SEATTLE, Feb. 12 /PRNewswire-FirstCall/ -- Blue Nile, Inc.
(Nasdaq: NILE) today reported financial results for its fourth quarter and
fiscal year ended December 30, 2007.
Net sales grew 23.3% to $111.9 million, compared to $90.7 million in the
fourth quarter of 2006. Operating income for the quarter rose 24.0% to
$10.1 million from $8.1 million in the fourth quarter of 2006. Net income
totaled $7.5 million, an increase of 31.1% over the fourth quarter last year.
Earnings per diluted share increased 28.6% to $0.45, compared to $0.35 in the
fourth quarter last year. Non-GAAP adjusted EBITDA increased 26.1% to
$12.4 million for the quarter, compared to $9.8 million for the fourth quarter
of 2006.
For the full year, Blue Nile reported net sales of $319.3 million, an
increase of 26.9% from fiscal year 2006. Operating income rose 35.4% to
$22.4 million from $16.6 million for the prior year. Net income for the year
increased 33.6% to $17.5 million, and net income per diluted share increased
36.8% to $1.04. Non-GAAP adjusted EBITDA for 2007 increased 31.4% to $29.9
million.
"We are very pleased with our financial performance for the fourth
quarter, which reflects excellent growth in sales and profitability. We
believe our results are even more impressive given the overall weakness in the
retail jewelry category during the holiday season," said Mark Vadon, Executive
Chairman. "The year 2007 was exceptional for Blue Nile -- we delivered
outstanding sales growth, even stronger earnings growth, and ended the year
with a very healthy cash balance of $123 million. We expanded our market share
domestically and made significant progress in our international business.
"As we enter 2008, we are well positioned to enhance our category
leadership," continued Vadon. "Our competitive position is strong, and we have
an incredible team that is among the best in all of e-commerce. Given the
current economic environment, however, we believe it is prudent to be
extremely cautious in our expectations for the year. There is tremendous
uncertainty in the luxury retail sector, which is experiencing a widely
reported consumer slowdown. Within this challenging environment, we will be
disciplined in our execution of our unique business model. We will continue to
focus obsessively on our customers, providing an exceptional Blue Nile
experience. I firmly believe that challenging times can provide opportunities
to create great value for our shareholders over the long term."
Blue Nile announced today that its Board of Directors authorized the
repurchase of up to an additional $100 million of the Company's common stock
over 24 months. The Company's current repurchase authorization now totals
$150 million. The timing and amount of any shares repurchased will be
determined by the Company's management based on its evaluation of market
conditions and other factors. Repurchases may also be made under a Rule 10b5-1
plan, which would permit shares to be repurchased when the Company might
otherwise be precluded from doing so under insider trading laws.
In a separate release today, the Company announced Mark Vadon has assumed
the new role of Executive Chairman of Blue Nile. Diane Irvine has been named
the new Chief Executive Officer.
Selected Financial Highlights
-- Gross profit for the quarter grew 25.9% to $23.7 million, from
$18.8 million for the fourth quarter of 2006. Gross profit as a
percentage of sales increased to 21.1% for the quarter, compared to
20.7% for the fourth quarter of 2006.
-- Selling, general and administrative expense for the quarter was
$13.6 million, compared to $10.7 million in the fourth quarter of
2006. Selling, general and administrative expense for the quarter
includes stock-based compensation expense of $1.7 million, compared to
$1.2 million in the fourth quarter of the prior year.
-- Net income per diluted share for the quarter includes stock-based
compensation expense of $0.06, compared to $0.04 for the fourth
quarter of 2006.
-- International sales totaled $7.2 million in the quarter, an increase
of 155% year over year. For the full year, international sales totaled
$17.2 million, a 108% increase compared to sales of $8.3 million for
fiscal 2006.
-- For the full year, net cash provided by operating activities was
$41.5 million compared to $40.5 million for fiscal year 2006.
Non-GAAP free cash flow for the year totaled $36.6 million, compared
to $38.6 million in the prior year. Free cash flow for 2007 includes
the change in deferred income taxes related to the full utilization of
net operating losses for income tax purposes in 2006, as well as
higher capital expenditures for 2007 related primarily to the
expansion of the Company's domestic fulfillment center.
