Egghead.com Reports First Quarter Results

Continues Steady Progress toward Profitability



HIGHLIGHTS

- Operating losses decline for 5th consecutive quarter

- Gross margin rate increases to 11.1%

- Sales to assigned business accounts up 30%

- Average order value up 15%

- Margin contribution per order up 22%

- Average cost to acquire a new customer down 49%



Apr 25, 2001, 01:00 ET from Egghead.com, Inc.

    MENLO PARK, Calif., April 25 /PRNewswire/ --
 Egghead.com(R), Inc. (Nasdaq: EGGS), a leading Internet direct marketer of
 technology and related products, today announced financial results for the
 quarter ended March 31, 2001. The company continued its progress toward
 profitability with reduced operating losses for the quarter and remains on
 track to reach profitability in the fourth quarter of this year. As a result
 of continued growth in its business-to-business sales and a variety of cost-
 cutting measures, and despite continuing challenges facing the technology
 sector, Egghead.com increased its gross margin rate from 10% to 11.1% and
 reduced its net loss per share to $0.19.
     (Photo:  http://www.newscom.com/cgi-bin/prnh/20000530/EGGHEADLOGO )
     "We continue to make steady progress in executing our plan to build a
 business based upon profitable sales, stable margins, and ongoing growth in
 the sale of technology products to business customers," said Jeff Sheahan,
 president and CEO of Egghead.com. "It is clear, however, that 2001 will be a
 challenging year for the technology products industry. Recognizing this, we
 have taken steps to get out in front of current business conditions with our
 recent right-sizing of the business. By streamlining and refining our business
 sales model, we now have a more efficient and productive operation from which
 to take the business forward."
 
     Key Financials
     Revenue for the first quarter of 2001 was $85.3 million, compared to
 revenue of $152.1 million in the comparable quarter a year ago. This decrease
 was largely the result of a combination of the company's elimination of low
 margin or "empty calorie" sales and lower consumer demand for technology
 products. Gross profit increased to $9.4 million for the quarter from $8.8
 million for the comparable quarter a year earlier. Operating expenses for the
 quarter were $18.0 million, compared to $32.5 million, excluding merger-
 related costs, for the same quarter a year ago. Net loss for the quarter was
 $8.1 million, or $0.19 per share, compared to a net loss of $25.1 million, or
 $0.67 per share, including merger costs, in the comparable quarter a year ago.
     "Our new business model is already proving itself, as evidenced by our
 gross profit improvement on a reduced sales base," said Mark Shepherd, senior
 vice president and CFO of Egghead.com. "Beginning in the second quarter, we
 will see a significant reduction in our operating expenses as a result of our
 recent right-sizing actions. The reduction in our Accounts Payable reflects
 the consolidation of our vendor base to those vendors who help contribute the
 most to our bottom-line. In addition to the $15.6 million of cash we had at
 the end of the quarter, we are pleased to have borrowing capacity of up to $20
 million under our IBM Global Financing agreement. The IBM facility provides us
 with increased vendor financing opportunities as we begin to utilize its
 potential."
 
     Business to Business Sales
     At the end of the quarter, the company undertook a detailed analysis of
 the business sales program, and determined that it could scale back the number
 of sales representatives, and more effectively focus those representatives on
 the highest potential Small- to Medium-sized Business customers.
     As of March 31, 2001, Egghead.com had approximately 52,000 business
 accounts assigned to sales representatives, and business customers requesting
 its online open accounts service increased by 27% to 8,000. Sales to these
 assigned accounts rose 30% over the previous quarter as sales representatives
 began to develop their high value customers and garner incremental revenue
 from this segment of the assigned base. Accounts assigned to business sales
 representatives made up 35% of the company's overall sales in the quarter, up
 from 25% in the previous quarter.
 
