KING OF PRUSSIA, Pa.--(BUSINESS WIRE)--GSI Commerce Inc. (Nasdaq: GSIC) today announced its financial results for its fiscal first quarter ended April 2, 2011.
Fiscal 2011 First Quarter Compared to Fiscal 2010 First Quarter
- Net revenues were $323.5 million compared to $272.6 million.
- Loss from operations was $27.9 million compared to $12.9 million and includes $7.3 million of expenses related to the pending acquisition of GSI by eBay, $3.5 million of expenses related to the acquisition of Fanatics, Inc. and $3.3 million of earn-out expenses related to the acquisition of Fetchback, Inc.
- Non-GAAP income from operations (NGIO) was $14.8 million compared to $17.4 million.
- Core NGIO was $19.3 million compared to $18.5 million.*
- Emerging NGIO loss was $4.6 million compared to $1.2 million.**
- Net loss was $13.6 million or $0.20 per share compared to net loss of $8.1 million or $0.13 per share.
- Trailing 12 month loss from operations was $32.2 million compared to income from operations of $11.9 million.
- Trailing 12 month NGIO was $132.1 million compared to $114.5 million.
- Trailing 12 month Core NGIO was $144.6 million compared to $114.3 million.
- Trailing 12 month Emerging NGIO loss was $12.6 million compared to NGIO profit of $0.2 million.
- Trailing 12 month cash flow from operating activities was $132.8 million compared to $127.7 million.
- Trailing 12 month free cash flow was $59.3 million compared to $76.2 million.
*Core includes Global e-Commerce Services, Global Marketing Services and corporate overhead.
**Emerging includes Rue La La and ShopRunner without allocation of corporate overhead.
The definitions of non-GAAP income from operations, free cash flow, and a discussion of the importance of these non-GAAP financial metrics to GSI’s business can be found under “Non-GAAP Financial Measures” provided later in this news release.
Non-GAAP Financial Measures
GSI’s consolidated financial statements are prepared and presented in accordance with GAAP. To supplement our consolidated financial statements in this release, we use the non-GAAP financial measures of non-GAAP income from operations 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 release 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. 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. These measures may be different from non-GAAP measures used by other companies.
Non-GAAP income from operations. We define non-GAAP income from operations as income from operations excluding stock-based compensation, depreciation and amortization expenses, and the following expenses relating to acquisitions: transaction expenses, due diligence expenses, integration expenses, non-cash inventory valuation adjustments, the cash portion of any deferred acquisition payments recorded as compensation expense, changes in fair value of deferred acquisition payments, and goodwill and intangible asset impairment charges. We consider non-GAAP income from operations 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 ASC 718 / 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 our business and operate in an emerging and 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 the following acquisition-related 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: transaction expenses, due diligence expenses, integration expenses, non-cash inventory valuation adjustments, the cash portion of any acquisition earn-out payments recorded as compensation expense, changes in fair value of deferred acquisition payments, and goodwill and intangible asset impairment charges.
Free cash flow. We define free cash flow as net cash provided by operating activities minus cash paid for fixed assets, including internal use software. 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 supplemental information about capital expenditures accrued, but not paid for during the applicable periods on the face of the cash flow statement in our Forms 10-K and 10-Q.
About GSI Commerce
GSI Commerce® enables e-commerce, multichannel retailing and digital marketing for global enterprises in the U.S. and internationally. GSI’s e-commerce services which include technology, order management, payment processing, fulfillment and customer care, are available on a modular basis or as part of an integrated solution. GSI’s Global Marketing Services division provides innovative digital marketing products and services comprised of database management and segmentation, marketing distribution channels, a global digital agency to drive strategic and creative direction and an advanced advertising analytics and attribution management platform. Additionally, GSI provides brands and retailers platforms to engage directly with consumers through RueLaLa.com, an online private sale shopping destination, and ShopRunner.com, a members-only shopping service that offers unlimited free two-day shipping and free shipping on returns for a $79 annual subscription.
