Shop At Home Reports First Quarter Results; collectibles.com Achieves Record $4.2 Million In Revenue; Quarterly Results Reflect Progress Of Turnaround Initiatives
NASHVILLE, Tenn.--(BUSINESS WIRE)--Nov. 13, 2000--Shop At Home, Inc. (Nasdaq:SATH), an electronic commerce leader in both the broadcast and Internet channels, today reported first quarter revenue of $39.6 million. Net loss for the first quarter was $7.3 million, or $0.24 per share.
collectibles.com(SM) continued its rapid sales growth with record quarterly revenues of $4.2 million, a 54% increase from the quarter ended June 30, 2000 and a 1,233% increase over the same period last year for shopathomeonline.com.
Improvements were made during the quarter in several key revenue and expense metrics, reflecting the comprehensive turnaround plan begun in July 2000. In comparison to the previous quarter ended June 30, 2000, the Company significantly cut operating costs (less cost of goods sold, depreciation and amortization) from $22.3 million to $19.3 million, a reduction of $3.0 million while improving EBITDA by $2.3 million.
Turnaround Progress Highlights
-- Gross Margin for the core business (the Network and
collectibles.com) improved to 34.1% from 30.7% in the quarter
ended June 30, 2000.
-- Chargebacks, primarily due to fraud, were reduced during the
quarter by $1.1 million, dropping from 3.6% of sales in the
June quarter to 2.4% for the September quarter. Chargebacks
have continued to drop in October to 1.3% of sales.
-- Full time personnel headcount has been reduced to 490
employees currently, from a peak of 618 full time employees in
May 2000. Total headcount, including part time personnel, has
been reduced 25% to 555 from 737, reducing annualized payroll
and benefits by over $4 million.
-- The Company has eliminated or renegotiated affiliate carriage
agreements resulting in annualized savings of $1.8 million.
-- The Company has eliminated or renegotiated other operating
contracts, resulting in annualized savings of $1.7 million.
-- On October 24, 2000 the Company successfully launched a
private label credit card program offering its customers a
variety of payment options. The benefit to the Company will be
the elimination of its internally financed "stretch pay"
program, which will improve cash position and losses due to
fraud and inefficiencies.
-- Shipped sales generated by database marketing efforts
increased to $2.4 million in the September quarter versus $0.9
million in the quarter ended June 30, 2000.
In October, the Company announced an expanded agreement with Echostar Communications, (Nasdaq:DISH) for a full time, non-preemptive channel, which included at no additional cost, a substantial advertising and promotional schedule beginning in early November. As a result of this and other agreements, Shop At Home now reaches over 26.0 million Full Time Equivalent (FTE) households versus 24.8 million at the end of June 2000. Despite the Company's announced intention to divest certain television assets and eliminate non-productive affiliates, it is expected to end fiscal year 2001 with a net increase in homes reached. Shop At Home currently reaches 60.1 million gross cable households, up from 59.0 million reported in June.
Shop At Home President and CEO, Kent Lillie said, "The Company began a comprehensive turnaround program in July which has produced some immediate results. Significant cost reductions have been achieved through headcount reductions, elimination of unprofitable affiliates, and in other operating expenses through the renegotiation of a number of our major operating agreements. We continue to work hard on reducing returned merchandise through a number of initiatives, including lowering average price points."
Mr. Lillie added, "I am pleased that collectibles.com has sustained strong growth momentum again this quarter and we continue to realize significant improvements in gross margin and other key metrics for our core businesses. I am also delighted that we have completed the definitive agreement to sell KZJL, Houston for a substantial return on our original investment. Given the Company's Net Operating Loss carryforwards (NOL) it is expected that this transaction will be largely tax free."
