GSI Commerce Inc. posted net revenues of $114.2 million for the first quarter of 2006, up 24.9% from net revenues of $91.4 million during the year-ago quarter. However, the comapny saw its net loss grow to $4.4 million, or 10 cents per share from a net loss of $1.6 million, or 4 cents per share, for 2005's fiscal first quarter.
Included in net loss and net loss per share for the first quarter of fiscal 2006 is a non-cash charge of approximately $1.6 million, or 4 cents per share, to reduce the carrying value of the shares owned by the company in Odimo Incorporated from $2.9 million to $1.3 million, which represents the market value of the shares as of April 1, 2006. These shares represent a portion of the consideration received when the company sold certain assets of Ashford.com to Odimo in fiscal 2002. GSI Commerce did not include this non- cash charge when it issued guidance for the first quarter and full year on Feb. 15, 2006.
Other Financial Highlights
- Merchandise sales were $191.0 million in the first quarter of fiscal
2006, a 40 percent increase compared to $136.2 million in the same
period in fiscal 2005. A definition of merchandise sales appears later
in this news release under "Non-GAAP Financial Measures."
- Adjusted EBITDA was $2.7 million in the first quarter of fiscal 2006,
compared to adjusted EBITDA of $1.2 million in the same period in 2005,
an increase of 126 percent. A definition of adjusted EBITDA appears
later in this news release under "Non-GAAP Financial Measures."
- Gross profit was $47.2 million in the first quarter of fiscal 2006, an
increase of 40 percent compared to $33.8 million in the same period in
2005.
- Gross margin was 41.3 percent in the first quarter of fiscal 2006, an
increase of 430 basis points from 37.0 percent in the same period in
2005.
- The company's cash, cash equivalents and marketable securities at the
end of the first quarter of fiscal 2006 was $132.1 million compared to
$156.7 million at the end of fiscal year 2005, and compared to $43.2
million at the end of fiscal 2005's first quarter.
- Inventory at the end of the first quarter of fiscal 2006 decreased to
$31.3 million compared to $34.6 million at the end of fiscal 2005 and
compared to $34.0 million at the end of fiscal 2005's first quarter.
Management Commentary
“We are off to a strong start to the year with net revenue, merchandise sales and adjusted EBITDA all above our expectations,” said Michael G. Rubin, chairman and CEO of GSI Commerce. “In addition, excluding stock-based compensation expense, which was impacted by the adoption of SFAS 123®, and the non-cash impairment charge for an investment, our net results would have meaningfully improved from a year ago and would have been above our guidance.
“Based on the momentum of our business, including a strong business development pipeline, we are increasing our level of investment spending while we believe we remain on track to achieve our profitability goals for the year of increasing net income between 85 percent and 178 percent and increasing adjusted EBITDA between 54 percent and 69 percent,” said Rubin. “Areas of incremental investment include opening a second call center, spending more on technology to enhance our platform and expanding our in-house product customization efforts for licensed products. We believe these incremental investments will better position us for the future.”
Fiscal 2006 Second Quarter and Annual Financial Guidance
- Net revenues are expected to be in the range of $110 million to $115
million, or increase between 20 percent and 25 percent.
- Merchandise sales are expected to be in the range of $185 million to
$193 million, or increase between 35 percent and 41 percent.
- Product sales are expected to be in the range of $88 million to $92
million, or increase between 17 percent and 22 percent.
- Service fees are expected to be in the range of $21 million to $23
million, or increase between 26 percent and 38 percent.
- Net loss is expected to be in the range of $4.7 million to $5.7
million.
- Adjusted EBITDA is expected to be in the range of $1.0 million to $2.0
million.
- Depreciation and amortization is expected to be approximately $4.5
million to $5.0 million, compared to $3.6 million in fiscal 2005's
second quarter.
- Stock-based compensation expense is expected to be approximately $2.0
million to $2.5 million, compared to $1.7 million in fiscal 2005's
second quarter, and includes the impact of SFAS 123®, which the
company adopted in the first quarter of fiscal 2006.
- Net interest income is expected to be approximately $0.5 million to
$0.6 million, compared to $0.1 million in fiscal 2005's second quarter.
- Consistent with second quarter of fiscal 2005, the company does not
intend to record a provision for income taxes in the second quarter of
fiscal 2006.
For the Full Year
- Net revenues are expected to be in the range of $559 million to $579
million, or an increase of between 27 percent and 31 percent.
- Merchandise sales are expected to be in the range of $923 million to
$973 million, or an increase of between 35 percent and 43 percent.
- Product sales are expected to be the range of $450 million to $463
million, or an increase of between 27 percent and 30 percent.
- Service fees are expected to be the range of $109 million to $116
million, or an increase of between 28 percent and 35 percent.
- Net income is expected to be in the range of $5.0 million to $7.5
million, or an increase of between 85 percent and 178 percent. Net
income guidance includes the $1.6 million impairment charge disclosed
above in this news release.
- Adjusted EBITDA is expected to be in the range of $32 million to $35
million, or an increase of between 54 percent and 69 percent.
- Depreciation and amortization is expected to be approximately $20
million.
- Stock-based compensation is expected to be approximately $8.0 million
and includes the impact of the adoption of SFAS 123®.
- Net interest income is expected to be approximately $2.5 million.
- A provision for income tax is expected to be in a range of 5 percent to
10 percent of pre-tax income.
- Capital expenditures are expected to be in the range of $28 million to
$30 million.
GSI COMMERCE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended
April 2, April 1,
2005 2006
Revenues:
Net revenues from product sales $76,652 $91,657
Service fee revenues 14,706 22,586
Net revenues 91,358 114,243
Cost of revenues from product sales 57,587 67,066
Gross profit 33,771 47,177
Operating expenses:
Sales and marketing, exclusive
of $183 and $1,309 reported
below as stock-based
compensation, respectively 20,859 29,404
Product development, exclusive
of ($30) and $192 reported
below as stock-based
compensation, respectively 6,589 8,211
General and administrative,
exclusive of ($397) and $422
reported below as stock-based
compensation, respectively 5,225 6,975
Stock-based compensation (245) 1,923
Depreciation and amortization 3,122 4,516
Total operating expenses 35,550 51,029
Other (income) expense:
Interest expense 233 778
Interest income (343) (1,490)
Other (income) expense (115) (150)
Impairment on investment - 1,647
Total other (income) expense (225) 785
Loss before income taxes and
cumulative effect of change in
accounting principle (1,554) (4,637)
Provision for income taxes - 2
Net loss before cumulative effect of
change in accounting principle (1,554) (4,639)
Cumulative effect of change in
accounting principle - (268)
Net loss $(1,554) $(4,371)
Basic and diluted loss per share:
Prior to cumulative effect of
change in accounting principle $(0.04) $(0.11)
Cumulative effect of change in
accounting principle $- $0.01
Net loss $(0.04) $(0.10)
Weighted average shares outstanding -
basic and diluted 41,662 44,680
