Geeknet Announces Second Quarter Financial Results Revenue increases 15% in second quarter to $23.1 million, highlighted by 24% growth in ThinkGeek revenue

FAIRFAX, Va., Aug. 2, 2012 /PRNewswire/ -- Geeknet, Inc. (Nasdaq: GKNT), the online network for the global geek community, today announced financial results for the quarter ended June 30, 2012.

(Logo: http://photos.prnewswire.com/prnh/20120510/MM05555LOGO)

Total revenue for the second quarter of 2012 was $23.1 million compared to $20.1 million of revenue for the second quarter of 2011.  Net income for the second quarter of 2012 was $1.6 million or $0.25 per diluted share compared to net loss of $2.1 million or $0.34 per share, for the same period a year ago. Net income for the second quarter of 2012 includes a $4 million gain related to the sale of a preferred stock investment. 

Adjusted EBITDA for the second quarter of 2012 was a loss of $541,000, compared to an adjusted EBITDA loss of $457,000 for the same period a year ago. Adjusted EBITDA for the second quarter of 2012 includes a $210,000 charge against inventory related to the voluntary removal of a product from the ThinkGeek site following a Consumer Product Safety Commission complaint against the manufacturer.  A reconciliation of net income as reported to adjusted EBITDA is included in this release.

Second Quarter Highlights:

  • ThinkGeek e-commerce revenue increased 24 percent to $17.8 million for the second quarter of 2012, compared to $14.3 million for the second quarter of 2011.  Orders received increased by 21 percent in the second quarter of 2012 as compared with the same period last year.
  • Media revenue decreased 8 percent to $5.3 million for the second quarter of 2012, compared to $5.8 million for the second quarter of 2011. 
  • Total cash and investments at the end of second quarter 2012 was $34.6 million.

"It was a successful quarter as we continue to focus on delivering profitable growth, positive adjusted EBITDA and positive cash from operations for 2012", said Ken Langone, Executive Chairman, Geeknet. "We continue to be confident that we have a large market opportunity ahead and will invest aggressively to drive growth while doing so responsibly to deliver profitable returns."

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

A conference call and audio webcast will be held at 11:00 a.m. ET on August 2, 2012 and may be accessed by calling (877) 348-9353 or (253) 237-1159 outside the U.S., or by visiting geek.net/investors. An audio replay will be available between 2:00 p.m. ET on August 2, 2012 and 11:59 p.m. ET on August 16, 2012 by calling (855) 859-2056 or (404) 537-3406, with Conference ID 87213993.

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.  Adjusted EBITDA 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 net income or net loss which is adjusted for interest and other income (expense) net and income taxes as well as stock-based compensation, gain on sale of assets and depreciation and amortization.  The method we use to produce adjusted EBITDA is not computed according to GAAP, is likely to differ from the methods used by other companies and should not be regarded as a substitute for results prepared in accordance with accounting principles generally accepted in the United States. Adjusted EBITDA, as we compute it, excludes certain expenses that we believe are not indicative of our core operating results, as well as income taxes, stock-based compensation and depreciation and amortization.  We consider our core operating results to include revenue recorded in a particular period and the related expenses that are intended to directly drive operating income during that period.

The EBITDA calculation excludes interest, income taxes and depreciation and amortization by its nature.  In addition, when we compute adjusted EBITDA we exclude stock-based compensation, gain on sale of assets and other amounts included in the Interest income and other income (expense) net caption, as we believe that these amounts represent income and expenses that are not directly related to our core operations.  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 rate at which we recognize the corresponding stock-based compensation expense over the course of future fiscal periods.  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. Gain on sale of assets is excluded from adjusted EBITDA because such activities are not representative of our core operations.

About Geeknet, Inc.

Geeknet is home to some of the best-known brands in the geek universe, and is the online network for the global geek community. We serve an audience of approximately 48 million users* each month and provide the tech-obsessed with content, culture, connections, commerce, and all the things that geeks crave. Want to learn more? Check out geek.net.

* Source: Google Analytics and Omniture, June 2012

Geeknet is a trademark of Geeknet, Inc. SourceForge, Slashdot, ThinkGeek, and Freecode are trademarks of Geeknet, Inc. in the United States and other countries. All other trademarks or product names are property of their respective owners.

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 potential profitability and the growth prospects for our online media and e-commerce businesses.  Actual results may differ materially from those expressed or implied in such forward-looking statements due to various factors, including: success in designing and offering innovative online advertising programs; decreases or delays in online advertising spending, especially in light of current macroeconomic challenges and uncertainty; our effectiveness at planning and managing our e-commerce inventory; our ability to achieve and sustain higher levels of revenue; our ability to protect and defend our intellectual property rights; rapid technological and market change; unforeseen expenses that we may incur in future quarters; and competition with, and pricing pressures from larger and/or more established competitors.  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, 2011, 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.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

 (unaudited)






Three Months Ended
June 30,


Six Months Ended
 June 30,


2012


2011


2012


2011

Net revenue:








e-Commerce revenue

$    17,804


$    14,319


$    35,314


$    29,524

Media revenue

5,275


5,751


10,028


10,462

Total net revenue

23,079


20,070


45,342


39,986

Cost of revenue:








e-Commerce cost of revenue

15,708


13,209


30,651


26,843

Media cost of revenue

1,186


1,459


2,186


2,805

Total cost of revenue

16,894


14,668


32,837


29,648

Gross margin

6,185


5,402


12,505


10,338

Operating expenses:








