GSI Commerce Inc. saw net revenues increase 38% for the fiscal year to $609.6 million from $440.4 million last year.
Merchandise sales increased 74% to $1.2 billion from $682.0 million. Net income increased to $53.7 million or $1.10 per diluted share from $2.7 million or 6 cents per diluted share. Fiscal year 2006 net income is inclusive of a favorable non-cash income tax benefit of $44.4 million.
“Our 2006 achievements demonstrate our ability to execute our strategy, highlighted by record financial results, nine new multiyear partner agreements and the extension of five partner relationships,” said Michael G. Rubin, chairman and CEO of GSI Commerce. “Continuing investment in our platform fueled our growth as we delivered new functions, features, facilities and services to our partners. I am excited about the company's outlook for 2007, and I am confident we will continue to deliver strong financial results while simultaneously investing in our business. Specifically, we plan to invest an estimated $12 million in discretionary fixed operating expenses in fiscal 2007 to enhance our global capabilities, strengthen our technology infrastructure, nearly double the investment in our technology product roadmap, automate our newest fulfillment center, increase our sales and marketing organization, and expand our management team. I expect that the combination of these investments and our strategic focus will further strengthen our leadership position in the industry.”
“GSI's fiscal year 2006 financial performance exceeded expectations driven by a solid performance in our seasonally strong fourth quarter. Notable accomplishments included an accelerated revenue growth rate, our seventh consecutive year of increased operating and adjusted EBITDA margins, significant growth in our cash flow from operations and our first year of positive free cash flow,” said Michael Conn, CFO of GSI Commerce. “Our fiscal 2007 guidance reflects expectations for continued momentum in our business. Similar to fiscal 2006, we expect that our investment spending will cause year-over-year earnings declines in the first three quarters of the year followed by strong year-over-year growth in income from operations, adjusted EBITDA and non-GAAP net income in the fourth quarter of fiscal 2007. However, due to the large non-cash income tax benefit we recorded in fiscal 2006, we would expect year-over-year declines in GAAP net income in all four quarters of fiscal 2007.”
For the fourth quarter, net revenue increased 49% to $257.2 million from $172.3 million. Merchandise sales increased 97% to $555.9 million from $282.4 million. Net income increased to $67.9 million or $1.33 per diluted share from
$11.7 million or 25 cents per diluted share. Fiscal 2006 fourth quarter net income is inclusive of a favorable non-cash income tax benefit of $44.4 million.
2007 Fiscal Year and First Quarter Financial Guidance
The company provides the following guidance for fiscal year 2007 (dollars
in millions):
GAAP Guidance Non-GAAP Guidance
Range Range
Net revenue $685 - $735 Merchandise sales (a) $1,500 - $1,600
Income from
operations $8 - $13 Adjusted EBITDA (b) $50 - $55
Net income $34 - $39 Non-GAAP net income (c) $19.5 - $24.5
The following additional fiscal 2007 year guidance is presented to reconcile the GAAP financial metric to its corresponding non-GAAP financial metric:
a) Merchandise sales: add to projected net revenue estimated
merchandise sales from non-owned inventory of approximately $1.0-
$1.1 billion and subtract estimated service fees of approximately
$200 million.
b) Adjusted EBITDA: add to projected income from operations estimated
depreciation and amortization of $33 million and estimated stock-
based compensation of $9 million.
c) Non-GAAP net income: add to projected net income estimated
stock-based compensation of $9 million and estimated amortization of
acquisition-related intangibles of $1.5 million and subtract
estimated non-cash income tax benefit of $25 million.
Capital expenditures for fiscal year 2007 are estimated to be approximately $50 million.
The company provides the following guidance for fiscal 2007 first quarter
(dollars in millions):
GAAP Guidance Non-GAAP Guidance
Range Range
Net revenue $128 - $138 Merchandise sales (a) $265 - $285
Loss from
operations $(7.5) - $(6.5) Adjusted EBITDA (b) $1.5 - $2.5
Net loss $(6.5) - $(5.5) Non-GAAP net loss (c) $(4.1) - $(3.1)
The following additional fiscal 2007 first quarter guidance is presented
to reconcile the GAAP financial metric to its corresponding non-GAAP financial
metric:
a) Merchandise sales: add to projected net revenue estimated
merchandise sales from non-owned inventory of approximately
$172-$182 million and subtract estimated service fees of
approximately $35 million.
b) Adjusted EBITDA: add to projected loss from operations estimated
depreciation and amortization of $7 million and estimated stock-
based compensation of $2 million.
c) Non-GAAP net loss: add to projected net loss estimated stock-based
compensation of $2 million and estimated amortization of
acquisition-related intangibles of $0.4 million for fiscal 2007
first quarter.
GSI COMMERCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
December December December December
31, 2005 30, 2006 31, 2005 30, 2006
Revenues:
Net revenues from product
sales $135,080 $190,327 $355,374 $461,183
Service fee revenues 37,174 66,880 85,018 148,370
Net revenues 172,254 257,207 440,392 609,553
Cost of revenues from product
sales 98,079 130,339 263,829 331,253
Gross profit 74,175 126,868 176,563 278,300
Operating expenses:
Sales and marketing,
inclusive of $1,391, $608,
$3,200, and $3,654, of
stock-based compensation 41,938 71,521 107,503 165,919
Product development,
inclusive of $24, $301,
$398, and $936, of
stock-based compensation 8,020 14,264 28,833 45,375
General and administrative,
inclusive of ($184), $783,
$207, and $2,988, of
stock-based compensation 7,727 11,236 22,714 36,062
Depreciation and amortization 4,203 6,385 14,635 21,297
Total operating expenses 61,888 103,406 173,685 268,653
Income from operations 12,287 23,462 2,878 9,647
Other (income) expense:
Interest expense 786 775 2,220 3,107
Interest income (1,111) (1,647) (2,944) (6,075)
Other (income) expense 553 (65) 582 37
Loss on investment - 110 - 2,873
Total other (income)
expense 228 (827) (142) (58)
Income before income taxes and
cumulative effect of change in
accounting principle 12,059 24,289 3,020 9,705
Provision (benefit) for income
taxes 321 (43,579) 321 (43,728)
Net income before cumulative
effect of change in accounting
principle 11,738 67,868 2,699 53,433
Cumulative effect of change in
accounting principle - - - 268
Net income $11,738 $67,868 $2,699 $53,701
Basic earnings per share:
Prior to cumulative effect of
change in accounting
principle $0.26 $1.49 $0.06 $1.18
Cumulative effect of change in
accounting principle $- $- $- $0.01
Earnings per share - basic $0.26 $1.49 $0.06 $1.19
Diluted earnings per share:
Prior to cumulative effect of
change in accounting
principle $0.25 $1.33 $0.06 $1.09
Cumulative effect of change in
accounting principle $- $- $- $0.01
Earnings per share - diluted $0.25 $1.33 $0.06 $1.10
Weighted average shares outstanding:
basic 44,450 45,679 43,216 45,174
diluted 49,781 51,287 45,321 50,625
