I think VUSA has been overlooked today and will rise soon.
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Company Press Release
Value America Reports 269% Increase in Third Quarter 1999 Revenues,
Reaching $57.6 Million
Gross Margin Increases 110% while Expenses as Percentage of Revenue Fall Significantly
CHARLOTTESVILLE, Va.--(BUSINESS WIRE)--Nov. 4, 1999-- Value America, Inc. (NASDAQ: VUSA - news), 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.
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