Egghead.com Same Quarter Sales Increase 77%; Exceed $41 Million
January 26, 1999 04:03 PM
SPOKANE, Wash.--(BUSINESS WIRE)--Jan. 26, 1999--Egghead.com, Inc. EGGS , today released financial results for the fiscal 1999 third quarter ended December 26, 1998.
The company's total revenues were $41.9 million during the third quarter of fiscal 1999, a 77% increase from the ongoing revenue of $23.7 million for the comparable period last year, and a 19% increase over revenues of $35.1 million for the quarter ended September 26, 1998. Total revenues for the nine months ended December 26, 1998 were $106.4 million, a 94% increase from the proforma ongoing revenues of $54.8 million for the same period in fiscal 1998. Proforma ongoing revenues include revenues of $21.6 million attributable to Surplus Direct for the period prior to its acquisition.
"The quarter was the most significant in the development of our on-line business since closing the retail stores in February and repositioning the company on the Internet," Egghead.com chairman and CEO George Orban said. "On November 21, we launched a unique new Web site that combined our three sites -- Surplusdirect.com, Surplusauction.com and Egghead.com into one shopping experience under the www.egghead.com umbrella. Between Thanksgiving and Christmas we experienced several days where revenues exceeded $1 million."
During the third quarter, Egghead initiated its first integrated on-line and off-line marketing program, including television, radio and print advertising nationwide. The company also entered into a marketing agreement with the @Home Network whereby Egghead will be a featured auction site on the @Home Network.
Egghead.com's registered auction bidders increased 35% from 242,000 at September 26, 1998 to 326,000 at December 26, 1998. The company's e-mail database expanded 28% from 2.2 million at September 26, 1998 to 2.8 million at quarter end, and the number of unique visits reached a total of 23 million during the quarter.
In December 1998, Egghead.com ranked 6th among at-work visitors, 7th among at-home visitors and 7th among at-work/home visitors respectively, when compared to all shopping sites on the Web, according to Media Metrix, a leading independent market research firm. These rankings position www.egghead.com as one of the most frequently visited PC product resellers on the Web.
"In spite of the recent progress we have many challenges ahead of us in the next two fiscal quarters," Orban said. "We will continue to make improvements in our technology and processes in order to provide a progressively better shopping experience. These are critical to achieving our growth plans."
Financial Results
The company's total revenues were $41.9 million for the third quarter of fiscal 1999, a 77 percent increase from the ongoing revenues of $23.7 million for the same period in fiscal 1998. Total revenues for the third quarter of fiscal 1998 were $99.1 million, including $75.4 million attributable to retail stores closed February 28, 1998. Revenues for the nine months ended December 26, 1998 were $106.4 million, a 94% increase from the proforma ongoing revenue of $54.8 million for the same period in fiscal 1998. Proforma ongoing revenues include revenues of $21.6 million attributable to Surplus Direct for the period prior to its acquisition.
Gross margin from operations for the third quarter of fiscal 1999 was 8.0%, compared to 10.6% in the previous quarter. Margin was adversely effected by an increase in the company's aged inventory reserve and a free shipping promotion in support of the new Web site launch.
Operating expenses for the quarter, excluding depreciation and amortization, of $15.1 million declined $6.1 million from the comparable period in fiscal 1998. The improvement is primarily attributable to the elimination of retail store operations expense of $8.4 million and the reduction in administrative and corporate expense of $0.7 million, offset by an increase in on-line selling and marketing expenses of $3.8 million.
The company realized a one-time gain of $3.3 million from the sale of its equity interest in its former operating subsidiary, Elekom.
The third quarter loss from operations was $8.9 million or $0.36 per share compared to $6.6 million or $0.29 per share for the comparable period last year. The nine-month loss from operations was $21.6 million or $0.90 per share compared to $15.2 million or $0.75 per share for the comparable nine-month period last year.
The company's cash position was $59.0 million as of December 26, 1998. Its inventory position was $14.6 million at the end of the third quarter a decrease of $2.1 million from the preceding quarter.
