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PeoplePC Announces First Quarter Financial Results; Operating Margins Dramatically Improve As Company Builds Momentum in Europe
4/25/2001 4:32:00 PM
SAN FRANCISCO--(BUSINESS WIRE)--April 25, 2001--PeoplePC, Inc. (NASDAQ:PEOP), the company that makes it easy and affordable to get online, today announced financial results for the first quarter ended March 31, 2001.
PeoplePC reported a better than anticipated net loss of $30.4 million, or $0.28 per basic and diluted share, compared to a net loss of $50.2 million, or $0.46 per basic and diluted share in the previous quarter, excluding non-cash charges in both quarters for the amortization of deferred stock-based compensation and a $3.8 million charge in the previous quarter, for the cumulative effect of a change in accounting. Including these non-cash charges, the Company reported a net loss of $36.2 million for the quarter, or $0.33 per basic and diluted share, compared to $64.9 million, or $0.60 per basic and diluted share in the previous quarter.
The Company reported that first quarter total gross sales were $73.8 million, compared to $37.1 million in first quarter of 2000. After a gross deferral of $67.2 million of sales, total net revenue was $37.3 million compared with $7.9 million reported in the first quarter of fiscal 2000. First quarter revenues reflect the early success of the Company's first major European program with Vivendi Universal, as well as revenues from program upgrades and peripheral sales to new members.
For the first quarter, which marked a slow period for the PC industry overall, the Company substantially narrowed its gross margin loss to $603,000 compared to $8.7 million loss reported in the preceding quarter.
The substantial improvement in gross margins reflects significantly better terms in the enterprise channel transactions, and stronger member commerce revenues as well as increased demand for computer peripherals. Over 85% of new consumer members upgraded to higher-performance, higher-margin computer bundles and peripherals during the quarter, up from approximately 50% of new members in the previous fourth quarter.
Commenting on the results, Nick Grouf, Chairman and Chief Executive Officer, stated, "Our Q1 results demonstrate PeoplePC's continued momentum as we leverage both our scale and our increased efficiencies to dramatically reduce operating expenses and acquisition costs. Our significant improvement in operating margins illustrates PeoplePC's ability to execute against its strategy despite a challenging market environment."
Total PeoplePC membership at the end of the first quarter increased to 496,000 members compared to 430,000 members at the end of fiscal 2000.
During the first quarter, PeoplePC achieved several key milestones, including:
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Launched PeopleShop(TM), the Company's online store that sells a wide range of computer-related merchandise directly to PeoplePC members. With this action, PeoplePC significantly expanded its product lines;
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PeoplePC Europe began the international roll out of the Vivendi Universal employee program, successfully wiring 44,000 French employees as phase one of a roll out to as many as 260,000 Vivendi Universal employees worldwide;
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Secured a new enterprise program with Cinergy Corp., one of the nation's leading diversified energy companies, to wire its 7,500 U.S. employees with a home computer and Internet access program;
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Extended its reach into the university market, with a program for Weber State University to offer PeoplePC programs to the university's 110,000 students, employees, and alumni. Streamlined its business processes and operations to focus on growing and servicing the enterprise channel. Business Outlook
Looking ahead, the Company anticipates continued improvement in gross and operating margins which will result from a combination of factors including membership growth, expanded and higher-margin product lines, new membership pricing to reflect the added value of PeoplePC's bundled products and services, improved terms with the Company's supply chain partners, reduced customer acquisition costs and operating efficiencies through increased volume.
As of March 31, 2001, the Company had cash and cash equivalents of over $49.4 million,and $40.8 million in total accounts receivable.
Commenting on first quarter results, Michael Glogowsky, acting Chief Financial Officer, PeoplePC said, "We are encouraged by the results of this past quarter and the Company's progress against our plan to turn cash flow positive by the end of the year."
