Bidz.com, Inc. Announces Financial Results for the First Quarter 2008 and Exceeds Guidance

LOS ANGELES--(BUSINESS WIRE)--Bidz.com, Inc. (NASDAQ: BIDZ), a leading online auctioneer of jewelry, today reported exceptional financial results for the three months ended March 31, 2008, significantly exceeding its previous guidance.

Net revenues for the first quarter of 2008 were $61.9 million, a 38.5% increase compared with $44.7 million reported in the first quarter of 2007. The substantial increase was due to the continued demand for the Company’s jewelry products, increased customer traffic, increased participation in its dynamic and unique auction format and an increase in the average sales amount per order. The Company also opportunistically sold wholesale merchandise in the first quarter of 2008, which accounted for $4.2 million in revenue for the first quarter of 2008.

“We continued to experience strong revenue growth and better than expected profitability in the first quarter, despite a difficult economic climate, which impacted the business of many other retailers,” said David Zinberg, President and Chief Executive Officer of Bidz.com. “We believe our success in this environment is a testament to the broad appeal of our business model, which features jewelry offered at prices significantly below other jewelry retailers; a fun and easy to use auction format; a vast selection of merchandise, with constant newness; and excellent customer service.”

David Zinberg continued, “The first quarter of 2008 marked our 17^th consecutive quarter of profitability and we expect the trend to continue. We remain focused on continuing to deliver great value, quality, service, and choice to our new and loyal customers, and remain confident in our strong financial outlook for the balance of the year. We believe this performance will reward long-term shareholders of Bidz.com.”

2008 Key Developments:

• Significantly reduced first quarter inventory by 38.6% to $34.8 million compared to $56.7 million at the end of fiscal year 2007
• Increased first quarter international sales by 59.6% to $14.6 million compared to $9.2 million in the prior year period
• Repurchased approximately 869,000 shares at an average price of $8.45 per share through April 30,
• Continue to increase vendor diversification; top 5 vendors represent 26.8% of total purchases in the first quarter 2008, compared to 33.9% in the prior year period
• Announced the initial launch of Buyz.com
• Continued to climb in internet rankings, Bidz is now ranked the number three site in the shopping/auction category, following eBay.com and eBayUK according to Ranking.com
• Significant improvements in all its key revenue, margin and customer metrics;

		Three months ended
		March 31,
		2008			2007			Change
Number of new buyers			83,179			58,056		43.3	%
Average selling price per order (gross)		$	182		$	154		18.2	%
Average orders per day			3,734			3,317		12.6	%
Average items sold per day			12,186			9,482		28.5	%
Acquisition cost per new buyer		$	50		$	45		11.1	%
Gross Margin $ per average order		$	53		$	38		39.5	%

The Company’s pre-tax income for the first quarter of 2008 was $7.8 million, significantly exceeding its revised guidance of $6.5-$7.3 million, and compared to $3.5 million in the prior year period in 2007. Net income for the first quarter of 2008 increased to $4.6 million, or $0.18 per fully diluted share on 25.8 million weighted average shares outstanding, compared to net income of $3.4 million, or $0.14 per fully diluted share on 23.7 million weighted average shares outstanding in the same period of 2007.

In the first quarter, gross profit increased 62.1% to $18.0 million from $11.1 million in the first quarter of 2007. Gross margins in the first quarter of 2008 were 29.1%, compared with 24.9% in the same period of 2007.

Operating expenses in the first quarter 2008 increased to $10.3 million compared to $7.5 million in the prior year period. Operating expenses as a percentage of sales decreased slightly to 16.6% compared with 16.8% in the prior year period. The absolute dollar increases were primarily due to the overall growth of the company and includes increases in marketing campaigns, as well as payroll related expenses.

As of March 31, 2008, the Company had $6.6 million in cash. The Company has working capital of $31.0 million and no long-term debt. The Company has no outstanding balance on its $25 million revolving line of credit.

The Company also said that it will continue to repurchase shares of its Common Stock in the open market under the stock repurchase program. Under this program, approximately $12.6 million is still available for additional share repurchase at prevailing prices in open market transactions, subject to market conditions, share price, and other considerations. Funds for the repurchase of shares are being provided by available cash from operations.

Business Outlook/Guidance

The Company is introducing new revenue guidance for the second quarter of 2008 of $48-$50 million, pre-tax income of approximately $4.5-$5.0 million and, fully taxed GAAP EPS of $0.09-$0.11. This compares to revenue of $39.1 million for the second quarter of 2007 and pre-tax income of $3.7 million.

For the full year 2008, the Company is increasing its fully taxed GAAP EPS to $0.52-$0.55 from $0.49-$0.53, and is reiterating its revenue guidance range of $225-$230 million, pre-tax income guidance of $25-26 million and gross margins of approximately 27-28%. The Company expects its effective tax rate for the full year of 2008 to be approximately 40-41%, and expects to end the year with approximately 28.5 million fully diluted shares outstanding.

Investor Conference Call

Bidz.com’s quarterly earnings conference call is scheduled to begin later today (May 6, 2008) at 1:30 p.m., Pacific Time. The call will be open to all interested investors through a live audio Web broadcast via the Internet on the investor relations section of the Company’s website at http://investors.bidz.com/.

For those unable to participate during the live broadcast, the webcast will be archived for 90 days and a replay will be available beginning Tuesday, May 6, 2008 at 7:30 p.m. ET, through May 20, 2008 at 12:00 a.m. ET. To access the replay, dial 800-406-7325 (U.S.) or 303-590-3030 (International), and use passcode: 3868629.

Bidz.com Inc.

