Geeknet (LNUX) Q4 Ending December 31st 2009 Guidance, Cash Burn, Q2 Actuals ending Jan 31, 2009, and What Really Needs to Happen [Now].
Q3 CC Transcript
[6:39] Patty Morris (CFO): "...our media business is not delivering revenue at the level we believe it can..."
[6:44] "...As such we reevaluated the operating structure of our media business in order to better deliver on our objectives...resulting in a change to our "GoToMarket" (new buzz word) approach. Accordingly, we effected a staff reduction of eighteen people primarily across engineering and sales to better manage expenses until media revenue begins to grow...these changes are not reflected in the third quarter results (ending September 30th 2009) and will be accounted for on our next quarterly call...annual savings as a result of the changes will be approximately $2.2 million which will be somewhat offset by select hires in the next few quarters..."
[7:45] "...guidance for the fourth quarter..."
[8:16] "...reinstating guidance..."
[8:22] "...I'll remind you that the fourth quarter is the seasonal quarter for our eCommerce business and generally our strongest revenue quarter...we expect overall revenue to be between $25.7 to $28.2 million for the fourth quarter (ending December 31). We expect media revenue to be between $3.7 and $4.2 million. We expect eCommerce revenue to be between $22 million and $24 million which would be a record for ThinkGeek and would represent growth of approximately 17% year over year. Additionally we expect to report adjusted EBITDA of approximately breakeven ($0.00) in Q4 (ending December 31)..." [emphasis added]
So, looking at q2 2009 ending January 31 2009** these were SourceForge's [actual] numbers during approximately the same period one year ago (key holiday sales)...
* Total revenue for the second quarter of fiscal 2009 (ending January 31) grew 9% to $23.9 million, as compared to $21.9 million for the second quarter of fiscal 2008.
* On a GAAP basis, net income for the second quarter of fiscal 2009 (ending January 31) was $0.5 million, or $0.01 per share, compared to a GAAP net income of $2.2 million, or $0.03 per share, for the same period a year ago (2008).
* Media revenue was $4.4 million for the second quarter of fiscal 2009 (ending January 31), a 4% increase over second quarter of fiscal 2008 revenue of $4.2 million.
* E-commerce revenue was $19.4 million for the second quarter of fiscal 2009, a 10% increase over second quarter fiscal 2008 revenue of $17.7 million.
* Total cash and investments balance at the end of the second fiscal quarter of 2009 (January 31) was $49.5 million.
* Total cash and investments balance, including restricted cash, at the end of the third quarter of 2009 (September 30th) was $35.6 million
In other word, Geeknet is projecting EBITDA of $0.00 for Q4 ending December 31, 2009 compared to EBITDA of approximately $674,000*** for Q2 2009 ending January 31st and has burned through approximately $14 million in cash.
1. This is why Merriman Curhan downgraded the stock.
2. Immediately replace non-performing Senior management and replace them with real talent with substantial experience in creating shareholder value in high technology and internet retailing (Best Buy, Amazon...).
3. Merchandise proprietary ThinkGeek line through Walmart, Costco, et al.
4. Acquire complementary companies to ThinkGeek e.g. jinx.com, in addition to key Web 2.0 properties if they make sense.
5. The right management team seems to be in place on the SourceForge.net side due to the Ohloh acquisition and that was/is a non-trivial accomplishment. Arguably [the] most challenging. This should be a significant revenue generator esp. negotiating substantial open-source data mining contracts e.g. the one they mentioned with Sun (JAVA) in the last conference call and vis-vis these two trends.
6. As soon as 2. and 3. above are efficiently and effectively implemented and announced Geeknet will be in a superior position to perform a secondary offering and under a new symbol e.g. (NASDAQ:G33K) to pursue 4. above and finally maximize Geeknet insider and non-insider shareholder value...
**Note: SourceForge/Geeknet changed their Fiscal year from q4 ending July 30 to December 31.
*** Net Income was $94,000 for 3 months ending January 31 2009 (before interest and other income, and provision for income taxes). Depreciation and amortization was 1,160,000 for six months ending January 31, 2009 (I divided that in two for 3 months ending). That would be $580,000. This would have to be added back to the 94,000 in Net income or EBITDA of appx. $674,000. Source: SEC FORM 10-Q ending 2009 filed March 12, 2009.