     Key Metrics
     In the first quarter, the total number of customers registered to bid or
 buy rose 4% over the prior quarter, to 3.9 million. Although unique and new
 buyers declined in the quarter, the overall Average Order Value (AOV) for the
 entire business was up by approximately 15%, to $201. With gross margins
 rising by 110 basis points to 11.1%, the margin contribution per order in the
 quarter was a little over $22 per order, up 22% from the previous quarter, and
 an increase of 84% over the same period last year.
     The overall increase in AOV is the result of two significant factors: 1) a
 40% quarter-over-quarter increase in the percentage of overall sales coming
 from our assigned business customers; and 2) a $620 AOV for assigned business
 accounts, an increase of 6% or $34 dollars, from the previous quarter.
     Repeat buyers accounted for 77% of purchases, a slight increase from 75%
 for the previous quarter. Average Cost to Acquire (CTA) a new customer
 decreased 49% to $17.50 from $35 in the prior quarter. New buyers' AOV in the
 quarter was $279 with a margin contribution per order of $31, which means that
 the company is recovering more than its customer acquisition expense on new
 buyers' average first orders.
 
     Business Outlook
     "Current economic conditions have led us to right-size our business, and
 although sales for the balance of the year will likely be flat to slightly
 down from the first quarter's results, we reaffirm our commitment to achieving
 profitability in the fourth quarter of this year through a combination of
 profitable sales to business customers, solid margin management, and further
 cost reductions fueled by new systems and ongoing improvements in operational
 productivity," added Sheahan.
     The company anticipates that for the full year 2001:
     -- Sales will be between $320 and $350 million;
     -- Margin rates will rise as the year progresses and average between 11%
        and 12%;
     -- Operating expenses will be between $45 and $55 million;
     -- As previously stated, the company will reach profitability by the
        fourth quarter of 2001.
 
     About Egghead.com
     Egghead.com  is a leading Internet direct marketer of technology and
 related products. With an emphasis on Small- to Medium- sized Business (SMB)
 customers, Egghead.com offers a wide range of products from computer hardware
 and software, consumer electronics and office products, to sporting goods and
 vacation packages. Its Clearance, After Work and Auction formats offer
 bargains on excess and closeout goods and services. Egghead.com combines broad
 selection, low prices, and excellent service to provide an outstanding online
 shopping experience for businesses and consumers. Egghead.com is located on
 the Internet at www.egghead.com.
     NOTE:  Egghead.com is a registered trademark of Egghead.com, Inc.
 
     This press release contains "forward-looking" statements, including
 projections about Egghead.com's business. For example, the statements under
 "Business Outlook," statements regarding the company's ability to achieve
 profitability, and the remarks by Mr. Sheahan and Mr. Shepherd are forward-
 looking statements. These forward-looking statements are based on information
 available at the time of this release and the company assumes no obligation to
 update any such forward-looking statements. The statements in this release are
 not guarantees of future performance; actual results could differ materially
 from current expectations as a result of many factors. For example: the
 company's vendors may cease or tighten the terms by which they do business
 with the company; the company's restructuring, particularly in its business
 accounts program, may reduce revenue growth or increase costs; the company may
 be unable to obtain new funding on favorable terms or at all; soft demand for
 computer products may reduce the company's sales; turnover of executives and
 key employees may strain the company's operations; and continued strong
 competition may make it difficult to increase gross margins. These and other
 risks and uncertainties associated with the company's business are detailed in
 its most recent Quarterly Report on Form 10-Q and its Annual Report on Form
 10-K which are on file with the SEC and available through www.sec.gov.
 