-- The Company's cash and cash equivalents totaled $122.8 million at
December 30, 2007.
-- The effective tax rate for the quarter was 33.3%, compared to 35.5%
for the fourth quarter of 2006. The lower tax rate is primarily due to
deferred tax asset adjustments. The Company's effective tax rate for
fiscal year 2007 was 34.3%, compared to 34.6% for fiscal year 2006.
-- Capital expenditures in the fourth quarter totaled $1.3 million,
compared to $0.2 million in the fourth quarter of 2006. Full year 2007
capital expenditures totaled $4.9 million compared to $1.9 million in
2006. The higher capital expenditures for 2007 relate primarily to
the expansion of the Company's domestic fulfillment center.
-- During the quarter, the Company repurchased 94,100 shares of its
common stock for $6.5 million. For the full year, the Company
repurchased 438,755 shares of its common stock for $20.0 million.
Financial Guidance
The Company announced its initial financial guidance for the first quarter
and fiscal year 2008. The following forward-looking statements reflect Blue
Nile's expectations as of February 12, 2008. Actual results may be materially
affected by many factors, such as consumer spending, economic conditions and
the various factors detailed below.
Expectations for the first quarter 2008 (Quarter Ending March 30, 2008):
-- Net sales are expected to be relatively flat with Q1 2007.
-- Net income is expected to be in a range of $0.11 to $0.14 per diluted
share. The estimated net income per diluted share includes the
estimated impact of stock compensation expense of approximately $0.07
per diluted share, compared to $0.05 per diluted share in the first
quarter of 2007.
-- The effective tax rate for the quarter is expected to be approximately
35%.
Expectations for fiscal year 2008 (Year Ending January 4, 2009):
-- Our goal is to grow net sales by at least 10% for the year and to grow
non-GAAP adjusted EBITDA by at least 10%.
-- Our net income per diluted share goal for 2008 is to achieve a GAAP
EPS level that approximates 2007.
-- Stock compensation expense for the year is estimated at approximately
$0.29 per diluted share, an incremental impact of $0.07 per diluted
share compared to 2007.
-- The effective tax rate for the year is expected to be approximately
35%.
-- Capital expenditures are expected to be approximately $2.5 million.
Blue Nile reports fiscal results on a 52/53-week format. The Company's
fiscal 2008 reporting period includes 53 weeks, with the additional week
falling into the fourth quarter.
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, July 1, 2007, and September 30,
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 Annual Report on Form
10-K for the year ended December 30, 2007, which we expect to file with the
Securities and Exchange Commission on or before February 28, 2008. 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 fourth quarter and
full year 2007 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 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
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, 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
December 30, December 31,
2007 2006
Net income $7,543 $5,753
Income tax expense 3,761 3,163
Other income, net (1,224) (786)
Depreciation and amortization 588 427
Stock-based compensation 1,688 1,242
Adjusted EBITDA $12,356 $9,799
Year ended Year ended
December 30, December 31,
2007 2006
Net income $17,459 $13,064
Income tax expense 9,128 6,916
Other income, net (4,175) (3,423)
Depreciation and amortization 1,772 1,868
Stock-based compensation 5,735 4,339
Adjusted EBITDA $29,919 $22,764
A reconciliation of differences of non-GAAP free cash flow from the
comparable GAAP measure of net cash provided by operating activities is as
follows (in thousands):
Quarter ended Quarter ended
December 30, 2007 December 31, 2006
Net cash provided by operating
activities $55,495 $47,280
Purchases of fixed assets,
including internal-use software
and website development (1,320) (218)
Non-GAAP free cash flow $54,175 $47,062
Year ended Year ended
December 30, 2007 December 31, 2006
Net cash provided by operating
activities $41,455 $40,518
Purchases of fixed assets,
