News Column

Speed Commerce Reports Fiscal Third Quarter 2014 Results

February 4, 2014

DALLAS , Feb. 4, 2014 (GLOBE NEWSWIRE) -- Speed Commerce, Inc. (Nasdaq:SPDC), a vertically integrated, multi-channel platform of e-commerce services and distribution solutions, reported financial results for its fiscal third quarter and nine months ended December 31, 2013 . Fiscal Q3 2014 Highlights vs. Same Year-Ago Quarter Net sales in the e-commerce and fulfillment services segment increased 52% to $32.6 million Net sales from the distribution of consumer electronics and accessories (CE&A) increased 32% to $62.6 million Adjusted gross margin increased 190 basis points to 11.4% Adjusted EBITDA increased 86% to $10.0 million First Nine Months of Fiscal 2014 vs. Same Year-Ago Period Net sales in the e-commerce and fulfillment services segment increased 150% to $83.2 million Net sales from the distribution of CE&A increased 33% to $111.4 million Adjusted gross margin increased 100 basis points to 11.4% Adjusted EBITDA increased 107% to $16.9 million Fiscal Q3 2014 Financial Results Net sales in the e-commerce and fulfillment services segment increased 52% in the fiscal third quarter to $32.6 million from $21.4 million in the year-ago quarter. This increase resulted from the addition of new e-commerce clients, strong growth in year-over-year sales from ongoing clients, as well as a full quarter's net sales from the business unit formerly known as SpeedFC. Net sales from the distribution of CE&A increased 32% to $62.6 million , while net sales from software declined 19% to $86.7 million . This resulted in total net sales in the distribution segment from ongoing business during the fiscal third quarter, which excludes sales of home video and video game products, decreasing 4% to $149.3 million from $155.0 million in the year-ago quarter. Consolidated net sales in the fiscal third quarter of 2014 increased 2% to $182.5 million from $178.3 million in the year-ago quarter. Adjusted gross margin (a non-GAAP measure) in the fiscal third quarter increased 190 basis points to 11.4% compared to 9.5% in the year-ago quarter (see "Use of Non-GAAP Financial Information" below for further discussion). This increase was primarily due to the increase in net sales from the higher margin e-commerce and fulfillment services segment. Total adjusted operating expenses (a non-GAAP measure) in the fiscal third quarter increased slightly to $13.3 million from $13.0 million in the year-ago quarter. As a percentage of net sales, adjusted operating expenses remained flat at 7.3% when compared to the year-ago quarter. Net loss in the fiscal third quarter was $1.0 million , or $(0.02) per diluted share, compared to net income of $10,000 , or $0.00 per diluted share, in the year-ago quarter. Adjusted EBITDA (a non-GAAP measure) in the fiscal third quarter increased 86% to $10.0 million compared to $5.4 million in the year-ago quarter. First Nine Months of Fiscal 2014 Financial Results Net sales in the e-commerce and fulfillment services segment increased significantly in the first nine months of 2014 to $83.2 million from $33.2 million in the same period a year ago. Net sales from the distribution of CE&A increased 33% to $111.4 million and net sales from software declined 19% to $203.4 million compared to the same period last year. Total net sales in the distribution segment from ongoing business during the first nine months of 2014, which excludes sales of home video and video game products, decreased 6% to $314.8 million from $333.7 million in the same period a year ago. Consolidated net sales in the first nine months of 2014 increased 7% to $399.3 million from $373.7 million in the same period a year ago. Adjusted gross margin (a non-GAAP measure) in the first nine months of 2014 increased 100 basis points to 11.4% compared to 10.4% in the same period a year ago. Total adjusted operating expenses (a non-GAAP measure) in the first nine months of 2014 increased slightly to $35.4 million from $34.3 million in the same period last year. As a percentage of net sales, adjusted operating expenses declined 30 basis points to 8.9% from 9.2% in the same period a year ago. Net loss in the first nine months of 2014 was $7.6 million , or $(0.13) per diluted share, compared to a net loss of $73,000 , or $(0.00) per diluted share, in the same period last year. Adjusted EBITDA (a non-GAAP measure) in the first nine months of 2014 increased 107% to $16.9 million compared to $8.2 million in the same period a year ago. Management Commentary "In our third fiscal quarter, e-commerce and CE&A continued to deliver exceptional sales growth, with e-commerce increasing 52% for the quarter and 150% year-to-date, and CE&A increasing over 32% for both the quarter and year-to-date," said Richard Willis , president and CEO of Speed Commerce . "While software sales were down 19% in the quarter, we continue to manage that business on a variable cost