EX-99.1 2 a09-10700_1ex99d1.htm EX-99.1

Exhibit 99.1

 

FOR IMMEDIATE RELEASE:
April 22, 2009
Media Contact:
Roger Johnson, Overstock.com, Inc.
+1 (801) 947-4430
rojohnson@overstock.com

GRAPHIC

 

Investor Contact:

Kevin Moon, Overstock.com, Inc.

+1 (801) 947-3282

kmoon@overstock.com

 

Overstock.com Reports First Quarter 2009

Financial Results

 

SALT LAKE CITY — Overstock.com, Inc. (NASDAQ: OSTK) today reported financial results for the quarterly period ending March 31, 2009.

 

Key Q1 2009 metrics (comparison to Q1 2008):

·                  Revenue:  $187.4M vs. $202.8M (an 8% decrease);

·                  Gross margin: 20.1% vs. 16.7% (a 337 basis point improvement);

·                  Gross profit:  $37.7M vs. $34.0M (an 11% increase);

·                  Sales and marketing expense: $13.5M vs. $15.0M (a 10% decrease);

·                  Contribution (gross profit less sales and marketing) (a non-GAAP measure): $24.2M vs. $19.0M (a 27% increase);

·                  G&A/Technology expense: $27.2M vs. $24.1M (a 13% increase);

·                  Net (loss): $(2.1)M vs. $(4.7)M (a $2.6M improvement);

·                  EPS: $(0.09)/share vs. $(0.20)/share (an $0.11/share improvement); and

·                  Adjusted EBITDA (TTM) (a non-GAAP measure):  $14.3M vs. $1.1M (a $13.2M improvement).

 

Dear Owner:

 

The current economic environment remains tough: our year-over-year revenues decreased 8%.  However, our continued focus on aspects of the business below the revenue line is paying off.  Gross margin was 20.1% in the quarter and, even adjusting for some non-recurring items, it was 19.1%, still an all-time high for us.  Similarly, contribution percentage was higher than ever due to better margins and a controlled marketing spend.  We are making prudent long-term investments in the business in talent and capital expenditures, throttled by internally generated cash flows, thus ensuring we do not get out in front of our headlights.

 

I look forward to speaking with you on our upcoming conference call, and until then, I remain,

 

Your humble servant,

 



 

Patrick M. Byrne

 

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

 

Key financial and operating metrics:

 

Total revenue — Total revenue for the three months ended March 31, 2009 and 2008 was $187.4 million and $202.8 million, respectively, an 8% decrease.

 

Gross profit — Gross profit for the three months ended March 31, 2009 and 2008 was $37.7 million and $34.0 million, respectively, an 11% increase, representing 20.1% and 16.7% as a percentage of total revenue for those respective periods.

 

In Q1 2009, we reduced total cost of goods sold by $1.9 million for recoveries from partners who were underbilled in 2008 for certain fees and charges that they were contractually obligated to pay and a refund due of overbillings by a freight carrier for charges from Q4 2008. This accounted for 103 basis points of the 337 basis point improvement from Q1 2008.  Without this reduction, gross profit for the three months ended March 31, 2009 would be $35.8 million (19.1% as a percentage of total revenue), a 5% increase from Q1 2008.

 

Contribution (a non-GAAP measure) and contribution margin — “Contribution” (gross profit less sales and marketing expenses) for the three months ended March 31, 2009 and 2008 was $24.2 million (12.9% contribution margin) and $19.0 million (9.3% contribution margin), respectively, a 27% increase, or a 355 basis point improvement.

 

 

 

Three months ended
March 31,

 

(amounts in thousands)

 

2008

 

2009

 

Total revenue

 

$

202,814

 

$

187,367

 

Cost of goods sold

 

168,843

 

149,676

 

 

 

 

 

 

 

Gross profit

 

33,971

 

37,691

 

Less: Sales and marketing expense

 

15,019

 

13,540

 

 

 

 

 

 

 

Contribution

 

$

18,952

 

$

24,151

 

Contribution margin

 

9.3

%

12.9

%

 

Without the adjustment to cost of goods sold described above, contribution for Q1 2009 would have been $22.3 million (11.9% contribution margin), a 17% increase.

 

Contribution reflects an additional way of viewing our results.  When viewed with our GAAP gross profit less sales and marketing expenses, we believe contribution provides investors information about the performance of the company’s sales and marketing efforts in generating gross profit.

