GSI Commerce (GSIC) beats, stock up slightly in a down market (4Q04 earnings)

GSI Commerce (ticker: GSIC) beat the consensus EPS estimate by a penny, and its stock rose slightly in subsequent trading. Details of the results and a quick comment:

Q4 Results

• Adjusted EPS of $0.29 beat the consensus estimate by a penny.
• Revenues of $135.8 million rose 43% year over year and beat the consensus estimate of $123.5 million.
• Revenue mix: net revenues from product sales of $109.1 million were up 30% year over year. Fixed and variable service fees were $26.7 million, up 140% year over year.
• Merchandise sales (the value of all transactions at retail prices that flow through the GSI platform) were $199.3 million, up 66% year over year.
• Merchandise sales mix: sporting goods sales of $91.2 million up 75% year on year, more than half of which came from new partners; other sales grew 59% to $108 million.
• Gross margin was 41.2%, up from 38.2% a year earlier.
• Gross profit rose by 54% year on year to $19.5 million.
• Operating expenses of $44.7 million rose 32% year on year.
• Operating expenses as a % of revs fell by 2.6% points year on year to 33%.
• Spending on online marketing was flat, as most advertising is funded by partners.
• GAAP net income was $10.6 million and $0.25 per share.
• Adjusted EBITDA was $16 million, 11.8% of revenue.
• Year-end cash and equivalents of $75.4 million.
• Inventory of $37.8 million up $14.9 million year over year.
• Accounts receivable of $14.9 million up $10 million year on year. GSI said that most of these receivables have since been collected.

Q1 Guidance

• Net revenue of $78-83 million, versus consensus of $82 million.
• Merchandise sales of $115-125 million.
• Net loss $$3.0-3.5 million.
• Adjusted EBITDA of breakeven to positive $0.5 million.

Full Year Guidance

• Adjusted EPS of $1.17-1.22, versus consensus of $1.21.
• Revenue of $390-410 million, versus consensus of $288 million.
• Merchandise sales of $610-630 million.
• Net income $10-12 million.
• Adjusted EBITDA of $26-28 million.
• Capex of $15 million.

Quick comments

• Noted: the rise in inventory year on year was to support the role out of electronics sales. Looks like more competition in electronics e-tailing is on the way.
• GSI Commerce has been viewed by some on the buy-side as playing in the least profitable area of e-commerce: back-end infrastructure and fulfilment. But note that its online advertising costs were basically flat year on year, because its partners do their own marketing. GSIC thus escaped the upward cost pressures faced by many other e-tailers due to rising PPC ad prices.

GSIC chart below.

Full disclosure: at the time of writing I'm short GSIC.