Vitacost.com Announces Results for the Fourth Quarter and Full Year 2011

 

Fourth Quarter New Customer Additions Up 98% to 254,000

 

BOCA RATON, Fla., March 15, 2012 – Vitacost.com, Inc. (NASDAQ:VITC), a leading online retailer and direct marketer of health and wellness products, reported financial results for the fourth quarter and full year ended December 31, 2011. The Company reported a 36% increase in the number of shipped orders in the fourth quarter of 2011, as new customers grew 98% on a year-over-year basis to 254,531. New customer growth was driven by significantly accelerated growth from Amazon.com and strong results from the Company’s new marketing initiatives.

 

The Company reported net sales of $67.4 million for the fourth quarter of 2011, a 14% increase from net sales of $59.2 million for the fourth quarter of 2010. Gross profit was $15.7 million, in the fourth quarter of 2011, up 13% year-over-year. Reported operating income was ($3.6) million in the fourth quarter of 2011 compared to ($6.5) million in the fourth quarter of 2010. Non-GAAP adjusted EBITDA for the fourth quarter was ($1.7) million compared to ($1.4) million in fourth quarter of 2010.

 

"The success of our new marketing programs has exceeded our expectations, as we nearly doubled the number of new customer additions during the quarter,” stated Jeffrey Horowitz, Vitacost.com’s Chief Executive Officer. “Our sales momentum has continued into the first quarter of 2012. We are acquiring new customers at an accelerated pace and working to optimize the Amazon.com channel. We continue to deliver on our long-term sales growth initiatives to expand our customer base and product offerings as we increase awareness of the Vitacost brand. We are excited about the outlook for Vitacost, as our executive management team is now complete and we have launched our new brand identity, advertising campaign and revitalized website, which should lead to continued levels of accelerated growth as we work to achieve our long-term financial goals.”

 

Fourth Quarter Financial Highlights

 

Customer Acquisition: The Company added 254,531 new customers in the fourth quarter of 2011, an increase of 98% year-over-year. The growth was driven by the success of the Refer-A-Friend campaign and accelerated growth on Amazon.com, combined with the continued effort to optimize the Company’s online marketing activities.

 

 

Active Customer Base: The Company ended the fourth quarter of 2011 with 1.4 million active customers, up 22% year-over-year.

 

Average Order Value: AOV for the fourth quarter was $68.67, a decline of 14% year-over-year. The year-over-year decline in AOV was primarily attributable to a significant increase in the number of orders placed on Amazon.com and generated through the Refer-A-Friend campaign. The Company’s AOV, excluding these two initiatives was consistent with the fourth quarter of 2010. While these programs have led to a significant increase in the number of new customers, initial orders carried a substantially lower AOV. The Company continues to evaluate and optimize its marketing efforts on the Amazon.com channel.

 

Gross Margin: Gross margin was 23.2% compared to 23.4% in the fourth quarter of 2010. The slight decline in gross margin was primarily due a shift in product mix with 78.0% of total product sales stemming from third party products in the fourth quarter of 2011 compared to 73.1% in the fourth quarter of the prior year, partially offset by a net reduction in shipping costs.

 

Sales & Marketing Expense: Sales and marketing expense was $6.1 million or 9.0% of sales in the fourth quarter of 2011, compared to $4.6 million or 7.8% of sales in the fourth quarter of 2010. The year-over-year increase was primarily the result of increased online advertising spending and fees paid to affiliates and partners, which drove strong customer acquisition in the quarter.

 

Fulfillment Expense: Fulfillment expense on a per order shipped basis remained flat year-over-year. As a percentage of sales, expenses increased to 9.9% for the fourth quarter of 2011 from 8.3% in the fourth quarter of 2010 primarily due to the lower AOV realized in the quarter.

 

Cash and Cash Equivalents: The Company had cash and cash equivalents of $12.9 million as of December 31, 2011. On February 21, 2012, the Company closed a private placement of common stock and warrants for approximately $34.8 million, which will be used to support the Company’s growth.

 

2011 Full Year Financial Results

 

For the full year of 2011, the Company reported net sales of $260.5 million, an 18.1% increase from net sales of $220.7 million for 2010. Gross profit was $59.9 million for the full year 2011, up 6.1% year-over-year. Gross margin was 23.0% compared to 25.6% for the full year 2010. Reported operating income was ($14.8) million in 2011 compared to ($13.5) million in 2010.