| GSI COMMERCE, INC. AND SUBSIDIARIES | ||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
| (In thousands) | ||||||||
| (unaudited) | ||||||||
| January 1, | April 2, | |||||||
| 2011 | 2011 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 242,146 | $ | 109,624 | ||||
| Accounts receivable, net | 96,382 | 72,151 | ||||||
| Inventory, net | 62,412 | 92,099 | ||||||
| Deferred tax assets | 16,439 | 19,235 | ||||||
| Prepaid expenses and other current assets | 16,984 | 21,497 | ||||||
| Total current assets | 434,363 | 314,606 | ||||||
| Property and equipment, net | 188,829 | 212,282 | ||||||
| Goodwill | 318,179 | 494,822 | ||||||
| Intangible assets, net | 132,972 | 204,953 | ||||||
| Long-term deferred tax assets | 2,279 | - | ||||||
| Other assets, net | 30,540 | 39,283 | ||||||
| Total assets | $ | 1,107,162 | $ | 1,265,946 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 144,323 | $ | 84,387 | ||||
| Accrued expenses and other | 197,417 | 154,277 | ||||||
| Deferred revenue | 23,808 | 28,088 | ||||||
| Current portion - long-term debt | 11,136 | 17,985 | ||||||
| Total current liabilities | 376,684 | 284,737 | ||||||
| Convertible notes | 123,391 | 125,107 | ||||||
| Long-term debt | 32,287 | 183,793 | ||||||
| Deferred acquisition payments | 1,750 | 4,673 | ||||||
| Deferred tax liabilities | - | 6,450 | ||||||
| Deferred revenue and other long-term liabilities | 10,017 | 9,300 | ||||||
| Total liabilities | 544,129 | 614,060 | ||||||
| Stockholders' equity: | ||||||||
| Preferred stock, $0.01 par value: | ||||||||
| Authorized shares - 5,000 | ||||||||
| Issued and outstanding shares - none | - | - | ||||||
| Common stock, $0.01 par value: | ||||||||
| Authorized shares - 180,000 and 180,000 | ||||||||
| Issued and outstanding shares - 66,984 and 72,246 | 670 | 722 | ||||||
| Additional paid in capital | 765,857 | 867,195 | ||||||
| Accumulated other comprehensive loss | (1,378 | ) | (306 | ) | ||||
| Accumulated deficit | (202,116 | ) | (215,725 | ) | ||||
| Total stockholders' equity | 563,033 | 651,886 | ||||||
| Total liabilities and stockholders' equity | $ | 1,107,162 | $ | 1,265,946 | ||||
| GSI COMMERCE, INC. AND SUBSIDIARIES | ||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||
| (In thousands, except per share data) | ||||||||||
| (Unaudited) | ||||||||||
| Three Months Ended | ||||||||||
| April 3, | April 2, | |||||||||
| 2010 | 2011 | |||||||||
| Revenues: | ||||||||||
| Net revenues from product sales | $ | 159,275 | $ | 178,940 | ||||||
| Service fee revenues | 113,317 | 144,554 | ||||||||
| Net revenues | 272,592 | 323,494 | ||||||||
| Costs and expenses: | ||||||||||
| Cost of revenues from product sales | 117,474 | 129,100 | ||||||||
| Marketing | 10,807 | 14,691 | ||||||||
| Account management and operations | 77,694 | 91,284 | ||||||||
| Product development | 34,317 | 46,587 | ||||||||
| General and administrative | 24,397 | 46,519 | ||||||||
| Depreciation and amortization | 18,761 | 23,165 | ||||||||
| Changes in fair value of deferred acquisition payments | 2,074 | - | ||||||||
| Total costs and expenses | 285,524 | 351,346 | ||||||||
| Loss from operations | (12,932 | ) | (27,852 | ) | ||||||
| Other (income) expense: | ||||||||||
| Interest expense | 5,208 | 5,248 | ||||||||
| Interest income | (234 | ) | (65 | ) | ||||||
| Other (income) expense | 474 | (1,098 | ) | |||||||
| Total other expense | 5,448 | 4,085 | ||||||||
