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| Blue Nile Announces Third Quarter 2007 Financial Results |
SEATTLE, November 6, 2007 – Blue Nile, Inc. (Nasdaq: NILE) reported financial results for its third quarter ended September 30, 2007. Blue Nile reported that its third quarter net sales increased 26.5% to $67.4 million, compared to $53.2 million in the third quarter of 2006. During the quarter, operating income rose 67.3% to $3.6 million, compared to $2.2 million in the third quarter of 2006. Net income in the third quarter totaled $3.0 million, or $0.18 per diluted share, compared to $1.8 million, or $0.11 per diluted share, in the prior year. Net income per diluted share increased 63.6% year over year. Net cash provided by operating activities was $33.2 million for the trailing twelve month period ended September 30, 2007, compared to $30.3 million for the trailing twelve month period ended October 1, 2006. Non-GAAP adjusted EBITDA increased $1.5 million to $5.4 million for the third quarter 2007, compared to $3.9 million for the third quarter 2006. "Our third quarter performance was excellent, with strong momentum in all product categories,” said Mark Vadon, Chief Executive Officer. “Our results reflect the way in which the Blue Nile brand and experience resonate with our customers. We executed well across all areas of the business and generated exceptional profitability. Our international markets made tremendous progress during the quarter, with 105% year over year growth." Other Financial Highlights
Financial Guidance The following forward-looking statements reflect Blue Nile's expectations as of November 6, 2007. Actual results may be materially affected by many factors, such as consumer spending, economic conditions and the various factors detailed below. Expectations for the fourth quarter 2007 (Quarter Ending December 30, 2007):
Expectations for the full year 2007 (Year Ending December 30, 2007):
Forward-Looking Statements This press release contains forward-looking statements that include risks and uncertainties, including, without limitation, all statements related to future financial performance, estimated stock-based compensation expense, anticipated effective tax rate, anticipated capital expenditures and plans to grow our business. Words such as “expect,” “anticipate,” “believe,” “will” and similar expressions are intended to identify forward-looking statements. These forward-looking statements are based upon our current expectations. Forward-looking statements involve risks and uncertainties. Our actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation, risks related to our fluctuating operating results, seasonality in our business, our ability to acquire products on reasonable terms, our online business model, demand for our products, our ability to attract customers in a cost effective manner, our limited operating history, the strength of our brand, competition, fraud, system interruptions, our ability to fulfill orders and other risks detailed in our filings with the Securities and Exchange Commission, including our quarterly reports on Form 10-Q for the quarters ended April 1, 2007 and July 1, 2007, and our Annual Report on Form 10-K for the year ended December 31, 2006. Additional information will also be set forth in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, which we expect to file with the Securities and Exchange Commission on or before November 9, 2007. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. All forward-looking statements are qualified in their entirety by this cautionary statement, and Blue Nile undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date hereof. Conference Call Blue Nile will host a conference call to discuss its third quarter 2007 financial results at 2:00 p.m. Pacific time today. A live webcast of the conference call may be accessed at http://investor.bluenile.com. Following the completion of the call, a recorded replay of the webcast will be available for 30 days at the same Internet address. This call will contain forward-looking statements and other material information regarding the Company's financial and operating results. In the event that any non-GAAP financial measure is discussed on the conference call that is not described in this release, related complementary information will be made available at http://investor.bluenile.com as soon as practicable after the conclusion of the conference call. Non-GAAP Financial Measures To supplement Blue Nile's consolidated financial statements presented in accordance with generally accepted accounting principles (“GAAP”), Blue Nile uses non-GAAP adjusted EBITDA and non-GAAP free cash flow as measures of certain components of financial performance. Blue Nile defines non-GAAP adjusted EBITDA as earnings before interest and other income, taxes, depreciation and amortization, adjusted to exclude the effects of stock-based compensation expense. Blue Nile defines non-GAAP free cash flow as net cash provided by (used in) operating activities less cash outflows for purchases of fixed assets, including internal use software and website development. Blue Nile's management does not itself, nor does it suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors should also note that the non-GAAP financial measures used by Blue Nile may not be the same non-GAAP financial measures, and may not be calculated in the same manner, as that of other companies. Whenever Blue Nile uses such non-GAAP financial measures, it provides a reconciliation of the non-GAAP financial measures to the most closely applicable GAAP financial measures. Investors are encouraged to review the related GAAP financial measures and the reconciliation of the non-GAAP financial measures to their most directly comparable GAAP financial measures. Blue Nile's management believes that non-GAAP adjusted EBITDA and non-GAAP free cash flow, as defined, provide meaningful supplemental information to the company and to investors. Blue Nile believes that both management and investors benefit from referring to these non-GAAP measures in assessing the performance of Blue Nile and when planning and forecasting future periods. Further, management believes that the inclusion of the non-GAAP adjusted EBITDA and non-GAAP free cash flow calculations provide consistency in Blue Nile's financial reporting and comparability with similar companies in Blue Nile's industry. A reconciliation of non-GAAP adjusted EBITDA is as follows (in thousands):
Quarter ended, Quarter ended,
September 30, 2007 October 1, 2006
Net income $ 2,972 $ 1,824
Income tax expense 1,601 1,007
Stock-based compensation 1,385 1,259
Depreciation/Amortization 408 490
Interest and other income, net (960) (671)
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Non-GAAP adjusted EBITDA 5,406 3,909
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Year to date Year to date
Quarter ended, Quarter ended,
September 30, 2007 October 1, 2006
Net income $ 9,916 $ 7,311
Income tax expense 5,367 3,753
Stock-based compensation 4,047 3,098
Depreciation/Amortization 1,184 1,441
Interest and other income, net (2,951) (2,637)
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Non-GAAP adjusted EBITDA 17,563 12,966
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A reconciliation of non-GAAP adjusted EBITDA is as follows (in thousands):
Twelve months ended Twelve months ended
September 30, 2007 October 1, 2006
Net cash provided by operating
activities $33,242 $30,329
Purchases of fixed assets, including
internal-use software and
website development (3,795) (2,017)
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Non-GAAP free cash flow $29,447 $28,312
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About Blue Nile, Inc. Blue Nile, Inc. is the leading online retailer of diamonds and fine jewelry. The Company delivers the ultimate customer experience, providing consumers with a superior way to buy engagement rings, wedding rings and fine jewelry. Blue Nile offers in-depth educational materials and unique online tools that place consumers in control of the jewelry shopping process. The Company has some of the highest quality standards in the industry and offers thousands of independently certified diamonds and fine jewelry at prices significantly below traditional retail. Blue Nile can be found online at www.bluenile.com, www.bluenile.ca and www.bluenile.co.uk. Blue Nile's shares are traded on the Nasdaq Stock Market LLC under the symbol NILE.
