EX-99.1 2 a07-20688_1ex99d1.htm EX-99.1

Exhibit 99.1

 

NEWS RELEASE
July 31, 2007

 

 

Media Contact:

Jared Matkin, Overstock.com, Inc.

+1 (801) 947-3880

jmatkin@overstock.com

Investor Contact:

Kevin Moon, Overstock.com, Inc.

+1 (801) 947-3282

kmoon@overstock.com

Overstock.com Reports Second Quarter 2007 Financial Results

SALT LAKE CITY (July 31, 2007) — Overstock.com, Inc. (NASDAQ: OSTK) today reported quarterly financial results for the period ending June 30, 2007.

Dear Investor:

During Q2 we generated $14.9 million positive operating cash flow and $2.0 million positive EBITDA, excluding restructuring costs (“EBITDA excluding restructuring costs” is a non-GAAP number: see the reconciliation to operating income in the “Key financial and operating metrics” section below).  Additionally, we generated $9.4 million positive trailing 12-month (“TTM”) operating cash flow. Our Q2 gross margins of 17.7% were a historical best for us. At this year’s start I suggested keeping an eye on contribution metrics (gross profits minus sales and marketing expenses): in Q2 our contribution margin was 12.3% (another record for us), and contribution profit grew 76% versus Q2 2006.

Two years is long to hold one’s breath, but sweet indeed is the air of $14.9 million positive operating cash flow.

Some data from the quarter:

·         Revenue:  $149.0 million for Q2 2007, down 6% from Q2 2006

·         Gross margin:  17.7%, up from 14.0% in 2006 (and 16.0% in Q1)

·         Gross profits:  $26.3 million, up 18% from 2006

·         Contribution margin:  12.3%, up from 6.5% in 2006 (and 8.9% in Q1)

·         EBITDA (non-GAAP, excludes restructuring): $2.0 million vs. $(7.5) million in 2006

·         Operating loss before restructuring (non-GAAP): $7.3 million

·         Cash flow from operations (TTM): $9.4 million, up from $(39.8) million in 2006

·         Net loss: $13.8 million or $0.58 loss per share

I look forward to our call, and as always, remain,

Your humble servant,

Patrick M. Byrne

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




 

Key financial and operating metrics

Total revenue — Overstock.com reported total revenue for the three months ended June 30, 2007 of $149.0 million, a 6% decrease from the $159.2 million reported in 2006.  For the six months ended June 30, 2007, total revenue was $306.9 million, a 9% decrease from the $337.2 million reported in 2006.

Gross profit and gross margin — Gross profits for the three months ended June 30, 2007 was $26.3 million (17.7% gross margin), an 18% increase from the $22.3 million (14.0% gross margin) reported in 2006.  For the six-month periods, gross profits were $51.6 million in 2007 and $46.1 million in 2006, respectively, a 12% increase.  Gross margins were 16.8% and 13.7% for those respective six-month periods.

Contribution and contribution margin — “Contribution” (gross profit less sales and marketing expenses) for the three months ended June 30, 2006 and 2007 was $10.4 million (6.5% contribution margin) and $18.3 million (12.3% contribution margin), respectively, a 76% increase.  For the six months ended June 30, 2006 and 2007, contribution was $21.5 million (6.4% contribution margin) and $32.4 million (10.5% contribution margin), respectively, a 51% increase.

 

 

Three months ended

 

Six months ended

 

 

 

June 30,

 

June 30,

 

 

 

2006

 

2007

 

2006

 

2007

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

$

159,192

 

$

148,967

 

$

337,236

 

$

306,897

 

Cost of goods sold

 

136,884

 

122,664

 

291,194

 

255,279

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

22,308

 

26,303

 

46,042

 

51,618

 

Less: Sales and marketing expense

 

11,911

 

7,962

 

24,570

 

19,246

 

 

 

 

 

 

 

 

 

 

 

Contribution

 

$

10,397

 

$

18,341

 

$

21,472

 

$

32,372

 

Contribution margin

 

6.5

%

12.3

%

6.4

%

10.5

%

 

Operating loss —Operating losses for the three months ended June 30, 2006 and 2007 were $15.6 million and $13.5 million, respectively. For the six months ended June 30, 2006 and 2007, operating losses were $29.7 million and $31.2 million, respectively.  However, operating losses before restructuring (non-GAAP) for the three and six months ending June 30, 2007, were $7.3 million and $19.0 million, respectively.  There were no restructuring costs in 2006.  Restructuring costs primarily represent efforts to reduce our overall expense structure through the consolidation of our corporate office, data centers and warehouse facilities. Therefore, we believe that discussing our

2




 

operating loss excluding restructuring costs provides useful information to investors because it is a representation of the expense structure of the company if the company had not originally incurred these costs.