basis, so the decline only had a minimal impact on EBITDA. We were also able improve adjusted gross margin 190 basis points while keeping our operating expenses on target. Together, these factors helped drive adjusted EBITDA of $10 million for the quarter, up 86% from last year, and year-to-date adjusted EBITDA was more than double last year at $16.9 million ." "Over the past three months," continued Willis, "our e-commerce business has entered into contracts to implement five new websites, with blue-chip clients that include Lowes, Huawei and one of the world's largest retailers. Between May and August, we plan to on-board seven new e-commerce clients, which is more than double our previous record for concurrent client implementations. We continue to invest in our e-commerce sales and marketing group, and I am pleased to announce the addition of Todd Cameron , our new VP of Sales and Marketing, who is now leading our growing sales and marketing team. In our CE&A distribution business, we have continued our expansion into the mobile channel by shipping product in the quarter to AT&T retail locations and will begin delivering product to T-Mobile stores this month. "As we complete fiscal 2014, we will continue to focus on the acquisition of new e-commerce clients and our organic growth initiatives, while working diligently to streamline costs in our distribution segment. We also remain committed to our acquisition strategy and are enthusiastic about our growing pipeline of opportunities. In fiscal 2014 and beyond, we look forward to realizing the benefits of scale, integration and operating leverage in our business." Fiscal 2014 Outlook Speed Commerce's adjusted EBITDA guidance for fiscal 2014 remains on track and is expected to range between $19 and $21 million , an approximate increase of 69% to 87% from fiscal 2013. To reflect the decline in software sales, the company is lowering its revenue guidance, with sales now expected to range between $490 million to $515 million , an approximate increase of 1% to 6% from fiscal 2013. Conference Call Speed Commerce will host a conference call tomorrow, February 5, 2014 at 11:00 a.m. Eastern time to discuss its fiscal third quarter 2014 results. President and CEO Richard Willis and CFO Terry Tuttle will host the call, followed by a question and answer period. Date: Wednesday, February 5, 2014 Time: 11:00 a.m. Eastern time ( 10:00 a.m. Central time ) Dial-in number: 1-877-941-4774 International dial-in number: 1-480-629-9760 Conference ID: 4663760 Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Liolios Group at 1-949-574-3860. The conference call will be broadcast live and available for replay at http://public.viavid.com/index.php?id=107553 and via the investor relations section of Speed Commerce's website at www.speedcommerce.com . A replay of the conference call will be available after 2:00 p.m. Eastern time on the same day through February 19, 2014 . Toll-free replay number: 1-877-870-5176 International replay number: 1-858-384-5517 Replay ID: 4663760 About Speed Commerce Speed Commerce, Inc. (Nasdaq:SPDC) provides a vertically integrated, multi-channel platform of e-commerce services and distribution solutions to retailers and manufacturers. The Company uniquely offers retail distribution programs, web site development and hosting, customer care, e-commerce fulfillment, and third party logistics services. For additional information, please visit the Company's website at www.speedcommerce.com . Use of Non-GAAP Information In evaluating the company's financial performance and operating trends, management considers information concerning the company's net sales, adjusted gross margins, adjusted operating expenses, and adjusted EBITDA, among other items, which are not calculated in accordance with generally accepted accounting principles ("GAAP") in the United States of America . The company's management believes these non-GAAP measures are useful to investors because they provide supplemental information that facilitates comparisons to prior periods and for the evaluation of financial results. Management uses these non-GAAP measures to evaluate its financial results, develop budgets and manage expenditures. The method the company uses to produce non-GAAP results is not computed according to GAAP, is likely to differ from the methods used by other companies and should not be regarded as a replacement for corresponding GAAP measures. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to the comparable GAAP results, which is attached to this release and can also be found on the company's website at www.speedcommerce.com . Safe Harbor The statements in this press release that are not strictly historical are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are intended to be covered by the safe harbors provided therein. The forward-looking statements are subject to risks and uncertainties, and the actual results that the company achieves may differ materially from these forward-looking statements due to such risks and uncertainties, including, but not limited to: difficult economic conditions that adversely affect the company's customers and vendors; the company's revenues being derived from a small group of customers; pending or prospective litigation may subject the company to significant costs; the seasonal nature of the company's business; the company's ability to adapt to the changing demands of its customers or vendors; the potential for the company to incur significant costs and to experience operational and logistical difficulties in connection with its information technology systems and fulfillment infrastructure; the company's dependence on significant clients and vendors; the company's ability to meet significant working capital requirements; and the company's ability to compete effectively in the highly competitive retail distribution and e-commerce services industries. In addition to these, a detailed statement of risks and uncertainties is contained in the company's reports to the U.S. Securities and Exchange Commission (the "SEC"), including, in particular, the company's proxy materials, the company's Form 10-K filings, as well as its other SEC filings and public disclosures. Investors and shareholders are urged to read this press release carefully. The company can offer no assurances that any projections, assumptions or forecasts made or discussed in this press release will be met, and investors should understand the risks of investing solely due to such projections. The forward-looking statements included in this press release are made only as of the date of this report and the company undertakes no obligation to update these forward-looking statements to reflect subsequent events or circumstances. Investors and shareholders may obtain free copies of the public filings through the website maintained by the SEC at www.sec.gov or at one of the SEC's other public reference rooms in Washington, D.C. , New York, New York or Chicago, Illinois . Please contact the SEC at 1-800- SEC -0330 for further information with respect to the SEC's public reference rooms. SPEED COMMERCE, INC. Consolidated Condensed Balance Sheets (In thousands) (Unaudited) (Unaudited) December 31 , December 31 , March 31 , 2013 2012 2013 Assets: Current assets: Cash $ 53 $ 62 $ 91 Accounts receivable, net 151,094 123,251 83,496 Inventories 54,761 39,018 34,197 Deferred tax assets current, net -- 1,441 -- Other 3,742 2,621 3,262 Total current assets 209,650 166,393 121,046 Property and equipment, net 18,450 11,441 14,085 Goodwill and intangible assets, net 53,527 55,777 54,213 Deferred tax assets non-current, net -- 9,028 -- Other assets 9,055 7,385 6,947 Total assets $ 290,682 $ 250,024 $ 196,291 Liabilities and shareholders' equity: Current liabilities: Accounts payable $ 167,102 $ 141,423 $ 103,953 Checks written in excess of cash balances 8,252 11,363 3,478 Revolving line of credit 30,891 17,432 23,884 Other 9,506 13,502 7,204 Total current liabilities 215,751 183,720 138,519 Long-term liabilities: Other liabilities 5,122 4,473 4,089 Total liabilities 220,873 188,193 142,608 Shareholders' equity 69,809 61,831 53,683 Total liabilities and shareholders' equity $ 290,682 $ 250,024 $ 196,291 SPEED COMMERCE, INC. Consolidated Statements of Operations and Comprehensive (Loss) (In thousands, except per share amounts) (Unaudited) Three months ended December 31 , Nine months ended December 31 , 2013 2012 2013 2012 Net sales Distribution $ 149,935 $ 156,856 $ 316,099 $ 340,476 E-commerce and fulfillment services 32,576 21,428 83,154 33,212 Total net sales 182,511 178,284 399,253 373,688 Cost of sales Distribution 136,429 143,045 289,057 306,280 E-commerce and fulfillment services 30,256 18,238 71,747 28,384 Total cost of sales 166,685 161,283 360,804 334,664 Gross profit Distribution 13,506 13,811 27,042 34,196 E-commerce and fulfillment services 2,320 3,190 11,407 4,828 Total gross profit 15,826 17,001 38,449 39,024 Operating expenses: Selling and marketing 4,805 5,312 12,494 13,805 Distribution and warehousing 4,661 2,394 10,437 5,907 General and administrative 3,773 4,544 13,840 10,653 Information technology 1,725 1,533 5,067 3,661 Depreciation and amortization 739 760 2,240 2,248 Total operating expenses 15,703 14,543 44,078 36,274 Loss from operations 123 2,458 (5,629) 2,750 Other income (expense): Interest income (expense), net (432) (325) (1,234) (586) Other income (expense), net (714) (503) (668) (602) Loss from operations, before income tax (1,023) 1,630 (7,531) 1,562 Income tax benefit (expense) (41) (1,620) (106) (1,635) Net income (loss) $ (1,064) $ 10 $ (7,637) $ (73) Basic net loss per common share $ (0.02) $ 0.00 $ (0.13) $ (0.00) Diluted net loss per common share $ (0.02) $ 0.00 $ (0.13) $ (0.00) Weighted average shares outstanding: Basic 64,928 44,883 59,332 39,749 Diluted 64,928 45,026 59,332 39,749 Other comprehensive