EX-99.1 3 dex991.htm PRESS RELEASE PRESS RELEASE

Exhibit 99.1

 

Investor Contact:

Jordan M. Copland

Executive Vice President and Chief Financial Officer

GSI Commerce, Inc.

(610) 491-7000

ir@gsicommerce.com

Media Contact:

Stephanie Larkin

Corporate Communications

GSI Commerce, Inc.

(610) 491-7013

larkins@gsicommerce.com

 

FOR IMMEDIATE RELEASE

 

GSI COMMERCE REPORTS FOURTH QUARTER FISCAL 2003 AND FULL FISCAL

YEAR 2003 RESULTS

 

Company Achieves EBITDA and GAAP Profit in Fourth Quarter and EBITDA Profit for Full Year

 

KING OF PRUSSIA, PENNSYLVANIA, February 18, 2004 – GSI COMMERCE, INC. (NASDAQ: GSIC), today announced operating results for the fourth quarter and fiscal year ended January 3, 2004.

 

Fourth Quarter Fiscal 2003 Financial Results

 

Net Revenues and Net Merchandise Sales:

 

Net revenues were $95.2 million for the fourth quarter of fiscal 2003, a 26% increase compared to net revenues of $75.3 million for the fourth quarter of fiscal 2002.

 

Net merchandise sales, a non-GAAP financial measure, were $120.3 million for the fourth quarter of fiscal 2003, a 46% increase compared to net merchandise sales of $82.2 million for the fourth quarter of fiscal 2002. 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.

 

Excluding sales attributable to the Ashford.com business, which GSI Commerce sold in December 2002, net revenues increased 44% in the fourth quarter of fiscal 2003 and net merchandise sales increased 65% in the fourth quarter of fiscal 2003. These financial measures as adjusted may be considered non-GAAP financial measures.

 

Net merchandise sales from the sporting goods category increased 54% in the fourth quarter of fiscal 2003 to $52.1 million compared to $33.9 million in the fourth quarter of fiscal 2002.

Net merchandise sales attributable to Ashford.com were less than $0.1 million in the fourth quarter of fiscal 2003, a decline of almost 100% compared to $9.3 million in the fourth quarter of fiscal 2002.

 

Net merchandise sales from Other categories increased 75% in the fourth quarter of fiscal 2003 to $68.1 million from $39.0 million in the fourth quarter of fiscal 2002.

 

Net Income, EPS and EBITDA:

 

Net income was $2.7 million for the fourth quarter of fiscal 2003, an improvement of $17.5 million compared to a net loss of $14.8 million for the fourth quarter of fiscal 2002.

 

Net income per share was $0.07 for the fourth quarter of fiscal 2003 compared to net loss per share of $0.38 in the fourth quarter of fiscal 2002, an improvement of $0.45 per share.

 

EBITDA, a non-GAAP financial measure, was $5.9 million for the fourth quarter of fiscal 2003, an improvement of $16.3 million compared to an EBITDA loss of $10.4 million for the fourth quarter of fiscal 2002. EBITDA represents earnings (or losses) before interest income/expense, taxes, depreciation and amortization and stock-based compensation.

 

Gross Profit and Operating Expenses:

 

Gross profit was $36.4 million in the fourth quarter of fiscal 2003, an increase of 65% compared to gross profit of $22.1 million in the fourth quarter of fiscal 2002. Gross margin was 38.2% for the fourth quarter of fiscal 2003 compared to gross margin of 29.3% for the fourth quarter of fiscal 2002, an increase of 890 basis points.

 

Operating expenses were $33.9 million for the fourth quarter of fiscal 2003, a decline of 8% compared to $36.8 million for the fourth quarter of fiscal 2002. Excluding restructuring costs related to Ashford.com and net loss on the sale of Ashford.com assets, operating expenses, which as adjusted may be considered a non-GAAP financial measure, increased 5% in the fourth quarter of fiscal 2003. As a percentage of net revenues, operating expenses were 35.6% in the fourth quarter of fiscal 2003 compared to 48.8% in the fourth quarter of fiscal 2002. Excluding restructuring costs related to Ashford.com and net loss on the sale of Ashford.com assets, operating expenses, which as adjusted may be considered a non-GAAP financial measure, as a percentage of net revenues were 42.7% in the fourth quarter of fiscal 2002.

