Presentation Materials

EX-99.1 2 dex991.htm PRESENTATION MATERIALS Presentation Materials

GSI Commerce, Inc.

February 2006

GSI Commerce, Inc.

February 2006

Exhibit 99.1

Safe Harbor Statement

All statements made in this presentation, other than statements of historical fact, are 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. 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 and the timing of its

establishment, extension, or termination of its relationships with strategic partners, 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, the performance of acquired businesses and the impact of SFAS Statement No.

123(R). 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.

Non-GAAP Financial Measures

This presentation contains the non-GAAP measures merchandise sales, adjusted EBITDA and

certain ratios that use those measures. 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. Merchandise

sales also include product sales related to Aspherio. GSI Commerce uses 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 organizational

costs such as business management 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 GAAP net revenue as well as the non-GAAP

financial measure merchandise sales and the percentages that such expenses bear to net

revenues and merchandise sales.

GSI Commerce also uses adjusted EBITDA, which represents earnings (or losses) before interest

income/expense, income taxes, depreciation and amortization, and

stock-based compensation.

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.

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. The

non-GAAP financial measures included in this presentation have been reconciled to the nearest

GAAP measures as required under Securities and Exchange Commission rules and can be found in

the appendices of this presentation.

Leading Provider of Outsourced e-Commerce Solutions

•

Approx. 50 major retailers & brands,

7 merchandise categories

•

Comprehensive,

centralized,

e-commerce platform

including technology,

logistics and customer care,

and marketing services

•

$440.4 million FY05 net revenues

•

Approx. 1,550 employees –

Pa., Ky., Fla.

and Barcelona, Spain

Large Addressable Domestic Market for GSI Commerce

2006 U.S. Online General

Merchandise Market *

$111.7 billion

* GSI Commerce excludes automobiles and parts, food and beverage, and travel from the estimated

, and travel from the estimated

calculation of the U.S. online general merchandise market. Source: Forrester Research

e: Forrester Research

$10.0

$4.0

$5.4

$5.1

$4.1

$ in billions

$23.5

$15.2

2006 Estimated

Target Categories

Worth $67.3 billion

2006 Estimated

Target Categories

Worth $67.3 billion

Apparel

Home

Consumer

Electronics

Music & Video

Sporting Goods

Jewelry & Luxury Goods

Health & Beauty

The U.S. Online General Merchandise Market *

$20

$40

$60

$80

$100

$120

$140

$160

$ in billions

Strong Growth Projected for e-Commerce

* GSI Commerce excludes automobiles and parts, food and beverage, and travel from the estimated

, and travel from the estimated

calculation of the U.S. online general merchandise market. Source: Forrester Research

ce: Forrester Research

2006E

$111.7

2007E

$128.0

2008E

$143.9

2009E

$158.9

2010E

$173.1

$180

Compelling Reason for Prospects to Outsource

Online business

is too large to

ignore, but too

small to justify

the investment

required to

achieve in-house

competency for

multichannel

e-commerce.

Total sales of retail categories* targeted by GSI Commerce

Online sales of retail categories targeted by GSI Commerce

expressed as a % of total sales of the same categories

* Target retail categories include home products, apparel, consumer electronics, music & video,

jewelry & luxury goods, sporting goods, and health & beauty as defined by Forrester Research.

For GSI Commerce partners, online sales generally average 3% to 4% of total sales.

$ billions

$200

$400

$600

$800

$1,000

2005E

6.1%

$894.8

2006E

7.3%

$917.4

2007E

8.5%

$939.5

2008E

9.5%

$962.2

2009E

10.5%

$985.7

2010E

11.3%

$1,010

GSI Offers a Strong Value Proposition

•

A Complete Solution

Increased efficiency –

one vendor

Improved integration –

built to work together

360°

understanding of business

•

GSI Commerce is Invisible to Consumers

Uncompromised

Not in conflict with partner’s business

•

Scale & Operating Leverage with Enterprise Focus

Platform expertise

Premium quality components

•

Focus on Growth and Investment

International platform

Marketing services

New/enhanced functionality (parametric search / alternative

payments / multivariate testing)

•

Win/Win Economics

Financial predictability and aligned interests through

long-term contracts

Platform Enables E-Commerce for Top Brands

Apparel

Electronics

Health & Beauty

Sporting Goods

Entertainment

Home

Jewelry & Luxury Goods

Growth Strategy

Compounding

effect of

long-term

agreements

Yr. 5

Yr. 4

Yr. 3

Yr. 2

Yr. 1

•

Add new partners

•

Grow revenues from each partner

Secular e-commerce growth

Platform enhancements

Marketing services

International

Competition

•

Web Platform

IBM, ATG, Microsoft, Amazon Services

•

Customer/Web Analtyics

/CRM

Siebel, E.piphany, Omniture,

WebSideStory, Coremetrics

•

Order Processing /Warehouse Mgmt.

