RedEnvelope Reports Second Quarter Results; Provides Business
Outlook For Third Quarter, Full Fiscal Year SAN FRANCISCO, Oct. 28
/PRNewswire-FirstCall/ -- RedEnvelope, Inc. today reported
financial results for the second quarter of fiscal year 2004, ended
September 28, 2003. RedEnvelope reported total net revenues of $8.3
million for the quarter compared to $5.4 million in the second
quarter of the prior fiscal year. Net loss was $(2.8) million, or
$(6.56) per share, compared to a loss of $(3.7) million, or
$(11.60) per share in the second quarter of fiscal year 2003. For
the first half of fiscal year 2004, RedEnvelope reported total net
revenues of $26.1 million compared to $20.7 million in the first
half of the prior fiscal year. Net loss was $(4.0) million, or
$(10.39) per share, compared to a loss of $(6.0) million, or
$(19.70) per share in the first half of fiscal year 2003. On
September 24, 2003, the registration statement was declared
effective for RedEnvelope's initial public offering, pursuant to
which RedEnvelope sold 2.2 million shares of common stock at $14
each. The initial public offering closed on September 30, 2003,
just following the end of the second fiscal quarter and, as a
result, the net IPO proceeds of approximately $29.0 million were
received subsequent to quarter end. "We are pleased with our
results for the second quarter, during which we began the next
chapter of our history by becoming a public company. Our mission is
to change gift giving in America by making the experience fun for
both the giver and recipient, and by offering high-quality gifts
for all occasions," said Alison May, RedEnvelope's President and
Chief Executive Officer. "During the second quarter, our continued
focus on revenue growth and expense control contributed to our
improved results. We are especially pleased with the customer
response to our new baby, birthday and wedding assortments this
quarter, a period not tied to a major gift-giving event," she said.
"We launched a new catalog in the second quarter as part of our
focus on everyday gift giving to reduce revenue dependency on major
holidays," Ms. May continued. "Our strength is proprietary gifts
for all occasions in a wide price range, appropriate for events
that take place throughout the entire year." Recent Highlights --
In July 2003, RedEnvelope appointed Daniel R. Lyle to its Board of
Directors. Mr. Lyle was a partner at PricewaterhouseCoopers LLP
until June 2003. In early October 2003, Karen Edwards joined the
RedEnvelope Board following completion of the initial public
offering. Ms. Edwards was most recently Vice President, Worldwide
Marketing, with Yahoo! Inc. The Board of Directors currently has
eight members. -- At the end of the second fiscal quarter,
RedEnvelope's customer file totaled 1.5 million names. For the
second fiscal quarter, net revenues from existing customers
represented approximately 60% of total net revenues. In the second
fiscal quarter, RedEnvelope shipped approximately 125,000 orders.
-- In August 2003, RedEnvelope assumed direct control of the
operations at the company's Ohio distribution center. Prior to that
date, the staff had been managed by a third-party fulfillment
company. -- During the second fiscal quarter, RedEnvelope
simplified its shipping and handling rate structure to offer flat
rates for standard ground, two-day, and overnight shipping. Prior
to this, RedEnvelope had used a variable shipping and handling rate
model with the charge dependent on the dollar amount of the order.
-- In August 2003, RedEnvelope assumed management of its outbound
transportation relationships. Prior to that date, these
relationships had been managed by a third-party fulfillment
company. Ms. May added, "Our focus is on creating a brand that is
inspired, modern, stylish and approachable. We will continue to
emphasize ease-of-use for our customers through improvements to our
website and friendly, professional service at our call center. We
have initiatives underway to make searching for products easier,
and to ensure that personalization and gift delivery meet our high
standards. " Business Outlook The following business outlook
contains forward-looking statements describing management's current
expectations for future periods. The matters discussed in these
forward-looking statements are subject to numerous assumptions,
risks and uncertainties, some of which are listed or referred to in
the cautionary note below. Similarly, the forward-looking guidance
provided in this press release is based on limited information
available to RedEnvelope at this time, which is subject to change.
As a result of these uncertainties and information limits, actual
results in the future may differ materially from management's
current expectations. Although management's expectations may change
after the date of this release, RedEnvelope undertakes no
obligation to revise or update the guidance below. The lack of any
revision or update is not meant to imply continued affirmation of
the guidance below. Currently, RedEnvelope anticipates its net
revenues for the third quarter of fiscal year 2004 will be
approximately $39.5 million to $42.5 million. Net income for the
third quarter is currently anticipated to be approximately $4.3
million to $4.7 million. For the full fiscal year 2004, which ends
March 28, 2004, net revenues are currently expected to be between
$84 million and $88 million. Based on these revenue expectations,
RedEnvelope currently anticipates that results will range between a
net loss of $400,000 and a net profit of $200,000. Webcast of
Management Presentation RedEnvelope, Inc. will make a presentation
regarding these results and the Company's business outlook over the
Internet at 2:00 p.m. (PT) / 5:00 p.m. (ET) today. To listen,
please log on to http://www.redenvelope.com/, go to "About
RedEnvelope," and follow the link entitled "October 28, 2003
Management Presentation: Second-Quarter Results" that will be
posted on that page. After the webcast, interested parties may
access a replay through the same link. The replay of the webcast
will remain available on our website through midnight (ET) on
October 27, 2004. To access an electronic copy of this press
release, please visit Investor Relations under the "About Us" tab
at http://www.redenvelope.com/. RedEnvelope, Inc. is an online
retailer of upscale gifts for every occasion, every day.
