8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report: May 22, 2007

(Date of earliest event reported)

GSI COMMERCE, INC.

(Exact name of registrant as specified in its charter)

Delaware	0-16611	04-2958132
(State or other jurisdiction of incorporation)	(Commission File No.)	(IRS Employer Identification No.)

935 First Avenue, King of Prussia, PA 19406

(Address of principal executive offices and zip code)

(610) 265-3229

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 7.01. Regulation FD Disclosure.

The Registrant will be presenting to investors its first quarter fiscal 2007 results. A copy of the Registrant’s presentation materials, appearing as Exhibit 99.1, is furnished and not filed pursuant to Regulation FD.

Item 9.01 Financial Statements and Exhibits.

99.1 Presentation Materials

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

GSI COMMERCE, INC.
By:	/s/ Michael G. Rubin
Michael G. Rubin
Chairman, President and Chief Executive Officer

Dated: May 22, 2007

Exhibit Index

Exhibit No.	Description
99.1	Presentation Materials

EX-99.1

michael

rubin

–

chairman, president, CEO

michael

conn

–

executive vice president, CFO

may 23, 2007

goldman

sachs

eighth annual internet conference 

Exhibit 99.1

2

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,”

“could,”

“guidance,”

“potential,”

“opportunity,”

“continue,”

“project,”

“forecast,”

“confident,”

“prospects,”

“schedule,”

“designed,”

“future”

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,

confidential

and

proprietary

information,

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

SEC.

GSI

Commerce

expressly

disclaims

any

intent

or

obligation

to

update

these

forward-looking

statements.

3

non-GAAP financial measures

This

presentation

contains

or

may

mention

the

non-GAAP

measures

merchandise

sales,

adjusted

EBITDA,

non-GAAP

net

income,

free

cash

flow

and

certain

ratios

that

use

those

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

merchandise

sales,

adjusted

EBITDA,

non-GAAP

net

income

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

presentation

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

as

well

as

comparisons

to

our

competitors’

operating

results.

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.

Merchandise

sales.

We

define

merchandise

sales

as

the

retail

value

of

all

sales

transactions,

inclusive

of

freight

charges

and

net

of

allowances

for

returns

and

discounts,

which

flow

through

our

platform,

whether

or

not

we

are

the

seller

of

the

merchandise

or

record

the

full

amount

of

such

sales

on

our

financial

statements.

We

consider

merchandise

sales

to

be

a

useful

metric

for

management

and

investors

because

a

significant

portion

of

our

sales

and

marketing

expenses,

including

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

our

platform,

whether

or

not

we

record

the

revenue

from

such

sales.

As

a

result,

we

use

this

metric

as

part

of

our

revenue

and

expense

forecasting

process

and

for

capacity

planning

purposes.

We

monitor

this

metric

on

a

daily

basis

and

consider

it

to

be

a

critical

measure

of

the

health

of

our

business.

Adjusted

EBITDA.

We

define

adjusted

EBITDA

as

income

from

operations

excluding

stock-based

compensation

and

depreciation

and

amortization

expenses.

We

consider

adjusted

EBITDA

to

be

a

useful

metric

for

management

and

investors

because

it

excludes

certain

non-cash

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

rapidly

and

operate

in

an

emerging

and

rapidly

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. 

Non-GAAP

net

income.

We

define

non-GAAP

net

income

as

net

income

plus

stock-based

compensation

expense

and

amortization

of

acquisition-related

intangibles

minus

cumulative

effect

of

change

in

accounting

principle

related

to

the

adoption

of

SFAS

123R

and

plus/minus

the

provision/benefit

for

income

taxes.

This

figure

is

then

taxed

at

our

current

annual

effective

tax

rate

to

arrive

at

non-GAAP

net

income.

We

believe

it

is

useful

to

exclude

stock-based

compensation

expense

from

non-

GAAP

net

income

for

the

same

reason

we

exclude

it

from

adjusted

EBITDA.

We

believe

it

is

useful

to

exclude

amortization

of

acquisition-related

intangibles

because

in

our

opinion

the

benefits

of

these

assets

could

exceed

the

amortization

period

and

this

supplemental

view

enables

management

and

investors

to

measure

the

business

without

this

potential

effect.

The

gain

we

recorded

from

the

cumulative

effect

of

change

in

accounting

principle

related

to

the

adoption

of

SFAS

123R

is

an

item

we

view

as

non-recurring

in

nature.

