GSI Commerce Inc. reported net revenues in its second quarter jumped 47% to $193.2 million from $131.3 million. The net loss was $19 million or 40 cents a share, compared to a loss of $5 million or 11 cents, a year ago.
GSI said non-GAAP revenues increased 85% to $102.9 million from $55.8 million. Non-GAAP income from operations was $6.7 million compared to $0.7 million. Loss from operations was $17.2 million compared to $9 million a year ago, and included $2.2 million in amortization expense related to e-Dialog and Zendor. GSI noted that amortization expense was not included in the companys guidance for the quarter.
GSI said the companys effective tax rate for the second quarter was 3.2%, bringing its effective tax rate on a year-to-date basis to 26.3%. The year-to-date tax rate approximates what the company currently expects for its full-year tax rate. The primary reason for the change in expected tax rate from the first quarter was the inclusion of amortization expense from e-Dialog and Zendor in the companys projected full-year results.
Beginning with this news release, the company said it is disclosing the non-GAAP metric, non-GAAP net revenues and reporting the former expense line of sales and marketing as two expense lines, marketing and account management and operations.
Non-GAAP net revenues are calculated by subtracting cost of revenues from product sales and marketing expenses from net revenues. A more thorough definition and discussion of the importance of non-GAAP net revenues to GSIs business as well as a definition and discussion of the importance of non-GAAP income from operations to GSIs business can be found under “Non-GAAP Financial Measures” provided later in this news release.
“GSIs second quarter performance was excellent. Our strategy had us well positioned, we executed strongly, and industry trends were favorable clearly a winning formula,” said Michael G. Rubin, chairman, president and CEO of GSI. “Net revenues grew close to 50 percent and above our guidance range. Non-GAAP income from operations of $6.7 million exceeded our guidance of $1.0 million to $2.0 million and was meaningfully greater than our previous best, non-fourth quarter performance for non-GAAP income from operations of $3.8 million. The momentum in our business along with our focus on capital efficiency should enhance free cash flow in 2008.”
GSI noted that it accomplished a number of key events since April 23:
- GSI launched five new Web stores, three in the
- GSI signed two new, multiyear, e-commerce agreements, both with companies that will be transitioning existing e-commerce businesses to the GSI platform. One agreement is with a regional department store chain, scheduled to launch its Web store in the fourth quarter of this year, and the other is with a national, specialty retailer of womens apparel, scheduled to launch its Web store in the first quarter of 2009.
- GSI extended multiyear agreements with five partners, including Polo Ralph Lauren Corporation and The Warnaco Group Inc., which also expanded its agreement to add a third apparel brand to the GSI e-commerce platform and to add marketing services.
- e-Dialog Inc. signed new e-mail services deals with 8 customers, including Oakley, Course Advisor, Lifetime Networks and Hickory Farms. Additionally, two GSI partners, both of which were added through the Accretive Commerce acquisition, The Warnaco Group Inc. and Cost Plus World Market, signed on for e-mail solutions powered by e-Dialog.
- gsi interactive signed new business with 17 customers, including e-commerce partners and other customers not on the GSI platform, for services that included search engine optimization, site design, paid search, affiliate marketing, studio photography and strategic e-commerce site assessment and planning. Included in these marketing services agreements was a significant extension and expansion of business with Toys “R” Us, which named gsi interactive as its agency of record and also included an e-mail solution from e-Dialog.
Fiscal Year 2008 and Third Quarter Guidance
The following forward-looking statements reflect GSIs expectations as of July 23, 2008. Given the potential changes in general economic conditions and consumer spending, the growth rate of e-commerce and various other risk factors discussed in our forward-looking statements disclosure and in our public reports, actual results may differ materially.
Fiscal Year 2008 Guidance
The company provides the following guidance for fiscal year 2008:
(a) Included in the guidance for loss from operations is amortization of acquisition-related intangibles for e-Dialog and Zendor.
(b) 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 and amortization of $67.0 million (inclusive of amortization from acquisition-related intangibles of $13.6 million), estimated stock-based compensation of $17.5 million, and acquisition-related integration costs of approximately $5.0 million.
Fiscal 2008 Third Quarter Guidance
The company provides the following guidance for fiscal 2008 third quarter:
· Net revenues are expected to be approximately $188.0 million to $193.0 million.
· Loss from operations is expected to be in a range of $18.5 million to $19.5 million. (a)
· Non-GAAP income from operations is expected to be in a range of $3.5 million to $4.5 million. (b)
(b) 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 and amortization of $17.0 million (inclusive of amortization from acquisition-related intangibles of $3.9 million), estimated stock-based compensation of $4.6 million, and acquisition-related integration costs of approximately $1.4 million.