Bidz.com, founded in 1998, is an online auctioneer of jewelry. Bidz offers its products through a live auction format. To learn more about Bidz.com visit its website at www.bidz.com.

Safe Harbor Statement

This press release includes forward-looking statements about the Company’s estimated revenue and earnings within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this release, including statements regarding the Company’s future financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” and similar expressions, as they relate to the Company, are intended to identify forward-looking statements. We have based these forward-looking statements largely on current expectations and projections about future events and financial trends that we believe may affect the Company’s financial condition, results of operations, business strategy and financial needs. Risks and uncertainties include that our common stock is subject to short selling and trading, and prices of our stock may be volatile; that we are subject to “prank” bidding; that we may face increasing costs to acquire new customers; the ability of the Company to attract customers to its website and offer attractive products; the ability to maintain profit levels while expanding international sales; the ability to detect fraud if we fail to maintain an effective system of internal controls; the ability to maintain our website, electronic data processing systems, and systems hardware; the ability to forecast accurately net revenue and plan for expenses; that we do not have a guaranteed supply of jewelry products and that we have a heavy concentration of inventory purchase from our top two suppliers; the ability to protect our intellectual property rights; and potential litigation and government enforcement actions that may result from our prior securities offerings. Please refer to Bidz.com’s reports and filings with the Securities and Exchange Commission for a further discussion of these risks and uncertainties. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date they are made. Bidz.com undertakes no obligation to update publicly any forward-looking statements to reflect new information, events or circumstances after the date they were made or to reflect the occurrence of unanticipated events.

Bidz.com, Inc.
Condensed Balance Sheets
(In thousands, except share and per share data)
	December 31,				March 31,
	2007				2008
						(Unaudited)
Assets
Current assets:
Cash	$	4,808			$	6,593
Accounts receivable		2,275				4,913
Inventories, net of reserves of $1,075 and $919 at December 31, 2007 and March 31, 2008, respectively		56,686				34,795
Other current assets		5,958				4,040
Total current assets		69,727				50,341
Property and equipment, net		1,323				1,364
Intangible asset		161				161
Deposits		104				104
Total assets	$	71,315			$	51,970
Liabilities and Stockholders' Equity
Current liabilities:
Revolving credit line	$	5,924			$	-
Accounts payable (includes related party amounts of $5,050 and $856 at December 31, 2007 and March 31, 2008, respectively)		26,400				12,010
Accrued expenses		4,509				5,676
Deferred revenue		2,900				1,635
Total current liabilities		39,733				19,321
Commitments and contingencies (note 10)
Stockholders' equity:
Preferred stock: par value $0.001; authorized 4,000,000 shares; none issued and outstanding at December 31, 2007 and March 31, 2008, respectively		-				-
Common stock: par value $0.001; authorized 100,000,000 shares; issued and outstanding 24,556,354 and 24,418,584 at December 31, 2007 and March 31, 2008, respectively		25				25
Additional paid in capital		35,875				34,968
Shares held in treasury, at cost; 100,000 and 433,827 shares at December 31, 2007 and March 31, 2008, respectively		(886	)			(3,517	)
Retained earnings (Accumulated deficit)		(3,432	)			1,173
Total stockholders’ equity		31,582				32,649
	$	71,315			$	51,970

Bidz.com, Inc.
Condensed Statements of Income (Unaudited)
(In thousands, except share and per share data)
	Three Months Ended March 31,
	2007				2008
Net revenue:
Merchandise sales	$	44,639			$	61,811
Other revenue		85				118
		44,724				61,929
Cost of revenue		33,596				43,893
Gross profit		11,128				18,036
Operating expenses:
General and administrative		4,843				5,907
Sales and marketing		2,600				4,199
Depreciation and amortization		74				162
Total operating expenses		7,517				10,268
Income from operations		3,611				7,768
Other income - interest income		1				13
Other expense - interest (expense)		(82	)			(11	)
Income before income tax expense		3,530				7,770
Income tax expense		95				3,165
Net income	$	3,435			$	4,605
Net income per share available to common shareholders - basic	$	0.15			$	0.19
Net income per share available to common shareholders - diluted	$	0.14			$	0.18
Weighted average number of shares outstanding - basic		23,245,987				24,538,263
Weighted average number of shares outstanding - diluted		23,724,657				25,828,507

Bidz.com, Inc.
Condensed Statements of Cash Flows (Unaudited)
(In thousands)
		Three Months Ended March 31,
		2007				2008
Cash flows provided by (used for) operating activities:
Net income		$	3,435			$	4,605
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			74				162
Change in inventory reserve			82				(156	)
Stock-based compensation			144				267
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable			535				(2,638	)
Inventories			1,508				22,047
Other current assets			254				1,918
Increase (decrease) in liabilities:
Accounts payable			(7,537	)			(14,390	)
Accrued expenses			(209	)			1,167
Deferred revenue			(1,965	)			(1,265	)
Net cash provided by (used for) operating activities			(3,679	)			11,717
Cash flows (used for) investing activities:
Capital expenditures			(227	)			(203	)
Cash flows provided by (used for) financing activities:
Revolving credit line			3,721				(5,924	)
Repurchase of common stock			-				(3,808	)
Proceeds from exercise of stock options			-				3
Net cash provided by (used for) financing activities			3,721				(9,729	)
Net (decrease) increase in cash			(185	)			1,785
Cash, beginning of period			359				4,808
Cash, end of period		$	174			$	6,593
Supplemental disclosure of cash flow information:
Interest paid		$	82			$	11
Income taxes paid		$	10			$	1,332