 

Fiscal 2003 Financial Results

 

Net Revenues and Net Merchandise Sales:

 

Net revenues were $241.9 million for fiscal 2003, a 40% increase compared to net revenues of $172.6 million for fiscal 2002.

 

Net merchandise sales were $282.0 million for fiscal 2003, a 58% increase compared to net merchandise sales of $178.3 million for fiscal 2002.

 

Excluding sales attributable to the Ashford.com business, net revenues increased 60% in fiscal 2003 and net merchandise sales increased 79% in fiscal 2003. These financial measures as adjusted may be considered non-GAAP financial measures.

 

Net merchandise sales from the sporting goods category increased 33% in fiscal 2003 to $128.5 million compared to $96.7 million in fiscal 2002.

Net merchandise sales attributable to Ashford.com were $1.0 million in fiscal 2003, a decline of 95% compared to $21.6 million in fiscal 2002.

 

Net merchandise sales from Other categories increased 154% in fiscal 2003 to $152.5 million from $60.0 million in fiscal 2002.

 

Net Income, EPS and EBITDA:

 

Net loss was $12.1 million for fiscal 2003, an improvement of $21.7 million compared to a net loss of $33.8 million for fiscal 2002.

 

Net loss per share was $0.30 for fiscal 2003 compared to net loss per share of $0.88 in fiscal 2002, an improvement of $0.58 per share.

 

EBITDA, a non-GAAP financial measure, was $0.1 million for fiscal 2003, an improvement of $23.6 million compared to an EBITDA loss of $23.5 million for fiscal 2002.

 

Gross Profit and Operating Expenses:

 

Gross profit was $87.2 million in fiscal 2003, an increase of 49% compared to gross profit of $58.4 million in fiscal 2002. Gross margin was 36.0% for fiscal 2003 compared to gross margin of 33.8% for fiscal 2002, an increase of 220 basis points.

 

Operating expenses were $100.4 million for fiscal 2003, an increase of 8% compared to $92.8 million for fiscal 2002. Excluding restructuring costs related to Ashford.com and net loss on the sale of Ashford.com assets, operating expenses, which as adjusted may be considered a non-GAAP financial measure, increased 13% in fiscal 2003. As a percentage of net revenues, operating expenses were 41.5% in fiscal 2003 compared to 53.8% in fiscal 2002. Excluding restructuring costs related to Ashford.com and net loss on the sale of Ashford.com assets, operating expenses, which as adjusted may be considered a non-GAAP financial measure, as a percentage of net revenues were 51.3% in fiscal 2002.

 

Balance Sheet

 

Cash, cash equivalents, short-term investments and marketable securities were $69.5 million at the end of fiscal 2003, a decrease of $5.3 million from $74.8 million at the end of fiscal 2002. Inventory was 6% lower at the end of fiscal 2003 and net property and equipment were 8% lower at the end of fiscal 2003 compared to the end of fiscal 2002. GSI Commerce had no debt at the end of fiscal 2003 or the end of fiscal 2002. Accounts payable, accrued expenses and other declined 3% at the end of fiscal 2003 compared to the end of fiscal 2002.

 

Management’s Commentary

 

Michael Rubin, Chairman and CEO of GSI Commerce, commented, “Fiscal 2003 represented an inflection point for GSI Commerce, as we delivered strong results highlighted by our first full year EBITDA profit since launching our initial web sites in fiscal 1999. Our proven track record, expertise, and infrastructure also contributed to a successful expansion of our partner base in fiscal 2003 with the addition of Ace Hardware, Linens ‘n Things, Liz Claiborne, Major League Baseball, NASCAR, Public Broadcasting Service, Polo.com, Rockport and Timberland.”

 

Mr. Rubin, continued, “A critical aspect of our success has been ongoing investments to continually enhance our scale and capabilities. Our guidance for fiscal 2004, which includes our expectation for our first full year GAAP net income, reflects a continuation of significant investment spending, while only containing projected revenue from agreements that have already been signed.”

Highlights Since October 29, 2003

 

  • GSI Commerce announced that it had been selected to develop and operate the new e-commerce store for Major League Baseball. The new e-commerce store launched on January 30, 2004.