 

2



 

General and administrative (“G&A”) expenses — G&A expenses totaled $13.5 million and $9.6 million for the three months ended March 31, 2009 and 2008, respectively, approximately 7.2% and 4.7% of total revenue for those respective periods.  The increase of $3.9 million in Q1 G&A expenses year over year is primarily due to an increase in merchandising, finance, human resources, and other administrative staff.  It also reflects an increase in facilities expenses and a one-time termination payment of $1.25 million accrued in connection with the termination of a consulting arrangement with Icent LLC.  We have paid the termination payment to Icent LLC’s chief executive officer James V. Joyce, who resigned from his position as a member of the Company’s Board of Directors on April 1, 2009.

 

The increase in G&A expenses was partially offset as we recognized a reduction of legal expense related to $600,000 of a $2.75 million payment that we received from an insurer in settlement of a dispute regarding insurance coverage of a legal matter.

 

Operating loss — Operating loss for the three months ended March 31, 2009 was $(3.1) million compared to $(5.1) million for the three months ended March 31, 2008, a $2.0 million improvement.

 

Other income (expense) — For the three months ended March 31, 2009, other income (expense) was $1.7 million. This included a $1.9 million gain, net of amortization of debt discount of $63,000 on the extinguishment of $4.9 million of our 3.75% Convertible Senior Notes.  This gain was offset in part by a loss on the disposition of fixed assets of $184,000.

 

Net loss — Net loss for the three months ended March 31, 2009 was $(2.1) million, or $(0.09) loss per common share, compared to $(4.7) million, or $(0.20) per common share in 2008.

 

Adjusted EBITDA — Adjusted EBITDA (a non-GAAP measure) for the three months ended March 31, 2009 and 2008 was $2.0 million and $2.7 million, respectively. For the twelve months ended March 31, 2009 and 2008, Adjusted EBITDA was $14.3 million and $1.1 million, respectively.  Adjusted EBITDA, which we reconcile to “Net income (loss)” below, is an additional way of viewing our results that, when viewed together with our GAAP results, provides a more complete understanding of factors affecting our results.  We believe that discussing Adjusted EBITDA is useful to us and investors because it approximates actual cash used or cash generated by the continuing operations of the business.

 

Our calculation of Adjusted EBITDA is set forth below:

 

3



 

 

 

Three months ended

 

Twelve months ended

 

 

 

March 31,

 

March 31,

 

(in thousands)

 

2008

 

2009

 

2008

 

2009

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(4,724

)

$

(2,099

)

$

(30,672

)

$

(10,033

)

Add back amounts for computation of Adjusted EBITDA:

 

 

 

 

 

 

 

 

 

Depreciation and amortization, including internal-use software and website development, and other amortization

 

6,497

 

4,185

 

28,221

 

20,355

 

Stock-based compensation expense to employees and directors

 

1,184

 

849

 

4,633

 

3,687

 

Stock-based compensation to consultants for services

 

(14

)

10

 

170

 

283

 

Stock-based compensation related to performance share plan

 

150

 

 

(400

)

(1,150

)

Treasury stock issued from treasury for 401(k) matching contribution

 

19

 

 

(89

)

 

Interest (income) expense, net

 

(403

)

743

 

(1,042

)

1,445

 

Other (income), net

 

 

(1,736

)

 

 

(290

)

Loss from discontinued operations

 

 

 

300

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

2,709

 

$

1,952

 

$

1,121

 

$

14,297

 

 

Free Cash Flow (a non-GAAP measure) — Free cash flow for the three months ended March 31, 2009 and 2008 totaled $(28.8) million and $(42.4) million, respectively.  For the twelve months ended March 31, 2009 and 2008, free cash flow was $(3.2) 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 “Net cash provided by (used in) operating activities,” is cash flow from operations reduced by “Expenditures for fixed assets, including internal-use software and website development.” 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.

 

 

 

Three months ended
March 31,

 

Twelve months ended
March 31,

 

(in thousands)

 

2008

 

2009

 

2008

 

2009

 

Net cash provided by (used in) operating activities

 

$

(41,044

)

$

(27,083

)

$

27,173

 

$

15,921

 

Expenditures for fixed assets, including internal-use software and website development

 

(1,313

)

(1,736

)

(3,479

)

(19,113

)

 

 

 

 

 

 

 

 

 

 

Free cash flow

 

$

(42,357

)

$

(28,819

)

$

23,694

 

$

(3,192

)

 

Cash and working capital — At March 31, 2009, Overstock.com had cash and cash equivalents of $78.6 million.  Working capital was $33.7 million and $39.7 million at March 31, 2009 and December 31, 2008, respectively.

