EX-99.1 2 a08-11945_1ex99d1.htm EX-99.1

Exhibit 99.1

 

NEWS RELEASE
April 18, 2008

 

 

Media Contact:

Kirstie Burden, Overstock.com, Inc.

+1 (801) 947-3172

kburden@overstock.com

 

Investor Contact:

Kevin Moon, Overstock.com, Inc.

+1 (801) 947-3282

kmoon@overstock.com

 

Overstock.com Reports First Quarter 2008 Financial Results

Announces Time and Date of Earnings Call

 

SALT LAKE CITY (April 18, 2008) — Overstock.com, Inc. (NASDAQ: OSTK) today reported financial results for the quarterly period ending March 31, 2008.

 

Key Q1 2008 metrics (comparison to Q1 2007):

·         Total revenue:  $200.7 million vs. $157.9 million (a 27% increase);

·         Gross margin: 17.3% vs. 16.0%

·         Gross profit:  $34.8 million vs. $25.3 million (a 37% increase);

·         Sales and marketing expense: $15.0 million vs. $11.3 million (a 33% increase);

·         Contribution (gross profit less marketing):  $19.8 million vs. $14.0 million (a 41% increase);

·         G&A / Technology expense: $24.1 million vs. $25.7 million (a 6% decrease);

·         Net loss: $3.9 million, or $(0.17) per share vs. $21.4 million (an 82% decrease);

·         EBITDA:  $3.5 million vs. $(8.3) million (an $11.7 million increase)

·         Operating cash flows (TTM): $27.2 million positive (a $39.1 million increase)

·         Share buyback: repurchased 1.1 million shares for $12.0 million

 

Dear Investor:

 

We returned to above industry-level revenue growth this quarter, capping off our turnaround plan that started with growth in contribution and gross profits over a year ago.  The combination of an expanding top line, gross profits and contribution dollars, along with declining fixed costs, is generating operating leverage in our business.

 

This is the third consecutive quarter we’ve had positive EBITDA. More significantly, over the last twelve months we have generated $27 million of positive operating cash flow. As a result, we ended the quarter with a comfortable $90 million of cash and marketable securities, despite the seasonal reduction of payables following the busy holiday season and $12 million we used to repurchase our shares during the quarter.

 

-more-

 


 

Overstock.com Reports First Quarter 2008 Financial Results

 

Other highlights of the quarter include:

 

·                  Our customer satisfaction is extraordinary, and customer loyalty is strong.

·                  Our site is getting faster and easier to use. The recommendations we provide customers are more and more helpful. We’ve also made many enhancements to our home page and the overall site design that are improving our customers’ shopping experience.

·                  Our selection has grown to become the widest selection of high-end, quality products at discount prices that we have ever offered.

·                  Our car site has launched and is off to a positive start.

 

We will discuss our Q1 results on April 22, 2008 at 11:00 a.m. Eastern Daylight Time. Please find details for the conference call below. I look forward to speaking with you then, and in the meantime remain,

 

Your humble servant,

 

Patrick M. Byrne

 

P.S. Please email Kevin Moon at kmoon@overstock.com with questions prior to the conference call.

 

Details for the Q1 conference call/webcast

 

We will hold our Q1 conference call/webcast on April 22, 2008 at 11:00 a.m. Eastern Daylight Time.  To access the live webcast and presentation slides, please go to http://investors.overstock.com.  To listen to the conference call via telephone, dial (866) 770-7051 and enter pass code 25722257 when prompted.  Participants outside the United States can dial +1 (617) 213-8064 and enter pass code 25722257 when prompted.

 

We will make available a replay of the webcast at http://investors.overstock.com starting 90 minutes after the live call has ended.  We will make available an audio replay of the webcast via telephone starting at 1:00 p.m. Eastern Daylight Time on Tuesday, April 22, through 11:59 p.m. Eastern Daylight Time on Tuesday, April 29, 2008.  To listen to the recorded webcast by phone, please dial (888) 286-8010 and enter pass code 67010968 when prompted.  Participants outside the U.S. can dial +1 (617) 801-6888 and enter pass code 67010968 when prompted.

