EX-99.1 2 e17665ex99_1.txt PRESS RELEASE Exhibit 99.1 GSI Commerce Reports Fiscal 2004 First Quarter Operating Results; Company Achieves Record First Quarter Net Revenues and Reduces Net Loss KING OF PRUSSIA, Pa., April 28 /PRNewswire-FirstCall/ -- GSI Commerce Inc. (Nasdaq: GSIC) today announced that for its first fiscal quarter ended April 3, 2004, the company increased its net revenues 36 percent to $66.3 million and reported a net loss of $4.0 million, or $0.10 per share, decreasing the company's net loss by $1.5 million, or $0.04 per share, compared to last year's first fiscal quarter. For the same comparable periods, adjusted EBITDA, a non-GAAP financial measure, improved by approximately $1.8 million to a loss of $1.1 million, and net merchandise sales, also a non-GAAP financial measure, rose 59 percent to $85.9 million. Definitions of the non- GAAP financial measures, adjusted EBITDA and net merchandise sales, and a discussion of why the company uses these measures, appear later in this news release. Net Revenues and Net Merchandise Sales Net revenues were $66.3 million for the first quarter of fiscal 2004, which was a 36 percent increase compared to net revenues of $48.9 million for the first quarter of fiscal 2003. Net revenues from product sales generated by the company's sporting goods category were $33.5 million for the first quarter of fiscal 2004, which was a 37 percent increase compared to $24.4 million for the first quarter of fiscal 2003. Net revenues from product sales generated by the company's other merchandise categories were $23.3 million for the first quarter of fiscal 2004, which was an 18 percent increase compared to $19.8 million for the first quarter of fiscal 2003. Service fee revenues increased 100 percent to $9.4 million in the first quarter of fiscal 2004 compared to $4.7 million in the first quarter of fiscal 2003. Net merchandise sales were $85.9 million for the first quarter of fiscal 2004, a 59 percent increase compared to net merchandise sales of $54.2 million for the first quarter of fiscal 2003. Net merchandise sales represent the retail value of all sales transactions, inclusive of freight charges and net of allowances for returns and discounts, which flow through the GSI Commerce platform, whether or not the company is the seller of the merchandise or records the full amount of such sales on its financial statements. Net merchandise sales from the sporting goods category increased 44 percent in the first quarter of fiscal 2004 to $35.1 million compared to $24.4 million in the first quarter of fiscal 2003. Net merchandise sales from the company's other merchandise categories increased 71 percent in the first quarter of fiscal 2004 to $50.8 million from $29.8 million in the first quarter of fiscal 2003. Net merchandise sales and net revenues from product sales for the company's other merchandise categories included $735,000 and $8,000 for the first quarter of fiscal 2003 and first quarter of fiscal 2004, respectively, related to the jewelry business of Ashford.com, which the company sold in December 2002. Net Loss, EPS and Adjusted EBITDA The company had a net loss of $4.0 million for the first quarter of fiscal 2004, which was an improvement of approximately $1.5 million compared to the net loss of $5.5 million for the first quarter of fiscal 2003. The company showed a $0.04 per share improvement with a net loss per share of $0.10 for the first quarter of fiscal 2004 compared to net loss per share of $0.14 for the first quarter of fiscal 2003. The company showed a $1.8 million improvement in adjusted EBITDA, with an adjusted EBITDA loss of $1.1 million in the first quarter of fiscal 2004 versus an adjusted EBITDA loss of $2.9 million in the first quarter of fiscal 2003. Adjusted EBITDA represents earnings (or losses) before interest income/expense, taxes, depreciation, amortization, and stock-based compensation. Gross Profit and Operating Expenses The company's gross profit improved 45 percent with $24.8 million in the first quarter of fiscal 2004 compared to a gross profit of $17.0 million in the first quarter of fiscal 2003. Gross margin improved to 37.4 percent for the first quarter of fiscal 2004 from 34.8 percent in the first quarter of fiscal 2003, an increase of 260 basis points. Total operating expenses were $29.1 million for the first quarter of fiscal 2004, an increase of 27 percent compared to $22.9 million for the first quarter of fiscal 2003. Total operating expenses, as a percentage of net revenues, decreased to 44 percent in the first quarter of fiscal 2004 compared to 47 percent in the first quarter of fiscal 2003. In addition, total operating expenses of $29.1 million, as a percentage of net merchandise sales of $85.9 million, decreased to 34 percent in the first quarter of fiscal 2004 compared to total operating expenses of $22.9 million, as