Monday, November 24, 2014 Last update: 4:03 AM
FreshNews.com - Covering Large & Obscure Tech Companies Since 1996

Geeknet Announces Second Quarter 2014 Financial Results and Acquisition of Treehouse Brand Stores

Companies mentioned in this article: Geeknet, Inc.

FAIRFAX, Va., Aug. 1, 2014 /PRNewswire/ --Geeknet, Inc. (Nasdaq: GKNT), the parent company of online retailer ThinkGeek.com, today announced financial results for the second quarter ended June 30, 2014. The company also announced the acquisition of substantially all of the assets and certain of the liabilities of Treehouse Brand Stores, LLC effective today for $1.5 million of initial cash consideration and total cash consideration of up to $3.5 million, to be paid based on the achievement of certain performance metrics.

http://photos.prnewswire.com/prnvar/20120510/MM05555LOGO

Total revenue for the second quarter of 2014 was $23.4 million, an increase of 6% from $22.0 million in the second quarter of 2013. Net loss for the second quarter of 2014 was $4.1 million or $0.62 per diluted share compared to net loss of $1.5 million or $0.23 per diluted share for the same period a year ago. Adjusted EBITDA loss for the second quarter of 2014 was $3.0 million, compared to an adjusted EBITDA loss of $0.4 million for the same period a year ago.

Second Quarter Highlights:

    --  Wholesale revenue grew to $5.6MM, up 48% when compared to the second
        quarter of 2013
    --  We delivered over 474 new products to our customers, including 74
        exclusive items
    --  Our conversion rate improved to 1.67% from 1.44% in 2013

"ThinkGeek grew revenue 6% in a competitive retail environment. We delivered strong growth from our GeekLabs exclusive products and our wholesale segment. Despite softer site revenues and pressure on margins this quarter, our entire team is focused on the upcoming fall and holiday seasons. To celebrate our fifteenth anniversary, but more importantly to improve the customer experience, ThinkGeek has launched a major brand refresh campaign including the redesign of our web site," said Katy McCarthy, Chief Executive Officer.

"A critical element of our strategic plan is to build out our platform to increase the customer base. Since 2009, Treehouse Brand Stores has worked directly with major video game publishers to engage fans with their unique and exclusive products. This acquisition enables Geeknet to establish official web stores under exclusive licenses while adding creative talent and expertise to our company," said McCarthy. "I am excited to join Geeknet and can't wait to work together to accelerate growth, while continuing to deliver even more of the unique merchandise our fans have come to expect," said Jed Seigle, President of Treehouse Brands.

Supplemental schedules of the Company's quarterly statements of operations and operational statistics are available on the Company's web site at investors.geek.net.

A conference call and audio webcast will be held at 11:00 am ET on August 1, 2014 and may be accessed by calling (877) 348-9353 or (253) 237-1159 outside the U.S., or by visiting investors.geek.net. A dial in replay will be available from 4:00 PM ET August 1, 2014 until 11:59 pm ET August 3, 2014 by calling (855) 859-2056, with conference ID 73137452.

About Geeknet, Inc.

ThinkGeek, Inc., a wholly owned subsidiary of Geeknet, Inc. (NASDAQ: GKNT), is the premier retailer for the global geek community. Since 1999, ThinkGeek has been creating a world where everyone can express their inner geek, embrace their passions, and connect with each other. Our obsession is creating and sharing unique and authentic product experiences that stimulate our fans' imaginations and fuel their geek core. We believe that there is a geek in everyone and that it should be celebrated. Want to learn more? Check out thinkgeek.com or geek.net.

Use of Non-GAAP Financial Measures

In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, we also report adjusted EBITDA. The method we use to calculate adjusted EBITDA is not in accordance with GAAP, is likely to differ from the methods used by other companies for similarly titled measures and should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results.

We believe that adjusted EBITDA provides useful information to both management and investors and is an additional measurement which may be used to evaluate our operating performance. Our management and Board of Directors use adjusted EBITDA as part of their reporting and planning process and it is the primary measure we use to evaluate our operating performance. In addition, we have historically reported adjusted EBITDA to the investment community. We also believe that the financial analysts who regularly follow and report on us and the business sector in which we compete use adjusted EBITDA to prepare their financial performance estimates to measure our performance against other sector participants and to project our future financial results.