/Merchandising Systems

SAP, JDA, Yantra, Manhattan Assoc.

•

Drop Ship

Commerce Hub, Vcommerce

•

Call Center

West, Convergys, PRC

•

Fulfillment & Logistics

DHL/Exel, UPS

•

Content

RR Donnelly

•

E-mail Mgmt.

Experian/CheetahMail,

DoubleClick/Performics,

Epsilon Interactive

•

Online Marketing

aQuantive, Digitas, ValueClick,

Grey Interactive, LinkShare

•

Fraud Mgmt.

CyberSource, Retail Decisions

•

Strategic Consulting

McKinsey & Co., Boston

Consulting Group, Accenture

•

System Integrator

Accenture, IBM, BearingPoint,

Sapient

•

Design

aQuantive/Razorfish, AKQA,

Blast Radius, Digitas

Growing Faster than the Industry

2001

2002

2003

2004

70.4% --

9 Months

GSI

Commerce

Merchandise

Sales

E-Commerce

Sales

Total Retail Sales

Percent Growth Y/Y *

E-commerce

Sales

and

Total

Retail

Sales

Source:

Census

Bureau,

U.S.

Department

Commerce.

For

reconciliation

non-GAAP

financial

measures,

see

Appendices

thru

B-1

and/or

see

our

results

for

fiscal

years

2001

2005

www.gsicommerce.com/news/news.jsp.

Prior

2002,

GSI

Commerce

did

not

use

merchandise

sales,

total

net

total

revenue

used

this

presentation

for

fiscal

year

2001.

2005

25.3% --

9 Months

8.2% --

9 Months

68.0%

24.3%

7.1%

58.2%

24.7%

4.2%

81.4%

31.0%

2.3%

3.0%

26.1%

135.2%

50%

100%

150%

Category Expansion & Partner Growth

1999

2000

2001

2002

2003

2004

2005

Sports

Consumer Electronics

Health & Beauty

Entertainment

Home

Apparel

Jewelry & Luxury Goods

Categories

Total number of partners launched

Partners launched during the year

2006

Net Revenues –

Trailing Four Quarters

Net Revenue $ in millions

$50

$100

$150

$200

$250

$300

$350

$400

$450

5.5

11.2

18.9

27.9

42.7

53.2

62.4

71.4

102.6

118.3

134.4

148.7

172.6

189.6

206.9

222.0

241.9

259.3

273.6

294.8

335.1

360.2

387.7

403.7

440.4

Business Models Provide Balanced Gross Profit Contribution

Owned

Inventory

Non-Owned

Inventory

100%

2005

Merchandise

Sales

$682.0

48%

$326.6

48%

$326.6

2005

Gross

Profit

$176.6

48%

$85

48%

$85

52%

$91.6

52%

$91.6

2005

Net

Revenue

$440.4

81%

$355.4

81%

$355.4

$ in millions

19%

$85

19%

$85

52%

$355.4

52%

$355.4

For a reconciliation of non-GAAP financial measures, see Appendices A thru B-1 and/or see our

results for fiscal years 2001 -

2005 at www.gsicommerce.com/news/news.jsp

$28.4 M

$20.7 M

$23.2 M

Adjusted

EBITDA

G&A and

Other

Gross

Profit

$176.6 M

$104.3 M

Sales &

Marketing

Product

Develop.

2005 Expense Breakdown

Fulfillment

Credit card proc.

Customer care

Revenue share

Business mgmt.

Marketing services

Technology

Legal

Finance

Business develop.