This announcement contains forward-looking statements about Egghead.com that involve risks and uncertainties that include, among others, Egghead.com's limited Internet operating history, risks associated with management of potential growth, competition, and Egghead.com's dependence on vendors, distributors and certain supply sources. More information about factors that potentially could affect Egghead.com's financial results is included in Egghead.com's Form 10-K for the fiscal year ended March 28, 1998 and Form 10-Q for the fiscal quarter ended September 26, 1998 filed with the Securities and Exchange Commission.
EGGHEAD.COM, INC. AND SUBSIDIARIES
----------------------------------
Consolidated Statements of Operations
(Amounts in thousands, except per share data)
13 Weeks Ended
---------------------
Dec. 26, Dec. 27,
1998 1997
----------- -----------
(unaudited) (unaudited)
Net sales:
Ongoing $ 41,875 $ 23,663
Retail -- 75,456
-------- --------
41,875 99,119
Cost of sales
Ongoing 38,520 20,446
Retail -- 63,026
-------- --------
38,520 83,472
Gross margin 3,355 15,647
Selling and marketing expense 10,976 16,353
General and administrative expense 4,137 4,878
Amortization of goodwill 430 393
Depreciation expense 722 1,293
-------- --------
Operating loss (12,910) (7,270)
Other income (expense) 4,045 642
-------- --------
Loss before income taxes (8,865) (6,628)
Income tax benefit -- --
-------- --------
Net loss $ (8,865) $ (6,628)
======== ========
Basic loss per share $ (0.36) $ (0.29)
======== ========
Weighted average common shares
outstanding 24,519 23,005
======== ========
EGGHEAD.COM, INC. AND SUBSIDIARIES
----------------------------------
Consolidated Statements of Operations
(Amounts in thousands, except per share data)
39 weeks Ended
--------------------
Dec. 26, Dec. 27,
1998 1997
----------- -----------
(unaudited)
Net sales:
Ongoing $ 106,449 $ 33,150
Retail -- 185,420
--------- ---------
106,449 218,570
Cost of sales
Ongoing 96,325 28,090
Retail -- 154,320
--------- ---------
96,325 182,410
Gross margin 10,124 36,160
Selling and marketing expense 23,664 36,099
General and administrative expense 10,892 13,463
Amortization of goodwill 1,278 577
Depreciation expense 1,594 3,708
--------- ---------
Operating loss (27,304) (17,687)
Other income (expense) 5,691 2,496
--------- ---------
Loss before income taxes (21,613) (15,191)
Income tax benefit -- --
--------- ---------
Net loss $ (21,613) $ (15,191)
========= =========
Basic loss per share $ (0.90) $ (0.75)
========= =========
Weighted average common shares
outstanding 24,123 20,241
========= =========
EGGHEAD.COM, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands)
Dec. 26, Sept. 26,
1998 1998
ASSETS -------- ---------
(unaudited)
Current assets:
Cash and cash equivalents $ 59,017 $ 59,523
Accounts receivable, net 1,660 2,721
Merchandise inventories, net 14,591 16,671
Prepaid expenses and other
current assets 651 789
Property held for sale 1,224 1,224
--------- ---------
Total current assets 77,143 80,928
--------- ---------
Property and equipment, net 6,921 3,536
Goodwill, net 32,061 32,490
Other assets 270 299
========= =========
$ 116,395 $ 117,253
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 16,916 $ 13,015
Accrued liabilities 12,584 11,559
Reserves and liabilities related
to restructuring 8,138 8,865
--------- ---------
Total current liabilities 37,638 33,439
--------- ---------
Other long-term liabilities -- --
--------- ---------
Total liabilities 37,638 33,439
--------- ---------
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.01 par value:
10,000,000 authorized
no shares issued and outstanding -- --
Common stock, $.01 par value:
50,000,000 shares authorized;
24,765,384 and 24,395,044
shares issued and outstanding,
respectively 248 244
Additional paid-in capital 174,939 171,135
Retained earnings (deficit) (96,430) (87,565)
--------- ---------
Total shareholders' equity 78,757 83,814
--------- ---------
116,395 117,253
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