GSI Commerce beats and raises (1Q05 earnings results)

GSI Commerce (ticker: GSIC) beat revenue and EPS estimates for Q1 and raised guidance for Q2.  Details:

Q1 Results
(all percentage changes and comparisons are year on year, unless stated otherwise)

• Net revenues were $91.4 million, up 38%. Consensus was $81.82 million.
• Merchandise sales (see definition below) were $136.2 million, up 59%.
• Net revenue breakdown: Sporting goods sales were $39.8 million, up 19%. Other merchandise sales were $36.9 million, up 58%.
• Merchandise sales breakdown: Sporting goods sales were $47.5 million, up 35%. Other merchandise sales were $88.7 million, up 75%.
• Service fee revenues were $14.7 million, up 57%.
• Gross profit was $33.7 million, up 36%.
• Gross margin was down 50 basis points to 36.9%, "driven by greater than planned product sales in the other category,
  which is primarily electronics, and which carry a lower gross margin
  than product sales of sporting goods."
• Total operating expenses were $35.6 million, up 23%. Operating expenses fell to 39.0% of net revenues from 43.9%. As a % of merchandise sales they were 26.1%, down from 33.9%.
• Net loss was $1.7 million.
• EPS was ($0.04) versus consensus of ($0.07).
• Adjusted EBITDA was $1.1 million versus adjusted EBITDA loss of $1.1 million.
• Balance sheet: cash and equivalents at end Q1 fell to $43.2 million from $75.4 million at end Q4 "consistent with the company’s typical seasonal working capital pattern", and also down from $51.9 million at end 1Q04 due to "the purchase and build out of the company’s new headquarters".

Q2 Guidance

• Net revenues of $84.0 million to $89.0 million. Current consensus: $81.03 million.
• Merchandise sales of $123.0 million to $133.0 million.
• Net loss of $2.5 million to $3.0 million.
• Adjusted EBITDA of $1.0 million to $1.5 million.

Full Year 2005 Guidance

• Net revenues of $405.0 million to $420.0 million. Current consensus: $409.53 million.
• Merchandise sales of $638.0 million to $658.0 million.
• Net income of $10.5 million to $12.5 million.
• Adjusted EBITDA of $27.0 million to $29.0 million.

Quick comments:

• Definition of merchandise sales: "Merchandise sales represent 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 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 business management costs such as marketing department staffing levels are related to the amount of sales made through GSI Commerce’s platform, whether or not GSI Commerce records the revenue from such sales."
• Significant customer activity during the quarter: (1) "The San Francisco 49ers signed a multi-year agreement with GSI Commerce to provide its National Football League franchise with an e-commerce solution for its licensed merchandise and other sporting goods. The new store launched on April 22, in time for the NFL draft in which the 49ers had the number one pick." (2) "Tweeter Home Entertainment Group, a national specialty consumer electronics retailer, signed a multi-year extension to its agreement with GSI Commerce and will expand its multichannel retailing capabilities to include “buy online and pick up in store