 

Key financial and operating metrics:

 

Total revenue — Total revenue for the three months ended March 31, 2007 and 2008 was $157.9 million and $200.7 million, respectively, a 27% increase.

 

2


 

Gross profit and gross margin — Gross profit for the three months ended March 31, 2007 and 2008 was $25.3 million and $34.8 million, respectively, a 37% increase, representing margins of 16.0% and 17.3% for those respective periods.

 

Contribution and contribution margin — “Contribution” (gross profit less sales and marketing expenses) for the three months ended March 31, 2007 and 2008 was $14.0 million (8.9% contribution margin) and $19.8 million (9.8% contribution margin), respectively, a 41% increase.

 

 

 

Three months ended
March 31,

 

 

 

2007

 

2008

 

Total revenue

 

$

157,930

 

$

200,745

 

Cost of goods sold

 

132,615

 

165,959

 

 

 

 

 

 

 

Gross profit

 

25,315

 

34,786

 

Less: Sales and marketing expense

 

11,284

 

15,019

 

 

 

 

 

 

 

Contribution

 

$

14,031

 

$

19,767

 

Contribution margin

 

8.9

%

9.8

%

 

Operating loss — Operating losses for the three months ended March 31, 2007 and 2008 were $17.7 million and $4.3 million, respectively.

 

EBITDA — EBITDA (a non-GAAP measure) for the three months ended March 31, 2007 and 2008 was $(8.3) million and $3.5 million, respectively. We believe that, because our current capital expenditures are significantly lower than our depreciation levels, discussing EBITDA at this stage of our business is useful to us and investors because it approximates actual cash used or cash generated by the operations of the business.

 

 

 

Three months ended

 

 

 

March 31,

 

 

 

2007

 

2008

 

Operating loss

 

$

(17,720

)

$

(4,312

)

Add:Depreciation and amortization

 

7,771

 

6,497

 

Stock-based compensation expense

 

1,073

 

1,184

 

Stock-based compensation to consultants for service

 

5

 

(14

)

Stock-based compensation for performance share plan

 

—

 

150

 

Treasury stock issued to employees as compensation

 

602

 

19

 

 

 

 

 

 

 

EBITDA

 

$

(8,269

)

$

3,524

 

 

Net loss — Net loss for the three months ended March 31, 2007, was $21.4 million, or $0.91 loss per share, compared to $3.9 million, or $0.17 loss per share in 2008.  For the three months ended

 

3


 

March 31, 2007, net loss included restructuring charges of $6.1 million. There were no restructuring charges in 2008.

 

Free Cash Flow (a non-GAAP measure) — Free cash flow for the three months ended March 31, 2007 and 2008 totaled $(58.7) million and $(42.4) million, respectively.  For the twelve months ended March 31, 2007 and 2008, free cash flow totaled $(29.1) million and $23.7 million.

 

Free cash flow reflects an additional way of viewing our cash flows and liquidity that, when viewed with our GAAP results, provides a more complete understanding of factors and trends affecting our cash flows. Free cash flow, which we reconcile to “Cash provided by operating activities,” is cash flow from operations reduced by “Expenditures for property and equipment.” Although we believe that cash flow from operating activities is an important measure, we believe free cash flow is a useful measure to evaluate our business since purchases of fixed assets are a necessary component of ongoing operations.  Therefore, we believe it is important to view free cash flow as a complement to our entire consolidated statements of cash flows. We believe that analyzing free cash flows on a trailing twelve month basis eliminates seasonal fluctuations in cash flows and more accurately reflects trends in this non-GAAP measure.