 

 

Three months ended

 

Six months ended

 

 

 

June 30,

 

June 30,

 

 

 

2006

 

2007

 

2006

 

2007

 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

$

(15,550

)

$

(13,519

)

$

(29,729

)

$

(31,239

)

Add back: restructuring

 

 

6,194

 

 

12,283

 

 

 

 

 

 

 

 

 

 

 

Operating loss before restructuring

 

$

(15,550

)

$

(7,325

)

$

(29,729

)

$

(18,956

)

 

EBITDA excluding restructuring costs (non-GAAP) — EBITDA excluding restructuring costs for the three months ended June 30, 2006 and 2007 was $(7.5) million and $2.0 million, respectively. For the six months ended June 30, 2006 and 2007, EBITDA excluding restructuring costs was $(14.0) million and $(146K), respectively. Restructuring costs primarily represent efforts to reduce our overall expense structure through the consolidation of our corporate office, data centers and warehouse facilities. Therefore, we believe that discussing EBITDA excluding restructuring costs provides useful information to investors because it is a representation of cash generated from the operations of the business if the company had not originally incurred these costs.

 

 

Three months ended

 

Six months ended

 

 

 

June 30,

 

June 30,

 

 

 

2006

 

2007

 

2006

 

2007

 

Operating loss

 

$

(15,550

)

$

(13,519

)

$

(29,742

)

$

(31,239

)

Add:Depreciation and amortization

 

6,876

 

7,974

 

13,026

 

15,745

 

Stock-based compensation expense

 

1,088

 

1,137

 

2,046

 

2,210

 

Stock-based compensation to consultants for service

 

(9

)

135

 

34

 

140

 

Treasury stock issued to employees as compensation

 

105

 

113

 

612

 

715

 

EBITDA

 

(7,490

)

(4,160

)

(14,024

)

(12,429

)

Add: Restructuring

 

 

6,194

 

 

12,283

 

EBITDA excluding restructuring

 

$

(7,490

)

$

2,034

 

$

(14,024

)

$

(146

)

 

Net loss — Net loss for the three months ended June 30, 2006, was $15.8 million, or $0.78 loss per share, compared to $13.8 million, or $0.58 loss per share in 2007. Net loss in Q2 includes $6.2 million of restructuring charges and loss from discontinued operations of $300K.  For the six months ended June 30, 2006 and 2007, net losses totaled $31.7 million and $35.2 million, respectively, or $1.60 and $1.49 loss per share for those respective periods.  Net loss in 2007 includes restructuring of $12.3 million and loss from discontinued operations of $3.9 million.  The 2006 net loss did not have any restructuring charges, but included $1.9 million from discontinued operations.

Cash and working capital — At June 30, 2007, Overstock.com had cash, cash equivalents and marketable securities of $93.0 million and working capital of $63.3 million.

3




 

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 the outlook of the company, as well as all such other risks as identified in our Form 10-K for the year ended December 31, 2006, and all our subsequent filings with the Securities and Exchange Commission, which contain and identify important factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements.

 

4




 

 

Overstock.com, Inc.

Consolidated Statements of Operations (unaudited)

(in thousands, except per share amounts)

 

 

 

Three months ended

 

Six months ended

 

 

 

June 30,

 

June 30,

 

 

 

2006

 

2007

 

2006

 

2007

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

Direct

 

$

68,770

 

$

43,578

 

$

148,480

 

$

89,279

 

Fulfillment partner

 

90,422

 

105,389

 

188,756

 

217,618

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

159,192

 

148,967

 

337,236

 

306,897

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

 

 

 

 

 

 

 

Direct

 

61,473

 

36,321

 

132,176

 

75,641

 

Fulfillment partner

 

75,411

 

86,343

 

158,998

 

179,638

 

 

 

 

 

 

 

 

 

 

 

Total cost of goods sold

 

136,884

 

122,664

 

291,174

 

255,279

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

22,308

 

26,303

 

46,062

 

51,618

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Sales and marketing

 

11,911

 

7,962

 

24,570

 

19,246

 

Technology

 

14,897

 

15,237

 

28,321

 

30,210

 

General and administrative

 

11,050

 

10,429

 

22,900

 

21,118

 

Restructuring

 

 

6,194

 

 

12,283

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

37,858

 

39,822

 

75,791

 

82,857

 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

(15,550

)

(13,519

)

(29,729

)

(31,239

)

 

 

 

