NEW YORK--(BUSINESS WIRE)--Sept. 1, 2004--Alloy, Inc.
(Nasdaq:ALOY), a media, marketing services, direct marketing and
retail company primarily targeting the dynamic Generation Y
population, today reported revenues for the fiscal quarter ended July
31, 2004 of $86.6 million and a net loss attributable to common
stockholders of $11.6 million or $0.27 per diluted share. For this
second fiscal quarter, Alloy registered a $4.6 million loss before
interest and other income/expense, income taxes, depreciation and
amortization, stock-based compensation expense, and restructuring
charges ("Adjusted EBITDA"). For additional financial detail,
including the reconciliation of Adjusted EBITDA to net income (loss)
determined under GAAP, please refer to the financial tables provided
at the end of this release.
Total revenues for the second fiscal quarter increased 8% to $86.6
million, compared with $80.5 million for the second quarter of fiscal
2003. Second fiscal quarter net merchandise revenues of $43.7 million
were up 46% compared with $30.0 million for last year's second fiscal
quarter. The increase resulted from our acquisition of dELiA*s, which
offset an overall decline in revenues for Alloy's legacy catalog
titles. Second fiscal quarter sponsorship and other revenues of $42.9
million were down 15% versus $50.5 million for the comparable period
in our last fiscal year. The decrease was primarily attributable to
reduced sales in our promotions and specialty direct marketing
businesses.
Second fiscal quarter gross profit increased to $42.1 million, or
48.7% of revenues, compared with $39.4 million, or 48.9% of revenues,
for the comparable period last year, largely as a result of the
overall increase in revenues.
Operating expenses were $51.4 million for the second quarter of
fiscal 2004 versus $39.9 million for the second quarter of fiscal
2003. The increase resulted primarily from the expenses of running the
acquired dELiA*s operations and the staff build-up in our merchandise
operations, along with higher legal and financial administration
costs.
Net loss for the second quarter of fiscal 2004 was $11.2 million,
compared with a net loss of $0.3 million for last fiscal year's second
quarter. Net loss attributable to common stockholders for the second
quarter of fiscal 2004 was $11.6 million, or $0.27 per diluted share,
compared with net loss attributable to common stockholders of $1.0
million, or $0.02 per diluted share, for last fiscal year's second
quarter. Adjusted EBITDA transitioned from earnings of $2.8 million
for the second fiscal quarter of 2003 to a loss of $4.6 million for
the second fiscal quarter of 2004.
Alloy's name database now stands at 27.1 million total names, of
which over 8 million have a buying history with the company.
Commenting on the quarter, Matt Diamond, Chairman and Chief
Executive Officer, stated, "Our second fiscal quarter sponsorship
business performance compared unfavorably to last year. To address
this challenge, we have embarked on an aggressive plan to drive
improved sales productivity and operating margins in the near term. In
our merchandise business, we continued to make significant strides in
strengthening operations while pursuing value-enhancing strategies for
the business in the 2005 fiscal year."
Looking ahead, Mr. Diamond concluded, "Primarily due to our
financial performance in the second quarter of fiscal 2004, we have
altered our full year financial outlook. We are revising our
merchandise revenue to the range of $215 million to $225 million, and
our sponsorship revenue to the range of $185 million to $195 million.
Our diluted net loss attributable to common stockholders per share has
been revised to a range of ($0.45) to ($0.55) and our Adjusted EBITDA
range is now $3 million to $6 million."
Total revenues for the six months ended July 31, 2004 increased
16% to $174.4 million compared with $149.9 million for the six months
ended July 31, 2003. Net merchandise revenues for the six months ended
July 31, 2004 of $88.0 million were up 47% versus $60.0 million for
the six months ended July 31, 2003. Sponsorship and other revenues of
$86.4 million for the six-month period ended July 31, 2004 were down
4% compared with $89.9 million for the same period last year. Gross
profit for the six months ended July 31, 2004 increased to $83.4
million, or 47.8% of revenues, compared with $70.8 million, or 47.2%
of revenues, for the first six months of fiscal 2003. Operating
expenses were $101.1 million for the six months ended July 31, 2004
versus $72.4 million for the six months ended July 31, 2003. Net loss
for the six months ended July 31, 2004 was $20.4 million, compared
with net loss of $0.7 million for the six months ended July 31, 2003.
