NEW YORK--(BUSINESS WIRE)--Dec. 7, 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 its fiscal quarter ended
October 31, 2004 of $110.0 million and net income attributable to
common stockholders of $1.6 million or $0.04 per diluted share. For
this third fiscal quarter, Alloy generated earnings of $7.5 million
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 third fiscal quarter increased 4.0% to
$110.0 million, compared with $105.8 million for the third quarter of
fiscal 2003. Third fiscal quarter net merchandise revenues of $54.0
million increased 11.3% compared with $48.6 million for last year's
third fiscal quarter. The increase resulted primarily from the
inclusion of a full fiscal quarter's sales for dELiA*s which we
acquired during last year's third fiscal quarter in September 2003.
Third fiscal quarter sponsorship and other revenues of $56.0 million
were down 2.2% versus $57.2 million for the comparable period of the
prior fiscal year. The decrease was primarily attributable to reduced
sales in our promotions business.
Third fiscal quarter gross profit remained relatively flat at
$53.2 million, or 48.3% of revenues, compared with $53.3 million, or
50.4% of revenues, for the comparable period last year. The decrease
in gross margin percentage was primarily the result of decreased gross
margins in our promotions business.
Operating expenses were $50.0 million for the third quarter of
fiscal 2004 versus $53.6 million for the third quarter of fiscal 2003.
The decrease resulted primarily from the cost savings derived from
integrating the acquired dELiA*s operations into our merchandise
operations, along with lower legal costs. During the third quarter, we
began to realize some of the synergies we expected to result from
combining our direct marketing operations with those of dELiA*s,
leveraging our combined scale, selling across our combined databases
while controlling overall catalog circulation, and consolidating
fulfillment operations. Separately, in an effort to improve earnings
in our sponsorship business we have been selectively eliminating
positions and reducing other fixed overhead costs.
Net income for the third quarter of fiscal 2004 was $2.0 million,
compared with a net loss of $6.8 million for last fiscal year's third
quarter. Net income attributable to common stockholders for the third
quarter of fiscal 2004 was $1.6 million, or $0.04 per diluted share,
compared with a net loss attributable to common stockholders of $7.2
million, or $0.17 per diluted share, for last fiscal year's third
quarter. Adjusted EBITDA increased from $4.6 million for the third
fiscal quarter of 2003 to $7.5 million for the third fiscal quarter of
2004.
Commenting on the quarter, Matt Diamond, Chairman and Chief
Executive Officer stated, "In our sponsorship business, we made
significant strides in reducing operating expenses and we plan to
continue making improvements in the cost structure during the fourth
quarter. In addition, we have stimulated our sales efforts by hiring
new media sales specialists and expanding our regional sales
initiatives. We believe that the moves we are making will allow us to
show increased sales productivity and give us a cost structure that
should allow us to deliver significant EBITDA growth in fiscal 2005.
In our merchandise business, we are beginning to realize the benefits
of the efficiency initiatives the management team has put in place. We
expect the financial improvement to continue into and through the
holiday season. Overall, we remain comfortable with the fiscal 2004
financial guidance we provided in our second quarter earnings release
on September 1st."
Total revenues for the nine months ended October 31, 2004
increased 11.2% to $284.4 million compared with $255.7 million for the
nine months ended October 31, 2003. Net merchandise revenues for the
nine months ended October 31, 2004 of $142.0 million were up 30.8%
versus $108.6 million for the nine months ended October 31, 2003.
Sponsorship and other revenues of $142.4 million for the nine-month
period ended October 31, 2004 were down 3.2% compared with $147.1
million for the same period last year. Gross profit for the nine
months ended October 31, 2004 increased to $136.5 million, or 48.0% of
revenues, compared with $124.1 million, or 48.5% of revenues, for the
first nine months of fiscal 2003. Operating expenses were $151.1
million for the nine months ended October 31, 2004 versus $126.0
million for the nine months ended October 31, 2003. The net loss for
the nine months ended October 31, 2004 was $18.4 million, compared
with a net loss of $7.5 million for the nine months ended October 31,
2003. Net loss attributable to common stockholders for the nine months
ended October 31, 2004 was $19.6 million, or $0.46 per diluted share,
compared with a net loss attributable to common stockholders of $9.1
million, or $0.22 per diluted share for the nine months ended October
31, 2003.
About Alloy
Alloy, Inc. (Nasdaq: ALOY) 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 and is comprised of two
distinct divisions: Alloy Media + Marketing and Alloy Merchandising
Group. Alloy Media + Marketing is one of the largest providers of
targeted media and promotional marketing programs incorporating such
industry recognized divisions as Alloy Marketing & Promotions (AMP),
360 Youth, American Multicultural Marketing (AMM), Market Place Media
(MPM), Alloy Education, Alloy Entertainment, and Alloy Out-of-Home.
