considering that a prior contract with a technology manufacturing client that was not renewed
effective August of this year, represented nearly 13% of our prior year Service Fee.
For our Business and Retail Connect business segment, which as Mark mentioned, includes our
Supplies Distributors operations and results from our P&G operations, revenue was $46 million in
2010 as compared to $47.3 million for the 2009 fourth quarter, a slight decrease on a
year-over-year basis, but in line with prior quarter trends.
Gross profit for the fourth quarter 2010 increased to $8.9 million or 13.1% of net revenue
excluding pass-through revenue as compared to $7.8 million or 12.3% of net revenue excluding
pass-through revenue in the fourth quarter of 2009. This increase is primarily due to an increased
percentage of our revenue being generated from the higher margin Service Fee activity as compared
to prior year.
Our gross margin for the services business remained relatively stable, near 28%, which is within
our targeted 25% to 30% range. Our newly combined business in Retail Connect segment experienced a
decrease in margin in the December 2010 quarter as compared to the prior year, primarily due to the
Supplies Distributors subsidiary. We believe based on existing conditions that our future growth
margin for the Supplies Distributors business to business activity will trend closer to this lower
actual performance from the December quarter, but we are targeting to add new direct-to-consumer
clients into our inventory ownership model under Retail Connect, which are expected to operate at
higher gross margins in the future.
Our SG&A for the quarter was down approximately $0.8 million to $8.0 million as compared to $8.8
million for the same period a year ago. And with the combination of all these results, in the
fourth quarter our consolidated Adjusted EBITDA was $2.6 million versus $0.6 million in the prior
year period or a $2 million growth in Adjusted EBITDA in the fourth quarter. This significant
improvement on a year-over-year basis is primarily a reflection of the strong top line growth in
our services business combined with an ongoing focus on costs.
For the fourth quarter, net loss was $2.7 million or $0.22 per basic and diluted share, compared to
a net loss of approximately $0.9 million or $0.10 per basic and diluted share for the same period
last year. However as we discussed, our net loss for the fourth quarter of 2010 included a $3.2
million loss from discontinued operations related to eCOST.com, including a $2.8 million goodwill
Now turning to the results for the full year, our consolidated revenue for calendar year 2010 was
$274.5 million compared to $267.9 million in 2009. This included a Service Fee revenue increase of
21% to $70.6 million compared with $58.6 million for 2009. Here again, the Service Fee growth is
somewhat masked by the fact that the prior year fee amount included fees from our prior contract
under a US government contract that was not renewed effective in April of 2009, and a full year
our technology manufacture client arrangement. As a result, actual growth in continuing existing
clients and new clients was much higher than this 21% overall result.
For our business in Retail Connect business segment, revenue was a $174.6 million in 2010 as
compared to $183 million in 2009, primarily due to softness in our Supplies Distributors
business-to-business subsidiary. While we currently expect that revenue from the Supplies
Distributors business will stay relatively flat or decrease slightly in 2011, this continues to be
an important part of our overall business operations and we are hopeful that new client activity in
our Retail Connect direct-to-consumer business will also contribute stronger results to the
combined business and retail segment Retail Connect segment in the future.
From a balance sheet standpoint, we continued to maintain solid working capital turnover results in
our various business segments. In addition, we continued to maintain a solid overall financial
position with total cash and restricted cash as of December 31, 2010 of approximately $20.3
million, which is relatively consistent with the September 2010 quarter.