EX-99.1 2 dex991.htm PRESENTATION MATERIALS Presentation Materials
investor presentation
Exhibit 99.1

2
safe harbor statement
All statements made in this presentation, other than statements of historical fact, are forward-looking statements. This presentation contains
forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words “look forward to,”
“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 the 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
to
the
operating
results
of
comparable
companies.
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 we record the full amount of such transaction as a product sale or a percentage of such transaction as a service fee on our financial statements.
Merchandise
sales
exclude
the
retail
value
of
all
sales
transactions
from
partners
acquired
through
the
acquisition
of
Accretive
Commerce
as
such
sales
do
not
flow
through
our
platform.
Merchandise sales do, however, include the value of freight services sold by Accretive Commerce to its partners. 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 have defined adjusted EBITDA as income from operations excluding stock-based compensation and depreciation and amortization expenses. Beginning with this
release
we
are
also
excluding
acquisition-related
integration
expenses.
We
consider
adjusted
EBITDA
to
be
a
useful
metric
for
management
and
investors
because
it
excludes
certain
non-cash and non-operating 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.
We
believe
the
exclusion
of
acquisition-related
integration
expenses
permits
evaluation
and
a
comparison
of
results
for
on-going
business
operations,
and it is on this basis that management internally assesses the company's performance.
Non-GAAP net income. We have defined 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. Beginning with this release, we are also
adding back acquisition-related integrated expenses to net income. 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 and acquisition-related integration expenses from non-GAAP net income for the same reasons we exclude them 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
cash
paid
for
fixed
assets,
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
the
operating
results
of
comparable
companies.
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 domestic business
emerging growth opportunities
marketing services –
gsi interactive SM
gsi international SM
financials
agenda
core domestic business
emerging growth opportunities
financials

5
technology
fulfillment
customer care
premium e-commerce solutions
end-to-end or modular
integrated components
customized
~ 80 major retailers / brands
13 retail categories
~ 3,400 employees
$672 million in trailing 12-month net revenues ended sept. 29, 2007
core domestic business
agenda
core domestic business
emerging growth opportunities
financials

6
Acquisition of Accretive Commerce expands domestic market position
announced aug. 16 / closed sept. 11
integration targeted for completion during second half 2008
adds 14 marquee partners
more depth added in key apparel, home, health & beauty and specialty foods categories
opportunity to provide new partners with services and platform options
increases scale and infrastructure
adds ~ 1 million sq. ft. of fulfillment space
adds 600 call center seats
enhances long-term growth
$83.6 million in 12-months trailing net revenues ended June 2007
opportunity
for
additional
services
/
platform
options
including
marketing
and
international
agenda
core domestic business
emerging growth opportunities
financials

7
healthy and growing U.S. e-commerce market
agenda
core domestic business
emerging growth opportunities
financials
“The
channel
continues
to
move
full
steam
ahead
while
capturing
a
larger
share
of
total
retail sales ( ~ 7%). This strong growth is an indication that the online retail channel is
still years away from reaching its saturation level and still has several years of double-
digit growth ahead.”
The State of Retailing Online 2007 –
a Shop.org
study conducted by Forrester Research
* 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 pet
supplies 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%

8
~ 80 leading retailers and brands
*  Slide shows selected partners.
agenda
core domestic business
emerging growth opportunities
financials

9
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
78
13
13
2007
70
9
acquisition partners
80
14
agenda
core domestic business
emerging growth opportunities
financials

10
2007 partner renewals
agenda
core domestic business
emerging growth opportunities
financials
partner since 2004;
multiyear extension
partner since 1999;
10-year extension
partner since 2005;
multiyear extension and
international expansion
partner since 2003;
multiyear extension
partner since 2003;
FY 2016 extension
partner since 2004;
FY 2014 extension
partner since 2006;
FY 2012 extension

11
value proposition
complete solution
enterprise scale & scope
focus on partner’s growth, brand and customer experience
agenda
core domestic business
emerging growth opportunities
financials

12
value proposition –
complete premium solution
end-to-end, integrated, multichannel,
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
agenda
core domestic business
emerging growth opportunities
financials
technology
fulfillment
customer care