 

  • GSI Commerce, through its majority owned subsidiary GSI-Chelsea Solutions, LLC, was selected by Liz Claiborne, Inc., The Timberland Company and Polo.com as the new e-commerce provider for their e-commerce businesses.

 

Financial Guidance

 

The following forward-looking statements reflect GSI Commerce’s expectations as of February 18, 2004. GSI Commerce provides guidance for its business only based on agreements that have already been signed. 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.

 

Fiscal 2004 Expectations

 

  • Net revenues are expected to be in the range of $290-$305 million.

 

  • Net merchandise sales are expected to be in the range of $425-$440 million.

 

  • Net income is expected to be in the range of $0-$2 million.

 

  • EBITDA is expected to be in the range of $13-$15 million.

 

First Quarter 2004 Expectations

 

  • Net revenues are expected to be in the range of $58-$62 million.

 

  • Net merchandise sales are expected to be in the range of $77-$81 million.

 

  • Net loss is expected to be in the range of $4.0-$5.0 million.

 

  • EBITDA loss is expected to be in the range of $1.0-$2.0 million.

 

Non-GAAP Financial Measures

 

This press release contains EBITDA, net merchandise sales and certain GAAP revenue and expense measures that exclude the Ashford.com business which may be considered non-GAAP financial measures. GSI Commerce uses 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 basis and on an 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 expense trends if they have visibility to both GAAP revenue as well as the non-GAAP financial measure net merchandise sales. In addition, GSI Commerce uses certain GAAP revenue and expense financial measures that exclude the Ashford.com business, which GSI Commerce sold in December 2002. GSI Commerce believes that investors will

have better insight into potential future trends and business performance by analyzing revenue and expense financial measures in the categories in which GSI Commerce currently operates. 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.

 

As used herein, “GAAP” refers to accounting principles generally accepted in the United States of America.

 

Fourth Quarter Conference Call

 

A conference call to discuss GSI Commerce’s fourth quarter 2003 and full year 2003 financial results will be held at 4:45 p.m. EST on February 18, 2004. For access to the conference call, call 1-888-928-9510 by 4:30 p.m. EST. The password is “Commerce” and the leader’s name is “Michael Rubin.” A tape recording of the conference call will be available, starting one hour after completion of the call, until the end of business on March 1, 2004. To access the recording, call 1-800-262-4960.

 

A live Webcast of the conference call will also be available at www.gsicommerce.com or www.streetevents.com. A replay of the Webcast will be available for a limited time.

 

About GSI Commerce

 

GSI Commerce is a leading outsource solution provider for e-commerce. The company develops and operates e-commerce businesses for retailers, branded manufacturers, media companies, television networks and professional sports organizations. The GSI Commerce platform includes Web site design and development, e-commerce technology, customer service, fulfillment, merchandising, content development and management, and online and database marketing.

 

Forward-Looking Statements

 

All statements made in this release and to be made in GSI Commerce’s fourth quarter 2003 conference call, including those in the tape recording, live audio and Webcast replay 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”, “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)

 

    

December 28,

2002

    

January 3,

2004

  
ASSETS                 

Current assets:

                 

Cash and cash equivalents

    $ 61,004     $ 57,558  

Short-term investments

      2,280       —    

Marketable securities

      11,543       11,912  

Accounts receivable, net of allowance of $1,533 and $709, respectively

      3,974       4,898  

Inventory

      24,306       22,910  

Current portion - notes receivable

      900       1,377  

Prepaid expenses and other current assets

      2,078       1,848  
    
 

Total current assets

      106,085       100,503  

Property and equipment, net

      48,669       44,840  

Goodwill, net

      13,453       13,453  

Notes receivable

      3,523       2,356  

Other equity investments

      2,159       2,159  

Other assets, net of accumulated amortization of $1,250 and $2,644, respectively

      13,684       12,272  
    
 

Total assets

    $ 187,573     $ 175,583  
    
 
LIABILITIES AND STOCKHOLDERS’ EQUITY                 

Current liabilities:

                 