We define adjusted EBITDA as earnings or loss from continuing operations before interest and other expense, income taxes, stock-based compensation and depreciation and amortization. Adjusted EBITDA excludes certain expenses that we believe are not directly related to our core operating results. Although some of the items may recur on a regular basis, management does not consider activities associated with these items as core to its operations. With respect to stock-based compensation, we recognize expenses associated with stock-based compensation that require management to make assumptions about our common stock, such as expected future stock price volatility, the anticipated duration of outstanding stock options and awards and the forfeiture rate. While other forms of expenses (such as cash compensation, inventory costs and real estate costs) are reasonably correlated to our underlying business and such costs are incurred principally or wholly in the particular fiscal period being reported, stock-based compensation expense is not reasonably correlated to the particular fiscal period in question, but rather is based on expected future events that have no relationship (and in certain instances, an inverse relationship) with how well we currently operate our business.

NOTE REGARDING FORWARD-LOOKING STATEMENTS: This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on our current expectations, and involve risks and uncertainties. Forward-looking statements contained herein include statements regarding our strategic plan and future growth, as well as statements regarding the impact of our acquisition of the Treehouse Brand Stores business. Actual results may differ materially from those expressed or implied in such forward-looking statements due to various factors, including: popularity and demand for our retail products; management's strategy, plans and objectives for future operations; employee relations and our ability to attract and retain highly qualified personnel; our ability to continue to invest in developing and acquiring new products; competition, competitors and our ability to compete; liquidity and capital resources; the outcome of any litigation to which we are a party; our accounting policies; sufficiency of our cash resources and investments to meet our operating and working capital requirements; our ability to successfully integrate the acquired assets and operations of Treehouse Brand Stores; our ability to realize the anticipated growth, synergies and other benefits from our acquisition of the Treehouse Brand Stores business; and our ability to retain relationships with key employees, vendors, licensors and customers of Treehouse Brand Stores. Investors should consult our filings with the Securities and Exchange Commission, sec.gov, including the risk factors section of our Annual Report on Form 10-K for the year ended December 31, 2013, for further information regarding these and other risks of our business. All forward-looking statements included in this press release are based upon information available to us as of the date hereof, and we do not assume any obligations to update such statements or the reasons why actual results could differ materially from those projected in such statements.


                                                                              GEEKNET, INC.

                                                                  CONSOLIDATED STATEMENTS OF OPERATIONS

                                                             (In thousands, except per share data, unaudited)


                                          Three Months Ended                         Six Months Ended
                                               June 30,                                  June 30,
                                               --------                                  --------

                                        2014                          2013                                 2014            2013
                                        ----                          ----                                 ----            ----

    Net revenue                                 $23,395                                    $22,004                     $46,086      $41,561

    Cost of revenue                   19,935                        17,595                               38,801          33,532
                                      ------                        ------                               ------          ------

    Gross margin                       3,460                         4,409                                7,285           8,029
                                       -----                         -----                                -----           -----

    Operating expenses:

    Sales and marketing                2,991                         1,919                                5,496           3,642

    Technology and
     design                            2,071                         1,494                                3,940           2,898

    General and
     administrative                    2,613                         2,473                                4,432           5,257

    Total operating
     expenses                          7,675                         5,886                               13,868          11,797
                                       -----                         -----                               ------          ------

    Loss from operations             (4,215)                      (1,477)                             (6,583)        (3,768)

    Interest and other
     income (expense),
     net                                  66                          (13)                                 189            (27)
                                         ---                           ---                                  ---             ---

    Loss from continuing
     operations before
     income taxes                    (4,149)                      (1,490)                             (6,394)        (3,795)

    Income tax provision                   -                            -                                   -              3
                                         ---                          ---                                 ---            ---

    Net loss from
     continuing
     operations                      (4,149)                      (1,490)                             (6,394)        (3,798)
                                      ------                        ------                               ------          ------

    Discontinued operations:

    Loss from
     discontinued
     operations, net of
     tax                                   -                         (41)                                   -           (69)
                                         ---                          ---                                  ---            ---

    Net loss                                   $(4,149)                                  $(1,531)                   $(6,394)    $(3,867)
                                                =======                                    =======                     =======      =======

    Loss per share from continuing
     operations:

    Basic and diluted                           $(0.62)                                   $(0.22)                    $(0.96)     $(0.57)
                                                 ======                                     ======                      ======       ======

    Loss per share from discontinued
     operations:

    Basic and diluted                      $          -                                   $(0.01)                $         -     $(0.01)
                                         ===        ===                                    ======               ===       ===      ======

    Net loss per share:

    Basic and diluted                           $(0.62)                                   $(0.23)                    $(0.96)     $(0.58)
                                                 ======                                     ======                      ======       ======

    Shares used in per share
     calculations:

    Basic and diluted                  6,694                         6,638                                6,676           6,612


                                                        GEEKNET, INC.

                                                 CONSOLIDATED BALANCE SHEETS

                                                  (In thousands, unaudited)


                                                  June 30, 2014                 December 31, 2013
                                                  -------------                 -----------------

                                                          ASSETS

    Current assets:

    Cash and cash equivalents                                      $45,277                          $53,084

    Accounts receivable, net of
     allowance of $1 and $6 as of
     June 30, 2014 and December
     31, 2013, respectively                               4,074                               9,719

    Inventories, net                                     17,738                              20,186

    Prepaid expenses and other
     current assets                                       3,708                               4,202
                                                          -----                               -----

    Total current assets                                 70,797                              87,191

    Property and equipment, net                           1,952                               2,465

    Other long-term assets                                   84                                  50
                                                            ---

    Total assets                                                   $72,833                          $89,706
                                                                   =======                          =======


                                           LIABILITIES AND STOCKHOLDERS' EQUITY

    Current liabilities:

    Accounts payable                                                $3,441                          $10,250

    Deferred revenue                                      1,842                               2,828

    Accrued and other liabilities                         3,224                               6,661
                                                          -----                               -----

    Total current liabilities                             8,507                              19,739
                                                          -----                              ------

    Other long-term liabilities                              14                                   -
                                                            ---

    Total liabilities                                     8,521                              19,739
                                                          -----                              ------

    Commitments and contingencies (Note 7)

    Stockholders' equity:

    Preferred stock, $0.001 par
     value; 1,000 shares
     authorized; no shares issued
     or outstanding                                           -                                  -

    Common stock, $0.001 par
     value; authorized -25,000;
     issued -6,997 and 6,901
     shares, as of June 30, 2014
     and December 31, 2013,
     respectively; outstanding -
     6,714 and 6,639 shares as of
     June 30, 2014 and December
     31, 2013, respectively                                   7                                   7

    Treasury stock                                      (3,818)                            (3,479)

    Additional paid-in capital                          817,904                             816,826

    Accumulated other
     comprehensive income                                    16                                  16

    Accumulated deficit                               (749,797)                          (743,403)
                                                       --------                            --------

    Total stockholders' equity                           64,312                              69,967
                                                         ------                              ------

      Total liabilities and
       stockholders' equity                                        $72,833                          $89,706
                                                                   =======                          =======


                                               GEEKNET, INC.

                                   CONSOLIDATED STATEMENTS OF CASH FLOWS

                                         (In thousands, unaudited)


                                                      Six Months Ended
                                                          June 30,
                                                          --------

                                                   2014                      2013
                                                   ----                      ----

    Cash flows from operating
     activities from continuing
     operations:

    Net loss                                              $(6,394)                $(3,867)

    Loss from
     discontinued
     operations, net of
     tax                                              -                       69
                                                    ---                      ---

    Loss from
     continuing
     operations                                 (6,394)                  (3,798)

    Adjustments to reconcile loss
     from continuing operations to
     net cash used in operating
     activities:

    Depreciation and
     amortization
     expense                                        620                       630

    Stock-based
     compensation
     expense                                      1,055                     1,464

    Provision for bad
     debts                                          (5)                      (3)