 

 

 

Three months ended

 

Twelve months ended

 

 

 

March 31,

 

March 31,

 

 

 

2007

 

2008

 

2007

 

2008

 

Net cash provided by operating activities

 

$

(58,240

)

$

(41,044

)

$

(11,955

)

$

27,173

 

Expenditures for property and equipment

 

(477

)

(1,313

)

(17,114

)

(3,479

)

 

 

 

 

 

 

 

 

 

 

Free cash flow

 

$

(58,717

)

$

(42,357

)

$

(29,069

)

$

23,694

 

 

Cash and working capital — At March 31, 2008, Overstock.com had cash, cash equivalents and marketable securities of $89.8 million and working capital of $61.7 million.

 

Early Q2 Developments

 

On April, 8, 2008, we entered into a lease for a 686,865 square foot warehouse facility now under construction in Salt Lake City, Utah. We plan to consolidate warehouse operations from two smaller warehouse facilities into the new warehouse.  We anticipate in the future that we may construct a corporate office facility within the new warehouse. More details regarding this lease are contained in the Form 8-K we filed on April 11, 2008 which can be found in our investor relations link on our website.

 

4


 

On April 14, 2008, Gradient filed a countersuit accusing us and Patrick Byrne of libeling Gradient.  We believe this countersuit is meritless and we will vigorously defend against it. We issued a separate press release about this countersuit on April 15, 2008.

 

On April 15, 2008, we received a letter from the Office of the District Attorney of Marin County, California, stating that the District Attorneys of Marin and four other counties in California have begun an investigation into the way we advertise products for sale, together with an administrative subpoena seeking related information and documents.  We follow industry advertising practices and we intend to respond fully to the subpoena and cooperate with the investigation.

 

About Overstock.com

 

Overstock.com, Inc. is an online “closeout” retailer offering discount, brand-name merchandise for sale over the Internet. The company offers its customers an opportunity to shop for bargains conveniently, while offering its suppliers an alternative inventory liquidation distribution channel. Overstock.com, headquartered in Salt Lake City, is a publicly traded company listed on the NASDAQ Global Market System and can be found online at http://www.overstock.com.

 

###

 

Overstock.com® is a registered trademark of Overstock.com, Inc. All other trademarks are the property of their respective owners.

 

This press release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements include, but are not limited to, statements regarding revenue growth, completion of a turnaround, operating leverage, future cash generation and EBITDA results, the helpfulness of product recommendations, construction of and/or feasibility of consolidating warehouse operations, building a corporate office in the new warehouse, our following industry advertising practices, the meritless nature of Gradient’s countersuit, the selection of products on our site, the status of our auctions and car sites,  and the outlook of the company, and the date and time of the Q1 earnings call.  Our Form 10-K for the year ended December 31, 2007, our quarterly reports on Form 10-Q, or any amendments, and our subsequent filings with the Securities and Exchange Commission identify important factors that could cause the actual results to differ materially from those contained in our projections, estimates or forward-looking statements.

 

5


 

Overstock.com, Inc.

Consolidated Statements of Operations (unaudited)

(in thousands, except per share amounts)

 

 

 

Three months ended

 

 

 

March 31,

 

 

 

2007

 

2008

 

Revenue

 

 

 

 

 

Direct

 

$

45,701

 

$

51,483

 

Fulfillment partner

 

112,229

 

149,262

 

 

 

 

 

 

 

Total revenue

 

157,930

 

200,745

 

 

 

 

 

 

 

Cost of goods sold

 

 

 

 

 

Direct

 

39,320

 

44,314

 

Fulfillment partner

 

93,295

 

121,645

 

 

 

 

 

 

 

Total cost of goods sold

 

132,615

 

165,959

 

 

 

 

 

 

 

Gross profit

 

25,315

 

34,786

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

Sales and marketing

 

11,284

 

15,019

 

Technology

 

14,973

 

14,516

 

General and administrative

 

10,689

 

9,563

 

Restructuring

 

6,089

 

—

 

 

 

 

 

 

 

Total operating expenses

 

43,035

 

39,098

 

 

 

 