| Loss before income taxes and equity-method | ||||||||||
| investment earnings | (18,380 | ) | (31,937 | ) | ||||||
| Benefit for income taxes | (10,255 | ) | (17,874 | ) | ||||||
| Equity-method investment earnings | - | (454 | ) | |||||||
| Net loss | $ | (8,125 | ) | $ | (13,609 | ) | ||||
| Loss per share- basic and diluted | $ | (0.13 | ) | $ | (0.20 | ) | ||||
| Weighted average shares outstanding - basic and diluted | 60,446 | 68,156 | ||||||||
| GSI COMMERCE, INC. AND SUBSIDIARIES | ||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||
| (In thousands) | ||||||||||
| (Unaudited) | ||||||||||
| Three Months Ended | ||||||||||
| April 3, | April 2, | |||||||||
| 2010 | 2011 | |||||||||
| Cash Flows from Operating Activities: | ||||||||||
| Net loss | $ | (8,125 | ) | $ | (13,609 | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||
| Depreciation | 14,646 | 18,024 | ||||||||
| Amortization | 4,115 | 5,141 | ||||||||
| Amortization of discount on convertible notes | 2,809 | 1,716 | ||||||||
| Changes in fair value of deferred acquisition payments | 2,074 | - | ||||||||
| Stock-based compensation | 6,931 | 5,012 | ||||||||
| Foreign currency transaction losses (gains) | 475 | (1,006 | ) | |||||||
| Equity-method investment earnings | - | (454 | ) | |||||||
| Deferred income taxes | (11,191 | ) | (18,598 | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||||
| Accounts receivable, net | 16,420 | 27,221 | ||||||||
| Inventory, net | (2,621 | ) | 4,739 | |||||||
| Prepaid expenses and other current assets | (561 | ) | (1,114 | ) | ||||||
| Other assets, net | 149 | (1,706 | ) | |||||||
| Accounts payable and accrued expenses | (110,530 | ) | (117,402 | ) | ||||||
| Deferred revenue | 238 | (465 | ) | |||||||
| Net cash used in operating activities | (85,171 | ) | (92,501 | ) | ||||||
| Cash Flows from Investing Activities: | ||||||||||
| Payments for acquisitions of businesses, net of cash acquired | - | (169,875 | ) | |||||||
| Cash paid for property and equipment, including internal use software | (15,868 | ) | (18,485 | ) | ||||||
| Net cash used in investing activities | (15,868 | ) | (188,360 | ) | ||||||
| Cash Flows from Financing Activities: | ||||||||||
| Proceeds from long term borrowing | - | 115,000 | ||||||||
| Borrowings on revolving credit loan | - | 40,000 | ||||||||
| Debt issuance costs paid | (856 | ) | (5,674 | ) | ||||||
| Repayments of capital lease obligations | (1,473 | ) | (2,832 | ) | ||||||
| Repayments of mortgage note | (50 | ) | (53 | ) | ||||||
| Excess tax benefit in connection with exercise of stock options and awards | 978 | 856 | ||||||||
| Proceeds from exercise of common stock options | 6,933 | 448 | ||||||||
| Net cash provided by financing activities | 5,532 | 147,745 | ||||||||
| Effect of exchange rate changes on cash and cash equivalents | (520 | ) | 594 | |||||||
| Net decrease in cash and cash equivalents | (96,027 | ) | (132,522 | ) | ||||||
| Cash and cash equivalents, beginning of period | 228,430 | 242,146 | ||||||||
| Cash and cash equivalents, end of period | $ | 132,403 | $ | 109,624 | ||||||
| GSI COMMERCE, INC. AND SUBSIDIARIES | |||||||||||||||||
| NON-GAAP INCOME FROM OPERATIONS AND RECONCILIATION TO GAAP RESULTS | |||||||||||||||||
| (In thousands) | |||||||||||||||||
| (Unaudited) | |||||||||||||||||
| Three Months Ended | Twelve Months Ended | ||||||||||||||||