    Provision for
     inventory write-
     downs                                           66                       427

    Loss on disposal of
     assets, net                                      -                        2

    Changes in assets and
     liabilities:

      Accounts receivable                         5,650                   (1,897)

      Inventories                                 2,382                     1,960

      Prepaid expenses
       and other assets                             460                     (359)

      Accounts payable                          (6,809)                  (5,868)

      Deferred revenue                            (986)                    (262)

      Accrued and other
       liabilities                              (3,437)                  (1,613)

      Other long-term
       liabilities                                   14                      (15)

     Net cash used in
      operating
      activities                                (7,384)                  (9,332)
                                                 ------                    ------

    Cash flows from investing
     activities:

    Purchase of
     property and
     equipment                                    (103)                      (5)

     Net cash used in
      investing
      activities                                  (103)                      (5)
                                                   ----                       ---

    Cash flows from financing
     activities:

    Proceeds from
     issuance of common
     stock                                           19                       272

    Repurchase of stock                           (339)                    (534)

      Net cash used in
       financing
       activities                                 (320)                    (262)
                                                   ----                      ----

    Cash flows from discontinued
     operations:

    Net cash used in
     operating
     activities                                       -                     (41)

    Net cash used in
     discontinued
     operations                                       -                     (41)
                                                    ---                      ---

    Net change in cash
     and cash
     equivalents                                (7,807)                  (9,640)
                                                 ------                    ------

    Cash and cash
     equivalents,
     beginning of year                           53,084                    57,294

    Cash and cash
     equivalents, end
     of period                                             $45,277                  $47,654
                                                           =======                  =======


                                                                        GEEKNET, INC.

                                                        RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA

                                                                  (In thousands, unaudited)


                            Three Months Ended June 30,                     Six Months Ended June 30,
                            ---------------------------                     -------------------------

                               2014                               2013                                 2014        2013

    Net loss - as reported            $(4,149)                                       $(1,531)               $(6,394)    $(3,867)

    Reconciling items:

    Loss from discontinued
     operations -net of tax       -                                41                                    -         69

    Interest and other
     (income) expense, net     (66)                                13                                (189)         27

    Income tax provision          -                                 -                                   -          3

    Stock-based
     compensation expense
     included in cost of
     revenue                     19                                 34                                   40       (120)

    Stock-based
     compensation expense
     included in operating
     expenses                   856                                773                                1,015       1,584

    Depreciation and
     amortization expense       307                                314                                  620         630


    Adjusted EBITDA                   $(3,033)                                         $(356)               $(4,908)    $(1,674)
                                       =======                                           =====                 =======      =======


                                             GEEKNET, INC.

                                              Segment Data

                                       (In thousands, unaudited)


                      Website            Wholesale               Total
                      -------            ---------               -----

    Three Months
     Ended June 30,
     2014

      Net revenue              $17,833                                  $5,562           $23,395

      Cost of revenue   16,116                           3,819                    19,935
                        ------                           -----                    ------

      Gross margin              $1,717                                  $1,743            $3,460

    Gross margin %      9.6%                          31.3%                    14.8%


    Three Months
     Ended June 30,
     2013

      Net revenue              $18,254                                  $3,750           $22,004

      Cost of revenue   15,155                           2,440                    17,595
                        ------                           -----                    ------

      Gross margin              $3,099                                  $1,310            $4,409

    Gross margin %     17.0%                          34.9%                    20.0%


    Six Months Ended
     June 30, 2014

      Net revenue              $35,712                                 $10,374           $46,086

      Cost of revenue   31,738                           7,063                    38,801
                        ------                           -----                    ------

      Gross margin              $3,974                                  $3,311            $7,285

    Gross margin %     11.1%                          31.9%                    15.8%


    Six Months Ended
     June 30, 2013

      Net revenue              $36,235                                  $5,326           $41,561

      Cost of revenue   29,994                           3,538                    33,532
                        ------                           -----                    ------

      Gross margin              $6,241                                  $1,788            $8,029

    Gross margin %     17.2%                          33.6%                    19.3%

GKNT-F

SOURCE Geeknet, Inc.