RedEnvelope offers a unique assortment of imaginative gifts through
its catalog and website, http://www.redenvelope.com/ This press
release contains forward-looking statements that involve risks,
uncertainties and assumptions, such as statements regarding our
plans, objectives and future operations and estimates of our
financial results for future periods. Our actual results and the
timing of events could differ materially from those anticipated in
these forward-looking statements as a result of several factors.
Factors that could affect future performance include, but are not
limited to: economic conditions and changes in consumer spending
levels; any significant disruption of our operations due to network
or systems failures or disruptions, power outages, regulatory
actions, natural disasters or attacks; our limited operating
history; any decrease in shipping and handling revenues arising out
of a recent change to our shipping and handling rate policy that is
not offset by increases in net revenues; difficulties encountered
in predicting consumer preferences, managing inventory levels or
gaining access to popular products; increased or more effective
competition from other retailers; difficulties encountered in
managing our growth; difficulties encountered in, or increased
costs of, fulfillment; increased costs for, or delays in the
receipt of, merchandise ordered by us; seasonality of the retail
business; increases in shipping, advertising or marketing costs;
increases in sales or other taxes; lower than expected utilization
of electronic commerce by consumers; product returns that exceed
expectations; litigation that may have an adverse effect on our
financial results, product offerings or reputation; changes in
foreign currency exchange rates; changes in key management
personnel; difficulties encountered in properly staffing our
operations or providing satisfactory customer service; changes in
government or regulatory requirements affecting e-commerce that may
restrict, or increase the cost of, our operations, and other risk
factors described in detail in our Prospectus dated September 24,
2003, including, without limitation, those discussed under the
captions, "Risk Factors," "Business" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations,"
which is on file with the Securities and Exchange Commission (the
"SEC") and available at the SEC's website at http://www.sec.gov/.
These forward-looking statements are made only as of the date of
this press release, and RedEnvelope undertakes no obligation to
update or revise the forward-looking statements, whether as a
result of new information, future events or otherwise. MEDIA
CONTACT: Astrid Stevenson RedEnvelope, Inc. 415-371-9100, ext. 293
INVESTOR CONTACT: Jordan Goldstein RedEnvelope, Inc. 415-371-9100,
ext. 283 REDENVELOPE, INC. CONDENSED STATEMENT OF OPERATIONS
(unaudited) Thirteen Weeks Twenty-six Weeks Ended Ended Sept 28,
Sept 29, Sept 28, Sept 29, 2003 2002 2003 2002 (in thousands,
except per share data) Net revenues $8,329 $5,366 $26,050 $20,653
Cost of sales 4,297 3,005 13,347 11,192 Gross profit 4,032 2,361
12,703 9,461 Operating expenses: Fulfillment 1,538 1,386 4,251
3,787 Marketing 1,679 983 5,426 4,513 General and administrative
3,545 3,535 6,814 6,881 Total operating expenses 6,762 5,904 16,491
15,181 Loss from operations (2,730) (3,543) (3,788) (5,720)
Interest income 5 58 15 117 Interest expense (101) (191) (270)
(367) Net loss $(2,826) $(3,676) $(4,043) $(5,970) Net loss per
share - basic and diluted $(6.56) $(11.60) $(10.39) $(19.70)
Weighted average shares outstanding - basic and diluted 431 317 389
303 REDENVELOPE, INC. CONDENSED BALANCE SHEETS (unaudited)
September 28, March 30, September 29, 2003 2003 2002 (in thousands)
Current assets: Cash and cash equivalents $2,959 $4,997 $9,706
Accounts receivable, net 309 286 120 Receivable from underwriter,
IPO net proceeds 28,952 -- -- Inventory 10,749 9,716 9,478 Prepaid
advertising and other current assets 1,582 2,099 1,550 Total
current assets 44,551 17,098 20,854 Property and equipment, net
4,005 4,462 5,308 Other assets and restricted cash 653 566 400
Total assets $49,209 $22,126 $26,562 Current liabilities: Accounts
payable and accrued expenses $11,126 $8,123 $6,137 Short-term loan
1,242 1,123 5,919 Capital lease obligations, current 762 673 433
Total current liabilities 13,130 9,919 12,489 Capital lease
obligations, long-term 1,147 1,102 1,628 Total liabilities 14,277
11,021 14,117 Mandatorily redeemable convertible preferred stock
82,556 82,556 82,372 Stockholders' deficit: Series A preferred
stock 953 953 953 Common stock 26 4 4 Additional paid-in capital
29,731 1,322 1,305 Deferred compensation (723) (162) (362) Notes
receivable from stockholders (44) (44) (44) Accumulated deficit
(77,567) (73,524) (71,782) Accumulated other comprehensive income
-- -- (1) Total stockholders' deficit (47,624) (71,451) (69,927)
Total liabilities, mandatorily redeemable convertible preferred
stock and stockholders' deficit $49,209 $22,126 $26,562 DATASOURCE:
RedEnvelope, Inc. CONTACT: MEDIA: Astrid Stevenson, ext. 293, or
INVESTOR: Jordan Goldstein, ext. 283, both of RedEnvelope, Inc.,
+1-415-371-9100 Web site: http://www.redenvelope.com/
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