income (loss): Net unrealized gain on foreign exchange rate translation, net of tax 157 76 192 159 Comprehensive income (loss) $ (907) $ 86 $ (7,445) $ 86 SPEED COMMERCE, INC. Supplemental Information (In thousands) (Unaudited) Business Segment Information and Net Sales by Geographic Region and Sales Channel Three Months Ended December 31 , 2013 % 2012 % Net sales: Distribution Software $ 86,696 47.5% $ 107,638 60.4% Consumer electronics and accessories 62,631 34.3% 47,363 26.6% Video games 608 0.3% 1,855 1.0% 149,935 82.2% 156,856 88.0% E-commerce and fulfillment services 32,576 17.8% 21,428 12.0% Net sales as reported $ 182,511 $ 178,284 Operating income (loss) Distribution $ 438 $ 499 E-commerce and fulfillment services (315) 1,959 Consolidated operating income (loss) $ 123 $ 2,458 Net Sales by Geographic Region United States $ 152,730 $ 144,666 Canada 29,781 33,618 Net Sales as reported $ 182,511 $ 178,284 Net Sales by Sales Channel Retail $ 126,052 $ 129,943 E-commerce 56,459 48,341 Net Sales as reported $ 182,511 $ 178,284 SPEED COMMERCE, INC. Supplemental Information (In thousands) (Unaudited) Business Segment Information and Net Sales by Geographic Region and Sales Channel Nine Months Ended December 31 , 2013 % 2012 % Net sales: Distribution Software $ 203,402 50.9% $ 249,838 66.9% Consumer electronics and accessories 111,432 27.9% 83,863 22.4% Video games 1,265 0.3% 6,775 1.8% 316,099 79.2% 340,476 91.1% E-commerce and fulfillment services 83,154 20.8% 33,212 8.9% Net sales as reported $ 399,253 $ 373,688 Operating income (loss) Distribution $ (9,273) $ 21 E-commerce and fulfillment services 3,644 2,729 Consolidated operating income (loss) $ (5,629) $ 2,750 Net Sales by Geographic Region United States $ 338,606 $ 311,268 Canada 60,647 62,420 Net Sales as reported $ 399,253 $ 373,688 Net Sales by Sales Channel Retail $ 271,232 $ 289,665 E-commerce 128,021 84,023 Net Sales as reported $ 399,253 $ 373,688 SPEED COMMERCE, INC. Supplemental Information (In thousands) (Unaudited) Adjusted Pro Forma (Loss) Before Income Tax for the Three Months Ended December 31 , GAAP Information Adjusted Pro Forma Information Three Months Ended December 31, Three Months Ended December 31, 2013 % of sales 2012 % of sales 2013 % of sales 2012 % of sales Net sales $182,511 $178,284 $182,511 $178,284 Gross profit (1) 15,826 8.7% 17,001 9.5% 20,829 11.4% 17,001 9.5% Operating expenses (2) 15,703 8.6% 14,543 8.2% 13,270 7.3% 13,017 7.3% Income (loss) from operations 123 2,458 7,559 3,984 Other (expense), net (1,146) (828) (1,146) (828) Income (loss) before income tax $ (1,023) $ 1,630 $ 6,413 $ 3,156 Three Months Ended December 31, 2013 2012 (1) Pro forma adjustments to gross profit consist of the following: Transaction and transition costs $ 5,003 $ -- Total adjustments $ 5,003 $ -- (2) Pro forma adjustments to operating expenses consist of the following: Transaction and transition costs $ 2,433 $ 1,526 Total adjustments $ 2,433 $ 1,526 SPEED COMMERCE, INC. Supplemental Information (In thousands) (Unaudited) Adjusted Pro Forma (Loss) Before Income Tax for the Nine Months Ended December 31 , GAAP Information Adjusted Pro Forma Information Nine Months Ended December 31, Nine Months Ended December 31, 2013 % of sales 2012 % of sales 2013 % of sales 2012 % of sales Net sales $399,253 $373,688 $399,253 $373,688 Gross profit (1) 38,449 9.6% 39,024 10.4% 45,338 11.4% 39,024 10.4% Operating expenses (2) 44,078 11.0% 36,274 9.7% 35,480 8.9% 34,348 9.2% Income (loss) from operations (5,629) 2,750 9,858 4,676 Other (expense), net (1,902) (1,188) (1,902) (1,188) Income (loss) before income tax $ (7,531) $ 1,562 $ 7,956 $ 3,488 Nine Months Ended December 31, 2013 2012 (1) Pro forma adjustments to gross profit consist of the following: Transaction and transition costs $ 6,889 $ -- Total adjustments $ 6,889 $ -- (2) Pro forma adjustments to operating expenses consist of the following: Transaction and transition costs $ 8,598 $ 1,926 Total adjustments $ 8,598 $ 1,926 SPEED COMMERCE, INC. Supplemental Information (In thousands) (Unaudited) Reconciliation of Net Loss to Adjusted EBITDA Three Months December 31 , 2013 2012 Net loss, as reported $ (1,064) $ 10 Interest expense, net 432 325 Income tax expense (benefit) 41 1,620 Depreciation and amortization 2,101 1,257 Foreign translation loss (gain) 714 388 Share-based compensation 345 245 Transaction and transition costs 7,436 1,526 Adjusted EBITDA $ 10,005 $ 5,371 Nine Months December 31 , 2013 2012 Net loss, as reported $ (7,637) $ (73) Interest expense, net 1,234 586 Income tax expense (benefit) 106 1,635 Depreciation and amortization 6,132 2,884 Foreign translation loss (gain) 676 493 Share-based compensation 859 705 Transaction and transition costs 15,487 1,926 Adjusted EBITDA $ 16,857 $ 8,156 CONTACT: Investor Relations Liolios Group, Inc. Cody Slach 1-949-574-3860 SPDC@liolios.com Source: Speed Commerce


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