| April 3, | April 2, | April 3, | April 2, | ||||||||||||||
| 2010 | 2011 | 2010 | 2011 | ||||||||||||||
| Reconciliation of GAAP (loss) income from operations to | |||||||||||||||||
| non-GAAP income from operations: | |||||||||||||||||
| GAAP (loss) income from operations | $ | (12,932 | ) | $ | (27,852 | ) | $ | 11,868 | $ | (32,238 | ) | ||||||
| Acquisition related integration, transaction, due diligence expenses, | |||||||||||||||||
| inventory valuation adjustments, and the cash portion of deferred | |||||||||||||||||
| acquisition payments recorded as compensation expense | 2,547 | 14,441 | 8,095 | 24,930 | |||||||||||||
| Stock-based compensation | 6,931 | 5,012 | 24,739 | 25,924 | |||||||||||||
| Depreciation and amortization (1) | 18,761 | 23,165 | 66,755 | 88,167 | |||||||||||||
| Changes in fair value of deferred acquisition payments | 2,074 | - | 3,025 | (63,037 | ) | ||||||||||||
| Impairment of goodwill and intangible assets | - | - | - | 88,318 | |||||||||||||
| Non-GAAP income from operations | $ | 17,381 | $ | 14,766 | $ | 114,482 | $ | 132,064 | |||||||||
| GAAP income (loss) from operations as a percentage | |||||||||||||||||
| of GAAP net revenues | (4.7 | %) | (8.6 | %) | 1.1 | % | (2.3 | %) | |||||||||
| Non-GAAP income from operations as a percentage | |||||||||||||||||
| of GAAP net revenues | 6.4 | % | 4.6 | % | 10.6 | % | 9.4 | % | |||||||||
(1) Includes amortization expense of acquisition related intangibles of $5,123 and $21,116 for the three- and twelve-months ended April 2, 2011 and $4,105 and $12,379 for the three- and twelve-months ended April 3, 2010.
| Three Months Ended April 2, 2011 | Twelve Months Ended April 2, 2011 | |||||||||||||||||||||||
| Core(2) | Emerging(2) | Consolidated | Core(2) | Emerging(2) | Consolidated | |||||||||||||||||||
| Reconciliation of GAAP income (loss) from operations to | ||||||||||||||||||||||||
| non-GAAP income (loss) from operations: | ||||||||||||||||||||||||
| Income (loss) from operations | $ | (20,249 | ) | $ | (7,603 | ) | $ | (27,852 | ) | $ | 12,676 | $ | (44,914 | ) | $ | (32,238 | ) | |||||||
| Acquisition related integration, transaction, due diligence expenses, | ||||||||||||||||||||||||
| inventory valuation adjustments, and the cash portion of deferred | ||||||||||||||||||||||||
| acquisition payments recorded as compensation expense | 14,354 | 87 | 14,441 | 23,226 | 1,704 | 24,930 | ||||||||||||||||||
| Stock-based compensation | 4,888 | 124 | 5,012 | 25,666 | 258 | 25,924 | ||||||||||||||||||
| Depreciation and amortization | 20,328 | 2,837 | 23,165 | 76,308 | 11,859 | 88,167 | ||||||||||||||||||
| Changes in fair value of deferred acquisition payments | - | - | - | - | (63,037 | ) | (63,037 | ) | ||||||||||||||||
| Impairment of goodwill and intangible assets | - | - | - | 6,769 | 81,549 | 88,318 | ||||||||||||||||||
| Non-GAAP income (loss) from operations | $ | 19,321 | $ | (4,555 | ) | $ | 14,766 | $ | 144,645 | $ | (12,581 | ) | $ | 132,064 | ||||||||||
| Three Months Ended April 3, 2010 | Twelve Months Ended April 3, 2010 | |||||||||||||||||||||||
| Core(2) | Emerging(2) | Consolidated | Core(2) | Emerging(2) | Consolidated | |||||||||||||||||||
| Reconciliation of GAAP income (loss) from operations to | ||||||||||||||||||||||||
| non-GAAP income (loss) from operations: | ||||||||||||||||||||||||
| Income (loss) from operations | $ | (5,452 | ) | $ | (7,480 | ) | $ | (12,932 | ) | $ | 22,296 | $ | (10,428 | ) | $ | 11,868 | ||||||||