 

 

 

 

 

 

 

Interest income

 

2,215

 

1,078

 

2,530

 

2,068

 

Interest expense

 

(1,275

)

(1,027

)

(2,542

)

(2,056

)

Other income, net

 

(1

)

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations

 

(14,611

)

(13,468

)

(29,742

)

(31,227

)

Discontinued operations:

 

 

 

 

 

 

 

 

 

Loss from discontinued operations

 

(1,128

)

(300

)

(1,907

)

(3,924

)

 

 

 

 

 

 

 

 

 

 

Net loss

 

(15,739

)

(13,768

)

(31,649

)

(35,151

)

Deemed dividend related to redeemable common stock

 

(33

)

 

(66

)

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to common shares

 

$

(15,772

)

$

(13,768

)

$

(31,715

)

$

(35,151

)

 

 

 

 

 

 

 

 

 

 

Net loss per common share - basic and diluted:

 

 

 

 

 

 

 

 

 

Loss from continuing operations

 

$

(0.72

)

$

(0.57

)

$

(1.50

)

$

(1.32

)

Loss from discontinued operations

 

$

(0.06

)

$

(0.01

)

$

(0.10

)

$

(0.17

)

Net loss per common share - basic and diluted

 

$

(0.78

)

$

(0.58

)

$

(1.60

)

$

(1.49

)

Weighted average common shares outstanding - basic and diluted

 

20,159

 

23,689

 

19,774

 

23,642

 

 

 

 

 

 

 

 

 

 

 

Other data:

 

 

 

 

 

 

 

 

 

Shopping bookings (in 000s)

 

$

172,091

 

$

165,683

 

$

372,991

 

$

336,045

 

Auction gross merchandise volume (in 000s)

 

$

6,860

 

$

3,753

 

$

14,939

 

$

8,448

 

Average customer acquisition cost (shopping)

 

$

23.23

 

$

20.20

 

$

21.35

 

$

22.20

 

 

 

5




 

 

Overstock.com, Inc.

Consolidated Balance Sheets (unaudited)

(in thousands)

 

 

 

December 31,

 

June 30,

 

 

 

2006

 

2007

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

126,965

 

$

75,044

 

Marketable securities

 

 

17,982

 

 

 

 

 

 

 

Cash, cash equivalents and marketable securities

 

126,965

 

93,026

 

Accounts receivable, net

 

11,638

 

7,942

 

Notes receivable

 

6,702

 

2,008

 

Inventories, net

 

20,274

 

15,425

 

Prepaid inventory

 

2,241

 

2,124

 

Prepaid expenses

 

7,473

 

8,735

 

Current assets of held for sale subsidiary

 

4,718

 

 

 

 

 

 

 

 

Total current assets

 

180,011

 

129,260

 

Property and equipment, net

 

56,198

 

40,209

 

Goodwill

 

2,784

 

2,784

 

Other long-term assets, net

 

578

 

302

 

Note receivable

 

 

3,909

 

Long-term assets of held for sale subsidiary

 

16,594

 

 

 

 

 

 

 

 

Total assets

 

$

256,165

 

$

176,464

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

66,039

 

$

33,544

 

Accrued liabilities

 

40,142

 

28,615

 

Capital lease obligations, current

 

5,074

 

3,806

 

Current liabilities of held for sale subsidiary

 

3,684

 

 

 

 

 

 

 

 

Total current liabilities

 

114,939

 

65,965

 

Capital lease obligations, non-current

 

3,983

 

 

Other long-term liabilities

 

 

3,227

 

Convertible senior notes

 

75,279

 

75,451

 

 

 

 

 

 

 

Total liabilities

 

194,201

 

144,643

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Common stock

 

2

 

2

 

Additional paid-in capital

 

325,771

 

329,357

 

Accumulated deficit

 

(198,694

)

(233,845

)

Treasury stock

 

(64,983

)

(63,583

)

Accumulated other comprehensive loss

 

(132

)

(110

)

 

 

 

 

 

 

Total stockholders’ equity

 

61,964

 

31,821

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

256,165

 

$

176,464

 

 

6




 

 

Overstock.com, Inc.

