Incredible quarter for VUSA--61% sequential revenue growth!! Like the new investor relations person said, VUSA will be to e-commerce what AOL is to internet access. Good luck and congrats to all VUSA longs.
Value America Reports 269% Increase in Third Quarter 1999 Revenues, Reaching $57.6 Million
Updated 9:06 AM ET November 4, 1999
Gross Margin Increases 110% while Expenses as Percentage of Revenue Fall Significantly
CHARLOTTESVILLE, Va. (BUSINESS WIRE) - Value America, Inc. (NASDAQ:VUSA), the one-stop Internet superstore selling brand-name technology, office and consumer products in 30 categories featuring 3,000 brands, today announced third quarter financial results.
Value America reported that its revenues for the quarter ended September 30, 1999, surged to $57.6 million, a 269% increase over revenue of $15.6 million in the comparable period a year ago. Third quarter revenue also represented a 61% increase over the second quarter ended June 30, 1999.
Value America reported a gross profit of $3.5 million, a 678% increase over third quarter 1998 gross profit of $0.5 million, and a 169% increase over the second quarter gross profit of $1.3 million. The Company's gross margin for the third quarter rose to 6.0%, which is a 110% increase over third quarter 1998 and a 67% increase over the 3.6% gross margin reported in the second quarter.
Net loss for the quarter was $31.6 million or $0.71 per common share on 44.5 million common shares outstanding. Net loss for the previous quarter was $31.8 million or $0.75 per common share on 42.3 million common shares outstanding. Net loss per common share, after considering dividends and non-cash accretion and beneficial conversion on redeemable preferred stock, was $0.71, compared to $0.79 for the quarter ended June 30, 1999.
Operating expenses as a percentage of revenue fell from 82% in the second quarter to 64% in the third quarter. This represents a 22% decrease compared to the previous quarter, while revenues grew 61%. Sales and marketing expenses also continued to decrease as a percentage of sales. For the quarter, sales and marketing expenses represented 48% of sales, compared to 79% of sales in the same period last year and 60% in the second quarter 1999.
"Our financial results prove that Value America's promising business model is becoming a viable and exciting business," said Tom Morgan, CEO of Value America. "Our bottom-line, no-nonsense focus on building a profitable business is paying off. Our inventory-less solution is a winner for brands that want e-commerce access, and for consumers who want the best brands at the best prices on the best products. We are constantly improving how and what we deliver to our customers, and we are pleased to be seeing such progress in the efficiency and productivity of our business model."
"Because Value America is a pure e-commerce, inventory-less model, we can grow our business rapidly and efficiently. As we add more customers and more brands, our state-of-the-art, scalable technology enables us to achieve the benefits of scale and the stronger margins that come with it," added Morgan. "We are extremely encouraged that all our trends are moving in the right direction, and we are determined to exceed our goals for growth and efficiency going forward."
In addition, Value America experienced a significant increase in its customer base, which grew nearly 50% during the quarter. These results were in addition to significant Company growth in the following areas:
Technology Infrastructure
Value America continued its substantial investment in technology infrastructure, building an e-commerce engine designed to support escalating membership and revenue growth. Major upgrades were made to systems infrastructure to enhance stability, scalability and efficiency. This included upgrading to the Oracle database platform, upgrading to a Unix infrastructure running on HP N-Class servers, and upgrading our EDI systems. The Value America web site continues to run on custom-developed software, but with extensive improvements in management and financial systems and call center tools. Customer relationship management software from Siebel systems was implemented to provide top-quality call center and operations tools. Transition to SAP systems for the financial and transaction management backbone of its systems is nearing completion, with full conversion to SAP scheduled for November 8.
Brand Expansion
Value America continued to build direct relationships with leading brands, enabling the company to sell products that ship directly from the manufacturers. In the third quarter alone, Value America added 366 brands to the store, bringing the total to 3,000 brands in 30 product categories. Significant partnerships were forged or deepened with market leaders such as IBM, Compaq, Fisher Price, 3Com, Nikon, Braun, and Mattel. The company also established business-to-business relationships with 15 Fortune 500 companies, including McGraw Hill, Time Warner, Ziff Davis, Blue Cross Blue Shield and Motorola.
