Egghead.com Same Quarter Sales Increase 73%, Exceed $35 Million; Company Prepares for Further Growth
October 20, 1998 04:05 PM
SPOKANE, Wash.--(BUSINESS WIRE)--Oct. 20, 1998--Egghead.com, Inc. EGGS , today released financial results for the fiscal 1999 second quarter ended September 26, 1998.
The company's total revenues were $35.1 million, a 73 percent increase from the proforma ongoing revenue of $20.2 million for the comparable period last year and a 19 percent increase over revenues of $29.5 million for the quarter ended June 27, 1998.
Egghead.com Chairman and CEO George Orban said, "While growing our business we made substantial investments to consolidate and integrate our web sites on a common Oracle technology platform. We are already experiencing benefits from this effort which over the long term is designed to enable us to increase merchandise revenues, improve the management of gross margin, expand into new product categories, add revenue from advertising, and lower our operating expense ratios. This developmental effort is key to launching our new web site and off-line marketing program in November." Egghead's sites, in the aggregate, ranked 8th among at-home and at-work visitors respectively, when compared to all shopping sites on the web, according to Media Metrix, a leading independent market research firm. During the quarter Egghead.com's registered auction bidders increased 44 percent from 168,000 to 242,000. The company's e-mail customer database expanded 14 percent from 2.0 million to 2.3 million and the number of visitors to its web sites exceeded 20 million, consistent with the prior quarter. Further, Egghead.com entered into marketing agreements with AOL, Netscape, Microsoft, ZDNet, CNET's Shopper.com and ebay.com and also selectively canceled certain on-line agreements.
"Egghead.com's long-term strategy is to create a major value- oriented on-line retail enterprise," Orban added. "We were also pleased to announce during the quarter that C. Scott Gibson, Robert T. Wall and Karen White, all individuals with substantial industry experience, joined our board of directors."
Financial Results
The company's total revenues were $35.1 million, a 73 percent increase from the proforma ongoing revenue of $20.2 million for the same period in fiscal 1998. Proforma ongoing revenues for the same period in fiscal 1998 exclude retail store revenue of $50.7 million attributable to retail stores closed February 28, 1998 and include revenues of $7.6 million attributable to Surplus Direct for the period prior to its acquisition.
Total revenues for the six months ended September 26,1998 were $64.6 million, a 67 percent increase from the proforma ongoing revenue of $38.6 million for the same period in fiscal 1998. Proforma ongoing revenues exclude retail store revenue of $102.7 million for closed stores and include revenues of $21.9 million attributable to Surplus Direct for the period prior to its acquisition.
Gross margin from ongoing operations was 10.6 percent for the second quarter of fiscal 1999, an increase of 20 basis points from the first quarter of fiscal 1999.
Operating expenses for the quarter, excluding depreciation and amortization of $0.9 million declined $5.1 million from the comparable period in fiscal 1998. Management attributed the improvement to the elimination of retail store operations expense of $7.3 million and the reduction in administrative and corporate expense of $1.2 million, offset by an increase in ongoing operations selling and marketing expenses of $3.5 million.
The second quarter pre-tax loss from ongoing operations was $7.2 million, or $0.30 per share compared to $4.9 million or $0.24 per share for the comparable period last year. The six month pretax loss from ongoing operations was $12.7 million compared to $8.6 million for the prior year comparable period.
The company's cash position was $59.5 million as of September 26, 1998.
This announcement contains forward-looking statements based on current expectations, estimates and projections about the Company's industry, management's beliefs and certain assumptions made by management. These forward-looking statements are not guarantees of future performance and are subject to certain risks and uncertainties that are difficult to predict. Accordingly, actual results may differ materially from those anticipated or expressed in such statements.
Potential risks and uncertainties include, among others, the Company's limited Internet operating history, the rapid evolution of Internet commerce and related technology, management of potential growth, the intensely competitive nature of the business of selling PC software, hardware and related products and of the electronic commerce business, and Egghead's dependence on vendors, distributors and certain supply sources. Readers are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date made. More information about these and other factors that potentially could affect the Company's financial condition and results is included in the Company's Form 10-K for the fiscal year ended March 28, 1998 and Form 10-Q for the quarter ended June 27, 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 26 weeks Ended
--------------------- ---------------------
(unaudited) (unaudited)
Sept. Sept. Sept. Sept.
26, 27, 26, 27,
1998 1997 1998 1997
----------- ----------- ----------- -----------
Net sales:
Retail $ -- $ 50,655 $ -- $ 102,724
Ongoing 35,054 12,635 64,574 16,727
----------- ----------- ----------- -----------
35,054 63,290 64,574 119,451
Cost of sales
Retail -- 41,745 -- 85,251
Ongoing 31,342 10,270 57,805 13,687
----------- ----------- ----------- -----------
31,342 52,015 57,805 98,938
Gross margin 3,712 11,275 6,769 20,513
Selling and
marketing
expense 6,920 10,745 12,689 19,746
General and
administrative
expense 3,687 4,918 6,754 8,585
Amortization of
goodwill 429 184 848 184
Depreciation
expense 507 1,161 872 2,415
------------ ------------- ----------- -----------
Operating loss (7,831) (5,733) (14,394) (10,417)
Other income
(expense) 632 828 1,646 1,854
----------- ----------- ----------- -----------
Loss before
income taxes (7,199) (4,905) (12,748) (8,563)
-
Income tax
benefit -- -- -- --
------- -------- ------- ------
Net loss $(7,199) $(4,905) $(12,748) $(8,563)
=========== =========== =========== ===========
Basic loss
per share $(0.30) $(0.24) $(0.53) $ (0.45)
=========== ============ =========== ===========
Weighted average
common shares
outstanding 24,281 20,127 23,925 18,859
=========== =========== =========== ===========
EGGHEAD.COM, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Dollars in thousands)
ASSETS Sept. 26 Sept. 27 June 27, 1998 1997 1998 --------- --------- -------- Current assets: Cash and cash equivalents $59,523 $54,131 $67,034 Accounts receivable, net 2,721 10,532 5,134 Merchandise inventories, net 16,671 63,268 10,896 Prepaid expenses and other current assets 789 3,768 561 Property held for sale 1,224 7,852 1,224 ------------- ------------- ----------- Total current assets 80,928 139,551 84,849 ------------- ------------- ----------- Property and equipment, net 3,536 12,922 2,524 Goodwill, net 32,490 34,153 32,920 Other assets 299 430 320 ============ ============= ============ $117,253 $187,056 $120,613 ============ ============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities: Accounts payable $13,015 $36,991 $16,869 Accrued liabilities 11,559 11,805 10,694 Liabilities related to disposition of CGE division -- 5,860 -- Reserves and liabilities related to restructuring 8,865 7,870 11,589 ------------ ------------ ----------- Total current liabilities 33,439 62,526 39,152 ------------ ------------ ----------- Other long-term liabilities -- 243 -- ------------ ------------ ----------- Total liabilities 33,439 62,769 39,152 ------------ ------------ ----------- 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; 24,395,044, 22,953,851, and 23,570,032 shares issued and outstanding, respectively 244 230 236 Additional paid-in capital 171,135 157,206 161,591 Retained earnings (deficit) (87,565) (33,149) (80,366) ----------- ------------ ---------- Total shareholders' equity 83,814 124,287 81,461 ----------- ------------ ---------- $117,253 $187,056 $120,613 =========== ============= ==========
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