GSI Commerce Reports Fiscal 2008 Year and Fourth Quarter Operating Results
Posted on: Wednesday, 11 February 2009, 15:01 CST
Fiscal Year 2008 Compared to Fiscal Year 2007
- Net revenues increased 29 percent to
$966.9 million from$750.0 million . - Non-GAAP net revenues increased 49 percent to
$491.4 million from$328.8 million . - Loss from operations was
$9.0 million compared to income from operations of$4.9 million . - Non-GAAP income from operations was
$81.9 million compared to$52.3 million . - Net loss was
$16.9 million or$0.36 per share compared to net income of$3.0 million or$0.06 per share. - Cash flow from operating activities was
$96.0 million compared to$58.1 million . - Free cash flow was
$38.8 million compared to$3.9 million .
The definitions of non-GAAP net revenues, non-GAAP income from operations, free cash flow, and a discussion of the importance of these non-GAAP financial metrics to GSI's business, can be found under "Non-GAAP Financial Measures" provided later in this news release.
"I am proud of the strong results we delivered in 2008, including net revenue growth of 29 percent, non-GAAP income from operations growth of 57 percent to
Fiscal 2009 First Quarter Guidance
The following forward-looking statements reflect GSI's expectations as of
The company provides the following guidance for fiscal 2009 first quarter:
- Net revenues are expected to be in a range of
$187.0 million to $192.0 million . - Loss from operations is expected to be in a range of
$20.0 million to $21.0 million . - Non-GAAP income from operations is expected to be in a range of
$2.0 million to $3.0 million .(a)
Conference Call Today
GSI has scheduled a conference call for
Live Conference Access:
- Phone -- Dial 1-888-679-8018, passcode 64667534 by
4:30 p.m. EST onFeb. 11 . For quicker access to the audio conference call the day of the event, investors can pre-register for the conference call by going to: https://www.theconferencingservice.com/prereg/key.process?key=PMKH7XJKB.
- Web -- Go to http://www.gsicommerce.com, and click on the webcast tab provided on the home page, or go to http://www.streetevents.com, where the conference call will be broadcast live. Please allow at least 15 minutes to register, download and install any necessary audio software.
Conference Replays:
- Web -- Go to http://www.gsicommerce.com, and click on the Webcast tab provided on the home page. Access will remain available through
March 13 .
Non-GAAP Financial Measures
GSI's consolidated financial statements are prepared and presented in accordance with GAAP. To supplement our consolidated financial statements, in this release and on the conference call, we use the non-GAAP financial measures of non-GAAP net revenues, non-GAAP income from operations and free cash flow. We also discuss certain ratios that use those measures. The non-GAAP measures and ratios presented are not intended to be considered in isolation of, as a substitute for, or superior to our GAAP financial information. We have included reconciliations later in this release of the non-GAAP measures to the nearest GAAP measure.
We use these non-GAAP financial measures for financial and operational decision making and as a means to evaluate our performance. In our opinion, these non-GAAP measures provide meaningful supplemental information regarding our performance. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate management's internal comparisons to our historical performance and liquidity. We believe these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision making and (2) they are used by institutional investors and the analyst community to help them analyze the health of our business. These measures may be different from non-GAAP measures used by other companies.
Non-GAAP net revenues. We define non-GAAP net revenues as net revenues minus cost of revenues from product sales and marketing expenses. Marketing expenses principally include client revenue share expenses, net advertising and promotional expenses, subsidized shipping and handling expenses, and catalog expenses. We consider non-GAAP net revenues to be a useful metric for management and investors because (1) it provides a metric for our investors to understand and analyze our company and (2) it provides investors with one of the primary metrics used by the company for evaluation and decision making purposes. We and many of our investors view us as a technology and business services company. Since most technology and business service companies generate their revenues from service fees and do not have product sales, we believe that by subtracting cost of revenues from product sales and marketing expenses from our net revenues from product sales, the company and investors will be better able to assess our revenues on a basis that more closely approximates the net revenues of other technology and business services companies. Further, management uses this metric for evaluating the performance of our business, making operating decisions and for budgeting purposes.