a percentage of net merchandise sales of $54.2 million, which was 42 percent in the first quarter of fiscal 2003. Balance Sheet The company's cash, cash equivalents, short-term investments and marketable securities at the end of fiscal 2004's first quarter were $51.9 million compared to $69.5 million at fiscal 2003 year end, a decrease of $17.6 million, which was attributable to the expected seasonality of working capital. Cash, cash equivalents, short-term investments and marketable securities at the end of fiscal 2004's first quarter increased $623,000 compared to the $51.9 million at the end of fiscal 2003's first quarter. The company's inventory at the end of fiscal 2004's first quarter was $21.1 million compared to $22.9 million at fiscal 2003 year end, a decrease of $1.9 million. Comparing inventory at the end of fiscal 2004's first quarter to the end of fiscal 2003's first quarter, inventory decreased $4.0 million to $21.1 million from $25.1 million. Management's Commentary "GSI Commerce had an excellent first quarter of fiscal 2004," said Michael Rubin, chairman and CEO of GSI Commerce. "We generated substantial revenue growth and added meaningful improvement to the bottom line. The revenue growth exceeded our guidance, and we delivered bottom-line results that came in at the high-end of our guidance, as we continued to focus strategically on investing to build a foundation for the planned growth of our business. We remain confident in our financial outlook for the year and, more importantly, with our long-term prospects." Highlights since Feb. 18, 2004 -- Liz Claiborne Inc. launched its new e-commerce store at www.LizClaiborne.com on the GSI Commerce e-commerce platform. -- MLB Advanced Media, LP (MLBAM), the interactive media and Internet company of Major League Baseball, launched its new e-commerce store located at shop.mlb.com, on the GSI Commerce e-commerce platform. -- GSI Commerce has partnered with Wilsons Leather Direct, Inc., the e-commerce arm of Wilsons The Leather Experts Inc. (Nasdaq: WLSN), the leading specialty retailer of leather outerwear, accessories and apparel in the United States, to provide a single-sourced, e-commerce solution for the Wilsons Leather online store. -- James Flanagan, an HR executive with more than 18 years' experience, was hired to fill the company's newly created post of senior vice president of human resources. Flanagan's leadership will support the company's evolving growth, which will require the company to invest in attracting, developing, rewarding and retaining the industry's top talent. Fiscal 2004 Second Quarter and Annual Financial Guidance The following forward-looking statements reflect GSI Commerce's expectations as of April 28, 2004. GSI Commerce provides guidance for its business based only on signed agreements. Given the potential changes in general economic conditions and consumer spending, the emerging nature of e- commerce, and various other risk factors discussed below, actual results may differ materially. The company provides the following guidance for fiscal 2004 second quarter: -- Net revenues are expected to be in the range of $63 million to $67 million. -- Net merchandise sales are expected to be in the range of $90 million to $94 million. -- Net loss is expected to be in the range of $3 million to $4 million. -- Adjusted EBITDA is expected to be in the range of a loss of $500,000 to an adjusted EBITDA profit of $500,000. The company also raised its guidance for fiscal 2004: -- Net revenues are expected to be in the range of $300 million to $320 million. -- Net merchandise sales are expected to be in the range of $440 million to $460 million. -- Net income is expected to be in the range of $0 to $2 million. -- Adjusted EBITDA is expected to be in the range of $13.5 million to $15 million. Non-GAAP Financial Measures This press release contains adjusted EBITDA, net merchandise sales and certain ratios that use net merchandise sales. GSI Commerce uses adjusted EBITDA as a means to evaluate its performance period to period without taking into account certain expenses, particularly stock-based compensation expense, which may fluctuate materially due to fluctuations in the price of GSI Commerce's common stock both on a quarterly and annual basis, and does not consistently reflect GSI Commerce's results from its core business activities. GSI Commerce also uses net merchandise sales as a metric for operating its business. Variable costs such as fulfillment and customer service labor expense, order processing costs such as credit card and bank processing fees and business management costs such as marketing department staffing levels are related to the amount of sales made through GSI Commerce's platform, whether or not GSI Commerce records the revenue from such sales. GSI Commerce believes that investors will have a more