                               Egghead.com, Inc.
                            CONDENSED BALANCE SHEETS
                                 (in thousands)
                                  (unaudited)
 
                                              March 31, 2001  December 31, 2000
     ASSETS
     Current assets:
       Cash and cash equivalents                  $14,437        $31,466
       Short term investments                       1,161          1,166
       Accounts receivable, net                    13,663         15,490
       Merchandise inventory                        5,628          6,123
       Prepaid expenses and other current assets    2,449          3,658
         Total current assets                      37,338         57,903
 
     Property and equipment, net                   13,743         13,294
     Other assets                                     733            772
         Total assets                             $51,814        $71,969
 
     LIABILITIES AND STOCKHOLDERS' EQUITY
     Current liabilities:
       Accounts payable                           $18,765        $26,330
       Accrued expenses                            18,052         21,292
       Deferred revenue                             1,991          3,108
         Total current liabilities                 38,808         50,730
 
     Long-term liabilities                          2,167          2,348
 
     Total stockholders' equity                    10,839         18,891
       Total liabilities and stockholders'
        equity                                    $51,814        $71,969
 
                               Egghead.com, Inc.
                       CONDENSED STATEMENTS OF OPERATIONS
                     (In thousands, except per share data)
                                  (unaudited)
 
 
                                              3 Months   3 Months    3 Months
                                                Ended      Ended       Ended
                                               3-31-01    12-31-00    3-31-00
     Revenue:
       Online                                  $82,611    $87,812    $147,375
       Commission and other revenue              2,690      3,812       4,674
         Total revenue                          85,301     91,624     152,049
 
     Cost of online revenue                     75,877     82,485     143,203
 
     Gross profit:
       Online                                    6,734      5,327       4,172
       Commission and other revenue              2,690      3,812       4,674
         Total gross profit                      9,424      9,139       8,846
 
     Total operating expenses excluding merger
      costs                                     17,997     20,403      32,515
 
       Interest and other income, net              452        (33)      1,098
 
     Net loss excluding merger costs            (8,121)   (11,297)    (22,571)
 
       Merger income (costs)                        --      1,725      (2,488)
 
     Net loss including merger costs           $(8,121)   $(9,572)   $(25,059)
 
     Net loss per share-basic and diluted
      excluding merger costs                    $(0.19)    $(0.27)     $(0.60)
 
     Net loss per share-basic and diluted
      including merger costs                    $(0.19)    $(0.23)     $(0.67)
 
     Weighted average common shares outstanding
      for purposes of computing:
       Basic and diluted                        42,897     42,442      37,496
 
                      MAKE YOUR OPINION COUNT - Click Here
                http://tbutton.prnewswire.com/prn/11690X82624568
 
 

SOURCE Egghead.com, Inc.
    MENLO PARK, Calif., April 25 /PRNewswire/ --
 Egghead.com(R), Inc. (Nasdaq: EGGS), a leading Internet direct marketer of
 technology and related products, today announced financial results for the
 quarter ended March 31, 2001. The company continued its progress toward
 profitability with reduced operating losses for the quarter and remains on
 track to reach profitability in the fourth quarter of this year. As a result
 of continued growth in its business-to-business sales and a variety of cost-
 cutting measures, and despite continuing challenges facing the technology
 sector, Egghead.com increased its gross margin rate from 10% to 11.1% and
 reduced its net loss per share to $0.19.
     (Photo:  http://www.newscom.com/cgi-bin/prnh/20000530/EGGHEADLOGO )
     "We continue to make steady progress in executing our plan to build a
 business based upon profitable sales, stable margins, and ongoing growth in
 the sale of technology products to business customers," said Jeff Sheahan,
 president and CEO of Egghead.com. "It is clear, however, that 2001 will be a
 challenging year for the technology products industry. Recognizing this, we
 have taken steps to get out in front of current business conditions with our
 recent right-sizing of the business. By streamlining and refining our business
 sales model, we now have a more efficient and productive operation from which
 to take the business forward."
 