Non-GAAP income from operations. We have defined non-GAAP income from operations as income from operations excluding stock-based compensation, depreciation and amortization expenses and acquisition-related integration expenses. Beginning with this release, we are also excluding transaction and due diligence expenses relating to acquisitions. We consider non-GAAP income from operations to be a useful metric for management and investors because it excludes certain non-cash and non-operating items. Because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use when valuing equity awards under SFAS 123R, we believe that viewing income from operations excluding stock-based compensation expense allows investors to make meaningful comparisons between our operating performance and those of other businesses. Because we are growing our business and operate in an emerging and changing industry, we believe that our level of capital expenditures and consequently the level of depreciation and amortization expense relative to our revenues could be meaningfully greater today than it will be over time. As a result, we believe it is useful supplemental information to view income from operations excluding depreciation and amortization expense as it provides a potential indicator of the future operating margin potential of the business. We believe the exclusion of acquisition-related integration, transaction and due diligence expense permits evaluation and a comparison of results for on-going business operations, and it is on this basis that management internally assesses the company's performance.
Free cash flow. We define free cash flow as net cash provided by operating activities minus cash paid for fixed assets, including internal use software. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that, after the acquisition of property and equipment, including information technology infrastructure, can be used for strategic opportunities, including investing in the business, making strategic acquisitions and strengthening the balance sheet. Analysis of free cash flow also facilitates management's comparisons of our operating results to the operating results of comparable companies. A limitation of using free cash flow as a means for evaluating our performance is that free cash flow reflects changes in working capital which is impacted by short-term changes in cash flow and the seasonality of our business which may not be indicative of long-term performance. Another limitation of free cash flow is that it excludes fixed assets purchased and placed in service, but not paid for during the applicable period. Our management compensates for this limitation by providing supplemental information about capital expenditures accrued, but not paid for during the applicable periods on the face of the cash flow statement in our Forms 10-K and 10-Q.
About GSI Commerce
GSI Commerce(R) (www.gsicommerce.com) is a leading provider of services that enable e-commerce, multichannel retailing and interactive marketing for large, business-to-consumer (b2c) enterprises in the U.S. and internationally. We deliver customized e-commerce solutions through an e-commerce platform, which is comprised of technology, fulfillment and customer care. We offer each of the platform's components on a modular basis, or as part of an integrated, end-to-end solution. We also offer a full suite of interactive marketing services through two divisions, gsi interactive(sm) and e-Dialog (www.e-Dialog.com).
Forward-Looking Statements
This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements made in this release, other than statements of historical fact, are forward-looking statements. The words "look forward to," "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "will," "would," "should," "could," "guidance," "potential," "opportunity," "continue," "project," "forecast," "confident," "prospects," "schedule," "designed," "future," "discussions," "if," "objective," and similar expressions typically are used to identify forward-looking statements. Forward-looking statements are based on the then-current expectations, beliefs, assumptions, estimates and forecasts about the business of GSI Commerce. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or implied by these forward-looking statements. Factors which may affect GSI Commerce's business, financial condition and operating results include the effects of changes in the economy, consumer spending, the financial markets and the industries in which GSI Commerce and its clients operate, changes affecting the Internet and e-commerce, the ability of GSI Commerce to develop and maintain relationships with strategic clients and suppliers and the timing of the establishment, extension or termination of its relationships with strategic clients, the ability of GSI Commerce to timely and successfully develop, maintain and protect its technology, confidential and proprietary information and product and service offerings and execute operationally, the ability of GSI Commerce to attract and retain qualified personnel, and the performance of acquired businesses. More information about potential factors that could affect GSI Commerce can be found in its most recent Form 10-K, Form 10-Q and other reports and statements filed by GSI Commerce with the SEC. GSI Commerce expressly disclaims any intent or obligation to update these forward-looking statements.