We

believe

it

is

useful

to

view

net

income

without

the

benefit

of

this

non-recurring

item.

We

exclude

the

GAAP

income

tax

provision

in

order

to

compute

the

non-GAAP

pre-tax

income.

The

non-GAAP

pre-tax

income

is

then

taxed

at

our

current

annual

effective

tax

rate

to

arrive

at

non-GAAP

net

income.

Free

cash

flow.

We

define

free

cash

flow

as

net

cash

provided

by

operating

activities

minus

capital

expenditures,

including

capitalized

software

development.

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

competitors'

operating

results.

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

information

about

capital

expenditures

on

the

face

of

the

cash

flow

statement

and

in

supplemental

disclosures

in

our

Forms

10-K

and

10-Q.

4

agenda

core business

emerging growth opportunities

financials

core business

emerging growth opportunities

marketing services –

gsi interactive

sm

gsi international

sm

financials

5

agenda

core business

emerging growth opportunities

financials

complete outsourced, e-commerce solution

strategy

technology

fulfillment

customer care

60+ major retailers and brands

13 merchandise categories

$609.6 million in net revenue in 2006

$1.2 billion in merchandise sales in 2006

e-commerce

expertise

technology

logistics

customer care

overview of core business

6

2007 U.S. online general merchandise market $138.1 billion

* GSI Commerce excludes automobiles and parts, travel, and event

and movie tickets, when discussing the U.S. online general merchandise market.  GSI target

retail categories include apparel, accessories & footwear, appliances & tools, baby products, consumer electronics, cosmetics & fragrances, home furnishings;

jewelry; music & videos (media entertainment); personal care; sporting goods & apparel; toys & video games; food, beverages and groceries (gifting / specialty

foods) and an unnamed category (entered in March 2007) as reported in the “US e-Commerce: Five-Year Forecast and Data Overview”

published by Forrester

Research Inc., Oct. 2006.

current categories total $88.7 billion in 2007 *

0

$20

$40

$60

$80

$100

$120

$140

$160

$180

2006

2007

2008

2009

2010

2011

$73.9

$88.7

$105.3

$122.6

$140.3

$159

20.3%

18.7%

16.4%

14.4%

13.3%

agenda

core business

emerging growth opportunities

financials

7

60

+

leading retailers and brands

overview

core business

emerging growth opportunities

financials

*  Slide shows selected partners.

8

adding 5 to 10 new partners and 1 to 2 categories per year

total domestic partners

current partners that launched or

are expected to launch with GSI during that year

number of categories

23

31

39

49

55

4

4

6

6

7

7

9

9

11

11

1999

2000

2001

2002

2003

2004

2005

2006

4

0

10

20

30

40

50

60

6

8

8

10

6

1

1

7

1

1

13

1

1

3

10

overview

core business

emerging growth opportunities

financials

62

13

13

2007

7

70

9

value proposition

complete solution

enterprise scale & scope

focus on partner’s growth, brand and customer experience

overview

core business

emerging growth opportunities

financials

10

value proposition –

complete solution

e-commerce

expertise

technology

logistics

customer care

overview

core business

emerging growth opportunities

financials

end-to-end, integrated

e-commerce platform

shared infrastructure

and customized solutions

increased efficiency –

one vendor

proven integration –

built to work together

e-commerce expertise -

360°understanding of business

11

value proposition –

enterprise scale & scope

not partner core competency –

e-commerce ~ 2% to 4% of

total sales

merchandise sales $1.2B in 2006

~ 2,500 employees

redundant, geographically

separate data centers

2 customer care facilities

~ 940 people

3 primary fulfillment centers

1.7 million sq. ft.

overview

core business

emerging growth opportunities

financials

12

value proposition –

focus on partner growth, brand and customer experience

enhanced features & functions

overview

core business

emerging growth opportunities

financials

blogs

& RSS feeds

decision wizards

ratings & reviews

express

shop

tm

&

mini

cart

tm

13

value proposition –

focus on partner growth, brand and customer experience

delivering multichannel capabilities

buy online, pick up in store

buy online, ship to store

buy online, return to store

digital versions of print media (e.g.