Accounts payable

    $ 31,664     $ 27,677  

Accrued expenses and other

      20,283       22,538  

Deferred revenue

      15,025       14,998  

Current portion - capital lease obligations

      78       —    
    
 

Total current liabilities

      67,050       65,213  

Mandatorily redeemable preferred stock, Series A, $0.01 par value, 10,000 shares authorized; 200 and 0 shares issued as of December 28, 2002 and January 3, 2004, respectively; 0 shares outstanding as of December 28, 2002 and January 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 December 28, 2002 and January 3, 2004, respectively

      —         —    

Common stock, $0.01 par value, 90,000,000 shares authorized; 38,857,855 and 40,781,036 shares issued as of December 28, 2002 and January 3, 2004, respectively; 38,783,645 and 40,779,826 shares outstanding as of December 28, 2002 and January 3, 2004, respectively

      389       408  

Additional paid in capital

      285,625       287,571  

Accumulated other comprehensive income

      57       —    

Accumulated deficit

      (165,547 )     (177,609 )
    
 
       120,524       110,370  

Less: Treasury stock, at par

      1       —    
    
 

Total stockholders’ equity

      120,523       110,370  
    
 

Total liabilities and stockholders’ equity

    $ 187,573     $ 175,583  
    
 

GSI COMMERCE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

     Three Months Ended
     Fiscal Year Ended
  
    

December 28,

2002

    

January 3,

2004

    

December 28,

2002

    

January 3,

2004

  

Revenues:

                                 

Net revenues from product sales

    $ 69,098     $ 84,094     $ 154,819     $ 216,510  

Service fee revenues

      6,223       11,115       17,819       25,409  
    
 
 
 

Net revenues

      75,321       95,209       172,638       241,919  

Cost of revenues from product sales

      53,247       58,793       114,258       154,731  
    
 
 
 

Gross profit

      22,074       36,416       58,380       87,188  
    
 
 
 

Operating expenses:

                                 

Sales and marketing, exclusive of $377, $600, $532 and $1,527 reported below as stock-based compensation, respectively

      19,460       22,891       49,757       58,226  

Product development, exclusive of $0, $4, $(44) and $42 reported below as stock-based compensation, respectively

      4,213       3,861       12,933       15,414  

General and administrative, exclusive of $61, $11, $(87) and $366 reported below as stock-based compensation, respectively

      4,214       3,679       14,971       13,392  

Restructuring costs related to Ashford.com

      1,680       55       1,680       74  

Net loss on sale of Ashford.com assets

      2,945       —         2,566       —    

Stock-based compensation

      438       615       401       1,935  

Depreciation and amortization

      3,817       2,835       10,509       11,386  
    
 
 
 

Total operating expenses

      36,767       33,936       92,817       100,427  
    
 
 
 

Other (income) expense:

                                 

Interest expense

      360       —         749       —    

Interest income

      (281 )     (263 )     (1,377 )     (1,177 )
    
 
 
 

Total other (income) expense

      79       (263 )     (628 )     (1,177 )
    
 
 
 

Net income (loss)

    $ (14,772 )   $ 2,743     $ (33,809 )   $ (12,062 )
    
 
 
 

Earnings (losses) per share - basic and diluted:

                                 

Net income (loss)

    $ (0.38 )   $ 0.07     $ (0.88 )   $ (0.30 )
    
 
 
 

Weighted average shares outstanding:

                                 

basic

      38,771       40,737       38,566       39,638  
    
 
 
 

diluted

      38,771       42,180       38,566       39,638  
    
 
 
 

GSI COMMERCE, INC. AND SUBSIDIARIES

EBITDA AND RECONCILIATION TO GAAP RESULTS

(In thousands, except per share data)

(Unaudited)

 

     Three Months Ended
     Fiscal Year Ended
  
    

December 28,

2002

    

January 3,

2004

    

December 28,

2002

    

January 3,

2004

  

EBITDA:

                                 

Net income (loss) excluding interest income and expense, taxes and charges for stock-based compensation and depreciation and amortization

    $ (10,438 )   $ 5,930     $ (23,527 )   $ 82  
    
 
 
 

Net income (loss) excluding interest income and expense, taxes and charges for stock-based compensation and depreciation and amortization, per share:

                                 

basic

    $ (0.27 )   $ 0.15     $ (0.61 )   $ 0.00  
    
 
 
