Presentation Materials

EX-99.1 2 dex991.htm PRESENTATION MATERIALS Presentation Materials

GSI Commerce, Inc.

August 2006

GSI Commerce, Inc.

August 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,”

“schedule”

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

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

its

establishment,

extension

termination

its

relationships

with

strategic

partners,

the

ability

GSI

Commerce

timely

and

successfully

develop,

maintain

and

protect

its

technology, confidential and proprietary information, and product and service offerings, the ability

of GSI Commerce to execute operationally and attract and retain qualified personnel, the ability of

GSI

Commerce

successfully

integrate

its

acquisitions

other

businesses,

any,

the

performance of any acquired businesses and the impact of SFAS 123(R). More information about

potential

factors

that

could

affect

GSI

Commerce

can

found

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

freight

charges

and

net

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. 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, impairment on investment, income taxes, depreciation and amortization,

cumulative effect of change in accounting principle related to the adoption of SFAS 123(R) and

stock-based compensation. GSI Commerce uses adjusted EBITDA as a means to evaluate its

performance

period

without

taking

into

account

certain

expenses,

particularly

stock-

based compensation expense, which historically has been materially impacted by fluctuations in

the price of GSI Commerce’s common stock both on a quarterly and annual basis, and is now

materially

impacted

the

adoption

SFAS

123(R),

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

financial

performance

prepared

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 Platform for Outsourced e-Commerce

•

Approximately 60 major

retailers & brands,

8 merchandise categories

and an international offering

•

End-to-end e-commerce

platform

Technology

Logistics and customer care

Marketing services

•

Delivers customized

solutions to partners

through platform

Marketing Services

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 calculation of the U.S.

online

general

merchandise

market.

Source:

e-Commerce:

2005

2010,

Forrester

Research,

Inc.,

Sept.

2005.

$ in billions

Apparel

Home

Consumer

Electronics

Music & Video

Sporting

Goods

Jewelry

& Luxury Goods

Health & Beauty

Toys

$23.5

$15.2

$10.0

$5.4

$5.1

$4.5

$4.1

$4.0

2006 Estimated

Target Categories

Worth $71.8 billion

2006 Estimated

Target Categories

Worth $71.8 billion

The U.S. Online General Merchandise Market *

$20

$40

$60

$80

$100

$120

$140

$160

$ in billions

Strong Growth Projected for e-Commerce

2006E

$111.7

2007E

$128.1

2008E

$143.9

2009E

$159.0

2010E

$173.2

$180

* GSI Commerce excludes automobiles and parts, food and beverage, and travel from the estimated calculation of the U.S.

online

general

merchandise

market.

Source:

e-Commerce:

2005

2010,

Forrester

Research,

Inc.,

Sept.

2005.

14.8%

12.3%

10.5%

8.9%

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

$ billions

2005E

6.2%

2006E

7.5%

$952.2

2007E

8.7%

2008E

9.7%

2009E

10.7%

2010E

11.5%

$880

$900

$920

$940

$960

$980

$1,000

$1,020

$1,040

$1,060

$928.5

$975.3

$999.1

$1,023.8

$1,049.2

Target

retail

Categories

Sports

Consumer Electronics

Health & Beauty

Entertainment

Home

Apparel

Jewelry & Luxury Goods

Toys

Internat’l

partners

Net Revenues –

Trailing Four Quarters

Net Revenue

$ in millions

$100

$600

$200

$300

$400

$500

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

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

$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

2001

2005

As a % of

net revenues

790 bp

190 bp

470 bp

490 bp

+1,940 basis points

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%

Cash *

$156.7

$117.5

$128.6

Inventory

$34.6

$33.1

$33.3

Net Fixed Assets

$87.9

$79.3

$91.3

Total Assets

$332.6

$274.8

$315.5

Debt

$71.2

$71.4

$70.9

A/P & Accrued

$101.7

$33.1

$33.3

Total Liabilities

$179.5

$130.5

$160.7

Equity

$153.2

$144.3

$154.8

* Cash and cash equivalents and marketable securities.

Strong Balance Sheet

($ millions)

Dec. 31, 2005

July 2, 2005

July 1, 2006

Appendix A

GSI COMMERCE, INC. AND SUBSIDIARIES

ADJUSTED EBITDA AND RECONCILIATION TO GAAP RESULTS

(In thousands)

(Unaudited)

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

13,559

20,736

Reconciliation of Adjusted EBITDA to GAAP results:

Adjusted EBITDA

13,559

20,736

Interest expense

538

2,220

Interest income

(1,162)

(2,944)

Income taxes

321

Stock-based compensation

3,576

3,805

Depreciation and amortization

10,944

14,635

Net income (loss)

(337)

2,699

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"