Sales Total $66.9 Million, Representing Growth of 2.4%
Non-GAAP Adjusted EBITDA Increases 17.4%, Reaching Record Third
Quarter Level
Earnings Per Diluted Share Increase to $0.17 from $0.15
Company Raises Financial Guidance
SEATTLE--(BUSINESS WIRE)--Nov. 5, 2009--
Blue Nile, Inc. (Nasdaq:NILE), the leading online retailer of diamonds
and fine jewelry, today reported financial results for its third quarter
ended October 4, 2009.
Net sales of $66.9 million increased 2.4% compared to the third quarter
of 2008 on strength in bridal jewelry sales and growth in international
markets. Operating income for the quarter grew 17.6% to $3.9 million
compared to $3.3 million in the third quarter last year. Operating
margin expanded 80 basis points to 5.8% of net sales compared to 5.0% of
net sales in the third quarter of 2008. Net income improved 10.3% to
$2.6 million, or $0.17 per diluted share compared to $2.3 million, or
$0.15 per diluted share in the third quarter of 2008.
Non-GAAP adjusted EBITDA for the third quarter totaled $6.3 million, an
increase of 17.4% over the same quarter in 2008 and a record level for
any third quarter in the Company’s history. As a percent of sales,
non-GAAP adjusted EBITDA improved to 9.5% compared to 8.3% in the third
quarter of 2008. Net cash provided by operating activities totaled $23.4
million for the trailing twelve month period ended October 4, 2009.
Non-GAAP free cash flow for the trailing twelve month period ended
October 4, 2009 increased to $20.9 million from $20.1 million a year ago.
“Our third quarter results were excellent and reflect continued positive
momentum in the business. We returned to top line growth and delivered
strong profitability,” said Diane Irvine, Chief Executive Officer. “The
Blue Nile brand is resonating with consumers in the current environment,
and we are gaining market share. As we look toward the important holiday
season, we are well positioned with a broad selection of diamond
engagement rings and fine jewelry and a newly redesigned website to
showcase these products.”
Selected Financial Highlights
-
International sales grew 27.5% in the quarter to a record level $8.8
million compared to $6.9 million in the third quarter of 2008.
Excluding the impact from changes in foreign exchange rates,
international sales increased 34.8%.
-
Gross profit for the quarter totaled $14.8 million. As a percent of
sales, gross profit improved 180 basis points to 22.1% compared to
20.3% for the third quarter of 2008. The Company continued to achieve
year over year gross margin improvement due largely to improved
product sourcing in both diamonds and jewelry.
-
Selling, general and administrative expenses for the quarter were
$10.9 million, compared to $10.0 million in the third quarter of 2008.
The increase was due to lower expenses in the third quarter of 2008
related to forfeited options and a reduction in incentive accruals. In
addition, 2009 includes expenses related to technology investments in
support of key initiatives such as the website redesign. Selling,
general and administrative expenses include stock-based compensation
expense of $1.8 million in the third quarter of 2009, compared to $1.6
million in the third quarter last year.
-
Net income per diluted share for the quarter includes stock-based
compensation expense of $0.08 compared to $0.07 for the third quarter
of 2008.
-
Cash and cash equivalents plus short-term investments at the end of
the third quarter totaled $47.5 million compared to $26.6 million at
the end of the third quarter last year.
Financial Guidance
“The trends in the business during the third quarter improved
sequentially, and we project that trend to continue in the fourth
quarter. Based on our third quarter results and our expectations for the
fourth quarter, we are raising our guidance,” said Marc Stolzman, Chief
Financial Officer. “We are projecting fourth quarter net sales between
$100 million and $109 million, and diluted earnings per share in the
range of $0.35 to $0.39.”