including internal-use software and
website development (4,897) (1,908)
Non-GAAP free cash flow $36,558 $38,610
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
http://www.bluenile.com, http://www.bluenile.ca and http://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)
December 30, December 31,
2007 2006
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $122,793 $78,540
Restricted cash -- 117
Marketable securities -- 19,767
Trade accounts receivable 2,452 1,484
Other accounts receivable 1,124 156
Inventories 20,906 14,616
Deferred income taxes 799 598
Prepaids and other current assets 1,072 740
Total current assets 149,146 116,018
Property and equipment, net 7,601 3,391
Intangible assets, net 286 319
Deferred income taxes 3,489 2,285
Other assets 64 93
Total assets $160,586 $122,106
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $85,866 $66,625
Accrued liabilities 9,549 7,315
Current portion of long-term financing
obligation 38 --
Current portion of deferred rent 238 197
Total current liabilities 95,691 74,137
Long-term financing obligation, less current
portion 880 --
Deferred rent, less current portion 538 666
Stockholders' equity:
Common stock 20 19
Additional paid-in capital 134,207 115,751
Deferred compensation (3) (180)
Accumulated other comprehensive income
(loss) 75 (2)
Retained earnings 24,569 7,110
Treasury stock (95,391) (75,395)
Total stockholders' equity 63,477 47,303
Total liabilities and stockholders'
equity $160,586 $122,106
Note: The balance sheet at December 31, 2006 has been derived from the
audited financial statements at that date.
BLUE NILE, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
(in thousands, except per share data)
Quarter ended Year ended
December 30, December 31, December 30, December 31,
2007 2006 2007 2006
Net sales $111,906 $90,729 $319,264 $251,587
Cost of sales 88,251 71,946 254,060 200,734
Gross profit 23,655 18,783 65,204 50,853
Selling, general and
administrative expenses 13,575 10,653 42,792 34,296
Operating income 10,080 8,130 22,412 16,557
Other income (expense),
net:
Interest income, net 1,037 787 3,760 3,323
Other income (expense) 187 (1) 415 100
Total other income
(expense), net 1,224 786 4,175 3,423
Income before income
taxes 11,304 8,916 26,587 19,980
Income tax expense 3,761 3,163 9,128 6,916
Net income $7,543 $5,753 $17,459 $13,064
Basic net income per
share $0.47 $0.36 $1.10 $0.79
Diluted net income per
share $0.45 $0.35 $1.04 $0.76
Shares used for
computation (in
thousands):
Basic 16,039 16,011 15,919 16,563
Diluted 16,925 16,673 16,814 17,278
BLUE NILE, INC.
Condensed Consolidated Statements of Cash Flow
(Unaudited)
(in thousands)
Year ended
December 30, December 31,
2007 2006
Operating activities:
Net income $17,459 $13,064
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,772 1,868
(Gain) loss on disposal of fixed
assets (8) 5
Stock-based compensation 5,832 4,434
Deferred income taxes (1,407) 2,654
Tax benefit from exercise of stock options 6,848 2,739
Excess tax benefit from exercise of
stock options (1,847) (172)
Changes in assets and liabilities:
Receivables, net (1,935) 236
Inventories (6,291) (2,852)
Prepaid expenses and other assets (306) 88
Accounts payable 19,241 16,468
Accrued liabilities 2,234 2,194
Deferred rent and other (137) (208)
Net cash provided by operating activities 41,455 40,518
Investing activities:
Purchases of property and equipment (4,897) (1,908)
Proceeds from the sale of property and
equipment 23 1
Purchases of marketable securities (20,230) (75,030)
Proceeds from the sale of marketable
securities 40,000 98,000
Transfers of restricted cash 120 2
Net cash provided by investing activities 15,016 21,065
Financing activities:
Repurchase of common stock (19,996) (57,387)
Proceeds from stock option exercises 5,875 2,251
Excess tax benefit from exercise of
stock options 1,847 172
Principal payments under long-term
financing obligation (22) --
Net cash used in financing activities (12,296) (54,964)
Effect of exchange rate changes on cash
and cash equivalents 78 --
Net increase in cash and cash equivalents 44,253 6,619
Cash and cash equivalents, beginning of period 78,540 71,921
Cash and cash equivalents, end of period $122,793 $78,540