13
value proposition –
enterprise scale & scope
not partner core competency –
e-commerce ~ 2% to 4% of total sales
~ 3,400 employees
redundant, geographically
separate data centers
4 customer care facilities
~ 1,600 seats
6 primary fulfillment centers
2.7 million sq. ft.
agenda
core domestic business
emerging growth opportunities
financials
Edwardsville, Ill.
Louisville, Ky.
Shepherdsville, Ky.
Richwood, Ky.
Los Angeles, Calif.
Pacoima, Calif.
Martinsville,
Va.
Nashville, Ten.
Melbourne, Fla.
Eau Claire, Wis.
Brunswick, Ga.
King of Prussia, Pa.

14
value proposition –
focus on partner growth, brand and customer experience
agenda
core domestic business
emerging growth opportunities
financials
decision wizards

15
value proposition –
focus on partner growth, brand and customer experience
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
agenda
core domestic business
emerging growth opportunities
financials
multichannel
capabilities

16
value proposition –
focus on partner growth, brand and customer experience
agenda
core domestic business
emerging growth opportunities
financials
leveraging relationships

17
value proposition –
focus on partner growth, brand and customer experience
More than
100,000 NFL
jerseys
decorated
in-house by
GSI July –
Dec.
2006
More than
9,000
customized
NFL team
jerseys were
ordered on
QVC.com
in a
single day.
agenda
core domestic business
emerging growth opportunities
financials
customization / personalization

18
value proposition –
focus on partner growth, brand and customer experience
~ 41 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
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”
agenda
core domestic business
emerging growth opportunities
financials
alternative payments

19
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
agenda
core domestic business
emerging growth opportunities
financials

20
marketing services
agenda
core domestic business
emerging growth opportunities
financials

21
marketing services
full-service, interactive marketing services
creative –
user experience & site design
online marketing (search, affiliate, comparison shopping engines, display)
e-mail
content development & digital photography
catalog services
provides services to ~ 50 partners
155 staff and growing
complementary acquisitions possible
agenda
core domestic business
emerging growth opportunities
financials

22
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.
$ in millions
agenda
core domestic business
emerging growth opportunities
financials

23
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 *
$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
agenda
core domestic business
emerging growth opportunities
financials

24
marketing services –
enhancing the customer experience
agenda
core domestic business
emerging growth opportunities
financials
usability lab

25
marketing services –
brand integration
agenda
core domestic business
emerging growth opportunities
financials

26
international
agenda
core domestic business
emerging growth opportunities
financials

27
international
executive presence in Barcelona, Spain
senior executive relocated in August
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
two international deals signed in 2007 for 2008 launches
iRobot
--
launching in three countries in 2008
Unnamed men’s apparel partner --
launching two stores each in six countries in 2008
agenda
core domestic business
emerging growth opportunities
financials

28
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%
agenda
core domestic business
emerging growth opportunities
financials

29
financials
agenda
core domestic business
emerging growth opportunities
financials

30
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 SM
international –
gsi international SM
agenda
core domestic business
emerging growth opportunities
financials

31
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
agenda
core domestic business
emerging growth opportunities
financials

32
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%
agenda
core domestic business
emerging growth opportunities
financials

33
. . . 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%
agenda
core domestic business
emerging growth opportunities
financials

34
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%
agenda
core domestic business
emerging growth opportunities
financials

35
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
.
agenda
core domestic business
emerging growth opportunities
financials

36
strong balance sheet
cash *
$103.5
$184.5
$166.2
inventory
$43.3
$46.8
$52.8
net fixed assets
$96.7
$106.2
$148.3
total assets
$308.4
$463.6
$608.5
debt
$70.8
$70.9
$236.8
a/p & accrued expenses
$74.7
$149.3
$127.3
total liabilities
$157.7
$235.9
$383.7
stockholders’
equity
$153.2
$227.7
$224.8
* cash and cash equivalents and marketable securities.
($ millions)
sept. 30, 2006
dec. 30, 2006
sept. 29, 2007
agenda
core domestic business
emerging growth opportunities
financials

37
appendices

38
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.

39
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

40
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 salesto net revenues:
(1)
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

41
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)