     Key Financials
     Revenue for the first quarter of 2001 was $85.3 million, compared to
 revenue of $152.1 million in the comparable quarter a year ago. This decrease
 was largely the result of a combination of the company's elimination of low
 margin or "empty calorie" sales and lower consumer demand for technology
 products. Gross profit increased to $9.4 million for the quarter from $8.8
 million for the comparable quarter a year earlier. Operating expenses for the
 quarter were $18.0 million, compared to $32.5 million, excluding merger-
 related costs, for the same quarter a year ago. Net loss for the quarter was
 $8.1 million, or $0.19 per share, compared to a net loss of $25.1 million, or
 $0.67 per share, including merger costs, in the comparable quarter a year ago.
     "Our new business model is already proving itself, as evidenced by our
 gross profit improvement on a reduced sales base," said Mark Shepherd, senior
 vice president and CFO of Egghead.com. "Beginning in the second quarter, we
 will see a significant reduction in our operating expenses as a result of our
 recent right-sizing actions. The reduction in our Accounts Payable reflects
 the consolidation of our vendor base to those vendors who help contribute the
 most to our bottom-line. In addition to the $15.6 million of cash we had at
 the end of the quarter, we are pleased to have borrowing capacity of up to $20
 million under our IBM Global Financing agreement. The IBM facility provides us
 with increased vendor financing opportunities as we begin to utilize its
 potential."
 
     Business to Business Sales
     At the end of the quarter, the company undertook a detailed analysis of
 the business sales program, and determined that it could scale back the number
 of sales representatives, and more effectively focus those representatives on
 the highest potential Small- to Medium-sized Business customers.
     As of March 31, 2001, Egghead.com had approximately 52,000 business
 accounts assigned to sales representatives, and business customers requesting
 its online open accounts service increased by 27% to 8,000. Sales to these
 assigned accounts rose 30% over the previous quarter as sales representatives
 began to develop their high value customers and garner incremental revenue
 from this segment of the assigned base. Accounts assigned to business sales
 representatives made up 35% of the company's overall sales in the quarter, up
 from 25% in the previous quarter.
 
     Key Metrics
     In the first quarter, the total number of customers registered to bid or
 buy rose 4% over the prior quarter, to 3.9 million. Although unique and new
 buyers declined in the quarter, the overall Average Order Value (AOV) for the
 entire business was up by approximately 15%, to $201. With gross margins
 rising by 110 basis points to 11.1%, the margin contribution per order in the
 quarter was a little over $22 per order, up 22% from the previous quarter, and
 an increase of 84% over the same period last year.
     The overall increase in AOV is the result of two significant factors: 1) a
 40% quarter-over-quarter increase in the percentage of overall sales coming
 from our assigned business customers; and 2) a $620 AOV for assigned business
 accounts, an increase of 6% or $34 dollars, from the previous quarter.
     Repeat buyers accounted for 77% of purchases, a slight increase from 75%
 for the previous quarter. Average Cost to Acquire (CTA) a new customer
 decreased 49% to $17.50 from $35 in the prior quarter. New buyers' AOV in the
 quarter was $279 with a margin contribution per order of $31, which means that
 the company is recovering more than its customer acquisition expense on new
 buyers' average first orders.
 
     Business Outlook
     "Current economic conditions have led us to right-size our business, and
 although sales for the balance of the year will likely be flat to slightly
 down from the first quarter's results, we reaffirm our commitment to achieving
 profitability in the fourth quarter of this year through a combination of
 profitable sales to business customers, solid margin management, and further
 cost reductions fueled by new systems and ongoing improvements in operational
 productivity," added Sheahan.
     The company anticipates that for the full year 2001:
     -- Sales will be between $320 and $350 million;
     -- Margin rates will rise as the year progresses and average between 11%
        and 12%;
     -- Operating expenses will be between $45 and $55 million;
     -- As previously stated, the company will reach profitability by the
        fourth quarter of 2001.
 
     About Egghead.com
     Egghead.com  is a leading Internet direct marketer of technology and
 related products. With an emphasis on Small- to Medium- sized Business (SMB)
 customers, Egghead.com offers a wide range of products from computer hardware
 and software, consumer electronics and office products, to sporting goods and
 vacation packages. Its Clearance, After Work and Auction formats offer
 bargains on excess and closeout goods and services. Egghead.com combines broad
 selection, low prices, and excellent service to provide an outstanding online
 shopping experience for businesses and consumers. Egghead.com is located on
 the Internet at www.egghead.com.
     NOTE:  Egghead.com is a registered trademark of Egghead.com, Inc.
 