Minority interest

Other

For a reconciliation of non-GAAP financial measures, see Appendices A thru B-1 and/or see our

results for fiscal years 2001 -

2005 at www.gsicommerce.com/news/news.jsp

Multiple Drivers of Margin Expansion

Gross

Margin

Sales &

Marketing

Product

Development

G&A and

Other

Gross Profit

35.2%

40.1%

Sales & Marketing

31.6%

23.7%

Product Develop.

8.4%

6.5%

G&A and Other

9.9%

5.2%

2001

2005

As a % of

net revenues

790 bp

190 bp

470 bp

490 bp

+1,940 basis points

Cash *

$75.4

$156.7

Inventory

$37.8

$34.6

Net Fixed Assets

$74.4

$87.9

Total Assets

$231.8

$332.6

Debt

$14.5

$71.2

A/P & Accrued

$89.9

$101.7

Total Liabilities

$113.8

$179.5

Equity

$118.1

$153.2

* Cash and cash equivalents, short-term investments and marketable securities

Strong Balance Sheet

($ millions)

Jan. 1, 2005

Dec. 31, 2005

Appendix A

GSI COMMERCE, INC. AND SUBSIDIARIES

ADJUSTED EBITDA AND RECONCILIATION TO GAAP RESULTS

(In thousands)

(Unaudited)

January 1,

December 31,

January 1,

December 31,

2005

Adjusted EBITDA:

Net gain (loss) excluding interest income and expense,

income taxes and charges for stock-based compensation

and depreciation and amortization

15,466

17,168

13,559

20,736

Reconciliation of Adjusted EBITDA to GAAP results:

Adjusted EBITDA

15,466

17,168

13,559

20,736

Interest expense

240

786

538

2,220

Interest income

(205)

(1,111)

(1,162)

(2,944)

Income taxes

321

Stock-based compensation

2,412

1,231

3,576

3,805

Depreciation and amortization

2,966

4,203

10,944

14,635

Net income (loss)

10,053

11,738

(337)

2,699

Three Months Ended

Twelve Months Ended

January 3,

January 1,

2004

2005

Merchandise sales

(1)

(a non-GAAP financial measure):

Category:

Sporting goods

128,489

200,394

Other

(2)

153,537

274,586

Total merchandise sales

(1)

(a non-GAAP

financial measure)

282,026

474,980

Net revenues -

(GAAP basis):

Net revenues from product sales:

Category:

Sporting goods

128,360

164,530

Other

(2)

88,150

110,458

Total net revenues from product sales

216,510

274,988

Service fee revenues

25,409

60,116

Total net revenues -

(GAAP basis)

241,919

335,104

GSI COMMERCE, INC. AND SUBSIDIARIES

MERCHANDISE SALES

(1)

AND RECONCILIATION TO GAAP RESULTS

(Dollars in thousands)

(Unaudited)

Appendix B

December 28,

2002

96,669

81,631

178,300

96,669

58,150

154,819

17,819

172,638

Fiscal Year 2004

Fiscal Year 2003

Fiscal Year 2002

Year Ended

December 31,

2005

261,568

420,429

681,997

212,932

142,442

355,374

85,018

440,392

Fiscal Year 2005

Appendix B . . . continued

January 3,

January 1,

2004

2005

Year Ended

GSI COMMERCE, INC. AND SUBSIDIARIES

MERCHANDISE SALES

(1)

AND RECONCILIATION TO GAAP RESULTS

(Dollars in thousands)

(Unaudited)

Reconciliation of merchandise sales

(1)

to net revenues:

Merchandise sales

(1)

(a non-GAAP financial measure):

Category:

Sporting goods

128,489

200,394

Other

(2)

153,537

274,586

Total merchandise sales

(1)

(a non-GAAP

financial measure)

282,026

474,980

Less:

Sales by partners

(3)

Category:

Sporting goods

(129)

(35,864)

Other

(65,387)

(164,128)

Total sales by partners

(3)

(65,516)

(199,992)

Add:

Service fee revenues

25,409

60,116

Net revenues -

(GAAP basis)

241,919

335,104

(1)

Merchandise

sales

represents

the

retail

value

all

sales

transactions,

inclusive

freight

charges

and

net

allowances

for

returns

and

discounts,

which

flow

through

the

GSI

Commerce

platform,

whether

not

GSI

Commerce

the

seller

the

merchandise

records

the

full

amount

such

sales

its

financial

statements.

(2)

The

"Other"