Working with these groups, marketers can connect with their targeted
audience through a host of advertising and marketing programs
incorporating Alloy's wide ranging media and marketing assets such as
direct mail catalogs, college and high school newspapers, Web sites,
display media boards, college guides, and promotional events. Alloy
Merchandising Group, our direct marketing and retail store division,
includes the dELiA*s, Alloy, CCS and Dan's Competition brand names and
sells apparel, accessories, footwear, room furnishings and action
sports equipment directly to the youth market through catalogs,
websites and retail stores. For further information regarding Alloy,
please visit our corporate website at (www.alloyinc.com).
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.
Alloy, Inc.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
10/31/2003 10/31/2004 10/31/2003 10/31/2004
Net merchandise revenues $48,558 $54,049 $108,557 $142,032
Sponsorship and other
revenues 57,193 55,954 147,140 142,383
--------------------------------------------
Total revenues 105,751 110,003 255,697 284,415
Cost of goods sold 52,473 56,830 131,574 147,877
--------------------------------------------
Gross profit 53,278 53,173 124,123 136,538
Selling and marketing
expenses 41,290 38,361 98,157 111,618
General and administrative
expenses 9,501 9,474 20,725 33,135
Amortization of acquired
intangible assets 2,083 1,724 5,763 4,913
Stock-based compensation 358 371 649 1,074
Restructuring charges 351 29 730 347
--------------------------------------------
Total operating expenses 53,583 49,959 126,024 151,087
(Loss) income from
operations (305) 3,214 (1,901) (14,549)
Interest and other income
(expense), net (970) (1,238) (687) (3,753)
--------------------------------------------
(Loss) income before
income taxes (1,275) 1,976 (2,588) (18,302)
Income tax expense 5,543 10 4,938 130
--------------------------------------------
Net (loss) income (6,818) 1,966 (7,526) (18,432)
Preferred stock dividend
and accretion 393 405 1,548 1,200
--------------------------------------------
Net (loss) income
attributable to common
stockholders ($7,211) $1,561 ($9,074) ($19,632)
Net (loss) income
attributable to common
stockholders per basic
share ($0.17) $0.04 ($0.22) ($0.46)
Net (loss) income
attributable to common
stockholders per diluted
share ($0.17) $0.04 ($0.22) ($0.46)
Weighted average basic
common shares
outstanding: 41,405,485 42,951,223 40,904,949 42,672,454
Diluted shares
outstanding per GAAP: 41,405,485 43,044,459 40,904,949 42,672,454
Reconciliation of EBTA
and Adjusted EBITDA to
GAAP Results (1):
-----------------------
Net (loss) income ($6,818) $1,966 ($7,526) ($18,432)
Income tax expense 5,543 10 4,938 130
Amortization of acquired
intangible assets 2,083 1,724 5,763 4,913
Stock-based compensation 358 371 649 1,074
Restructuring charges 351 29 730 347
----------------------------------------------------------------------
EBTA excluding stock-based
compensation,
restructuring and asset
write-downs $1,517 $4,100 $4,554 ($11,968)
Interest and other income
(expense), net (970) (1,238) (687) (3,753)
Depreciation and
amortization 2,108 2,119 4,358 6,551
----------------------------------------------------------------------
Adjusted EBITDA $4,595 $7,457 $9,599 ($1,664)
(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, October 31,
2004 2004
(audited) (unaudited)
Assets
Current Assets
Cash and cash equivalents $30,543 $11,636
Marketable securities 19,014 6,537
Accounts receivable, net 31,492 48,328
Inventories 29,021 42,907
Prepaid catalog costs 2,028 4,960
Other current assets 3,813 5,906
----------------------
Total current assets 115,911 120,274
Marketable securities 5,585 1,016
Property and equipment, net 27,234 25,153
Goodwill, net 274,796 277,615
Intangible and other assets, net 25,865 22,192
----------------------
Total assets $449,391 $446,250
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $28,740 $34,403
Deferred revenues 15,124 20,711
Accrued expenses and other current
liabilities 39,755 34,911
----------------------
Total current liabilities 83,619 90,025
Long term liabilities 743 5,082
Convertible debt 69,300 69,300
Series B Preferred Stock 14,434 15,634
Stockholders' Equity 281,295 266,209
----------------------
Total liabilities
and stockholders' equity $449,391 $446,250
CONTACT: Alloy, Inc.
Jim Johnson, 212-244-4307
SOURCE: Alloy, Inc.
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