 

diluted

    $ (0.27 )   $ 0.14     $ (0.61 )   $ 0.00  
    
 
 
 

Reconciliation of EBITDA to GAAP results:

                                 

EBITDA

    $ (10,438 )   $ 5,930     $ (23,527 )   $ 82  

Interest expense

      360       —         749       —    

Interest income

      (281 )     (263 )     (1,377 )     (1,177 )

Taxes

      —         —         —         —    

Stock-based compensation

      438       615       401       1,935  

Depreciation and amortization

      3,817       2,835       10,509       11,386  
    
 
 
 

Net income (loss)

    $ (14,772 )   $ 2,743     $ (33,809 )   $ (12,062 )
    
 
 
 

GSI COMMERCE, INC. AND SUBSIDIARIES

PRO FORMA OPERATING EXPENSES AND RECONCILIATION TO GAAP RESULTS

(In thousands)

(Unaudited)

 

     Three Months Ended
    Fiscal Year Ended
    

December 28,

2002

   

January 3,

2004

   

December 28,

2002

   

January 3,

2004

Pro forma operating expenses:

                            

Operating expenses excluding restructuring costs related to Ashford.com and net loss on sale of Ashford.com assets

    $ 32,142    $ 33,881    $ 88,571    $ 100,353
    
  
  
  

Reconciliation of pro forma operating expenses to GAAP results:

                            

Pro forma operating expenses

    $ 32,142    $ 33,881    $ 88,571    $ 100,353

Restructuring costs related to Ashford.com

      1,680      55      1,680      74

Net loss on sale of Ashford.com assets

      2,945      —        2,566      —  
    
  
  
  

Total operating expenses

    $ 36,767    $ 33,936    $ 92,817    $ 100,427
    
  
  
  

GSI COMMERCE, INC. AND SUBSIDIARIES

NET MERCHANDISE SALES (1) AND RECONCILIATION TO GAAP RESULTS

(Dollars in thousands)

(Unaudited)

 

     Three Months Ended
              
    

December 28,

2002

    

January 3,

2004

     Variance
  
         Amount
     %
  

Net merchandise sales (1) - (a non-GAAP financial measure):

                               

Category:

                               

Sporting goods

    $ 33,927     $ 52,080     $ 18,153     54 %

Ashford.com (2)

      9,319       41       (9,278 )   -100 %

Other

      38,965       68,133       29,168     75 %
    
 
 
     

Total net merchandise sales (1) - (a non-GAAP financial measure)

    $ 82,211     $ 120,254     $ 38,043     46 %
    
 
 
     

Net revenues - (GAAP basis):

                               

Net revenues from product sales:

                               

Category:

                               

Sporting goods

    $ 33,927     $ 51,955     $ 18,028     53 %

Ashford.com (3)

      9,319       41       (9,278 )   -100 %

Other

      25,852       32,098       6,246     24 %
    
 
 
     

Total net revenues from product sales

      69,098       84,094       14,996     22 %

Service fee revenues

      6,223       11,115       4,892     79 %
    
 
 
     

Total net revenues - (GAAP basis)

    $ 75,321     $ 95,209     $ 19,888     26 %
    
 
 
     

Reconciliation of net merchandise sales (1) to net revenues:

                               

Net merchandise sales (1) - (a non-GAAP financial measure):

                               

Category:

                               

Sporting goods

    $ 33,927     $ 52,080     $ 18,153     54 %

Ashford.com

      9,319       41       (9,278 )   -100 %

Other

      38,965       68,133       29,168     75 %
    
 
 
     

Total net merchandise sales (1) - (a non-GAAP financial measure)

      82,211       120,254       38,043     46 %

Less:

                               

Sales by partners (4):

                               

Category:

                               

Sporting goods

      —         (125 )     (125 )   —    

Ashford.com

      —         —         —       —    

Other

      (13,113 )     (36,035 )     (22,922 )   175 %
    
 
 
     

Total sales by partners (4)

      (13,113 )     (36,160 )     (23,047 )   176 %

Add:

                               

Service fee revenues

      6,223       11,115       4,892     79 %
    
 
 
     

Net revenues - (GAAP basis)