catalogs, circulars)

online/offline gift card redemption and

purchase

online/offline loyalty program integration

online/offline private label credit card

integrated registries

overview

core business

emerging growth opportunities

financials

14

value proposition –

focus on partner growth, brand and customer

experience

~ 38 partner web stores use one or more alternative payment methods

black friday

thru cyber Monday, 2006 –

Bill Me Later, Google Checkout and

PayPal accounted for more than 18% of purchases made on GSI Commerce’s

partner sites using those services

overview

core business

emerging growth opportunities

financials

1x login & account set up

track all order & shipping

info. in one account

virtual wallet

extensive network

quick, easy credit

“90 days same as cash”

alternative payments

15

competition

outsource

insource

web platform

IBM, ATG, Microsoft

customer care

West, Convergys

fulfillment /logistics

DHL, UPS

design

aQuantive, Grey Interactive

online marketing

aQuantive, ValueClick

strategy/sys.  integrators

McKinsey, Accenture

order proc/merch

systems

SAP, Yantra

e-mail mgmt.

Experian, epsilon

retailer

e-commerce decision

GSI

web

platform

custom

solutions

marketing

services

fulfillment

/logistics

customer

care

one-stop, full-service

solution provider

overview

core business

emerging growth opportunities

financials

16

marketing services

overview

core business

emerging growth opportunities

financials

17

marketing services

overview

core business

emerging growth opportunities

financials

full-service interactive agency

creative –

user experience & site design

online marketing (search, affiliate, comparison

shopping engines, branded)

e-mail

content development & digital photography

catalog services

provides services to ~ 50 partners

135 staff and growing

hiring division president

complimentary acquisitions possible

18

marketing services –

online advertising market

estimated U.S. online advertising as

% of total U.S. advertising spend

estimated U.S. online

advertising revenues

2006

2007

2008

2009

2010

2011

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

0%

2%

4%

6%

8%

10%

12%

$19.3

$24.7

$29.5

$34.0

6.6%

8.1%

9.2%

11.4%

10.0%

10.8%

$38.2

$42.0

16.9% CAGR

Source: Piper Jaffray, U.S. Online Advertising Forecast.

overview

core business

emerging growth opportunities

financials

$ in millions

19

marketing services –

a multichannel requirement

almost

$400

billion

of

store

sales

–

or

16%

of

total

retail

sales

–

were

directly

influenced

by

the

Web

(cross-channel sales) in 2006. This will grow at a 17% CAGR over the next five years resulting in

cross-channel sales by consumers of more than $1 trillion by 2012 *

51% of online consumers have researched and then purchased offline *

45% of online consumers buy additional products once inside an offline store *

main reason consumers purchased offline: wanted product immediately *

overview

core business

emerging growth opportunities

financials

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

2006

2007

2008

2009

2010

2011

2012

16%

20%

24%

28%

32%

35%

38%

$2,481

$2,552

$2,627

$2,705

$2,787

$2,873

$2,954

total cross-channel sales -

% *

total retail sales, excluding travel *

CAGR = 17%

* Source: Forrester Research Inc., “The Web’s Impact on In-Store Sales: U.S. Cross-Channel Sales Forecast, 2006 to 2012.”, May 7, 2007.

$ in millions

20

marketing services –

enhancing the customer experience

Google maps integration

provides a rich customer

experience

accurate, visually branded

store locations

geo-location auto targets closest

stores for the consumer

overview

core business

emerging growth opportunities

financials

21

marketing services –

brand integration

overview

core business

emerging growth opportunities

financials

22

international

overview

core business

emerging growth opportunities

financials

23

overview

core business

emerging growth opportunities

financials

international

executive presence in Barcelona, Spain

steve

davis

relocating to build and run the business

leveraging 2006 acquisition of Aspherio and incrementally developing core platform

europe

followed by asia

size of the market, current Barcelona presence, and fewer language & cultural challenges

interest of domestic partners

ability to gain traction with new partners

buy / build assets to assemble end-to-end solution

an end-to-end solution is strategic differentiator

24

overview

core business

emerging growth opportunities

financials

international –

european

e-commerce market

*

Includes the following European countries: United Kingdom, Germany, France, Italy, Spain, Netherlandds, Belgium, Luxembourg, Norway, Sweden,

Denmark, Finland, Austria, Switzerland, Ireland, Portugal and Greece.  Source: Forrester Research Inc., “Europe’s e-Commerce Forecast: 2006 to

2011,”

June 29, 2006.  Euros were converted to U.S. dollars for this presentation.  As of 5/10/07 that rate was 1 Euro = $1.354

projected

growth

of

european

online

sales

european

online

population

expected

to

grow

from

189

million

in

2006

to

242

million

in

2011,

or

from

58%

to

74%

of

the

adult

population.