PeoplePC will be holding a conference call with investors today, April 25, 2001 at 5:00 p.m. EDT. To access live over the Internet:
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go to PeoplePC's home page: www/peoplepc.com
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click on "About Us" at the bottom of the page
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click on "Media and Investor Relations" on the sidebar of the page
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click on "Event Calendar" under the Investor Relations heading
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Click on "Live Webcast" under the Media Relations heading
Listeners should sign on 5 minutes before the broadcast starts to allow time to download and media software. Alternatively, interested parties can listen to a replay of the call by phoning (719) 457-0820. At the prompt, key in the access code 701127. The replay will be available 2 hours after the call finishes for a period of two weeks.
Finally, the annual meeting of stockholders of PeoplePC will be held on May 31, 2001 at 2:30 pm local time at the Palace Hotel, 2 New Montgomery, San Francisco, California 94105 About PeoplePC
PeoplePC, founded in early 1999, provides a hassle-free and more affordable way to get online so that everyone can have access to and participate in the digital economy. PeoplePC offers its unique end-to-end solution both to individual consumers and to major corporations interested in wiring their workforces and creating deeper relationships with customers through PeoplePC online real estate. A PeoplePC membership comes complete with a new, brand name computer system, Internet access, and high-quality customer support and service. There's also a value-packed, customizable online community that fosters long-term connections with PeoplePC members and ongoing revenue possibilities. PeoplePC offers its services on a global basis, allowing people across the world to reap the rewards of the digital age. For more information, visit http://www.peoplepc.com.
This press release contains forward-looking statements that are subject to the assumptions, risks, and uncertainties discussed below. Actual results may vary from those projected in the forward-looking statements. If the Company's assumptions about the future do not materialize or prove to be incorrect, the Company's results could differ materially from those expressed or implied by such forward-looking statements. A forward-looking statement is any statement that looks to future events, including any projections of earnings, revenues, or other financial items; any statements of plans, strategies and objectives of management for future operations; any statements regarding proposed new products, services or developments; any statements regarding future economic conditions or performance; statements of belief and any statement of assumptions underlying any of the foregoing.
In addition, the above forward-looking statements depend on assumptions relating to our ability to expand our membership and enter into new enterprise agreements, our ability to negotiate and execute the Put Option Agreement with @viso, Ltd. as discussed in our preliminary proxy statement, our ability to finance certain receivables, our ability to provide consumer financing for the purchase of our products and services, the willingness of third party vendors to provide products and services on acceptable terms, our ability to meet our obligations under enterprise agreements, the costs of providing products and services, customer acquisition costs, our mix of products and services, our ability to generate revenues from merchants in our buyers club, competition, international expansion, and other risks described from time to time in PeoplePC's Securities and Exchange Commission periodic reports and filings. The Company assumes no obligation to update these forward-looking statements to reflect events that occur or circumstances that exist after the date on which they were made. Further information on potential factors that could affect these forward looking statements and the company's financial results are included in our filings with the Securities and Exchange Commission, including the company's annual report on Form 10-K filed on April 2, 2001 and the Preliminary Proxy Statement filed on April 17, 2001.
