 2005's fourth quarter, and
includes the impact of SFAS 123.
Net interest income is expected to be approximately $0.7 million,
compared to $0.3 million in fiscal 2005's fourth quarter.
The company expects to record a provision for income taxes in the range
of 2% to 3% of pre-tax income.
For fiscal 2006, net revenues are expected to be in the range of $587 million to $597
million, or an increase of between 33% and 36%.
Merchandise sales are expected to be in the range of $1.13 billion to
$1.17 billion, or an increase of between 66% and 72%.
Product sales are expected to be in the range of $448 million to $453
million, or an increase of between 26% and 27%.
Service fees are expected to be in the range of $139 million to $144
million, or an increase of between 64% and 69%.
Net income is expected to be in the range of $5.5 million to $6.5
million, or an increase of between 103% and 141%. Net
income guidance includes $2.8 million of impairment charges taken in
the first three fiscal quarters of 2006 related to the company's
investment in Odimo Incorporated and $0.7 million related to the
retirement of the company's former president and chief operating
officer.
Adjusted EBITDA is expected to be in the range of $34 million to $35
million, or an increase of between 64% and 69%.
Depreciation and amortization is expected to be approximately $21
million.
Stock-based compensation is expected to be approximately $7.0 million.
Net interest income is expected to be approximately $3.0 million.
A provision for income tax is expected to be in a range of 5% to
10% of pre-tax income.
Capital expenditures are expected to be in the range of $40 million to
$45 million.
GSI COMMERCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
Oct. 1, Sept. 30, Oct. 1, Sept. 30,
2005 2006 2005 2006
Revenues:
Net revenues from product sales $68,484 $84,673 $220,294 $270,856
Service fee revenues 16,422 33,802 47,844 81,490
Net revenues 84,906 118,475 268,138 352,346
Cost of revenues from product sales 50,724 60,811 165,749 200,914
Gross profit 34,182 57,664 102,389 151,432
Operating expenses:
Sales and marketing, inclusive
of $699, $668, $1,808, and
$3,046, of stock-based
compensation 22,366 34,824 65,563 94,398
Product development, inclusive
of $151, $215, $375, and $635
of stock-based compensation 7,565 13,944 20,814 31,111
General and administrative,
inclusive of $236, $1,232,
$391, and $2,205, of stock-based
compensation 5,088 9,465 14,987 24,827
Depreciation and amortization 3,693 5,535 10,433 14,912
Total operating expenses 38,712 63,768 111,797 165,248
Other (income) expense:
Interest expense 788 776 1,434 2,332
Interest income (1,015) (1,445) (1,834) (4,428)
Other expense 237 194 31 101
Loss on investment - 737 - 2,763
Total other (income)
expense 10 262 (369) 768
Loss before income taxes and
cumulative effect of change in
accounting principle (4,540) (6,366) (9,039) (14,584)
Benefit for income taxes - (151) - (149)
Net loss before cumulative effect of
change in accounting principle (4,540) (6,215) (9,039) (14,435)
Cumulative effect of change in
accounting principle - - - 268
Net loss $(4,540) $(6,215) $(9,039) $(14,167)
Basic and diluted loss per share:
Prior to cumulative effect of
change in accounting principle $(0.10) $(0.14) $(0.21) $(0.32)
Cumulative effect of change in
accounting principle $- $- $- $0.01
Net loss $(0.10) $(0.14) $(0.21) $(0.31)
Weighted average shares outstanding
- basic and diluted 44,203 45,344 42,805 45,005
Prior period Sales and marketing expenses, Product development expenses,
and General and administrative expenses have been reclassified to be
inclusive of stock based compensation. The purpose of the
reclassifications are to conform the prior period amounts to the
classifications used in the current period.