thorough understanding of its historical expenses and expense trends if they have visibility to both GAAP net revenue as well as the non-GAAP financial measure net merchandise sales and the percentages that such expenses bear to net revenues and net merchandise sales. These financial measures should be considered in addition to, and not as a substitute for, or superior to, other measures of financial performance prepared in accordance with GAAP. These financial measures included in this press release have been reconciled to the nearest GAAP measure as is required under SEC rules. First Quarter Conference Call GSI Commerce has scheduled a conference call on April 28 at 4:45 p.m. EDT to discuss the company's fiscal 2004 first quarter results and expectations for future performance. For access to the conference call, please call the toll-free conference number, 1-888-928-9510, by 4:30 p.m. EDT. The conference password is "commerce" and the leader's name is "Michael Rubin." Alternatively, to listen to the call live on the Web, go to the GSI Commerce Web site, www.gsicommerce.com, and click on the link provided on the home page. Please do this at least 15 minutes prior to the call (4:30 p.m. EDT) to register, download and install any necessary audio software. For those who cannot listen to the Web broadcast, a telephone replay of the conference call will be available one hour after the completion of the call and remain available through May 12. About GSI Commerce GSI Commerce provides an e-commerce solution enabling retailers, branded manufacturers, entertainment companies and professional sports organizations to operate e-commerce businesses. The company's e-commerce solution includes Web site design, e-commerce technology, managed hosting, order fulfillment, customer service, merchandising and order management, online merchandising, customer relationship management, content development and online marketing. The company operates either all or a portion of the e-commerce businesses for more than 40 partners. Forward-Looking Statements All statements made in this release and to be made in GSI Commerce's fiscal 2004 first quarter conference call, including those in the tape recording, live audio and live Webcast of the call, other than statements of historical fact, are or will be forward-looking statements. The words "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "will," "would," "should," "guidance," "potential," "continue," "project," "forecast," "confident," "prospects," 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 and the industries and markets in which GSI Commerce operates. 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 partners operate, changes affecting the Internet and e- commerce, the ability of GSI Commerce to develop and maintain relationships with strategic partners and suppliers, the ability of GSI Commerce to timely and successfully develop, maintain and protect its technology and product and service offerings and execute operationally, the ability of GSI Commerce to attract and retain qualified personnel, the ability of GSI Commerce to successfully integrate its acquisitions of other businesses, if any, 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 Securities and Exchange Commission. GSI Commerce expressly disclaims any intent or obligation to update these forward-looking statements, except as otherwise specifically stated by GSI Commerce. GSI COMMERCE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (Unaudited) January 3, April 3, 2004 2004 ASSETS Current assets: Cash and cash equivalents $57,558 $35,813 Marketable securities 11,912 16,096 Accounts receivable, net of allowance of $709 and $666, respectively 4,898 7,768 Inventory 22,910 21,063 Current portion - notes receivable 1,377 1,385 Prepaid expenses and other current assets 1,848 1,927 Total current assets 100,503 84,052 Property and equipment, net 44,840 44,643 Goodwill, net 13,453 13,453 Notes receivable 2,356 2,168 Other equity investments 2,159 2,159 Other assets, net of accumulated amortization of $2,644 and $3,012, respectively 12,272 11,868 Total assets $175,583 $158,343 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $27,677 $17,995 Accrued expenses and other 22,538 19,636 Deferred revenue 14,998 13,225 Total current liabilities 65,213 50,856 Mandatorily redeemable preferred stock, Series A, $0.01 par value, 10,000 shares authorized; 0 shares issued and outstanding as of January 3, 2004 and April 3, 2004, respectively - - Commitments and contingencies Stockholders' equity: Preferred stock, $0.01 par value, 4,990,000 shares authorized; 0 shares issued and outstanding as of January 3, 2004 and April 3, 2004, respectively - - Common stock, $0.01 par value, 90,000,000 shares authorized; 40,781,036 and 40,974,462 shares issued as of January 3, 2004 and April 3, 2004, respectively; 40,779,826 