Remember when Internet companies were talking about EBITDA because there were no actual earnings? You probably figured that they would either turn the corner of viability or run out of money. Even the debt-laden Amazon (NASDAQ:AMZN) would weave in and out of the cash flow gauge before emerging as a consistently profitable survivor.
Maybe that's why last night's news that Drugstore.com (NASDAQ:DSCM) had produced its first positive quarter of EBITDA feels like dated news. It takes you back to a time of boy bands, Y2K parties, and $99 scooters, doesn't it?
Still, Drugstore.com is finally starting to produce. Gross margins are at an all-time high. Orders from repeat customers are growing faster than those from first-timers -- a decent indicator of loyalty. For the year, Drugstore.com wound up narrowing its deficit to post a loss of $0.27 a share. Revenue climbed by 27% to hit $245.7 million.
Unfortunately, now that the seasonal December period has passed, the company is looking to go back into the red on an EBITDA basis in the current quarter. While the company is looking to grow sales by more than 45% in 2004, in part due to smart acquisitions like contact lens specialist Vision Direct, it will lose at least $0.13 a share this year. The company's cash balance, which four years ago was better than $130 million, has been whittled down to just $43.6 million. EBITDA will be positive for the year, but how much longer with investors wait for free cash flow and actual earnings?
Yes, the stock showed some healthy gains last year. It broke out of its penny stock slump for the first time since the autumn of 2000. But while the company has taken steps towards recovery it's still sickly in other ways. I'm sorry, but this is just not what the doctor ordered.
While Amazon's promise has made it a worthy stock selection in The Motley Fool Stock Advisor, the same can't be said for Drugstore.com. What will it take to become consistently profitable? Is the company on the right track? How did Amazon make online commerce work? All this and more -- in the Amazon discussion board. Only on Fool.com.
