Geeknet, Inc. (Nasdaq:GKNT) Management Interview



Geeknet, Inc.
CFO: Kathyrn McCarthy


Juan Costello: Good day from Wall Street. This is Juan Costello, senior analyst with The Wall Street Reporter and joining us today is Katy McCarthy, the CFO for Geeknet Incorporated. The company trades on NASDAQ and ticker symbol is GKNT. Thanks for joining us today Katy.

Kathryn McCarthy: Thank you very much. It’s great to be here.

Juan Costello: Great. Now starting off, talk about some of the drivers behind the company’s quarterly results which were particularly strong.

Kathryn McCarthy: Sure. We had a strong 4th quarter. We had 53% topline growth in the quarter. With our ThinkGeek business contributing 60% revenue growth year over year and our media business showing 12% revenue growth. So we are happy with the growth in the quarter.

Juan Costello: Certainly. And perhaps you can give us a brief history and overview of the company for some of our listeners that maybe new to the story.

Kathryn McCarthy: Certainly. Geeknet is a company that is, it’s been a public company for ten years or more but it’s evolved a lot over those years. And now, the company is called Geeknet has two distinct business units. One is the e-commerce business called ThinkGeek which is an online retailer of products targeted towards technology enthusiasts and the geek community. And the other part of the business is our media business that has certain websites, SourceForge, Slashdot, and Freshmeat that are sites that where people can download open source code and technology enthusiasts can collaborate. Those businesses have come together under the umbrella of Geeknet and Ken Langone is our CEO.

Juan Costello: Certainly. And talk to us about the recent partnership through ThinkGeek for Q-Games and some of the other recent partnerships?

Kathryn McCarthy: Sure. Today we announced a partnership with a popular game developer called Q-Games. They created a game called Pixel Junk game series that’s very popular with some of our followers, our customers. And they’re partnering with us to offer licensed products to fans of those games. And we’re really excited about it. Many of our customers are fans of the series and we’re definitely fans of the series as well.

Juan Costello: Well good. So what do you say makes the company unique from some of the other players in the sector?

Kathryn McCarthy: I think what makes us unique is our customers and the partnership we have with our customers. We believe we have a very strong collaboration, peer production. We feel like we have a terrific set of customers, people who care very much about the products we design in our E-commerce business or the software they can download and our media business. They’re very loyal. They’re passionate. They’re definitely people who are technology professionals and enthusiasts that form a terrific customer base.

Juan Costello: Great. So do you believe that the company’s pretty well uhm Kat, pretty well positioned right now to take advantage of some of the trends in your sector?

Kathryn McCarthy: When we look at the E-commerce business, if you look at some of the studies, a recent study by Forrester, the US retail sales online will continue to grow 10% a year through 2015. And that actually grew 13% between 2009 and 2010. And we feel as an E-commerce retailer, we have the opportunity to take advantage of that.

We also have recently ramped up what we do in social media. If you think about the year 2010 for example, we put a big focus there and we’re able to take advantage of that with our customers. We have more than 200,000 Twitter followers and 150,000 Facebook fans. So in that sense, we believe we’re well positioned in E-commerce.

In media, we have a large number of uniques. Our SourceForge business for example has 41 million unique visitors. And we have many outside the United States and we hope to take advantage of that.

Juan Costello: Great, good answer. And perhaps you can walk us through your background experience Katy and talk a little bit about the strength of the management team there.

Kathryn McCarthy: Certainly. My background is prior to coming to Geeknet, I spent 18 years with GE in a variety of roles. Most recently, I was the CFO of GE’s healthcare business. But I’ve been in many different industries through my time there including some time at GE Corporate.

We had some change in the management team. We announced that we are moving our headquarters from Mountain View, California outside of San Francisco to Fairfax, Virginia where our ThinkGeek business is headquartered. We felt there were cost synergies there as well as it better aligned us with the business. Our media business is still based in San Francisco.

So with that, we’ve named Caroline Offutt who has been running the E-commerce business for years as the CEO of that business. And Scott Collison is the CEO of the media business.

Juan Costello: Well good. What are some of the goals and milestones that the team there is hoping to accomplish over the course of the next year?

Kathryn McCarthy: Well, I’d say first and foremost, our goal is profitable growth. We mentioned that in our recent earnings call and I think in previous calls. We want to continue to grow. We want to make sure we’re investing in the business for future growth but we want to do that profitably.

We’ve had some investment over the years. There’s been repositioning that’s occurred. We believe that, we’ve done that so we can drive profitable growth from the future. While we don’t provide specific guidance, that’s what our hope is for 2011 and beyond.

Juan Costello: Well certainly. And so once again, joining us today is Katy McCarthy, the CFO for Geeknet Incorporated which trades on NASDAQ. Ticker symbol, GKNT. Currently trading at 26.75 a share. The market cap is north of 16 million. And we were just discussing the company’s positive Q4 results and recent partnership with Q-Games.

And so before we conclude Katy, to recap some of your key points here, why do you believe investors should consider the company as a good long term investment opportunity?

Kathryn McCarthy: We believe that our company is well-positioned with unique products, with a customer base who’s very enthusiastic and passionate and collaborative. And we’ll continue to innovate to serve that customer base.

Juan Costello: Well we certainly look forward to continue to track your company’s growth and report on your upcoming progress. And I like to thank you for taking the time to join us today and update our investors on Geeknet.

Kathryn McCarthy: Thank you very much. I appreciate you having me today.

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