Contact: Greg Ryan Dir. Corporate Communication GSI Commerce, Inc. e-mail: ryang@gsicommerce.com phone: 610-491-7294 GSI COMMERCE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (Unaudited) December 29, January 3, 2007 2009 ASSETS Current assets: Cash and cash equivalents $231,511 $130,315 Accounts receivable, less allowance for doubtful accounts of $1,833 and $2,747 64,285 78,544 Inventory 47,293 42,856 Deferred tax assets 14,114 17,951 Prepaid expenses and other current assets 12,459 11,229 Total current assets 369,662 280,895 Property and equipment, net 156,774 164,833 Goodwill 82,757 193,453 Intangible assets, net of accumulated amortization of $4,972 and $18,340 16,476 46,663 Long-term deferred tax assets 45,234 30,371 Other assets, net of accumulated amortization of $14,545 and $17,484 22,737 18,473 Total assets $693,640 $734,688 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $85,667 $98,100 Accrued expenses 98,179 116,501 Deferred revenue 17,588 20,397 Current portion - long-term debt 2,406 4,887 Total current liabilities 203,840 239,885 Convertible notes 207,500 207,500 Long-term debt 27,245 32,609 Deferred revenue and other long-term liabilities 5,634 6,838 Total liabilities 444,219 486,832 Commitments and contingencies Stockholders' equity: Preferred stock, $0.01 par value, 5,000,000 shares authorized; 0 shares issued and outstanding as of December 29, 2007 and January 3, 2009 - - Common stock, $0.01 par value, 90,000,000 shares authorized; 46,847,919 and 47,630,824 shares issued as of December 29, 2007 and January 3, 2009, respectively; 46,847,716 and 47,630,621 shares outstanding as of December 29, 2007 and January 3, 2009, respectively 468 476 Additional paid in capital 366,400 383,883 Accumulated other comprehensive loss (156) (2,289) Accumulated deficit (117,291) (134,214) Total stockholders' equity 249,421 247,856 Total liabilities and stockholders' equity $693,640 $734,688 GSI COMMERCE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three Months Ended Twelve Months Ended December 29, January 3, December 29, January 3, 2007 2009 2007 2009 Revenues: Net revenues from product sales $223,141 $244,759 $512,194 $577,073 Service fee revenues 111,983 146,621 237,763 389,853 Net revenues 335,124 391,380 749,957 966,926 Costs and expenses: Cost of revenues from product sales 148,698 168,304 356,541 405,254 Marketing 32,314 30,141 64,573 70,282 Account management and operations, inclusive of $1,017, $3,291, $3,101 and $7,109 of stock-based compensation 76,790 84,590 177,333 259,929 Product development, inclusive of $589, $2,110, $1,615 and $3,898 of stock-based compensation 21,161 30,632 65,898 103,988 General and administrative, inclusive of $995, $427, $3,703 and $7,148 of stock-based compensation 12,319 16,512 43,333 68,332 Depreciation and amortization 13,593 18,650 37,337 68,153 Total costs and expenses 304,875 348,829 745,015 975,938 Income (loss) from operations 30,249 42,551 4,942 (9,012) Other (income) expense: Interest expense 2,174 2,708 6,016 9,826 Interest income (2,245) (375) (9,270) (1,772) Other expense, net 186 729 237 1,562 Loss on sale of marketable securities 5,007 - 5,007 - Impairment of equity investments - 1,665 - 1,665 Total other expense 5,122 4,727 1,990 11,281 Income (loss) before income taxes 25,127 37,824 2,952 (20,293) Provision (benefit) for income taxes 8,624 13,383 (87) (3,370) Net income (loss) $16,503 $24,441 $3,039 $(16,923) Basic earnings (loss) per share $0.35 $0.51 $0.07 $(0.36) Diluted earnings (loss) per share $0.30 $0.45 $0.06 $(0.36) Weighted average shares outstanding - basic 46,774 47,595 46,433 47,347 Weighted average shares outstanding - diluted 57,432 56,729 48,739 47,347 GSI COMMERCE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Twelve Months Ended December 29, January 3, 2007 2009 Cash Flows from Operating Activities: Net Income (loss) $3,039 $(16,923) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 32,763 54,557 Amortization 4,574 13,596 Stock-based compensation 8,419 18,155 Foreign currency transaction losses - 1,571 Loss on sale of marketable securities 5,007 - Impairment of equity investments - 1,665 Loss (gain) on disposal of equipment 34 (354) Deferred income taxes (505) (3,261) Changes in operating assets and liabilities: Accounts receivable, net (7,005) (8,130) Inventory (471) 4,437 Prepaid expenses and other current assets (2,265) 2,142 Other assets, net 1,106 2,171 Accounts payable and accrued expenses 7,633 23,267 Deferred revenue 5,805 3,076 Net cash provided by operating activities 58,134 95,969 Cash Flows from Investing Activities: Payments for acquisitions of businesses, net of cash acquired (100,574) (145,001) Cash paid for property and equipment, including