 

 

 

Operating loss

 

(17,720

)

(4,312

)

 

 

 

 

 

 

Interest income

 

990

 

1,304

 

Interest expense

 

(1,029

)

(901

)

 

 

 

 

 

 

Loss from continuing operations

 

(17,759

)

(3,909

)

Discontinued operations:

 

 

 

 

 

Loss from discontinued operations

 

(3,624

)

—

 

 

 

 

 

 

 

Net loss

 

$

(21,383

)

$

(3,909

)

 

 

 

 

 

 

Net loss per common share - basic and diluted:

 

 

 

 

 

Loss from continuing operations

 

$

(0.75

)

$

(0.17

)

Loss from discontinued operations

 

$

(0.16

)

$

—

 

Net loss per common share - basic and diluted

 

$

(0.91

)

$

(0.17

)

Weighted average common shares outstanding - basic and diluted

 

23,594

 

23,345

 

 

 

 

 

 

 

Other data:

 

 

 

 

 

Shopping bookings (in 000s)

 

$

170,362

 

$

216,322

 

Auction gross merchandise volume (in 000s)

 

$

4,695

 

$

2,610

 

Average customer acquisition cost (shopping)

 

$

24.58

 

$

25.21

 

 


 

Overstock.com, Inc.

Consolidated Balance Sheets (unaudited)

(in thousands)

 

 

 

December 31,

 

March 31,

 

 

 

2007

 

2008

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

101,394

 

$

60,094

 

Marketable securities

 

46,000

 

29,750

 

 

 

 

 

 

 

Cash, cash equivalents and marketable securities

 

147,394

 

89,844

 

Accounts receivable, net

 

12,304

 

13,042

 

Note receivable

 

1,506

 

1,004

 

Inventories, net

 

25,933

 

17,970

 

Prepaid inventory

 

3,572

 

2,568

 

Prepaid expenses

 

7,572

 

10,118

 

 

 

 

 

 

 

Total current assets

 

198,281

 

134,546

 

Property and equipment, net

 

27,197

 

22,069

 

Goodwill

 

2,784

 

2,784

 

Other long-term assets, net

 

86

 

30

 

Note receivable

 

4,181

 

4,317

 

 

 

 

 

 

 

Total assets

 

$

232,529

 

$

163,746

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

70,648

 

$

32,839

 

Accrued liabilities

 

52,598

 

40,008

 

Capital lease obligations, current

 

3,796

 

2

 

 

 

 

 

 

 

Total current liabilities

 

127,042

 

72,849

 

Other long-term liabilities

 

3,034

 

2,828

 

Convertible senior notes

 

75,623

 

75,710

 

 

 

 

 

 

 

Total liabilities

 

205,699

 

151,387

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Common stock

 

2

 

2

 

Additional paid-in capital

 

333,909

 

335,188

 

Accumulated deficit

 

(243,709

)

(247,618

)

Treasury stock

 

(63,278

)

(75,218

)

Accumulated other comprehensive loss

 

(94

)

5

 

 

 

 

 

 

 

Total stockholders’ equity

 

26,830

 

12,359

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

232,529

 

$

163,746

 

 


 

Overstock.com, Inc.

Consolidated Statements of Cash Flows (unaudited)

(in thousands)

 

 

 

Three months ended March 31,

 

Twelve months ended December 31,

 

 

 

2007

 

2008

 

2007

 

2008

 

 

 

 

 

 

 

 

 

 

 

Cash flows from operating activities of continuing operations:

 

 

 

 

 

 

 

 

 

Net loss

 

$

(21,383

)

$

(3,909

)

$

(107,239

)

$

(27,541

)

Adjustments to reconcile net loss to cash provided by (used in) operating activities of continuing operations:

 

 

 

 

 

 

 

 

 

Loss from discontinued operations

 

3,624

 

—

 

9,727

 

300

 

Depreciation and amortization

 

7,771

 

6,497

 

33,948

 