Forward-Looking Statements
This press release contains forward-looking statements that include
risks and uncertainties, including, without limitation, all statements
related to future financial and business performance, market opportunity
and plans to grow our business. Words such as “expect,” “anticipate,”
“believe,” “project,” “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 general economic
conditions, 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, 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 Annual Report on Form 10-K for the year ended
January 4, 2009. Additional information will also be set forth in our
Quarterly Report on Form 10-Q for the quarter ended October 4, 2009,
which we expect to file with the Securities and Exchange Commission on
or before November 13, 2009. 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
The Company will host a conference call to discuss its third quarter
financial results today at 2:00 p.m. PT/5:00 p.m. ET. 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. The Company reports sales information
in accordance with GAAP. Internally, management monitors its sales
performance on a non-GAAP basis that eliminates the positive or negative
effects that result from translating international sales into U.S.
dollars (the “constant exchange rate basis”). 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 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 these 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, as well as international sales on a
constant exchange rate basis 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. Management believes the
constant exchange rate measurement provides a more representative
assessment of the sales performance and provides better comparability
between reporting periods.
A reconciliation of non-GAAP adjusted EBITDA to net income is as follows
(in thousands):
|
|
|
Quarter ended
|
|
Quarter ended
|
|
|
October 4, 2009
|
September 28, 2008
|
|
Net income
|
|
$
|
2,575
|
|
|
$
|
2,335
|
|
|
Income tax expense
|
|
|
1,386
|
|
|
|
1,226
|
|
|
Other income, net
|
|
|
(100
|
)
|
|
|
(279
|
)
|
|
Depreciation and amortization
|
|
|
655
|
|
|
|
559
|
|
|
Stock-based compensation
|
|
|
1,827
|
|
|
|
1,560
|
|
|
Adjusted EBITDA
|
|
$
|
6,343
|
|
|
$
|
5,401
|
|
|
|
|
Year to date ended
|
|
Year to date ended
|
|
|
October 4, 2009
|
September 28, 2008
|
|
Net income
|
|
$
|
7,359
|
|
|
$
|
8,111
|
|
|
Income tax expense
|
|
|
3,962
|
|
|
|
4,332
|
|
|
Other income, net
|
|
|
(218
|
)
|
|
|
(1,770
|
)
|
|
Depreciation and amortization
|
|
|
1,868
|
|
|
|
1,512
|
|
|
Stock-based compensation
|
|
|
5,495
|
|
|
|
5,208
|
|
|
Adjusted EBITDA
|
|
$
|
18,466
|
|
|
$
|
17,393
|
|
A reconciliation of differences of non-GAAP free cash flow from the
comparable GAAP measure of net cash provided by (used in) operating
activities is as follows (in thousands):
|
|
|
Quarter ended
|
|
Quarter ended
|
|
|
October 4, 2009
|
September 28, 2008
|
|
Net cash (used in) provided by operating activities
|
|
$
|
(263
|
)
|
|
$
|
1,454
|
|
Purchases of fixed assets, including internal-
use software and
website development
|
|
|
(855
|
)
|
|
|
(673
|
)
|
|
Non-GAAP free cash flow
|
|
$
|
(1,118
|
)
|
|
$
|
781
|
|
|
|
|
Twelve months ended
|
|
Twelve months ended
|
|
|
October 4, 2009
|
September 28, 2008
|
|
Net cash provided by operating activities
|
|
$
|
23,381
|
|
|
$
|
23,003
|
|
Purchases of fixed assets, including internal-
use software and
website development
|
|
|
(2,520
|
)
|
|
|
(2,873
|
)
|
|
Non-GAAP free cash flow
|
|
$
|
20,861
|
|
|
$
|
20,130
|
|
The following table reconciles year-over-year international sales
percentage increases (decreases) from the GAAP sales measures to the
non-GAAP constant exchange rate basis:
|
Quarter ended
October 4, 2009
|
Year over year growth
|
Effect of foreign exchange movements
|
Year over year growth on constant exchange rate basis
|
|
International Sales
|
27.5%
|
(7.3%)
|
34.8%
|
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
|
|
(Unaudited)
|
|
(in thousands)
|
|
|
|
|
|
|
|
October 4,
|
|
January 4,
|
|
|
2009
|
|
|
2009
|
|
|
|
|
|
|
|
|
ASSETS
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
32,494
|
|
|
$
|
54,451
|
|
|
Short-term investments
|
|
15,000
|
|
|
|
-
|
|
|
Trade accounts receivable
|
|
1,236
|
|
|
|
984
|
|
|
Other accounts receivable
|
|
142
|
|
|
|
725
|
|
|
Inventories
|
|
17,846
|
|
|
|
18,834
|
|
|
Deferred income taxes
|
|
223
|
|
|
|
670
|
|
|
Prepaids and other current assets
|
|
1,078
|
|
|
|
1,069
|
|
|
Total current assets
|
|
68,019
|
|
|
|
76,733
|
|
|
Property and equipment, net
|
|
7,711
|
|
|
|
7,558
|
|
|
Intangible assets, net
|
|
338
|
|
|
|
271
|
|
|
Deferred income taxes
|
|
6,228
|
|
|
|
5,014
|
|
|
Other assets
|
|
144
|
|
|
|
89
|
|
|
Total assets
|
$
|
82,440
|
|
|
$
|
89,665
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
Current liabilities:
|
|
|
|
|
|
|
Accounts payable
|
$
|
42,334
|
|
|
$
|
62,291
|
|
|
Accrued liabilities
|
|
4,976
|
|
|
|
6,607
|
|
|
Current portion of long-term financing obligation
|
|
43
|
|
|
|
41
|
|
|
Current portion of deferred rent
|
|
205
|
|
|
|
205
|
|
|
Total current liabilities
|
|
47,558
|
|
|
|
69,144
|
|
|
|
|
|
|
|
|
|
Long-term financing obligation, less current portion
|
|
807
|
|
|
|
839
|
|
|
Deferred rent, less current portion
|
|
226
|
|
|
|
374
|
|
|
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
|
|
Common stock
|
|
20
|
|
|
|
20
|
|
|
Additional paid-in capital
|
|
152,017
|
|
|
|
144,913
|
|
|
Accumulated other comprehensive income
|
|
95
|
|
|
|
17
|
|
|
Retained earnings
|
|
43,558
|
|
|
|
36,199
|
|
|
Treasury stock
|
|
(161,841
|
)
|
|
|
(161,841
|
)
|
|
Total stockholders' equity
|
|
33,849
|
|
|
|
19,308
|
|
|
Total liabilities and stockholders' equity
|
$
|
82,440
|
|
|
$
|
89,665
|
|
|
BLUE NILE, INC.
|
|
Condensed Consolidated Statements of Operations
|
|
(Unaudited)
|
|
(in thousands, except per share data)
|
|
|
|
|
|
|
|
Quarter ended
|
|
Year to date ended
|
|
|
October 4,
|
|
September 28,
|
|
October 4,
|
|
September 28,
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
66,943
|
|
$
|
65,376
|
|
$
|
199,198
|
|
$
|
209,542
|
|
Cost of sales
|
|
52,146
|
|
|
52,114
|
|
|
156,168
|
|
|
167,233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
14,797
|
|
|
13,262
|
|
|
43,030
|
|
|
42,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and
|
|
|
|
|
|
|
|
|
|
|
|
|
administrative expenses
|
|
10,936
|
|
|
9,980
|
|
|
31,927
|
|
|
31,636
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
3,861
|
|
|
3,282
|
|
|
11,103
|
|
|
10,673
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income, net
|
|
23
|
|
|
184
|
|
|
101
|
|
|
1,299
|
|
Other income, net
|
|
77
|
|
|
95
|
|
|
117
|
|
|
471
|
|
Total other income, net
|
|
100
|
|
|
279
|
|
|
218
|
|
|
1,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
3,961
|
|
|
3,561
|
|
|
11,321
|
|
|
12,443
|
|
Income tax expense
|
|
1,386
|
|
|
1,226
|
|
|
3,962
|
|
|
4,332
|
|
Net income
|
$
|
2,575
|
|
$
|
2,335
|
|
$
|
7,359
|
|
$
|
8,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share
|
$
|
0.18
|
|
$
|
0.16
|
|
$
|
0.51
|
|
$
|
0.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per share
|
$
|
0.17
|
|
$
|
0.15
|
|
$
|
0.49
|
|
$
|
0.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used for computation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
14,538
|
|
|
14,621
|
|
|
14,515
|
|
|
15,080
|
|
Diluted
|
|
15,377
|
|
|
15,200
|
|
|
15,152
|
|
|
15,723
|
|
BLUE NILE, INC.