 

During 2011, the Company recorded $3.4 million in expenses primarily associated with the Strategic Review and Equity Capitalization issue. During 2010, the Company recorded $10.6 million in expenses associated with the proxy contest, Strategic Review, Settlement of the Derivative Lawsuit, and Equity Capitalization issue. Excluding these items in both periods, the Company would have reported non-GAAP adjusted EBITDA of ($4.2) million in 2011 compared to $3.7 million in 2010.

 

 

Analyst Day

 

The Company announced it will host an analyst day in New York City in June 2012. The meeting will include presentations from the Executive Management team.

 

E-Commerce Metrics

 

A copy of historical e-commerce metrics is available on the Company's website at http://investor.vitacost.com/events.cfm.

 

Conference Call Information

 

The Company will host a conference call to discuss these results and will provide additional comments and details at that time. Participating on the call will be Jeff Horowitz, the Company’s Chief Executive Officer and Brian Helman, Chief Financial Officer.

 

The conference call is scheduled to begin at 10:00 a.m. EDT on March 15, 2011. The call will be broadcast live over the Internet hosted on the Investor Relations section of Vitacost.com's website at http://investor.vitacost.com/events.cfm, and will be archived online through March 29, 2012. In addition, you may dial (877) 705-6003 to listen to the live broadcast.

 

A telephonic playback will be available from 1:00 p.m. EDT, March 15, 2012, through March 29, 2012. Participants can dial (877) 870-5176 to hear the playback. The pass code is 390262.

 

 

About Vitacost.com, Inc.

 

Vitacost.com, Inc. (NASDAQ: VITC) is a leading online retailer and direct marketer of health and wellness products, including dietary supplements such as vitamins, minerals, herbs and other botanicals, amino acids and metabolites, as well as cosmetics, organic body and personal care products, pet products, sports nutrition and health foods. Vitacost.com, Inc. sells these products directly to consumers through its website, www.vitacost.com. Vitacost.com, Inc. strives to offer its customers the broadest selection of healthy living products, while providing superior customer service and timely and accurate delivery.

 

Forward-Looking Statements

 

Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements made herein, which include statements regarding the Company’s future growth prospects, future financial performance, and customer acquisition strategy and expectations regarding the pace of customer growth, involve known and unknown risks and uncertainties, which may cause the Company’s actual results in current or future periods to differ materially from those anticipated or projected herein. Those risks and uncertainties include, among other things, the current global economic downturn or recession; difficulty expanding the Company’s manufacturing and distribution facilities; significant competition in the Company’s industry; unfavorable publicity or consumer perception of the Company’s products on the Internet; the incurrence of material product liability and product recall costs; inability to defend intellectual property claims; costs of compliance and the Company’s failure to comply with government regulations; the Company’s failure to keep pace with the demands of customers for new products; disruptions in the Company’s manufacturing system, including information technology systems, or losses of manufacturing certifications; or the lack of long-term experience with human consumption of some of the Company’s products with innovative ingredients. Those and other risks are more fully described in the Company’s filings with the Securities and Exchange Commission, including the Company’s Form 10-K for the full year ended December 31, 2011 and in the Company's subsequent filings with the Securities and Exchange Commission made prior to or after the date hereof.

 

 

Discussion of Non-GAAP Financial Measures

 

To supplement the consolidated financial statements presented in accordance with GAAP, Vitacost.com uses the non-GAAP measure of adjusted EBITDA, defined as earnings before interest, taxes, depreciation, and amortization of intangible assets. To adjust for the impact of certain matters in 2010 and 2011, the Company has further adjusted the EBITDA calculation to exclude the impact of stock-based compensation expense and expenses from certain legal actions, settlements and related costs, severance costs, and certain other charges and credits. These non-GAAP measures are provided to enhance the user’s overall understanding of the Company’s current financial performance. Management believes that adjusted EBITDA provides useful information to the Company and to investors by excluding certain items that may not be indicative of the Company’s core operating results. However, adjusted EBITDA should not be considered in isolation, or as a substitute for, or as superior to, net income/loss, cash flows, or other consolidated income/loss or cash flow data prepared in accordance with GAAP, or as a measure of the Company’s profitability or liquidity. Although adjusted EBITDA is frequently used as a measure of operating performance, it is not necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculation. Operating income (loss) is the closest financial measure prepared by the Company in accordance with GAAP in terms of comparability to adjusted EBITDA. Attached at the end of this release is a reconciliation of reported operating income (loss) determined under GAAP to the presentation of adjusted EBITDA.