 

4



 

About Overstock.com

Overstock.com, Inc. is an online retailer offering brand-name merchandise at discount prices.  The company offers its customers an opportunity to shop for bargains conveniently, while offering its suppliers an alternative inventory 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 regularly posts information about the company and other related matters on its website under the heading “Investor Relations.”

 

# # #

 

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 all statements other than statements of historical facts. Our Form 10-K/A for the year ended December 31, 2008, and our other subsequent filings with the Securities and Exchange Commission identify important factors that could cause our 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,

 

 

 

2008

 

2009

 

 

 

 

 

 

 

Revenue, net

 

 

 

 

 

Direct

 

$

51,764

 

$

35,059

 

Fulfillment partner

 

151,050

 

152,308

 

 

 

 

 

 

 

Total net revenue

 

202,814

 

187,367

 

 

 

 

 

 

 

Cost of goods sold

 

 

 

 

 

Direct

 

44,803

 

30,478

 

Fulfillment partner

 

124,040

 

119,198

 

 

 

 

 

 

 

Total cost of goods sold

 

168,843

 

149,676

 

 

 

 

 

 

 

Gross profit

 

33,971

 

37,691

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

Sales and marketing

 

15,019

 

13,540

 

Technology

 

14,516

 

13,789

 

General and administrative

 

9,563

 

13,454

 

 

 

 

 

 

 

Total operating expenses

 

39,098

 

40,783

 

 

 

 

 

 

 

Operating loss

 

(5,127

)

(3,092

)

 

 

 

 

 

 

Interest income, net

 

1,304

 

123

 

Interest expense

 

(901

)

(866

)

Other income (expense), net

 

 

1,736

 

 

 

 

 

 

 

Net loss

 

$

(4,724

)

$

(2,099

)

 

 

 

 

 

 

Net loss per common share - basic and diluted

 

$

(0.20

)

$

(0.09

)

 

 

 

 

 

 

Weighted average common shares outstanding - basic and diluted

 

23,345

 

22,803

 

 

 

 

 

 

 

Other data:

 

 

 

 

 

Shopping bookings (in 000s)

 

$

219,754

 

$

203,990

 

Auction gross merchandise volume (in 000s)

 

$

2,610

 

$

5,188

 

Average customer acquisition cost (shopping)

 

$

25.21

 

$

22.05

 

 



 

Overstock.com, Inc.

Consolidated Balance Sheets

(in thousands)

 

 

 

December 31,

 

March 31,

 

 

 

2008

 

2009

 

 

 

 

 

(unaudited)

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

100,577

 

$

78,607

 

Marketable securities

 

8,989

 

 

 

 

 

 

 

 

Cash, cash equivalents and marketable securities

 

109,566

 

78,607

 

Accounts receivable, net

 

6,985

 

9,693

 

Notes receivable

 

1,250

 

 

Inventories, net

 

17,723

 

11,695

 

Prepaid inventory, net

 

761

 

1,401

 

Prepaid expense

 

9,694

 

8,733

 

 

 

 

 

 

 

Total current assets

 

145,979

 

110,129

 

Fixed assets, net

 

23,144

 

20,513

 

Goodwill

 

2,784

 

2,784

 

Other long-term assets, net

 

538

 

2,920

 

 

 

 

 

 

 

Total assets

 

$

172,445

 

$

136,346

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity (Deficit)

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

62,120

 

$

31,476

 

Accrued liabilities

 

25,154

 

27,234

 

Deferred revenue

 

19,026

 

17,683

 

 

 

 

 

 

 

Total current liabilities

 

106,300

 

76,393

 

Other long-term liabilities

 

2,572

 

2,823

 

Convertible senior notes

 

66,558

 

61,730

 

 

 

 

 

 

 

Total liabilities

 

175,430

 

140,946

 

 

 

 

 

 

 

Stockholders’ deficit:

 

 

 

 

 

Common stock

 

2

 

2

 

Additional paid-in capital

 

338,620

 

339,479

 

Accumulated deficit

 

(264,985

)

(267,084

)

Treasury stock

 

(76,670

)

(76,997

)

Accumulated other comprehensive income

 

48

 

 

 

 

 

 

 

 

Total stockholders’ deficit

 

(2,985

)

(4,600

)

 

 

 

 

 

 

Total liabilities and stockholders’ deficit

 

$

172,445

 

$

136,346

 

 



 

Overstock.com, Inc.

