Provide Commerce, Inc Announces Fiscal Third Quarter Results

[HenryTo]

PRVD is a recent Motley Fool Rule Breaker pick, by the way. The stock is down >30% in after-hours trading, even though guidance was decent:
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Provide Commerce, Inc. Announces Fiscal Third Quarter Results
Thursday April 28, 4:05 pm ET


SAN DIEGO, Calif.--(BUSINESS WIRE)--April 28, 2005--Provide Commerce, Inc. (Nasdaq: PRVD - News):
For the Third Quarter:

* Net Sales Increased 40% to $57.2 Million with GAAP Earnings Per Diluted Share of $0.25

* Pro Forma Earnings Increased 59% to $4.4 Million or $0.32 Per Diluted Share

Provide Commerce, Inc. (Nasdaq: PRVD - News), an e-commerce marketplace of websites for perishable goods, today reported financial results for its third quarter ended March 31, 2005.

The Company reported net sales of $57.2 million for the third quarter of fiscal 2005, up 40% from $40.7 million in the third quarter of fiscal 2004. Gross profit increased 42% to $26.8 million compared to $18.9 million in the prior year quarter. This resulted in a gross profit of 47.0% versus 46.4% in the same period during fiscal 2004. GAAP net income for the quarter was $3.5 million or $0.25 per diluted share, compared to $15.9 million or $1.14 per diluted share in the third quarter of fiscal 2004. GAAP net income for the third quarter of fiscal 2005 includes income tax expense of $3.1 million versus an income tax benefit of $11.8 million in the third quarter of 2004 related to the release of the Company's valuation allowance against its deferred tax assets. GAAP net income for the third quarter of fiscal 2005 also includes $850,000 of stock-based compensation expense as calculated under FAS No. 123, compared to $547,000 in the third quarter of fiscal 2004. The results of the third quarter of fiscal 2005 also include the impact of the Easter holiday, which fell into the fourth quarter during fiscal 2004.

Bill Strauss, Chief Executive Officer of Provide Commerce, stated, "We are pleased with our ability to balance growth and profitability. Not only did our gross profit expand year-over-year, but we continue to be efficient in marketing, merchandising and operations which translates into great value for our customers. As always, we credit our direct business model which affords Provide Commerce a distinct advantage in a competitive environment and encourages lifelong satisfied customers."

Management believes that the most accurate measure of year-over-year operating performance is pro forma earnings, defined as: GAAP earnings excluding stock-based compensation expense and the related tax effect. Provide Commerce does not believe the use of pro forma earnings, and the corresponding per share results, lessen the importance of comparable GAAP measures. Pro forma earnings, and its reconciliation to the nearest GAAP measure, are included in the attached financial tables.

Pro forma earnings for the quarter were $4.4 million compared to $2.8 million for the third quarter of fiscal year 2004. Pro forma earnings per share on 14.0 million shares outstanding increased to $0.32 for the quarter ended March 31, 2005 versus $0.20 on 13.9 million shares outstanding for the quarter ended March 31, 2004.

Strauss commented, "Two primary factors caused our earnings to be slightly lower than our guidance. First, although gross profit percentage improved year over year, it was lower than we anticipated due to increased promotional offers during the quarter. We did this to maintain our position which we believe is the quality and value leader in the online floral category. Second, we spent additional IT dollars on website improvements which will directly affect the customer experience and ease of use which we believe will further enhance customer satisfaction and loyalty."

For the three month period, the Company added approximately 422,000 new customers, a 28% increase compared to approximately 330,000 new customers added in the third quarter of fiscal 2004. As of March 31, 2005, there were approximately 3.8 million customers in Provide Commerce's database, a 41% increase from approximately 2.7 million customers at the same time last year. In addition, returning customers generated 55% of net sales during the quarter, compared to 47% in the same quarter last year, reflecting continued strength in repeat orders along with strong absolute growth. Average order value was $53.14 in the third quarter of fiscal 2005 compared to $53.27 during the third quarter of fiscal 2004.

Strauss continued, "Our low cost, direct business model, which stresses customer service and exceptional products, uniquely positions Provide Commerce to generate high levels of free cash flow, strong profitability and continued earnings per share growth. It allows us to continually grow our core business, invest in strategic and complimentary verticals like our Gourmet Food Business Unit, and explore other options to create value over time."

Balance Sheet & Liquidity

As of March 31, 2005, the Company had $70.8 million of cash, cash equivalents and marketable securities, a 37% increase over March 31, 2004. At quarter end, Provide Commerce also had $72.9 million of stockholders' equity and no bank debt.

Financial Guidance

The Company announced its guidance for fourth quarter and the fiscal year ending June 30, 2005. Based on the current outlook:

* Net sales are still expected to be between $170.0 and $172.5 million.

* GAAP net income is expected to be between $7.2 and $7.4 million or $0.52 and $0.54 per fully diluted share.

* Pro forma earnings are expected to be between $10.0 and $10.2 million or $0.72 and $0.74 per fully diluted share.

* Fully diluted shares outstanding for fiscal year 2005 are expected to be approximately 13.8 million compared to approximately 12.0 million for fiscal year 2004.

For the fourth quarter of fiscal 2005:

* Net sales are still expected to be between $59.5 and $62.0 million.

* GAAP net income is expected to be between $3.2 million and $3.5 million or $0.23 and $0.25 per share.

* Pro forma earnings are expected to be between $4.2 million and $4.5 million or $0.30 and $0.32 per share.

Please note that due to the calendar date shift of Easter from April 11, 2004 to March 27, 2005, net sales for Easter shifted from fiscal fourth quarter of 2004 to the fiscal third quarter of 2005. Normalizing for this Easter quarter shift, which represents approximately $4.0 million of net sales, the midpoint of Provide Commerce's projected fourth quarter net sales guidance represents approximately 25% growth from the prior year.

The Company is adjusting earnings guidance for two primary reasons. First, the Company anticipates competition in the online advertising environment from both floral and non-floral companies. To that end, the Company expects marketing expenditures to fall within the 22 - 23% range of net sales for the year, up from the 21 - 22% of annual net sales as previously anticipated.

Second, based on current oil prices, fuel surcharges will be higher in the fourth quarter which will negatively impact the Company's gross profit. Provide Commerce still expects gross profit percentage to fall within the 46 - 47% range for the fiscal year.

The Company anticipates non-cash stock based compensation to be approximately $3.2 million for fiscal 2005. Because stock based compensation is not generally deductible in calculating the Company's provision for income taxes, the Company anticipates that the effective tax rate for fiscal 2005 will range between 47% and 48%. However, the Company's cash outlay for taxes will be significantly reduced for the foreseeable future due to Provide Commerce's net operating loss carry-forwards which totaled approximately $24 million as of June 30, 2004.