Product Categories
During the third quarter, Value America continued its focus on expanding the number of product categories available to consumers, but also increasing depth and selection within each product category. The office products division, which offers products from industry leaders like 3M, Esselte, Acco and Fellowes, presents one of the most extensive arrays of office products on the Internet. Consumer products such as Consumer Electronics, Cameras, Housewares, Toys and Major Appliances were the fastest-growing segments of Value America's sales. Overall, sales of consumer products grew 53% over last quarter. This trend of rapid product addition will continue in coming months as Value America focuses on introducing new product and service areas, as well as expanding existing categories.
In August, the Company launched the Value America credit card, which is proving successful from both a revenue and customer satisfaction standpoint. Already, nearly 5,000 customers are using Value America credit cards.
Advertising
Value America continued to increase the efficiency of its ad spending. Net media spending for the third quarter increased 4.5% to $16.2 million, generating a 61% increase in revenues to nearly $58 million. Expense to revenue performance improved 100% over the third quarter last year, from a 1.5:1 to a 3:1 return on investment. That is an increase of 30% over the second quarter return of 2.3:1. Newspaper continues to be a very successful medium for generating demand and sales. Electronic Direct Mail continues to drive demand with the Value America members, as well as drive repeat purchases. Advertising programs effectively generated demand and also built on the Value America brand, demonstrated by increases in brand awareness.
The affiliate program, which includes groups that link from their web sites to Value America's main store, continued to bring in new customers. Nearly 14,000 affiliates were added during the third quarter, bringing the total to 63,435.
Operations
This quarter, an enhanced EDI system was installed, capable of handling Value America's rapid growth. Continued fine-tuning helped improve information flow between Value America and its suppliers. Email tools were also added to allow more efficient and effective customer service. Management of product returns was transferred to a third party operator, while development of the FedEx RPS Returns program was completed. This program, which is due to launch in the fourth quarter, will allow customers to schedule pick-up of a product with FedEx, and in many cases have a replacement product delivered at the same time.
About Value America
Value America, Inc. (Valueamerica.com) launched the Internet's leading superstore in February 1997. Value America is a brand-direct and factory-authorized marketplace for technology, office and consumer products. With over 30 product categories, Value America offers customers superior value on products from more than 3,000 of the world's most trusted brands. Through unique multi-media product demonstrations, customers are provided with thorough product information, allowing them to make informed and confident buying decisions. Value America was the first to combine high tech and high touch by offering the convenience of online shopping with the personal benefits of real customer service. In addition, Value America is the first true "convergence-commerce" company, integrating the telephone, television, PC and wireless devices to empower consumers to shop its store. The Company is particularly proud of its alliance marketplaces that help fund and empower charities, universities, religious organizations and trade unions.
A conference call discussing these results will be conducted at 5 p.m. EST today by calling 800-230-1093, and specifying Value America. Transcripts of this call will be available at the Value America web site at in the Investor Information area.
The attached financial statements are an integral part of this release.
The matters discussed in this press release include forward-looking statements regarding, among other things, future operating results. In addition, when used in this press release, the words "intends to," "believes," "anticipates," "expects" and similar expressions are intended to identify forward-looking statements. Such statements are subject to a number of risks and uncertainties. Actual results in the future could differ materially and adversely from those described in the forward-looking statements as a result of various important factors, including: continued growth of electronic commerce; uncertainties and risks of Internet-based technologies employed by Value America; competition for sales over the Internet; anticipated operating losses; fluctuations in quarterly results; governmental regulation of electronic commerce; and the other risk factors set forth in Value America's prospectus filed with the Securities and Exchange Commission on April 6, 1999 and other documents filed by the Company with the Securities and Exchange Commission. We undertake no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect any futures events or circumstances.