     This press release contains "forward-looking" statements, including
 projections about Egghead.com's business. For example, the statements under
 "Business Outlook," statements regarding the company's ability to achieve
 profitability, and the remarks by Mr. Sheahan and Mr. Shepherd are forward-
 looking statements. These forward-looking statements are based on information
 available at the time of this release and the company assumes no obligation to
 update any such forward-looking statements. The statements in this release are
 not guarantees of future performance; actual results could differ materially
 from current expectations as a result of many factors. For example: the
 company's vendors may cease or tighten the terms by which they do business
 with the company; the company's restructuring, particularly in its business
 accounts program, may reduce revenue growth or increase costs; the company may
 be unable to obtain new funding on favorable terms or at all; soft demand for
 computer products may reduce the company's sales; turnover of executives and
 key employees may strain the company's operations; and continued strong
 competition may make it difficult to increase gross margins. These and other
 risks and uncertainties associated with the company's business are detailed in
 its most recent Quarterly Report on Form 10-Q and its Annual Report on Form
 10-K which are on file with the SEC and available through www.sec.gov.
 
                               Egghead.com, Inc.
                            CONDENSED BALANCE SHEETS
                                 (in thousands)
                                  (unaudited)
 
                                              March 31, 2001  December 31, 2000
     ASSETS
     Current assets:
       Cash and cash equivalents                  $14,437        $31,466
       Short term investments                       1,161          1,166
       Accounts receivable, net                    13,663         15,490
       Merchandise inventory                        5,628          6,123
       Prepaid expenses and other current assets    2,449          3,658
         Total current assets                      37,338         57,903
 
     Property and equipment, net                   13,743         13,294
     Other assets                                     733            772
         Total assets                             $51,814        $71,969
 
     LIABILITIES AND STOCKHOLDERS' EQUITY
     Current liabilities:
       Accounts payable                           $18,765        $26,330
       Accrued expenses                            18,052         21,292
       Deferred revenue                             1,991          3,108
         Total current liabilities                 38,808         50,730
 
     Long-term liabilities                          2,167          2,348
 
     Total stockholders' equity                    10,839         18,891
       Total liabilities and stockholders'
        equity                                    $51,814        $71,969
 
                               Egghead.com, Inc.
                       CONDENSED STATEMENTS OF OPERATIONS
                     (In thousands, except per share data)
                                  (unaudited)
 
 
                                              3 Months   3 Months    3 Months
                                                Ended      Ended       Ended
                                               3-31-01    12-31-00    3-31-00
     Revenue:
       Online                                  $82,611    $87,812    $147,375
       Commission and other revenue              2,690      3,812       4,674
         Total revenue                          85,301     91,624     152,049
 
     Cost of online revenue                     75,877     82,485     143,203
 
     Gross profit:
       Online                                    6,734      5,327       4,172
       Commission and other revenue              2,690      3,812       4,674
         Total gross profit                      9,424      9,139       8,846
 
     Total operating expenses excluding merger
      costs                                     17,997     20,403      32,515
 
       Interest and other income, net              452        (33)      1,098
 
     Net loss excluding merger costs            (8,121)   (11,297)    (22,571)
 
       Merger income (costs)                        --      1,725      (2,488)
 
     Net loss including merger costs           $(8,121)   $(9,572)   $(25,059)
 
     Net loss per share-basic and diluted
      excluding merger costs                    $(0.19)    $(0.27)     $(0.60)
 
     Net loss per share-basic and diluted
      including merger costs                    $(0.19)    $(0.23)     $(0.67)
 
     Weighted average common shares outstanding
      for purposes of computing:
       Basic and diluted                        42,897     42,442      37,496
 
                      MAKE YOUR OPINION COUNT - Click Here
                http://tbutton.prnewswire.com/prn/11690X82624568
 
 SOURCE  Egghead.com, Inc.