Blue Nile, INC.
Condensed Consolidated Balance Sheets
(in thousands)
September 30, December 31,
2007 2006
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $74,299 $78,540
Restricted cash - 117
Marketable securities - 19,767
----------- -----------
Total cash and marketable securities 74,299 98,424
Trade accounts receivable 1,509 1,484
Other accounts receivable 695 156
Inventories 15,298 14,616
Deferred income taxes 740 598
Prepaid federal income taxes 2,985 -
Other prepaids and current assets 1,127 740
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Total current assets 96,653 116,018
Property and equipment, net 5,868 3,391
Intangible assets, net 295 319
Deferred income taxes 2,951 2,285
Other assets 64 93
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Total assets $105,831 $122,106
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Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $40,334 $66,625
Accrued liabilities 5,136 7,315
Current portion of deferred rent 244 197
----------- -----------
Total current liabilities 45,714 74,137
Deferred rent, less current portion 617 666
Commitments and contingencies
Stockholders' equity:
Common stock 19 19
Additional paid-in capital 131,348 115,751
Deferred compensation (10) (180)
Accumulated other comprehensive loss 44 (2)
Retained earnings 17,026 7,110
Treasury stock (88,927) (75,395)
----------- -----------
Total stockholders' equity 59,500 47,303
----------- -----------
Total liabilities and stockholders'
equity $105,831 $122,106
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Blue Nile, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
(in thousands, except per share data)
Quarter ended Year to date ended
September 30, October 1, September 30, October 1,
2007 2006 2007 2006
Net sales $67,355 $53,248 $207,358 $160,858
Cost of sales 53,998 42,842 165,809 128,788
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Gross profit 13,357 10,406 41,549 32,070
Selling, general and
administrative expenses 9,744 8,246 29,217 23,643
--------- --------- --------- --------
Operating income 3,613 2,160 12,332 8,426
Other income (expense), net:
Interest income 947 670 2,723 2,536
Other income 13 1 228 101
--------- --------- --------- --------
Total other income
(expense), net 960 671 2,951 2,637
--------- --------- --------- --------
Income before income taxes 4,573 2,831 15,283 11,064
Income tax expense 1,601 1,007 5,367 3,753
--------- --------- --------- --------
Net income $2,972 $1,842 $9,916 $7,311
--------- --------- --------- --------
--------- --------- --------- --------
Basic net income per share $0.19 $0.11 $0.62 $0.44
--------- --------- --------- --------
Diluted net income per share $0.18 $0.11 $0.59 $0.42
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Shares used for computation
(in thousands):
Basic 15,959 16,014 15,879 16,747
Diluted 16,912 16,670 16,756 17,489
Blue Nile, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Year to date ended
September 30, October 1,
2007 2006
Operating activities:
Net income $9,916 $7,311
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 1,184 1,441
(Gain) loss on disposal of fixed assets (6) 4
Stock-based compensation 4,129 3,155
Deferred income taxes (809) 2,222
Tax benefit from exercise of stock options 6,209 1,007
Excess tax benefit from exercise of
stock options (1,599) (44)
Changes in assets and liabilities:
Receivables, net (563) 900
Inventories (683) (912)
Prepaid federal income taxes (2,985) -
Other prepaid expenses and assets (360) (5)
Accounts payable (26,291) (20,312)
Accrued liabilities (2,180) (1,378)
Deferred rent (2) (151)
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Net cash used in operating activities (14,040) (6,762)
Investing activities:
Purchases of property and equipment (3,577) (1,690)
Proceeds from the sale of property
and equipment 8 1
Purchases of marketable securities (20,230) (55,042)
Proceeds from the maturity of
marketable securities 40,000 68,000
Transfers of restricted cash 120 -
--------- ---------
Net cash provided by investing
activities 16,321 11,269
Financing activities:
Repurchase of common stock (13,532) (46,370)
Proceeds from stock option exercises 5,366 1,685
Excess tax benefit from exercise of
stock options 1,599 44
--------- ---------
Net cash used in financing activities (6,567) (52,419)
Effect of exchange rate changes on
cash and cash equivalents 45 -
--------- ---------
Net decrease in cash and cash
equivalents (4,241) (47,912)
Cash and cash equivalents, beginning
of period 78,540 71,921
--------- ---------
Cash and cash equivalents, end of
period $74,299 $24,009
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