VALUE AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands of dollars, except per share data)
(unaudited)
Quarters Ended YTD
September 30,
---------------------------------------
1999 1998 1999 1998
Total Revenues..............$..57,632 $ 15,613 $121,438 $ 22,965
Total Cost of Revenues.........54,156 15,167 115,616 22,217
Gross Margin (loss).............3,476 446 5,822 748
Operating Expenses:
Sales, advertising and
marketing................ 27,480 12,257 66,900 21,392
General and
administrative.............4,785 2,264 12,141 4,040
Technical and system
development................4,397 1,585 10,618 2,799
Professional fee.......... -- -- -- 1,700
Total operating expenses 36,662 16,106 89,659 29,931
Operating loss................(33,186) (15,660) (83,837) (29,183)
Other Income and Expenses:
Interest (expense) income,
net.......................1,599 81 (13,980) 229
Net Loss......................(31,587) (15,579) (97,817) (28,954)
Accretion and dividends
on Series A, Series B
and Series C redeemable
preferred stock.......... -- (4,156) 12,162 (6,570)
Beneficial conversion
feature on Series C
redeemable preferred
stock.................... -- -- 19,800 --
Net loss available for
common stockholders (1) $ (31,587) $ (19,735) $(129,779) $ (35,524)
Net Loss Per Common Share:
Basic and diluted.......$...(0.71) $ (0.85) $ (3.52) $ (1.53)
Weighted Average Number of
Shares:
Basic and diluted..........44,487 23,153 36,866 23,153
(1)
Net loss per share
Net loss per share (basic and diluted) for the nine month period
ended September 30, 1999, excluding the accretion and dividends on
Series A, Series B and Series C redeemable preferred stock and
beneficial conversion feature on preferred stock, are $2.65. The
accretion and dividends on the redeemable preferred stock represents
the recording of the periodic increase in the carrying value of these
securities prior to the IPO to increase their value to the redemption
value on the redemption date. The recordation of the accretion does
not affect the Company's cash flows or net loss. The beneficial
conversion feature on preferred stock represents the difference
between the fair market value of the common stock underlying the
Series C redeemable preferred stock issued and the conversion price of
this preferred stock. The recordation of the beneficial conversion
feature does not affect the Company's cash flows or net loss. The
accretion, dividends and beneficial conversion feature on Series C
redeemable preferred stock have no affect on earnings per share for
the quarter ended September 30, 1999.
VALUE AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars, except share data)
Sept. 30, Dec. 31,
1999 1998
----------- ----------
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 85,714 $ 20,127
Restricted cash 5,250 5,000
Short-term investments 30,221 --
Accounts receivable, net of allowance of
$1,131 and $1,021 10,830 3,011
Debt issuance costs -- 26,095
Inventory 1,805 639
Other current assets 2,622 --
----------- ----------
Total Current Assets 136,442 54,872
----------- ----------
Equipment, furniture and fixtures, net 16,393 2,061
Restricted cash -- 1,500
Long-term investments 1,486 --
Deferred offering costs -- 1,369
Notes receivable from officers 1,200 250
Goodwill 1,344 --
Other assets 428 45
=========== ==========
Total Assets $ 157,293 $ 60,097
=========== ==========
LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK
AND STOCKHOLDERS'EQUITY (DEFICIT)
Current Liabilities:
Accounts payable.............................. $ 27,649 $ 15,568
Accrued expenses.............................. 7,433 4,515
Deferred revenue.............................. 5,385 2,204
Accrued stock-based compensation.............. 2,235 1,372
Notes payable................................. -- 29,024
Other current liabilities..................... 3,863 143
Total Current Liabilities................... 46,565 52,826
Deferred revenue................................ 106 930
Other liabilities................................ 2,768 83
Total Liabilities.......................... 49,439 53,839
Commitments and contingencies
Mandatorily Redeemable Preferred Stock:
Series A, without par value, convertible, 5%
cumulative dividend; 5,000,000 shares
authorized, 0 and 5,000,000 issued and
outstanding at September 30, 1999 and
December 31, 1998, respectively;
redeemable for $4.00 per share........... -- 14,440
Series B, without par value, convertible, 5%
cumulative dividend; 617,979 shares
authorized, 0 and 617,979 issued and
outstanding at September 30, 1999 and
December 31, 1998, respectively;
redeemable for $60.94 per share............ -- 23,382
Series C, without par value, convertible, 5%
cumulative dividend; 6,000,000 shares
authorized (0 at December 31, 1998), 0
issued and outstanding; redeemable for
$20.00 per share........................... -- --
Stockholders'Equity (Deficit):
Preferred Stock, without par value;
25,000,000 shares authorized (0 at
December 31, 1998); 0 shares issued and
outstanding................................ -- --
Common stock, without par value, 500,000,000
shares authorized and 44,686,559 shares
issued and outstanding at September 30,
1999; 100,000,000 shares authorized and
23,777,700 shares issued and outstanding
at December 31, 1998....................... 289,656 7,482
Warrants...................................... 14,490 26,585
Unrealized loss on securities
available-for-sale........................... 1,033 --
Accumulated deficit........................... (197,325) (65,631)
Total Stockholders'Equity (Deficit)......... 107,854 (31,564)
Total Liabilities, Mandatorily Redeemable
Preferred Stock and Stockholders'Equity
(Deficit)................................ $157,293 $ 60,097
|