Consolidated Statements of Cash Flows (unaudited)

(in thousands)

 

 

 

Three months ended March 31,

 

Twelve months ended March 31,

 

 

 

2008

 

2009

 

2008

 

2009

 

 

 

 

 

 

 

 

 

 

 

Cash flows from operating activities of continuing operations:

 

 

 

 

 

 

 

 

 

Net loss

 

$

(4,724

)

$

(2,099

)

$

(30,672

)

$

(10,033

)

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

 

 

 

 

 

 

 

 

 

Loss from discontinued operations

 

 

 

300

 

 

Depreciation and amortization, including internal-use software and website development

 

6,497

 

4,185

 

28,221

 

20,355

 

Realized loss on marketable securities

 

 

39

 

 

373

 

Loss on settlement of notes receivable

 

 

 

 

3,929

 

Loss on disposition of fixed assets

 

 

184

 

1

 

324

 

Stock-based compensation to employees and directors

 

1,184

 

849

 

4,633

 

3,687

 

Stock-based compensation to consultants for services

 

(14

)

10

 

170

 

283

 

Stock-based compensation relating to performance share plan

 

150

 

 

(400

)

(1,150

)

Issuance of common stock from treasury for 401(k) matching contribution

 

19

 

 

(89

)

 

Amortization of debt discount

 

87

 

74

 

345

 

321

 

Gain from early extinguishment of debt

 

 

(1,926

)

 

(4,775

)

Asset impairment and depreciation (other non-cash restructuring)

 

 

 

2,169

 

 

Restructuring charges

 

 

 

4,025

 

 

Notes receivable accretion

 

(136

)

 

(408

)

(409

)

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

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

1,931

 

(2,708

)

(1,331

)

130

 

Inventories, net

 

7,673

 

6,028

 

108

 

6,275

 

Prepaid inventory, net

 

1,004

 

(640

)

33

 

533

 

Prepaid expenses

 

(2,546

)

(707

)

(683

)

(283

)

Other long-term assets, net

 

 

(716

)

381

 

(1,232

)

Accounts payable

 

(37,519

)

(30,644

)

9,418

 

(1,363

)

Accrued liabilities

 

(12,669

)

2,080

 

4,712

 

2,468

 

Deferred revenue

 

(1,775

)

(1,343

)

6,639

 

(3,507

)

Other long-term liabilities

 

(206

)

251

 

(399

)

(5

)

 

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities of continuing operations

 

(41,044

)

(27,083

)

27,173

 

15,921

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities of continuing operations:

 

 

 

 

 

 

 

 

 

Purchases of marketable securities

 

(6,539

)

 

(81,756

)

(29,009

)

Maturities of marketable securities

 

22,911

 

 

52,169

 

41,631

 

Sales of marketable securities prior to maturity

 

 

8,902

 

 

16,642

 

Expenditures for fixed assets, including internal-use software and website development

 

(1,313

)

(1,736

)

(3,479

)

(19,113

)

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

 

 

 

9,892

 

 

Collection of note receivable

 

502

 

1,250

 

1,757

 

2,254

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) investing activities of continuing operations

 

15,561

 

8,416

 

(21,417

)

12,405

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities of continuing operations:

 

 

 

 

 

 

 

 

 

Payments on capital lease obligations

 

(3,794

)

 

(3,808

)

(2

)

Drawdowns on line of credit

 

5,268

 

1,612

 

6,522

 

9,307

 

Paydowns on line of credit

 

(5,268

)

(1,612

)

(6,522

)

(9,307

)

Payments to retire convertible senior notes

 

 

(2,976

)

 

(9,526

)

Purchase of treasury stock

 

(12,000

)

(327

)

(12,000

)

(1,779

)

Exercise of stock options

 

 

 

2,077

 

1,471

 

 

 

 

 

 

 

 

 

 

 

Net cash used in financing activities of continuing operations

 

(15,794

)

(3,303

)

(13,731

)

(9,836

)

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

(23

)

 

(11

)

23

 

Cash used in operating activities of discontinued operations

 

 

 

(614

)

 

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

(41,300

)

(21,970

)

(8,600

)

18,513

 

Less change in cash and cash equivalents from discontinued operations

 

 

 

614

 

 

Cash and cash equivalents, beginning of period

 

101,394

 

100,577

 

68,080

 

60,094

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

 

$

60,094

 

$

78,607

 

$

60,094

 

$

78,607