Geeknet Announces First Quarter 2014 Financial Results Revenue increases 16% in the first quarter to $22.7 million

FAIRFAX, Va., May 8, 2014 /PRNewswire/ -- Geeknet, Inc. (Nasdaq: GKNT), the parent company of online retailer ThinkGeek.com, today announced financial results for the quarter ended March 31, 2014.

Total revenue for the first quarter of 2014 was $22.7 million, an increase of 16% from $19.6 million in the first quarter of 2013.  Net loss for the first quarter of 2014 was $2.2 million or $0.34 per diluted share compared to net loss of $2.3 million or $0.35 per diluted share for the same period a year ago.  Adjusted EBITDA loss for the first quarter of 2014 was $1.9 million, compared to an adjusted EBITDA loss of $1.3 million for the same period a year ago.

First Quarter Highlights:

  • Wholesale revenue grew to $4.8MM, up over 200% when compared to the first quarter of 2013
  • We delivered over 400 new products to our customers
  • Our Average Order Value shipped increased by $3 and we improved conversion when compared to 2013

"ThinkGeek grew revenue 16% in a challenging retail environment. We delivered strong growth from our GeekLabs exclusive products and continued to build our wholesale business. Despite pressure on margins, we implemented initiatives to increase new customers, improve our technology and enhance the site experience. We are committed to executing the right short term actions while making smart investments for the long term," said Katy McCarthy,  Chief Executive Officer.

Supplemental schedules of the Company's quarterly statements of operations and operational statistics are available on the Company's web site at investors.geek.net.

A conference call and audio webcast will be held at 11:00 am ET on May 8, 2014 and may be accessed by calling (877) 348-9353 or (253) 237-1159 outside the U.S., or by visiting investors.geek.net. A dial in replay will be available from 2:00 PM ET May 8, 2014 until 11:59 pm ET May 10, 2014 by calling (855) 859-2056 or (404) 537-3406, with conference ID 35786126.

About Geeknet, Inc.

ThinkGeek, Inc., a wholly owned subsidiary of Geeknet, Inc. (NASDAQ: GKNT), is the premier retailer for the global geek community.  Since 1999, ThinkGeek has been creating a world where everyone can express their inner geek, embrace their passions, and connect with each other.  Our obsession is creating and sharing unique and authentic product experiences that stimulate our fans' imaginations and fuel their geek core.  We believe that there is a geek in everyone and that it should be celebrated.  Want to learn more?  Check out thinkgeek.com or geek.net.

Use of Non-GAAP Financial Measures

In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, we also report adjusted EBITDA.  The method we use to calculate adjusted EBITDA is not in accordance with GAAP, is likely to differ from the methods used by other companies for similarly titled measures and should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results.

We believe that adjusted EBITDA provides useful information to both management and investors and is an additional measurement which may be used to evaluate our operating performance. Our management and Board of Directors use adjusted EBITDA as part of their reporting and planning process and it is the primary measure we use to evaluate our operating performance.  In addition, we have historically reported adjusted EBITDA to the investment community.  We also believe that the financial analysts who regularly follow and report on us and the business sector in which we compete use adjusted EBITDA to prepare their financial performance estimates to measure our performance against other sector participants and to project our future financial results.

We define adjusted EBITDA as earnings or loss from continuing operations before gain on sale of non-marketable securities, interest and other expense, income taxes, stock-based compensation and depreciation.  Adjusted EBITDA excludes certain expenses that we believe are not directly related to our core operating results.  Although some of the items may recur on a regular basis, management does not consider activities associated with these items as core to its operations.  With respect to stock-based compensation, we recognize expenses associated with stock-based compensation that require management to make assumptions about our common stock, such as expected future stock price volatility, the anticipated duration of outstanding stock options and awards and the forfeiture rate.  While other forms of expenses (such as cash compensation, inventory costs and real estate costs) are reasonably correlated to our underlying business and such costs are incurred principally or wholly in the particular fiscal period being reported, stock-based compensation expense is not reasonably correlated to the particular fiscal period in question, but rather is based on expected future events that have no relationship (and in certain instances, an inverse relationship) with how well we currently operate our business.

NOTE REGARDING FORWARD-LOOKING STATEMENTS: This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on our current expectations, and involve risks and uncertainties. Forward-looking statements contained herein include statements regarding our strategic plan and future growth.  Actual results may differ materially from those expressed or implied in such forward-looking statements due to various factors, including: popularity and demand for our retail products; management's strategy, plans and objectives for future operations; employee relations and our ability to attract and retain highly qualified personnel; our ability to continue to invest in developing and acquiring new products; competition, competitors and our ability to compete; liquidity and capital resources; the outcome of any litigation to which we are a party; our accounting policies; and sufficiency of our cash resources and investments to meet our operating and working capital requirements.    Investors should consult our filings with the Securities and Exchange Commission, sec.gov, including the risk factors section of our Annual Report on Form 10-K for the year ended December 31, 2013, for further information regarding these and other risks of our business. All forward-looking statements included in this press release are based upon information available to us as of the date hereof, and we do not assume any obligations to update such statements or the reasons why actual results could differ materially from those projected in such statements.