Consolidated Statements of Cash Flows (unaudited)

(in thousands)

 

 

 

Three months ended June 30,

 

Six months ended June 30,

 

Twelve months ended June 30,

 

 

 

2006

 

2007

 

2006

 

2007

 

2006

 

2007

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from operating activities of continuing operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(15,739

)

$

(13,768

)

$

(31,649

)

$

(35,151

)

$

(50,334

)

$

(105,268

)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from discontinued operations

 

1,128

 

300

 

1,907

 

3,924

 

4,478

 

8,898

 

Depreciation and amortization

 

6,876

 

7,974

 

13,026

 

15,745

 

22,572

 

35,046

 

Realized (gain) loss from marketable securities

 

(1,868

)

 

(2,085

)

 

1,292

 

 

Realized loss on disposition of property and equipment

 

1

 

1

 

599

 

1

 

2,056

 

1

 

Stock-based compensation

 

1,088

 

1,137

 

2,046

 

2,210

 

2,045

 

4,284

 

Stock-based compensation to consultants for services

 

(9

)

135

 

34

 

140

 

60

 

129

 

Treasury stock issued to employees as compensation

 

105

 

113

 

612

 

715

 

744

 

890

 

Amortization of debt discount and deferred financing fees

 

139

 

86

 

278

 

172

 

475

 

311

 

Restructuring

 

 

6,194

 

 

12,283

 

 

17,957

 

Gain from retirement of convertible senior notes

 

 

 

 

 

(1,988

)

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

(977

)

(431

)

1,339

 

3,396

 

(2,970

)

5

 

Inventories, net

 

6,529

 

1,237

 

18,447

 

4,849

 

(13,275

)

53,411

 

Prepaid inventory

 

5,592

 

477

 

6,386

 

117

 

7,163

 

1,119

 

Prepaid expenses

 

723

 

700

 

(1,171

)

(1,262

)

(1,557

)

913

 

Other long-term assets

 

(29

)

176

 

18

 

266

 

(2,122

)

744

 

Accounts payable

 

(1,603

)

5,467

 

(65,224

)

(32,592

)

(5,440

)

(2,568

)

Accrued liabilities

 

(8,384

)

5,141

 

(23,569

)

(18,114

)

(2,995

)

(6,460

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

 

(6,428

)

14,939

 

(79,006

)

(43,301

)

(39,796

)

9,412

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities of continuing operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in restricted cash

 

55

 

 

253

 

 

833

 

 

Purchases of marketable securities

 

 

(21,381

)

 

(21,381

)

(23,552

)

(21,381

)

Sales of marketable securities

 

49,475

 

3,400

 

56,756

 

3,400

 

110,833

 

3,400

 

Expenditures for property and equipment

 

(5,102

)

(1,439

)

(11,906

)

(1,916

)

(32,272

)

(13,450

)

Acquisition of Ski West

 

 

 

 

 

(25,111

)

 

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

 

 

9,892

 

 

9,892

 

 

9,892

 

Paydown of note receivable

 

 

753

 

 

4,694

 

 

4,694

 

Decrease in cash resulting from de-consolidation of variable entity

 

 

 

 

 

 

(102

)

Expenditures for other long-term assets

 

 

 

(100

)

 

(100

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) investing activities

 

44,428

 

(8,775

)

45,003

 

(5,311

)

30,631

 

(16,947

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities of continuing operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

Payments on capital lease obligations

 

(326

)

(4

)

(2,754

)

(5,251

)

(6,788

)

(5,454

)

Borrowings on line of credit

 

42,530

 

 

73,258

 

1,169

 

85,126

 

14,592

 

Payments on line of credit

 

(62,530

)

 

(73,258

)

(1,169

)

(85,126

)

(14,592

)

Payments to retire convertible senior notes

 

 

 

 

 

(7,735

)

 

Proceeds from the issuance of common stock

 

25,000

 

 

25,000

 

 

25,000

 

39,406

 

Purchase of treasury stock

 

 

 

 

 

 

 

Settlement of call options for cash

 

 

 

 

 

7,937

 

 

Exercise of stock options

 

434

 

768

 

1,461

 

1,921

 

4,868

 

2,994

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) financing activities

 

5,108

 

764

 

23,707

 

(3,330

)

23,282

 

36,946

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

(44

)

36

 

(29

)

21

 

83

 

84

 

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

 

246

 

(614

)

70

 

(204

)

25

 

1,307

 

Cash used in investing activities of discontinued operations

 

(263

)

 

(304

)

(53

)

(402

)

(315

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

43,047

 

6,350

 

(10,559

)

(52,178

)

13,823

 

30,487

 

Change in cash and cash equivalents from discontinued operations

 

17

 

614

 

234

 

257

 

377

 

(993

)

Cash and cash equivalents, beginning of period

 

2,486

 

68,080

 

55,875

 

126,965

 

31,350

 

45,550

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

 

$

45,550

 

$

75,044

 

$

45,550

 

$

75,044

 

$

45,550

 

$

75,044

 

 

 

7