Net loss attributable to common stockholders for the six months ended
July 31, 2004 was $21.2 million, or $0.50 per diluted share, compared
with net loss attributable to common stockholders of $1.9 million, or
$0.05 per diluted share for the six months ended July 31, 2003.
About Alloy
Alloy, Inc. is a media, marketing services, direct marketing and
retail company primarily targeting Generation Y, a key demographic
segment comprising the more than 60 million boys and girls in the
United States between the ages of 10 and 24. Alloy's convergent media
model uses a wide range of media assets to reach more than 25 million
Generation Y consumers each month. Through Alloy's 360 Youth media and
marketing services unit, marketers can connect with the Generation Y
audience through a host of advertising and marketing programs
incorporating Alloy's media and marketing assets such as direct mail
catalogs, college and high school newspapers, Web sites, school-based
media boards, and college guides. Alloy's promotional marketing arm,
AMP Agency, is a lifestyle marketer offering creative thinking for
consumer brands through custom marketing solutions both on and
off-line, and specializing in mobile tours, events and grassroots
marketing. AMP was named 2004 "Agency of the Year" by PROMO Magazine.
Alloy generates revenue from its broad reach in the Generation Y
Community by providing marketers advertising and marketing services
through 360 Youth and AMP Agency and by selling apparel, accessories,
footwear, room furnishings and action sports equipment directly to the
youth market through catalogs, Web sites and retail stores. For
further information regarding Alloy, please visit our Web site
(www.alloyinc.com) and click on "Investor Relations". Please visit
www.360youth.com and www.ampagency.com for further information on our
media, marketing & promotional services.
This announcement may contain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934, including statements
regarding our expectations and beliefs regarding our future results or
performance. Because these statements apply to future events, they are
subject to risks and uncertainties. When used in this announcement,
the words "anticipate", "believe", "estimate", "expect",
"expectation", "project" and "intend" and similar expressions are
intended to identify such forward-looking statements. Our actual
results could differ materially from those projected in the
forward-looking statements. Additionally, you should not consider past
results to be an indication of our future performance. Factors that
might cause or contribute to such differences include, among others,
our ability to: increase revenues, generate high margin sponsorship
and multiple revenue streams, increase visitors to our Web sites
(www.alloy.com, www.delias.com, www.ccs.com, and www.danscomp.com) and
build customer loyalty; develop our sales and marketing teams and
capitalize on these efforts, develop commercial relationships with
advertisers and the continued resilience in advertising spending to
reach the teen market; manage the risks and challenges associated with
integrating newly acquired businesses; and identify and take advantage
of strategic, synergistic acquisitions and other revenue
opportunities. Other relevant factors include, without limitation: our
competition; seasonal sales fluctuations; inventory performance;
changes in consumer preference or fashion trends; reliance on third
party suppliers; our inability to achieve and maintain profitability;
the uncertain economic and political climate in the United States and
throughout the rest of the world and the potential that such climate
may deteriorate further; and general economic conditions. For a
discussion of certain of the foregoing factors and other risk factors
see the "Risk Factors That May Affect Future Results" section included
in our annual report on Form 10-K for the year ended January 31, 2004,
as amended, which is on file with the Securities and Exchange
Commission. We do not intend to update any of the forward-looking
statements after the date of this announcement to conform these
statements to actual results or to changes in management's
expectations, except as may be required by law.