(c) 2001 PeoplePC, Inc. PeoplePC, PeopleShop, and their respective logos, are among the trademarks and/or service marks of PeoplePC, Inc. in the U.S. and other countries. All other trademarks belong to their respective holders (c)
PEOPLEPC INC
Unaudited Consolidated Statement of Operations
(In thousands, except per share amounts)
Three months ended
March 31, March 31, December 31,
----------------------------------------------
2001 2000 2000
----------------------------------------------
Net Revenues:
Membership revenues
earned $34,506 $4,552 $34,131
Other revenues 2,827 3,334 11,804
----------------------------------------------
Total Net Revenues 37,333 7,885 45,935
Cost of revenues 37,936 11,076 54,611
----------------------------------------------
Gross loss (603) (3,191) (8,676)
Operating expenses:
Sales and marketing 7,002 14,603 13,862
General and
administrative 26,781 9,909 33,922
Amortization of
deferred stock
based
compensation 5,802 6,697 10,856
Other operating
expense (1,873) 0 (6,900)
----------------------------------------------
Total operating
expenses 37,712 31,209 51,740
----------------------------------------------
Operating loss (38,315) (34,400) (60,416)
Minority interest 2,436 0 2,232
Net interest and other (308) 645 (2,824)
----------------------------------------------
Net loss before
cumulative effect of
accounting change ($36,188) ($33,757) ($61,008)
===============================================
Cumulative effect of
accounting change (3,844)
------------
Net loss ($64,852)
============
Basic and diluted net
loss per share ($0.33) ($1.03) ($0.60)
Shares used in
computing basic and
diluted net loss
per share 109,551 32,916 108,574
PEOPLEPC INC
Unaudited Pro Forma Consolidated Statement of Operations
(In thousands, except per share amounts)
Three months ended
March 31, March 31, December 31,
---------------------------------------------------
2001 2000 2000
---------------------------------------------------
Net Revenues:
Membership
revenues earned $34,506 $4,552 $34,131
Other revenues 2,827 3,334 11,804
-------------------------------------------------
Total Net Revenues 37,333 7,885 45,935
Cost of revenues 37,936 11,076 54,611
-------------------------------------------------
Gross loss (603) (3,191) (8,676)
Operating expenses:
Sales and marketing 7,002 13,105 13,862
General and
administrative 26,781 9,909 33,922
Other operating
expenses (1,873) 0 (6,900)
-------------------------------------------------
Total operating
expenses 31,910 23,014 40,884
-------------------------------------------------
Operating loss (32,513) (26,205) (49,560)
Minority interest 2,436 0
Net interest
and other (308) 645 (591)
-------------------------------------------------
Net loss ($30,385) ($25,560) ($50,151)
=================================================
Pro forma basic and
diluted net loss
per share on an
as converted basis ($0.28) ($0.29) ($0.46)
Shares used in
computing pro
forma basic and
diluted net loss
per share on an
as converted
basis 109,551 86,732 108,574
Note: The above unaudited pro forma statement of operations
excludes the effects of the following:
Amortization of deferred stock based compensation for the quarters
ended March 31, 2001 and March 31, 2000 was $5,802 and $6,697.
A non-cash cash charge to sales and marketing related to the
issuance of warrants in the amount of $1,498 for the quarter ended
March 31, 2000.
Note 2: Cost of revenues includes a gross provision for customer
acquisition discounts of $2,491 and $2,500 for quarters ended
March 31, 2001 and 2000 respectively.
PEOPLEPC INC
Consolidated Balance Sheet
(In thousands)
March 31,
2001 December 31,
(Unaudited) 2000
-------------------------------------
Assets:
Cash, cash equivalents and
short-term investments $49,420 $88,447
Accounts receivable, net 31,746 41,864
Prepaid/Other current assets 2,889 2,177
-------------------------------------
Total current assets 84,055 132,488
Accounts receivable, long-term 9,065 11,589
Property and equipment, net 8,511 7,688
Other assets 1,257 1,266
-------------------------------------
Total assets $102,888 $153,031
=====================================
Liabilities & Stockholders' Deficit
Accounts payable $24,080 $23,745
Borrowings under line of credit 4,917 5,176
Deferred revenue - net short term 25,977 19,047
Accruals/Other current liabilities 13,680 39,193
-------------------------------------
Total Current liabilities 68,654 87,161
Deferred revenue - net long term 28,081 28,121
Other long term liabilities 1,195 0
-------------------------------------
Total Liabilities 97,929 115,282
Minority Interest $44,338 $46,700
Stockholders' deficit (39,379) (8,951)
-------------------------------------
Total liabilities and
stockholders' deficit $102,888 $153,031
=====================================
As of March 31, 2001 there were 114,713 shares of common stock
issued and outstanding and 110,312 shares of common stock issued,
outstanding and fully vested.
CONTACT:
Investor Contact:
PeoplePC, Inc
Denise Ganz
415-901-6879
denise.ganz@peoplepchq.com
or
Financial Media:
Edelman Financial
Torie Pennington
212-704-4528
torie.pennington@edelman.com
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