*

in

2003,

19%

of

europe’s

online

population

shopped

online

--

that

number

is

expected

to

grow

to

54%

by

2011.

*

2006

2007

2008

2009

2010

2011

$ in billions

$309.9

$138.9

$177.2

$219.3

$264.0

$356.1

$0

$50

$100

$150

$200

$250

$300

$350

$400

23.7%

20.4%

17.4%

14.9%

27.5%

25

overview

core business

emerging growth opportunities

financials

international –

asia

e-commerce market

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

2006

2007

2008

2009

2010

$108.3

$131.1

$151.5

$173.1

$190.2

21.0%

15.6%

14.3%

10.0%

*

Source:

International

Data

Corporation

(IDC),

Internet

Commerce

Model

11.1

projected growth of asian

online sales *

$ in billions

26

overview

core business

emerging growth opportunities

financials

financials

27

growth strategy for the business

core enterprise market

add new partners (5 –

10 per year) –

long-term, exclusive deals

grow annuity transaction volume

increase incremental revenue –

technology & multichannel projects

renew / extend agreements

emerging growth opportunities

marketing services -

gsi interactive

international –

gsi international

overview

core business

emerging growth opportunities

financials

sm

sm

28

overview

core business

emerging growth opportunities

financials

net revenues –

trailing four quarters

$0

$100

$200

$300

$400

$500

$600

$700

$5.5

FY99

$42.8

FY00

$102.6

FY01

$172.6

FY02

$241.9

FY03

$335.1

FY04

$440.4

FY05

$609.6

FY06

$ in millions

29

overview

core business

emerging growth opportunities

financials

merchandise sales and gross profit

100%

2006

merchandise sales

0%

non-owned

inventory

(service fees)

owned

inventory

(product sales)

$1,187.8

61%

$726.6

2006

gross profit

$278.3

53%

$148.4

47%

$129.9

2006

net revenue

$609.6

76%

$461.2

$ in millions

39%

$461.2

For

a

reconciliation

of

non-GAAP

financial

measures,

see

Appendices

A

thru

B

and/or

see

our

results

for

fiscal

years

2001

-

2006

at

www.gsicommerce.com/news/news.jsp

.

24%

$148.4

30

overview

core business

emerging growth opportunities

financials

changing revenue mix . . .

product sales % contribution to net revenue

service fees  % contribution to net revenue

% net revenue

0%

20%

40%

60%

80%

100%

1999

2000

2001

2002

2003

2004

2005

2006

100%

97.7%

95.8%

89.7%

89.5%

82.0%

80.7%

75.7%

2.3%

4.2%

10.3%

10.5%

18.0%

19.3%

24.3%

service fees compounded annual growth rate from 2002 –

2006 = 70%

product sales compounded annual growth rate from 2002 –

2006 = 31.4%

31

overview

core business

emerging growth opportunities

financials

. . . more fully impacts gross profit contribution

product sales  % contribution to gross profit

service fees  % contribution to gross profit

0%

20%

40%

60%

80%

100%

1999

2000

2001

2002

2003

2004

2005

2006

% gross profit

100%

92.4%

87.7%

69.5%

70.9%

54.5%

51.9%

46.7%

7.6%

12.3%

30.5%

29.1%

45.5%

48.1%

53.3%

32

overview

core business

emerging growth opportunities

financials

Delivering revenue growth & margin expansion

For a reconciliation of non-GAAP financial measures, see

Appendices A thru D and/or see our results for fiscal years

2001 -

2006  at www.gsicommerce.com/news/news.jsp

.

net revenue

$ in millions

adjusted

EBITDA

-467.3%

$0

$100

$200

$300

$400

$500

$600

$700

1999

2000

2001

2002

2003

2004

2005

2006

$5.5

$42.8

$102.6

$172.6

$241.9

$335.1

$440.4

$609.6

0.1%

4.4%

4.9%

6.4%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

-95.4%

-16.2%

-11.3%

33

overview

core business

emerging growth opportunities

financials

annual free cash flow –

2006 positive milestone

$ in millions

-$25

-$20

-$15

-$10

-$5

$0

$5

$10

$15

$20

$25

$30

2002

2003

2004

2005

2006

-$19.4

-$7.5

-$13.6

-$5.3

$23.5

For

a

reconciliation

of

non-GAAP

financial

measures,

see

Appendices

A

thru

D

and/or

see

our

results

for

fiscal

years

2001

-

2006

at

www.gsicommerce.com/news/news.jsp

.