internal use software (54,196) (57,180) Proceeds from disposition of assets - 1,500 Cash paid for equity investments (3,083) - Purchases of marketable securities (263,688) - Sales of marketable securities 371,264 - Net cash used in investing activities (50,277) (200,681) Cash Flows from Financing Activities: Proceeds from convertible notes 150,000 - Borrowings on revolving credit loan - 70,000 Repayments on revolving credit loan - (70,000) Proceeds from capital lease financing - 7,901 Debt issuance costs paid (5,042) (561) Repayments of capital lease obligations (935) (3,032) Repayments of mortgage note (182) (195) Excess tax benefit in connection with exercise of stock options and awards 359 14 Proceeds from exercise of common stock options 8,080 1,385 Net cash provided by financing activities 152,280 5,512 Effect of exchange rate changes on cash and cash equivalents (8) (1,996) Net increase (decrease) in cash and cash equivalents 160,129 (101,196) Cash and cash equivalents, beginning of period 71,382 231,511 Cash and cash equivalents, end of period $231,511 $130,315 GSI COMMERCE, INC. AND SUBSIDIARIES NON-GAAP INCOME FROM OPERATIONS AND RECONCILIATION TO GAAP RESULTS (In thousands) (Unaudited) Three Months Ended Twelve Months Ended December 29, January 3, December 29, January 3, 2007 2009 2007 2009 Reconciliation of GAAP income (loss) from operations to non-GAAP income from operations: GAAP income (loss) from operations $30,249 $42,551 $4,942 $(9,012) Acquisition related integration, transaction and due diligence expenses 1,597 1,697 1,597 4,636 Stock-based compensation 2,601 5,828 8,419 18,155 Depreciation and amortization (1) 13,593 18,650 37,337 68,153 Non-GAAP income from operations $48,040 $68,726 $52,295 $81,932 (1) Includes amortization expense of acquisition related intangibles of $3,923 and $13,551 for the three- and twelve-months ended January 3, 2009 and $3,380 and $4,531 for the three- and twelve-months ended December 29, 2007. GSI COMMERCE, INC. AND SUBSIDIARIES NON-GAAP NET REVENUES AND RECONCILIATION TO GAAP RESULTS (In thousands) (Unaudited) Three Months Ended Twelve Months Ended December 29, January 3, December 29, January 3, 2007 2009 2007 2009 Reconciliation of GAAP net revenues to non-GAAP net revenues: GAAP net revenues $335,124 $391,380 $749,957 $966,926 Cost of revenues from product sales (148,698) (168,304) (356,541) (405,254) Marketing expenses (32,314) (30,141) (64,573) (70,282) Non-GAAP net revenues $154,112 $192,935 $328,843 $491,390 GSI COMMERCE, INC. AND SUBSIDIARIES FREE CASH FLOW AND RECONCILIATION TO GAAP RESULTS (In thousands) (Unaudited) Twelve Months Ended December 29, January 3, 2007 2009 Reconciliation of GAAP operating cash flow to free cash flow: GAAP cash flow from operating activities $58,134 $95,969 Cash paid for property and equipment, including internal use software (54,196) (57,180) Free cash flow $3,938 $38,789 GSI COMMERCE, INC. AND SUBSIDIARIES RESULTS BY SEGMENT (In thousands) (Unaudited) Three Months Ended December 29, 2007 Interactive E-Commerce Marketing Intersegment Services Services Eliminations Consolidated Net revenues $330,767 $8,854 $(4,497) $335,124 Costs and expenses before depreciation, amortization and stock-based compensation expense 286,941 6,237 (4,497) 288,681 Operating (loss) income before depreciation, amortization and stock-based compensation expense $43,826 $2,617 $- $46,443 Three Months Ended January 3, 2009 Interactive E-Commerce Marketing Intersegment Services Services Eliminations Consolidated Net revenues $368,408 $27,762 $(4,790) $391,380 Costs and expenses before depreciation, amortization and stock-based compensation expense 308,814 20,327 (4,790) 324,351 Operating income before depreciation, amortization and stock-based compensation expense $59,594 $7,435 $- $67,029 Twelve Months Ended December 29, 2007 Interactive E-Commerce Marketing Intersegment Services Services Eliminations Consolidated Net revenues $737,832 $26,894 $(14,769) $749,957 Costs and expenses before depreciation, amortization and stock-based compensation expense 691,749 22,279 (14,769) 699,259 Operating income before depreciation, amortization and stock-based compensation expense $46,083 $4,615 $- $50,698 Twelve Months Ended January 3, 2009 Interactive E-Commerce Marketing Intersegment Services Services Eliminations Consolidated Net revenues $900,040 $84,508 $(17,622) $966,926 Costs and expenses before depreciation, amortization and stock-based compensation expense 837,648 69,604 (17,622) 889,630 Operating income before depreciation, amortization and stock-based compensation expense $62,392 $14,904 $- $77,296SOURCE GSI Commerce, Inc.
Source: PR Newswire
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