|
|
Condensed Consolidated Statements of Cash Flow
|
|
(Unaudited)
|
|
(in thousands)
|
|
|
|
|
|
Year to date ended
|
|
|
October 4,
|
|
September 28,
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
Operating activities:
|
|
|
|
|
|
|
Net income
|
$
|
7,359
|
|
|
$
|
8,111
|
|
|
Adjustments to reconcile net income to net cash provided by
|
|
|
|
|
|
|
(used in) operating activities:
|
|
|
|
|
|
|
Depreciation and amortization
|
|
1,868
|
|
|
|
1,512
|
|
|
Loss on disposal of property and equipment
|
|
62
|
|
|
|
20
|
|
|
Stock-based compensation
|
|
5,615
|
|
|
|
5,298
|
|
|
Deferred income taxes
|
|
(767
|
)
|
|
|
(981
|
)
|
|
Tax benefit from exercise of stock options
|
|
214
|
|
|
|
511
|
|
|
Excess tax benefit from exercise of stock options
|
|
(47
|
)
|
|
|
(141
|
)
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
Receivables
|
|
331
|
|
|
|
1,195
|
|
|
Inventories
|
|
988
|
|
|
|
2,944
|
|
|
Prepaid federal income taxes
|
|
-
|
|
|
|
(440
|
)
|
|
Prepaid expenses and other assets
|
|
(64
|
)
|
|
|
30
|
|
|
Accounts payable
|
|
(19,964
|
)
|
|
|
(45,380
|
)
|
|
Accrued liabilities
|
|
(1,632
|
)
|
|
|
(5,093
|
)
|
|
Deferred rent and other
|
|
(147
|
)
|
|
|
(78
|
)
|
|
Net cash used in operating activities
|
|
(6,184
|
)
|
|
|
(32,492
|
)
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
(2,063
|
)
|
|
|
(1,553
|
)
|
|
Proceeds from the sale of property and equipment
|
|
-
|
|
|
|
10
|
|
|
Purchase of short-term investments
|
|
(15,000
|
)
|
|
|
-
|
|
|
Net cash used in investing activities
|
|
(17,063
|
)
|
|
|
(1,543
|
)
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
Repurchase of common stock
|
|
-
|
|
|
|
(65,273
|
)
|
|
Proceeds from stock option exercises
|
|
1,195
|
|
|
|
2,984
|
|
|
Excess tax benefit from exercise of stock options
|
|
47
|
|
|
|
141
|
|
|
Principal payments under long-term financing obligation
|
|
(30
|
)
|
|
|
(28
|
)
|
|
Net cash provided by (used in) financing activities
|
|
1,212
|
|
|
|
(62,176
|
)
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
78
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
(21,957
|
)
|
|
|
(96,202
|
)
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period
|
|
54,451
|
|
|
|
122,793
|
|
|
Cash and cash equivalents, end of period
|
$
|
32,494
|
|
|
$
|
26,591
|
|
Source: Blue Nile, Inc.
Blue Nile, Inc.
Eileen Askew, 206.336.6745 (Investors)
bluenileir@bluenile.com
or
John
Baird, 206.336.6805 (Media)
johnb@bluenile.com
|