Sales and marketing

3,584


3,302


6,784


6,669

Research and development

1,880


1,309


3,770


2,286

General and administrative

3,098


2,927


6,398


5,899

Amortization of intangible assets

21


20


43


41

Total operating expenses

8,583


7,558


16,995


14,895

Loss from operations

(2,398)


(2,156)


(4,490)


(4,557)

Gain on sale of non-marketable securities

4,021


-


4,021


-

Interest and other income (expense), net

(14)


15


(30)


7

Income (loss) before income taxes

1,609


(2,141)


(499)


(4,550)

Provision (benefit) for income taxes

-


-


13


(23)

Net income (loss)

$     1,609


$    (2,141)


$       (512)


$    (4,527)

Net Income (loss) per share:








Basic

$       0.25


$      (0.34)


$      (0.08)


$      (0.72)

Diluted

$       0.25


$      (0.34)


$      (0.08)


$      (0.72)

Shares used in per share calculations:








Basic

6,442


6,306


6,409


6,294

Diluted

6,473


6,306


6,409


6,294









 

 

GEEKNET, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(unaudited)






June 30, 2012


December 31, 2011

ASSETS

Current assets:




Cash and cash equivalents

$       34,609


$        36,910

Accounts receivable, net of allowance of $244 and $27 as of June 30, 2012 and December 31, 2011, respectively

5,722


6,264

Inventories, net

11,160


8,935

Prepaid expenses and other current assets

4,180


2,377

Total current assets

55,671


54,486

Property and equipment, net

5,545


5,717

Other long-term assets

2,027


4,089

Total assets

$       63,243


$        64,292





LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:




Accounts payable

$         5,264


$          6,327

Deferred revenue

3,311


3,500

Accrued liabilities and other

1,758


3,409

Total current liabilities

10,333


13,236

Other long-term liabilities

79


71

Total liabilities

10,412


13,307

Commitments and Contingencies




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 — 6,611 and 6,473 shares, as of June 30, 2012 and December 31, 2011, respectively; outstanding — 6,468 and 6,361 shares as of June 30, 2012 and December 31, 2011, respectively

7


7

Treasury stock

(1,431)


(978)

Additional paid-in capital

810,642


807,829

Accumulated other comprehensive income

(3)


(1)

Accumulated deficit

(756,384)


(755,872)

Total stockholders' equity

52,831


50,985

Total liabilities and stockholders' equity

$       63,243


$        64,292





 

 

 

GEEKNET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)




Six Months Ended
 June 30,


2012


2011

Cash flows from operating activities:




Net loss

$     (512)


$  (4,527)

Adjustments to reconcile net loss to net cash used in operating activities:




Depreciation and amortization

1,050


1,056

Stock-based compensation expense

2,620


1,913

Provision for bad debts

224


3

Provision for excess and obsolete inventory

263


221

Provision for returns

416


492

Gain on sale of non-marketable securities

(4,021)


-

Loss on sale of assets, net

4


-

Changes in assets and liabilities:




Accounts receivable

318


(1,738)

Inventories

(2,488)


3,790

Prepaid expenses and other assets

(1,764)


(1,165)

Accounts payable

(1,063)


(8,760)

Deferred revenue

(190)


832

Accrued restructuring liabilities

-


-

Accrued liabilities and other

(2,065)


(2,160)

Other long-term liabilities

8


4

Net cash used in operating activities

(7,200)


(10,039)

Cash flows from investing activities:




Purchase of property and equipment

(848)


(921)

Proceeds from sale of non-marketable equity investment

6,000


-

Proceeds from sales of intangible assets, net

10


65

Net cash provided by (used in) investing activities

5,162


(856)

Cash flows from financing activities:




Proceeds from issuance of common stock

191


679

Repurchase of stock

(452)


(189)

Net cash (used in) provided by financing activities

(261)


490

Effect of exchange rates on cash and cash equivalents

(2)


(5)

Net decrease in cash and cash equivalents

(2,301)


(10,410)

Cash and cash equivalents, beginning of year

36,910


35,333

Cash and cash equivalents, end of period

$  34,609


$  24,923





 

GEEKNET, INC.

RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA

(In thousands)

(unaudited)






Three Months Ended
June 30,


Six Months Ended
 June 30,


2012


2011


2012


2011

Reconciliation of net income( loss) - as reported to adjusted EBITDA:








Net Income (loss) - as reported

$     1,609


$    (2,141)


$       (512)


$    (4,527)

Reconciling items:








Gain on sale of non-marketable securities

(4,021)


-


(4,021)


-

Interest and other (income) expense, net

14


(15)


30


(7)

Provision (benefit) for income taxes

-


-


13


(23)

Stock-based compensation expense included in cost of revenues

80


79


207


123

Stock-based compensation expense included in operating expenses

1,240


1,105


2,413


1,790

Depreciation and amortization

537


515


1,050


1,056

Adjusted EBITDA

$       (541)


$      (457)


$       (820)


$    (1,588)









GKNT-F

SOURCE Geeknet, Inc.



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