Cross-selling opportunities from the recent purchase of e-mail services provider e-Dialog and overall growth in e-commerce is giving GSI Commerce Inc. a financial boost. The e-commerce platform provider posted fiscal Q2 revenue of $193.2 million, up 47% from $131.3 million from the same time period a year earlier.
The revenue beat GSI’s expectations for the quarter, and, despite U.S. economic woes, the company doesn’t seem to be worried about meeting revenue expectations for the rest of the year either. GSI reiterated its earlier projection of $1 billion in revenue in 2008, which would be a 33% increase from $750 million in 2007.
“GSI’s second quarter performance was excellent. Our strategy had us well positioned, we executed strongly, and industry trends were favorable – clearly a winning formula,” says Michael G. Rubin, chairman, president and CEO of GSI. “Net revenues grew close to 50% and above our guidance range. The momentum in our business along with our focus on capital efficiency should enhance free cash flow in 2008.”
The company reported a net loss of $19 million, up from $5 million a year earlier. The higher loss stems from the recent acquisitions of UK-based fulfillment and customer service provider Zendor.com, e-commerce platform provider Accretive Commerce and e-Dialog. GSI spent $275 million to buy those companies.
GSI secured five deals to launch e-commerce web sites in the past quarter, including one with surf-themed apparel company Quicksilver and another with shoe and accessory retailer Kenneth Cole. Analysts say the new contracts put GSI near the high end of its goal of adding five to 10 new retail clients during its fiscal year.
GSI also signed deals this quarter with two retailers it will not name. Both merchants—one a regional department store chain, the other a woman’s apparel retailer—are moving their e-commerce sites to GSI’s platform.
The firm’s e-mail company, e-Dialog, secured eight new contracts in Q2, including with sunglass merchant Oakley and food and gift retailer Hickory Farms. GSI Interactive, which offers such services as search engine optimization, affiliate marketing and e-commerce site assessment, signed 17 deals, including with major toy retailer Toys “R” Us.
Deutsche Bank Securities Inc. maintained it “Buy” rating for GSI, citing the e-Dialog purchase as prime cross-selling opportunity.
“Cross selling initiatives are beginning to play out well, especially for the e-mail business,” Deutsche Bank said in its analysis. “We believe as GSI migrates its 40+ e-mail customers to the e-Dialog platform, incremental services revenues could be realized over the next few quarters. Business at e-Dialog remains robust and we continue to expect e-mail to be an area of marketing services that is highly attractive.”
GSI will reap the rewards of more retailers selling online, adds Colin Sebastian, an analyst with Lazard Capital Markets.
“We believe GSIC is well-positioned to benefit from ongoing multi-channel retail
trends and moves by traditional retailers to establish stronger online footprints,” Sebastian says. Lazard had estimated e-commerce spending to grow 17% in 2008, although Sebastian says it's trending below that at about 13%.
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