28,221

 

Realized loss (gain) on marketable securities

 

—

 

—

 

(1,868

)

—

 

Loss on disposition of property and equipment

 

—

 

—

 

1

 

1

 

Stock-based compensation

 

1,073

 

1,184

 

4,235

 

4,633

 

Stock-based compensation to consultants for services

 

5

 

(14

)

(15

)

170

 

Stock-based compensation relating to performance share plan

 

—

 

150

 

—

 

(400

)

Treasury stock issued to employees as compensation

 

602

 

19

 

882

 

(89

)

Amortization of debt discount and deferred financing fees

 

86

 

87

 

364

 

345

 

Asset impairment and depreciation (restructuring)

 

—

 

—

 

—

 

2,169

 

Restructuring

 

6,089

 

—

 

11,763

 

4,025

 

Notes receivable accretion

 

—

 

(136

)

—

 

(408

)

Changes in operating assets and liabilities, net of effect of acquisition and discontinued operations:

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

3,827

 

(738

)

(541

)

(5,531

)

Inventories, net

 

3,612

 

7,963

 

58,703

 

(1,308

)

Prepaid inventory

 

(360

)

1,004

 

6,234

 

33

 

Prepaid expenses

 

(1,962

)

(2,546

)

936

 

(683

)

Other long-term assets

 

90

 

—

 

539

 

381

 

Accounts payable

 

(38,059

)

(37,809

)

(9,638

)

4,762

 

Accrued liabilities

 

(23,255

)

(12,590

)

(19,986

)

18,492

 

Other long-term liabilities

 

—

 

(206

)

—

 

(399

)

 

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

 

(58,240

)

(41,044

)

(11,955

)

27,173

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities of continuing operations:

 

 

 

 

 

 

 

 

 

Change in restricted cash

 

—

 

—

 

55

 

—

 

Purchases of marketable securities

 

—

 

(6,539

)

—

 

(81,756

)

Sales of marketable securities

 

—

 

22,911

 

49,475

 

52,169

 

Expenditures for property and equipment

 

(477

)

(1,313

)

(17,114

)

(3,479

)

Proceeds from the sale of property and equipment

 

—

 

—

 

1

 

—

 

Proceeds from the sale of discontinued operations, net of cash transferred

 

—

 

—

 

—

 

9,892

 

Collection of note receivable

 

3,941

 

502

 

3,941

 

1,757

 

Decrease in cash resulting from de-consolidation of variable entity

 

—

 

—

 

(102

)

—

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) investing activities

 

3,464

 

15,561

 

36,256

 

(21,417

)

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities of continuing operations:

 

 

 

 

 

 

 

 

 

Payments on capital lease obligations

 

(5,247

)

(3,794

)

(5,776

)

(3,808

)

Borrowings on line of credit

 

1,169

 

5,268

 

57,122

 

6,522

 

Payments on line of credit

 

(1,169

)

(5,268

)

(77,122

)

(6,522

)

Issuance of common stock in offerings, net of issuance costs

 

—

 

—

 

64,406

 

(12,000

)

Purchase of treasury stock

 

—

 

(12,000

)

—

 

—

 

Exercise of stock options

 

1,153

 

—

 

2,660

 

2,077

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) financing activities

 

(4,094

)

(15,794

)

41,290

 

(13,731

)

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

(15

)

(23

)

4

 

(11

)

Cash provided by (used in) operating activities of discontinued operations

 

410

 

—

 

2,167

 

(614

)

Cash used in investing activities of discontinued operations

 

(53

)

—

 

(578

)

—

 

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

(58,528

)

(41,300

)

67,184

 

(8,600

)

Change in cash and cash equivalents from discontinued operations

 

(357

)

—

 

(1,590

)

614

 

Cash and cash equivalents, beginning of period

 

126,965

 

101,394

 

2,486

 

68,080

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

 

$

68,080

 

$

60,094

 

$

68,080

 

$

60,094