EX-99.1 2 a08-19612_1ex99d1.htm EX-99.1

Exhibit 99.1

 

NEWS RELEASE
July 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 Second Quarter 2008 Financial Results

 

SALT LAKE CITY (July 18, 2008) – Overstock.com, Inc. (NASDAQ: OSTK) today reported financial results for the quarterly period ending June 30, 2008.

 

Key Q2 2008 metrics (comparison to Q2 2007):

 

·         Total revenue:  $188.8 million vs. $149.0 million (27% gain);

·         Gross margin: 18.1% (all-time high) vs. 17.7%;

·         Gross profit:  $34.1 million vs. $26.3 million (30% gain);

·         Sales and marketing expense: $14.2 million vs. $8.0 million (79% increase);

·         Contribution (gross profit less marketing expense):  $19.9 million vs. $18.3 million (8% gain);

·         G&A / Technology expense: $26.2 million vs. $25.7 million (a 2% increase);

·         Net loss: $6.5 million [$(0.28)/share] vs. $13.8 million [$(0.58)/share] (53% gain);

·         EBITDA:  $1.1 million vs. $(4.2) million (a $5.3 million gain);

·         EBITDA (TTM):  $9.6 million vs. ($54.9) million (a $64.5 million gain);

·         Operating cash flows (TTM): $12.7 million vs. $9.4 million (a $3.3 million gain).

 

Dear Owner:

 

For the first time in its history your business has generated four consecutive quarters of positive EBITDA and TTM operating cash flows.  We ended Q2 with $87 million in cash, having bought in $12 million of stock earlier in 2008.  Our financial condition is sound despite a weak economy.

 

Strong growth in our fulfillment partner business drove revenues and gross profits this quarter. Total revenue grew 27%, the same pace we experienced in Q1, and gross margins reached an historical high of 18.1%. The fulfillment partner business accelerated to 41% year-over-year growth and 19.4% gross margins. We continue to increase product selection for our customers (now up to ~100k non-media SKUs vs. ~43k for the same period last year).

 

We added over 500,000 new customers this quarter, up 31% from last year: while this is primarily attributable to our marketing efforts, we feel that this is also an indication that the current economic climate is driving more people to discount shopping.  Most of the areas we spend marketing dollars are fairly well dialed-in, a few channels are in the process of being dialed-in (but we see how to do it), and one is purely exploratory: we spent a considerable amount in that

 

-more-

 



 

exploratory channel this quarter in an effort to hasten the dialing-in process.  We expect to see improved marketing efficiency in Q3.

 

Our Technology and G&A expenses are under control, even though we are doing more basic projects than we ever have in the past. Some of these are directed to better inventory purchasing and handling, some will benefit our website, and some are long-term projects, such as the housing tab that went live this quarter, joining the cars and auctions tabs. In addition, we are building an extremely robust training environment for our company which, while costly now, should yield superb long-term benefits (this has become the work of Steve Tryon, our retired US Army Colonel).

 

Both customer service and warehouse operations have gotten dialed-in past all our expectations. Our customer satisfaction continues to astonish me. We are building a new Customer Care operation in our new warehouse. The rest of our corporate facility anticipates moving to that new warehouse sometime around June of next year.

 

As always, I look forward to speaking with you about your business during the upcoming conference call. 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 June 30, 2007 and 2008 was $149.0 million and $188.8 million, respectively, a 27% increase. For the six months ended June 30, 2008, total revenue was $389.6 million, a 27% increase from the $306.9 million reported in 2007.

 

Gross profit and gross margin — Gross profit for the three months ended June 30, 2007 and 2008 was $26.3 million and $34.1 million, respectively, a 30% increase, representing margins of 17.7% and 18.1% for those respective periods. For the six-month periods, gross profits were $51.6 million in 2007 and $68.9 million in 2008, a 33% increase.  Gross margins were 16.8% and 17.7% 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, 2007 and 2008 was $18.3 million (12.3% contribution margin) and $19.9 million (10.5% contribution margin), respectively, an 8% increase. For the six months ended June 30, 2007 and 2008, contribution was $32.4 million (10.5% contribution margin) and $39.6 million (10.2% contribution margin), respectively, a 22% increase.

 

2



 

 

 

Three months ended

 

Six months ended

 

(in thousands)

 

June 30,

 

June 30,

 

 

 

2007

 

2008

 

2007

 

2008

 

Total revenue

 

$

148,967

 

$

188,842

 

$

306,897

 

$

389,587

 

Cost of goods sold

 

122,664

 

154,737

 

255,279

 

320,696

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

26,303

 

34,105

 

51,618

 

68,891

 

Less: Sales and marketing expense

 

7,962

 

14,244

 

19,246

 

29,263

 

 

 

 

 

 

 

 

 

 

 

Contribution

 

$

18,341

 

$

19,861

 

$

32,372

 

$

39,628

 

Contribution margin

 

12.3

%

10.5

%

10.5

%

10.2

%

 

Operating loss — Operating losses for the three months ended June 30, 2007 and 2008 were $13.5 million (including $6.2 million of restructuring) and $6.3 million, respectively. For the six months ended June 30, 2007 and 2008, operating losses were $31.2 million (including $12.3 million of restructuring) and $10.6 million, respectively.