34

overview

core business

emerging growth opportunities

financials

strong balance sheet

cash *

$132.1

$184.5

$134.0

inventory

$31.3

$46.8

$41.9

net fixed assets

$83.6

$106.2

$118.2

total assets

$300.8

$463.6

$407.7

debt

$71.1

$70.9

$78.7

a/p & accrued expenses

$69.2

$149.3

$82.2

total liabilities

$146.3

$235.9

$178.3

stockholders’

equity

$154.5

$227.7

$229.4

* cash and cash equivalents and marketable securities.

($ millions)

april

1, 2006

dec. 30, 2006

mar. 31, 2007

35

appendices

36

appendix a

January 1,

December 30,

December 29,

December 28,

January 3,

January 1,

January 3,

January 1,

2000

2000

2001

2002

2004

2005

2005

2006

(29,083)

$          

(53,557)

$          

(32,497)

$          

(34,437)

$          

(13,064)

$          

(401)

$                

2,878

$              

9,647

$              

2,655

4,983

10,282

401

1,935

3,576

3,805

7,578

728

8,074

6,662

10,509

11,386

10,944

14,635

21,297

(25,700)

$          

(40,500)

$          

(15,553)

$          

(23,527)

$          

257

$                 

14,119

$           

21,318

$           

38,522

$           

Twelve Months Ended

GSI COMMERCE, INC. AND SUBSIDIARIES

ADJUSTED EBITDA

(1)

AND RECONCILIATION TO GAAP RESULTS

(In thousands)

(Unaudited)

FY1999

FY2000

FY2001

FY2002

FY2003

FY2004

FY2005

FY2006

Reconciliation of GAAP Income from

operations to Adjusted EBITDA:

GAAP Income from operations

Stock-based compensation

Depreciation and amortization

Adjusted EBITDA

(1)

Adjusted EBITDA no longer includes other income (expense) as a reconciling item between Adjusted EBITDA and GAAP results.

37

appendix b

GSI COMMERCE, INC. AND SUBSIDIARIES

MERCHANDISE SALES

(1)

AND RECONCILIATION TO GAAP RESULTS

(Dollars in thousands)

(Unaudited)

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

$           

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

385,950

$           

801,849

1,187,799

$        

314,696

$           

146,487

461,183

148,370

609,553

$           

December 30,

2006

Fiscal Year 2006

38

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

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 merchandise sales and net revenues from product sales include $1,034 and $10 for the year

ended

January

3,

2004

and

January

1,

2005,

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.

December 28,

2002

96,669

$           

81,631

178,300

--

(23,481)

(23,481)

17,819

172,638

$           

Fiscal Year 2004

Fiscal Year 2003

Fiscal Year 2002

December 31,

2005

Fiscal Year 2005

261,568

$           

420,429

681,997

(48,636)

(277,987)

(326,623)

85,018

440,392

$           

385,950

$           

801,849

1,187,799

(71,254)

(655,362)

(726,616)

148,370

609,553

$           

December 30,

2006

Fiscal Year 2006

39

appendix c

December 28,

January 3,

January 1,

December 31,

December 30,

2002

2004

2005

2005

2006

Reconciliation of GAAP operating cash flow to free cash flow

GAAP cash flow from operating activities

10,041

$            

475

$                  

21,094

$            

24,285

$            

66,077

$            

Cash paid for fixed assets, including capitalized

software development

(29,480)

(7,999)

(34,717)

(29,551)

(42,621)

Free Cash Flow

(19,439)

$           

(7,524)

$              

(13,623)

$           

(5,266)

$              

23,456

$            

Twelve Months Ended

GSI COMMERCE, INC. AND SUBSIDIARIES

FREE CASH FLOW AND RECONCILIATION TO GAAP OPERATING CASH FLOW

(In thousands)

(Unaudited)