 

  

Vitacost.com, Inc.

Consolidated Balance Sheets

December 31, 2011 and December 31, 2010

($ in 000s)

 

 

		For the Year ended December 31,
Assets		2011				2010
Current Assets
Cash and cash equivalents		$	12,939			$	11,952
Securities available for sale			-				10,912
Accounts receivable			2,169				440
Other receivables			264				1,087
Inventory, net			34,822				29,828
Prepaid expenses			1,913				1,361
Other assets			2,568				3,553
Total current assets			54,674				59,134
Property and equipment, net			33,629				38,011
Goodwill			2,200				2,200
Intangible assets, net			1				5
Deposits			125				114
			2,326				2,319
Total assets		$	90,629			$	99,464
Liability and Stockholders' Equity
Current Liabilities
Current maturities of notes payable		$	-			$	59
Accounts payable			30,250				23,892
Deferred revenue			4,573				2,134
Accrued expenses			6,425				10,672
Total current liabilities			41,247				36,757
Deferred tax liability			574				521
Total liabilities		$	41,821			$	37,278
Commitments and Contingencies
Stockholders' Equity
Preferred stock, par value $.00001 per share; authorized 25,000,000;
no shares issued and outstanding at December 31, 2011,
and December 31, 2010, respectively			-				-
Common stock, par value $.00001 per share; authorized 100,000,000;
27,974,553, and 27,780,453 shares issued and outstanding at			-				-
December 31, 2011, and December 31, 2010, respectively
Additional paid-in capital			76,262				74,830
Accumulated other comprehensive loss			-				(20	)
Retained earnings/(Accumulated Deficit)			(27,455	)			(12,624	)
Total stockholders' equity			48,807				62,185
Total liabilities and stockholders' equity		$	90,629			$	99,464

 

 

Vitacost.com, Inc.

Condensed Consolidated Statement of Operations ($ in 000s)

(Unaudited)

 

		Three Months Ended
		December 31, 2011												December 31, 2010
		As								Excluding				As								Excluding
		Reported				Adjustments				Adjustments				Reported				Adjustments				Adjustments
Net Sales		$	67,414							$	67,414			$	59,240							$	59,240
Cost of Goods Sold			51,759								51,759				45,361								45,361
Gross Profit			15,655								15,655				13,879								13,879
Fulfillment			6,651								6,651				4,890								4,890
Sales & Marketing			6,074								6,074				4,632								4,632
General & Administrative			6,495				357				6,139				10,810				3,104				7,706
Total Operating Expenses			19,221								18,864				20,333								17,228
Operating Income			(3,566	)							(3,209	)			(6,454	)							(3,349	)
Interest Income			2								2				34								34
Interest Expense			-								-				41								41
Other Income (Expense)			9								9				14								14
Income (loss) before taxes			(3,555	)							(3,199	)			(6,365	)							(3,261	)
Income tax (expense) benefit			(13	)			-				(13	)			(4,281	)			(5,338	)			1,057
Net Income (loss)		$	(3,568	)						$	(3,212	)		$	(10,646	)						$	(2,204	)
EPS
Basic		$	(0.13	)						$	(0.12	)		$	(0.38	)						$	(0.08	)
Fully Diluted		$	(0.13	)						$	(0.12	)		$	(0.38	)						$	(0.08	)
Basic Shares Outstanding			27,900								27,900				27,771								27,771
Fully Diluted Shares Outstanding			27,900								27,900				27,771								27,771

 

 

Vitacost.com, Inc.

Condensed Consolidated Statement of Operations ($ in 000s)

(Audited)

  