    $ 75,321     $ 95,209     $ 19,888     26 %
    
 
 
     
(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) Net merchandise sales excluding Ashford.com increased 65% from $72.9 million for the three-month period ended December 28, 2002 to $120.2 million for the three-month period ended January 3, 2004. Net merchandise sales including Ashford.com increased 46% from $82.2 million for the three-month period ended December 28, 2002 to $120.3 million for the three-month period ended January 3, 2004.
(3) Net revenues excluding Ashford.com increased 44% from $66.0 million for the three-month period ended December 28, 2002 to $95.2 million for the three-month period ended January 3, 2004. Net revenues including Ashford.com increased 26% from $75.3 million for the three-month period ended December 28, 2002 to $95.2 million for the three-month period ended January 3, 2004.
(4) 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.

GSI COMMERCE, INC. AND SUBSIDIARIES

NET MERCHANDISE SALES (1) AND RECONCILIATION TO GAAP RESULTS

(Dollars in thousands)

(Unaudited)

 

     Fiscal Year Ended
              
    

December 28,

2002

    

January 3,

2004

     Variance
  
         Amount
     %
  

Net merchandise sales (1) - (a non-GAAP financial measure):

                               

Category:

                               

Sporting goods

    $ 96,669 (5)   $ 128,489     $ 31,820     33 %

Ashford.com (2)

      21,617       1,034       (20,583 )   -95 %

Other

      60,014       152,503       92,489     154 %
    
 
 
     

Total net merchandise sales (1) - (a non-GAAP financial measure)

    $ 178,300     $ 282,026     $ 103,726     58 %
    
 
 
     

Net revenues - (GAAP basis):

                               

Net revenues from product sales:

                               

Category:

                               

Sporting goods

    $ 96,669 (5)   $ 128,360     $ 31,691     33 %

Ashford.com (3)

      21,617       1,034       (20,583 )   -95 %

Other

      36,533       87,116       50,583     138 %
    
 
 
     

Total net revenues from product sales

      154,819       216,510       61,691     40 %

Service fee revenues

      17,819       25,409       7,590     43 %
    
 
 
     

Total net revenues - (GAAP basis)

    $ 172,638     $ 241,919     $ 69,281     40 %
    
 
 
     

Reconciliation of net merchandise sales (1) to net revenues:

                               

Net merchandise sales (1) - (a non-GAAP financial measure):

                               

Category:

                               

Sporting goods

    $ 96,669 (5)   $ 128,489     $ 31,820     33 %

Ashford.com

      21,617       1,034       (20,583 )   -95 %

Other

      60,014       152,503       92,489     154 %
    
 
 
     

Total net merchandise sales (1) - (a non-GAAP financial measure)

      178,300       282,026       103,726     58 %

Less:

                               

Sales by partners (4):

                               

Category:

                               

Sporting goods

      —         (129 )     (129 )   —    

Ashford.com

      —         —         —       —    

Other

      (23,481 )     (65,387 )     (41,906 )   178 %
    
 
 
     

Total sales by partners (4)

      (23,481 )     (65,516 )     (42,035 )   179 %

Add:

                               

Service fee revenues

      17,819       25,409       7,590     43 %
    
 
 
     

Net revenues - (GAAP basis)

    $ 172,638     $ 241,919     $ 69,281     40 %
    
 
 
     
(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) Net merchandise sales excluding Ashford.com increased 79% from $156.7 million for the fiscal year ended December 28, 2002 to $281.0 million for the fiscal year ended January 3, 2004. Net merchandise sales including Ashford.com increased 58% from $178.3 million for the fiscal year ended December 28, 2002 to $282.0 million for the fiscal year ended January 3, 2004.
(3) Net revenues excluding Ashford.com increased 60% from $151.0 million for the fiscal year ended December 28, 2002 to $240.9 million for the fiscal year ended January 3, 2004. Net revenues including Ashford.com increased 40% from $172.6 million for the fiscal year ended December 28, 2002 to $241.9 million for the fiscal year ended January 3, 2004.
(4) 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.
(5) Includes $8.3 million from sales of one of GSI Commerce’s partner’s products sold primarily through its direct response television campaigns in addition to Web site and toll-free number sales.