ONSALE Reports Record Fourth Quarter Revenue; 27 Percent Increase in Gross Merchandise Sales Over Previous Quarter for Online Auction House

Business Wire, Feb 12, 1998

MENLO PARK, Calif.--(BUSINESS WIRE)--Feb. 12, 1998--ONSALE Inc. (NASDAQ:ONSL), a pioneer and leader in online auctions today announced financial results for fourth quarter and year ended December 31, 1997.

Gross merchandise sales for the quarter were a record $41.1 million, up 27 percent sequentially from gross merchandise sales of $32.3 million in the third quarter ended September 30, 1997. Revenue for the quarter was $33.0 million, a 31 percent increase over revenue of $25.1 million in the third quarter. Net loss for the quarter was $1.7 million, or $0.09 per share, compared with a net loss of $583,000, or $0.03 per share, in the third quarter. For the fourth quarter ended December 31, 1996, the company reported gross merchandise sales of $14.4 million, revenues of $8.3 million, and net income of $140,000, or $0.01 per share.

For the year, gross merchandise sales were $115.9 million, a 277 percent increase over gross merchandise sales of $30.7 million in 1996. Revenues were $89.0 million, compared with revenues of $14.3 million in the prior year. Net loss for 1997 was $2.5 million, or $0.16 per share, compared with net income of $361,000, or $0.03 per share, in 1996.

At year end, ONSALE had 418,000 registered bidders, a 30 percent increase over the third quarter. These registered bidders placed 728,000 bids during the quarter (vs. 497,000 bids in the previous quarter), resulting in 232,000 orders (vs. 150,000 in the previous quarter). Of these orders, 73 percent were to repeat customers (vs. 69 percent in the previous quarter).

"The outstanding growth in the quarter reflects our success in broadening our product offerings, forming strategic alliances with key suppliers, and increasing our exposure through sponsorship agreements with premier content sites on the Web," said Jerry Kaplan, chief executive office of ONSALE.

"During the quarter, we achieved a number of significant milestones that highlight the growth in our business and the widening acceptance of ONSALE as an important distribution and purchasing channel," said Kaplan.

These highlights include: -0-

-- Launch of the Sports and Fitness Auction Supersite(TM)

ONSALE and CBS SportsLine, a leading Internet-based sports media service, unveiled the new co-branded site in late October. Consumers can enter through the CBS SportsLine site or ONSALE's homepage to bid on sports memorabilia and sports-related products over ONSALE's state-of-the-art auction management system.

-- Launch of The ONSALE Exchange(TM)

The ONSALE Exchange, a self-service auction site, functions much like a traditional "classified advertising" service, bringing together buyer and seller. The ONSALE Exchange allows small businesses and individuals to sell merchandise over the Web using ONSALE's auction management system.

-- Reaching the Three-Millionth Bid

During the fourth quarter, ONSALE reached its three-millionth bid approximately three months after reaching the two-millionth bid mark. This milestone demonstrates the growing acceptance of online auctions and reinforces ONSALE's continuing growth.

-- First $1 Million Customer

ONSALE announced selling more than one million dollars in merchandise to a single customer. This represents the largest ONSALE customer account to date, and illustrates how many business buyers are utilizing online auctions as a way to save on capital expenditures.

-- Additional Strategic Online Partnerships

ONSALE signed agreements with ZDNet, PointCast, Wired Digital and Deja News as part of its ongoing strategy to increase exposure to a growing base of buyers. As part of the agreements, ONSALE will appear as the exclusive auction sponsor on all product pages of ZDNet, as well as on the Computer Shopper NetBuyer website. ONSALE also became a charter sponsor of PointCast's new business resource site EntryPoint(TM), and will be positioned as the premier auction vendor on Shop Wired, a network of co-branded commerce sites from leading Internet retailers and "Wired" magazine.

Secondary Offering

ONSALE completed a secondary offering of 2.3 million shares bringing the company an additional $45 million in working capital.

According to Kaplan, ONSALE engaged in several successful promotional initiatives during the quarter to increase the bidder-to-buyer conversion rate and the repeat customer rate, that had the effect of reducing the reported gross margin as a percentage of gross merchandise sales. These included free shipping of selected items during the holidays, and other giveaways. Price reductions in the personal computer market early in the quarter, and the effects of the ONSALE Exchange launch, also contributed to this drop.

"I'm pleased to report that margins on personal computers bounced back in December, and have remained at their historic levels," Kaplan said. Operating expenses increased from $4.1 million in the third quarter to $6.0 million in the fourth quarter. This increase was primarily attributable to investment in marketing initiatives, infrastructure development, and establishing reserves in connection with non-recurring potential expenses related to suppliers.