 

 

GEEKNET, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data, unaudited)



Three Months Ended

 March 31,


2014


2013





Net revenue

$

22,691


$

19,557

Cost of revenue

18,866


15,937

  Gross margin

3,825


3,620

Operating expenses:




  Sales and marketing

2,505


1,723

  Technology and design

1,869


1,404

  General and administrative

1,819


2,784

   Total operating expenses

6,193


5,911

Loss from operations

(2,368)


(2,291)

Interest and other income (expense), net

123


(14)

Loss from continuing operations before income taxes

(2,245)


(2,305)

Income tax provision


3

  Net loss from continuing operations

(2,245)


(2,308)

Discontinued operations:




  Loss from discontinued operations, net of tax


(28)

Net loss

$

(2,245)


$

(2,336)

Loss per share from continuing operations:




  Basic and diluted

$

(0.34)


$

(0.35)

Loss per share from discontinued operations:




  Basic and diluted

$


$

Net loss per share:




  Basic and diluted

$

(0.34)


$

(0.35)

Shares used in per share calculations:




  Basic and diluted

6,658


6,586

 

 

GEEKNET, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, unaudited)



March 31,

2014


December 31,

2013

ASSETS



Current assets:




   Cash and cash equivalents

$

44,276


$

53,084

   Accounts receivable, net of allowance of $1 and $6 as of March 31, 2014 and December 31, 2013, respectively

4,676


9,719

   Inventories, net

21,880


20,186

   Prepaid expenses and other current assets

2,477


4,202

   Total current assets

73,309


87,191

Property and equipment, net

2,152


2,465

Other long-term assets

50


50

     Total assets

$

75,511


$

89,706





LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:




   Accounts payable

$

2,771


$

10,250

   Deferred revenue

2,358


2,828

   Accrued and other liabilities

2,661


6,661

   Total current liabilities

7,790


19,739

Commitments and Contingencies (Note 7)




Stockholders' equity:




   Preferred stock, $0.001 par value; 1,000 shares authorized; no shares issued or outstanding


   Common stock, $0.001 par value; authorized — 25,000;  issued — 6,937 and 6,901 shares, as of March 31, 2014 and December 31, 2013, respectively; outstanding — 6,663 and 6,639 shares as of March 31, 2014 and December 31, 2013, respectively

7


7

   Treasury stock

(3,679)


(3,479)

   Additional paid-in capital

817,025


816,826

   Accumulated other comprehensive income

16


16

   Accumulated deficit

(745,648)


(743,403)

   Total stockholders' equity

67,721


69,967

     Total liabilities and stockholders' equity

$

75,511


$

89,706

 

 

GEEKNET, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, unaudited)



Three Months Ended

March 31,


2014


2013

Cash flows from operating activities from continuing operations:




   Net loss

$

(2,245)


$

(2,336)

   Loss from discontinued operations, net of tax


28

   Loss from continuing operations

(2,245)


(2,308)

   Adjustments to reconcile loss from continuing operations to net cash used in operating activities:




   Depreciation expense

313


316

   Stock-based compensation expense

180


657

   Provision for bad debts

(5)


(3)

   Inventory write-downs

18


85

   Changes in assets and liabilities:




      Accounts receivable

5,048


(187)

      Inventories

(1,712)


1,440

      Prepaid expenses and other assets

1,725


1,289

      Accounts payable

(7,479)


(4,804)

      Deferred revenue

(470)


(459)

      Accrued and other liabilities

(4,000)


(1,969)

      Other long-term liabilities


(14)

         Net cash used in operating activities

(8,627)


(5,957)

Cash flows from investing activities:




   Purchase of property and equipment


(11)

         Net cash used in investing activities


(11)

Cash flows from financing activities:




   Proceeds from issuance of common stock

19


112

   Repurchase of stock

(200)


(421)

         Net cash used in financing activities

(181)


(309)

Net change in cash and cash equivalents

(8,808)


(6,277)

Cash and cash equivalents, beginning of year

53,084


57,294

Cash and cash equivalents, end of period

$

44,276


$

51,017

 

 

GEEKNET, INC.

RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA

(In thousands, unaudited)



Three Months Ended

 March 31,


2014


2013

Net loss - as reported

$

(2,245)


$

(2,336)

Reconciling items:




   Loss from discontinued operations - net of tax


28

   Interest and other (income) expense, net

(123)


14

   Income tax provision


3

   Stock-based compensation expense included in cost of revenue

21


(154)

   Stock-based compensation expense included in operating expenses

159


811

   Depreciation expense

313


316

Adjusted EBITDA

$

(1,875)


$

(1,318)

 

 

GEEKNET, INC.

Segment Data

(In thousands, unaudited)




Website


Wholesale


Total
Company

Three Months Ended March 31, 2014







    Net revenue


$

17,879


$

4,812


$

22,691

    Cost of revenue


15,622


3,244


18,866

    Gross margin


$

2,257


$

1,568


$

3,825

    Gross margin %


12.6%


32.6%


16.9%








Three Months Ended March 31, 2013







    Net revenue


$

17,981


$

1,576


$

19,557

    Cost of revenue


14,839


1,098


15,937

    Gross margin


$

3,142


$

478


$

3,620

    Gross margin %


17.5%


30.3%


18.5%








 

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GKNT-F

SOURCE Geeknet, Inc.



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