Three months ended September 30, 2000 vs. three months ended September 30, 1999
Net Revenues. The Company's net revenues forthe quarter ended September 30, 2000, were $39.6 million, a decrease of 12.6% from $45.3 million for the same quarter in 1999. The decrease in net revenue is a direct result of increased sales returns and chargebacks. Returns for the first quarter increased from $10.0 million or 18.2% of sales last year to $15.5 million or 27.6% of sales this year. Chargebacks increased from $0.4 million or 0.7% of sales last year to $1.3 million or 2.4% of sales this year. The Network accounted for 86.6% of total net revenues on an average of 25.0 million FTE Cable Households in the quarter ended September 30, 2000 compared to an average of 20.1 million FTE Cable Households in the 1999 quarter, representing a 29.9% increase. collectibles.com represented 10.7% of the Company's total net revenues or $4.2 million. The remaining 2.7% of revenues resulted from approximately $1.1 million in revenue from Collector's Edge, a decrease of $1.0 million or 47.7% from the 1999 period. The decrease in Collector's Edge's revenue was due to a higher level of competition in the football card market.
Cost of Goods Sold. Cost of goods sold represents the purchase price of merchandise and inbound freight. For the quarter ended September 30, 2000, the cost of goods sold rose as a percentage of net revenues to 67.1% from 62.8% in the comparable 1999 period. The cost of goods were $26.5 million for the quarter ended September 30, 2000 compared to $28.4 million for the quarter ended September 30, 1999. The cost of goods for the Network was 64.5% or $22.5 million for the quarter ended September 30, 2000 compared to 62.6% or $27.5 million for the quarter ended September 30, 1999. The cost of goods for collectibles.com was 67.4% or $2.9 million with no comparable cost in September 1999. However, the cost of goods was 117.9% or $1.3 million for Collector's Edge as of September 30, 2000 due to inventory liquidation and poor product performance, compared to 67.7% or $1.4 million for the quarter ended September 30, 1999. Margins for the Network and collectibles.com were also negatively impacted by an increase in credit card chargebacks from $0.4 million in the quarter ended September 30, 1999 to $1.3 million for the quarter ended September 30, 2000.
Salaries and Wages. Salaries and wages for the quarter ended September 30, 2000 were $4.8 million, an increase of $2.1 million over the comparable 1999 quarter. After adding back $0.4 million in salaries capitalized in the first quarter last year as part of the development of the enterprise wide computer system, this increase would be reduced to $1.7 million. Salaries and wages, as a percent of revenues, increased to 12.1% in the 2000 period compared to 6.0% in the 1999 period (6.9% after adding back capitalized salaries). The increase in salaries is due to the full effect of the startup of collectibles.com and the addition of information systems staff required to support the Company's new enterprise wide computer system.
Transponder and Affiliate Charges. Transponder, and affiliate charges for the quarter ended September 30, 2000 were $8.5 million, an increase of $0.6 million or 7.7% over the comparable 1999 quarter. During the same period, FTE Cable Households grew 23.9%. The affiliate carriage cost component of this expense category increased as a percentage of revenues to 20.1% from 16.3%.
Other General Operating and Administrative Expenses. Other general, operating and administrative expenses for the quarter ended September 30, 2000 were $6.0 million, an increase of $1.8 million or 43.8% over the comparable 1999 quarter. This increase was comprised of primarily expenses relating to collectibles.com, including advertising expenses of $1.3 million associated with the continued revenue growth of collectibles.com.
Depreciation and Amortization. Depreciation and amortization for the quarter ended September 30, 2000 was $3.0 million, an increase of $1.6 million or 110.1% over the comparable 1999 quarter, due to the installation of the enterprise wide information system and the launch of collectibles.com.
Interest. Interest expense of $2.6 million increased by $295 or 13.0% over the comparable period in 1999. The increase is primarily due to interest associated with the bank facility.
CONFERENCE CALL AND WEBCAST OF QUARTERLY EARNINGS
The Company has scheduled a conference call to discuss FY 2001 first quarter earnings, for Tuesday, November 14, at 9:00 am Central Time. Interested parties may access the call via a live, listen-only WEBCAST by logging into www.vcall.com or www.collectibles.com (corporate home page), 15 minutes prior to the conference call. The replay of the call will be available for 90 days on both sites.
Shop At Home also announces a WEB CHAT with the Company's President and CEO, Kent Lillie, scheduled for 10:00 a.m. Central Time, on Tuesday, November 14, 2000. To participate in the web chat, log on to www.collectibles.com and press "chat". Instructions will be provided on the website. |