and 40,973,252 shares outstanding as of January 3, 2004 and April 3, 2004, respectively 408 410 Additional paid in capital 287,571 288,739 Accumulated other comprehensive loss - (25) Accumulated deficit (177,609) (181,637) 110,370 107,487 Less: Treasury stock, at par - - Total stockholders' equity 110,370 107,487 Total liabilities and stockholders' equity $175,583 $158,343 GSI COMMERCE, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three Months Ended March 29, April 3, 2003 2004 Revenues: Net revenues from product sales $44,173 $56,878 Service fee revenues 4,706 9,390 Net revenues 48,879 66,268 Cost of revenues from product sales 31,853 41,508 Gross profit 17,026 24,760 Operating expenses: Sales and marketing, exclusive of $229 and $494 reported below as stock-based compensation, respectively 13,124 17,449 Product development, exclusive of $0 and $49 reported below as stock-based compensation, respectively 3,699 4,483 General and administrative, exclusive of $59 and $84 reported below as stock-based compensation, respectively 3,081 3,920 Stock-based compensation 288 627 Depreciation and amortization 2,698 2,599 Total operating expenses 22,890 29,078 Other (income) expense: Interest income (381) (290) Total other (income) expense (381) (290) Net loss $(5,483) $(4,028) Losses per share - basic and diluted: Net loss $(0.14) $(0.10) Weighted average shares outstanding: basic and diluted 38,784 40,868 GSI COMMERCE, INC. AND SUBSIDIARIES ADJUSTED EBITDA AND RECONCILIATION TO GAAP RESULTS (In thousands) (Unaudited) Three Months Ended March 29, April 3, 2003 2004 Adjusted EBITDA: Net loss excluding interest income and expense, taxes and charges for stock- based compensation and depreciation and amortization $(2,878) $(1,092) Reconciliation of Adjusted EBITDA to GAAP results: Adjusted EBITDA $(2,878) $(1,092) Interest expense - - Interest income (381) (290) Taxes - - Stock-based compensation 288 627 Depreciation and amortization 2,698 2,599 Net loss $(5,483) $(4,028) GSI COMMERCE, INC. AND SUBSIDIARIES NET MERCHANDISE SALES (1) AND RECONCILIATION TO GAAP RESULTS (Dollars in thousands) (Unaudited) Three Months Ended March 29, April 3, Variance 2003 2004 Amount % Net merchandise sales (1) - (a non- GAAP financial measure): Category: Sporting goods $24,407 $35,086 $10,679 44% Other (2) 29,769 50,801 21,032 71% Total net merchandise sales (1) - (a non- GAAP financial measure) $54,176 $85,887 $31,711 59% Net revenues - (GAAP basis): Net revenues from product sales: Category: Sporting goods $24,407 $33,538 $9,131 37% Other (2) 19,766 23,340 3,574 18% Total net revenues from product sales 44,173 56,878 12,705 29% Service fee revenues 4,706 9,390 4,684 100% Total net revenues - (GAAP basis) $48,879 $66,268 $17,389 36% Reconciliation of net merchandise sales (1) to net revenues: Net merchandise sales (1) - (a non-GAAP financial measure): Category: Sporting goods $24,407 $35,086 $10,679 44% Other (2) 29,769 50,801 21,032 71% Total net merchandise sales (1) - (a non- GAAP financial measure) 54,176 85,887 31,711 59% Less: Sales by partners (3): Category: Sporting goods - (1,548) (1,548) - Other (10,003) (27,461) (17,458) 175% Total sales by partners (3) (10,003) (29,009) (19,006) 190% Add: Service fee revenues 4,706 9,390 4,684 100% Net revenues - (GAAP basis) $48,879 $66,268 $17,389 36% (1) Net merchandise sales represents the retail value of all sales transactions, inclusive of freight charges and net of allowances for returns and discounts, which flow through the GSI Commerce platform, whether or not GSI Commerce is the seller of the merchandise or records the full amount of such sales on its financial statements. (2) The "Other" categories of both net merchandise sales and net revenues from product sales include $735,000 and $8,000 for the three-month periods ended March 29, 2003 and April 3, 2004, respectively, related to Ashford.com. (3) Represents the retail value of all product sales through the GSI Commerce platform where the inventory is owned by the partner and the partner is the seller of the merchandise. GSI Commerce records service fee revenues on these sales. Contacts: Media Investor Greg Ryan Michael Conn Director, Corporate Communications Senior Vice President tel: 610-491-7294 tel: 610-491-7002 fax: 610-265-2866 fax: 610-491-7302 e-mail: ryang@gsicommerce.com e-mail: connm@gsicommerce.com SOURCE GSI Commerce, Inc. -0- 04/28/2004 /CONTACT: Media: Greg Ryan, Director, Corporate Communications, +1-610-491-7294, fax: +1-610-265-2866, e-mail: ryang@gsicommerce.com; or Investor: Michael Conn, Senior Vice President, +1-610-491-7002, fax: +1-610-491-7302, e-mail: connm@gsicommerce.com, both of GSI Commerce/ /Web site: http://www.gsicommerce.com / (GSIC WLSN) CO: GSI Commerce, Inc.; Wilsons Leather Direct, Inc.; Wilsons The Leather Experts Inc. ST: Pennsylvania IN: ECM CPR MLM REA SU: ERN ERP MAV CCA