| Acquisition related integration, transaction, due diligence expenses, | ||||||||||||||||||||||||
| inventory valuation adjustments, and the cash portion of deferred | ||||||||||||||||||||||||
| acquisition payments recorded as compensation expense | 983 | 1,564 | 2,547 | 3,973 | 4,122 | 8,095 | ||||||||||||||||||
| Stock-based compensation | 6,931 | - | 6,931 | 24,739 | - | 24,739 | ||||||||||||||||||
| Depreciation and amortization | 16,077 | 2,684 | 18,761 | 63,255 | 3,500 | 66,755 | ||||||||||||||||||
| Changes in fair value of deferred acquisition payments | - | 2,074 | 2,074 | - | 3,025 | 3,025 | ||||||||||||||||||
| Impairment of goodwill and intangible assets | - | - | - | - | - | - | ||||||||||||||||||
| Non-GAAP income (loss) from operations | $ | 18,539 | $ | (1,158 | ) | $ | 17,381 | $ | 114,263 | $ | 219 | $ | 114,482 | |||||||||||
(2) Core results include the Global e-Commerce Services segment and the Global Marketing Services segment. Emerging results include the Consumer Engagement Segment.
| GSI COMMERCE, INC. AND SUBSIDIARIES | |||||||||
| FREE CASH FLOW AND RECONCILIATION TO GAAP RESULTS | |||||||||
| (In thousands) | |||||||||
| (Unaudited) | |||||||||
| Twelve Months Ended | |||||||||
| April 3, | April 2, | ||||||||
| 2010 | 2011 | ||||||||
| Reconciliation of GAAP operating cash flow to free cash flow: | |||||||||
| GAAP cash flow from operating activities | $ | 127,663 | $ | 132,799 | |||||
| Cash paid for property and equipment, including internal use software | (51,464 | ) | (73,530 | ) | |||||
| Free cash flow | $ | 76,199 | $ | 59,269 | |||||
| GSI COMMERCE, INC. AND SUBSIDIARIES | ||||||||||||||||||
| RESULTS BY SEGMENT | ||||||||||||||||||
| (In thousands) | ||||||||||||||||||
| (Unaudited) | ||||||||||||||||||
| Three Months Ended April 3, 2010 | ||||||||||||||||||
| Global | Global | |||||||||||||||||
| E-Commerce | Marketing | Consumer | Intersegment | |||||||||||||||
| Services | Services | Engagement | Eliminations | Consolidated | ||||||||||||||
| Net revenues | $ | 201,372 | $ | 38,371 | $ | 44,454 | $ | (11,605 | ) | $ | 272,592 | |||||||
| Segment costs and expenses (1) | 192,164 | 29,040 | 45,612 | (11,605 | ) | 255,211 | ||||||||||||
| Segment profit (loss) | $ | 9,208 | $ | 9,331 | $ | (1,158 | ) | $ | - | $ | 17,381 | |||||||
| Three Months Ended April 2, 2011 | ||||||||||||||||||
| Global | Global | |||||||||||||||||
| E-Commerce | Marketing | Consumer | Intersegment | |||||||||||||||
| Services | Services | Engagement | Eliminations | Consolidated | ||||||||||||||
| Net revenues | $ | 231,768 | $ | 50,322 | $ | 57,587 | $ | (16,183 | ) | $ | 323,494 | |||||||
| Segment costs and expenses (1) | 219,404 | 43,365 | 62,142 | (16,183 | ) | 308,728 | ||||||||||||
| Segment profit (loss) | $ | 12,364 | $ | 6,957 | $ | (4,555 | ) | $ | - | $ | 14,766 | |||||||
(1) Segment costs and expenses are GAAP costs and expenses excluding stock-based compensation expenses, depreciation and amortization expenses, and the following expenses related to acquisitions: transaction expenses, due diligence expenses, integration expenses, non-cash inventory valuation adjustments, the cash portion of any deferred acquisition payments recorded as compensation expense, changes in fair value of deferred acquisitions payments, and goodwill and intangible asset impairment charges.