(tables to follow)
Alloy, Inc.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Three
Months Months Six Months Six Months
Ended Ended Ended Ended
7/31/2003 7/31/2004 7/31/2003 7/31/2004
Net merchandise revenues $30,028 $43,702 $59,999 $87,984
Sponsorship and other
revenues 50,473 42,863 89,946 86,429
--------------------------------------------
Total revenues 80,501 86,565 149,945 174,413
Cost of goods sold 41,125 44,420 79,100 91,047
--------------------------------------------
Gross profit 39,376 42,145 70,845 83,366
Selling and marketing
expenses 31,489 37,254 56,867 73,257
General and administrative
expenses 6,266 11,896 11,224 23,661
Acquired intangible asset
amortization 1,896 1,667 3,680 3,189
Stock-based compensation 291 352 291 703
Restructuring charge 0 192 380 318
--------------------------------------------
Total operating expenses 39,942 51,361 72,442 101,128
Loss from operations (566) (9,216) (1,597) (17,762)
Interest and other income
(expense), net (3) (1,829) 284 (2,515)
--------------------------------------------
Loss before income taxes (569) (11,045) (1,313) (20,277)
Income tax (benefit)
expense (248) 110 (606) 120
--------------------------------------------
Net loss (321) (11,155) (707) (20,397)
Preferred stock dividend
and accretion 702 401 1,155 795
--------------------------------------------
Net loss attributable to
common stockholders ($1,023) ($11,556) ($1,862) ($21,192)
Net loss attributable to
common stockholders per
basic share ($0.02) ($0.27) ($0.05) ($0.50)
Net loss attributable to
common stockholders per
diluted share ($0.02) ($0.27) ($0.05) ($0.50)
Weighted average basic
common shares
outstanding: 41,135,614 42,969,012 40,650,532 42,715,834
Diluted shares
outstanding per GAAP: 41,135,614 42,969,012 40,650,532 42,715,834
Reconciliation of EBTA and
Adjusted EBITDA to GAAP
Results (1):
--------------------------
Net loss ($321) ($11,155) ($707) ($20,397)
Income tax expense (248) 110 (606) 120
Acquired intangible asset
amortization 1,896 1,667 3,680 3,189
Stock-based compensation 291 352 291 703
Restructuring charge 0 192 380 318
----------------------------------------------------------------------
EBTA excluding stock-based
compensation,
restructuring and asset
write-downs $1,618 ($8,834) $3,038 ($16,067)
Interest and other income
(expense), net (3) (1,829) 284 (2,515)
Depreciation and
amortization 1,207 2,406 2,250 4,675
----------------------------------------------------------------------
Adjusted EBITDA $2,828 ($4,599) $5,004 ($8,877)
(1) This press release contains the non-GAAP financial measures EBTA
and Adjusted EBITDA. Alloy uses EBTA and Adjusted EBITDA to evaluate
its performance period to period without taking into account certain
expenses which, in the opinion of Alloy management, do not reflect
Alloy's results from its core business activities. These non-GAAP
financial measures should be considered in addition to, and not as a
substitute for, or superior to, other measures of financial
performance prepared in accordance with GAAP. These non-GAAP measures
included in this press release have been reconciled to the nearest
GAAP measure as is now required under new SEC rules regarding the use
of non-GAAP financial measures. As used herein, "GAAP" refers to
accounting principles generally accepted in the United States of
America.
Alloy, Inc.
SELECTED CONDENSED CONSOLIDATED BALANCE SHEET DATA
(In thousands)
January 31, July 31,
2004 2004
(audited) (unaudited)
Assets
Current Assets
Cash and cash equivalents $30,543 $16,157
Marketable securities 19,014 10,036
Accounts receivable, net 31,492 34,693
Inventories, net 29,021 32,721
Prepaid catalog costs 2,028 2,716
Other current assets 3,813 6,574
----------------------
Total current assets 115,911 102,897
Marketable securities 5,585 2,067
Property and equipment, net 27,234 26,013
Goodwill, net 274,796 281,172
Intangible and other assets, net 25,865 23,917
----------------------
Total assets $449,391 $436,066
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $28,740 $28,935
Deferred revenues 15,124 17,253
Accrued expenses and other current
liabilities 39,755 35,693
----------------------
Total current liabilities 83,619 81,881
Long term liabilities 743 5,231
Convertible debt 69,300 69,300
Series B Preferred Stock 14,434 15,230
Stockholders' Equity 281,295 264,424
----------------------
Total liabilities and
stockholders' equity $449,391 $436,066
CONTACT: Alloy, Inc.
Jim Johnson, 212-244-4307
SOURCE: Alloy, Inc.
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