		Year Ended
		December 31, 2011												December 31, 2010
		As								Excluding				As								Excluding
		Reported				Adjustments				Adjustments				Reported				Adjustments				Adjustments
Net Sales		$	260,523							$	260,523			$	220,680							$	220,680
Cost of Goods Sold			200,597				(454	)			201,051				164,206								164,206
Gross Profit			59,927								59,473				56,475								56,475
Fulfillment			22,290				94				22,196				17,354								17,354
Sales & Marketing			22,842				892				21,949				18,728								18,728
General & Administrative			29,620				2,893				26,727				33,919				10,606				23,313
Total Operating Expenses			74,752								70,873				70,000								59,394
Operating Income			(14,825	)							(11,400	)			(13,525	)							(2,919	)
Interest Income			26								26				128								128
Interest Expense			(3	)							(3	)			(341	)							(341	)
Other Income (Expense)			24								24				38								38
Income (loss) before taxes			(14,779	)							(11,353	)			(13,700	)							(3,094	)
Income tax (expense) benefit			(53	)			-				(53	)			(1,491	)			(2,587	)			1,096
Net Income (loss)		$	(14,831	)						$	(11,406	)		$	(15,191	)						$	(1,998	)
EPS
Basic		$	(0.53	)						$	(0.41	)		$	(0.55	)						$	(0.07	)
Fully Diluted		$	(0.53	)						$	(0.41	)		$	(0.55	)						$	(0.07	)
Basic Shares Outstanding			27,829								27,829				27,704								27,704
Fully Diluted Shares Outstanding			27,829								27,829				27,704								27,704

 

 

Vitacost.com - Revenue by Product Line

($ in 000s)

  

		Three Months Ended December 31,
		2011				2010
Third-party product (1)		$	50,688			$	40,417
Proprietary products			14,323				14,847
Freight			2,403				3,976
Net sales			67,414				59,240

 

(1) Third-party product sales include advertising and fees earned from affiliate programs of $0 in 4Q11 and $103 in 4Q10.

 

		Year Ended December 31,
		2011				2010
Third-party product (1)		$	190,542			$	147,065
Proprietary products			60,973				59,159
Freight			9,009				14,457
Net sales			260,523				220,680

 

(1) Third-party product sales include advertising and fees earned from affiliate programs of $0 for 2011 and were $771 for 2010.

 

Vitacost.com Reconciliation of GAAP Operating Income to Adjusted EBITDA

 

To supplement the consolidated financial statements presented in accordance with GAAP, Vitacost.com uses the non-GAAP measure of adjusted EBITDA, defined as earnings before interest, taxes, depreciation, and amortization of intangible assets. To adjust for the impact of certain matters in 2010 and 2011, the Company has further adjusted the EBITDA calculation to exclude the impact of stock-based compensation expense and expenses from certain legal actions, settlements and related costs, severance costs, and certain other charges and credits. These non-GAAP measures are provided to enhance the user’s overall understanding of the Company’s current financial performance. Management believes that adjusted EBITDA provides useful information to the Company and to investors by excluding certain items that may not be indicative of the Company’s core operating results. However, adjusted EBITDA should not be considered in isolation, or as a substitute for, or as superior to, net income/loss, cash flows, or other consolidated income/loss or cash flow data prepared in accordance with GAAP, or as a measure of the Company’s profitability or liquidity. Although adjusted EBITDA is frequently used as a measure of operating performance, it is not necessarily comparable to other similarly titled captions of other companies due to differences in methods of calculation. Operating income (loss) is the closest financial measure prepared by the Company in accordance with GAAP in terms of comparability to adjusted EBITDA. Below is a reconciliation of reported operating income (loss) determined under GAAP to the presentation of adjusted EBITDA.

 

 

Adjusted EBITDA Calculation ($ in 000s)

 

 

		Three Months Ended December 31,								Year Ended December 31,
		2011				2010				2011				2010
Reported operating (loss) income			(3,566	)			(6,454	)			(14,825	)			(13,525	)
Depreciation and amortization			1,605				1,384				6,174				5,138
FAS 123R - Stock Option Expense			(104	)			577				1,008				1,463
Adjusted EBITDA		($	2,066	)		($	4,492	)		($	7,644	)		($	6,924	)
Adjustments:
- Severance to former executives			243								1,108
- Accrued severance to former executives							1,113								2,267
- Executive recruiting fees			113				-				374
- Credit from shipping provider											(454	)
- Settlement of derivative lawsuits															3,500
- Proxy reimbursement expenses to GHP															700
- 2010 audit fee to independent accountants							533								533
- Additional proxy/legal/consulting expenses			-				1,458				2,398				3,607
Total			357				3,104				3,425				10,606
Adjusted EBITDA		($	1,709	)		($	1,388	)		($	4,218	)		$	3,682

 

Investor Contact:

Vitacost.com

Kathleen Reed

Director of Investor Relations

561.982.4180

 

ICR, Inc.

John Mills

Senior Managing Director

310.954.1105