 

EBITDA — EBITDA (a non-GAAP measure) for the three months ended June 30, 2007 and 2008 was $(4.2) million (including $6.2 million of restructuring) and $1.1 million, respectively. For the trailing twelve months ended June 30, 2007 and 2008, EBITDA was $(54.9) million (including $12.3 million of restructuring) and $9.6 million, respectively. We believe that, because our current capital expenditures are lower than our depreciation levels, discussing EBITDA at this stage of our business is useful to us and investors because it approximates cash used or cash generated by the operations of the business.

 

 

 

Three months ended
June 30,

 

Trailing Twelve months ended
June 30,

 

 

 

2007

 

2008

 

2007

 

2008

 

Operating loss

 

$

(13,519

)

$

(6,317

)

$

(95,276

)

$

(20,989

)

Add: Depreciation and amortization

 

7,974

 

5,887

 

35,046

 

26,134

 

 Stock-based compensation

 

1,137

 

1,068

 

4,284

 

4,564

 

 Stock-based compensation to consultants for services

 

135

 

329

 

129

 

364

 

 Stock-based compensation relating to performance share plan

 

 

150

 

 

(250

)

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

 

113

 

 

890

 

(202

)

EBITDA

 

$

(4,160

)

$

1,117

 

$

(54,927

)

$

9,621

 

 

Net loss — Net loss for the three months ended June 30, 2008, was $6.5 million, or $0.28 loss per share, compared to $13.8 million, or $0.58 loss per share in 2007.  Net loss in Q2 2007 included $6.2 million of restructuring charges and loss from discontinued operations of $300K. For the six months ended June 30, 2007 and 2008, net losses totaled $35.2 million and $10.4 million, respectively, or $1.49 and $0.45 loss per share for those respective periods.  Net loss in 2007 included restructuring expense of $12.3 million and a loss from discontinued operations of $3.9 million.

 

3



 

Free Cash Flow (a non-GAAP measure) — Free cash flow for the three months ended June 30, 2007 and 2008 totaled $13.5 million and $(4.7) million, respectively.  For the trailing twelve months ended June 30, 2007 and 2008, free cash flow totaled $(4.0) million and $5.5 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

 

Trailing Twelve months ended

 

 

 

June 30,

 

June 30,

 

 

 

2007

 

2008

 

2007

 

2008

 

Net cash provided by (used in) operating activities

 

$

14,939

 

$

449

 

$

9,412

 

$

12,683

 

Expenditures for property and equipment

 

(1,439

)

(5,136

)

(13,450

)

(7,176

)

 

 

 

 

 

 

 

 

 

 

Free cash flow

 

$

13,500

 

$

(4,687

)

$

(4,038

)

$

5,507

 

 

Cash and working capital — At June 30, 2008, Overstock.com had cash, cash equivalents and marketable securities of $86.7 million and working capital of $58.4 million.

 

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® is a registered trademark of Overstock.com, Inc.

 

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 soundness of the company’s financial condition, future increases in product selection, a belief that the current economic climate will drive increases in customer growth, accuracy or effectiveness of marketing programs, the extent that we have expenses under control, the effect of internal projects, the benefits of our internal training program, the timing of moving personnel to our new warehouse, a belief that free cash flow is an important and useful measure to evaluate our business, as well as all such other risks as identified in our Form 10-K for the year ended December 31, 2007, our subsequent quarterly reports on Form 10-Q, or any amendments thereto, 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.

 

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,

 

 

 

2007

 

2008

 

2007

 

2008

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

Direct revenue

 

$

43,578

 

$

39,939

 

$

89,279

 

$

91,422

 

Fulfillment partner revenue

 

105,389

 

148,903

 

217,618

 

298,165

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

148,967

 

188,842

 

306,897

 

389,587

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

 

 

 

 

 

 

 

Direct

 

36,321

 

34,752

 

75,641

 

79,066

 

Fulfillment partner

 

86,343

 

119,985

 

179,638

 

241,630

 

 

 

 

 

 

 

 

 

 

 

Total cost of goods sold

 

122,664

 

154,737

 

255,279

 

320,696

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

26,303

 

34,105

 

51,618

 

68,891

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Sales and marketing

 

7,962

 

14,244

 

19,246

 

29,263

 

Technology

 

15,237

 

15,311

 

30,210

 

29,827

 

General and administrative

 

10,429

 

10,867

 

21,118

 

20,430

 

Restructuring

 

6,194

 

 

12,283

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

39,822

 

40,422

 

82,857

 

79,520

 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

(13,519

)

(6,317

)

(31,239

)

(10,629

)

 

 

 

 

 

 

 

 

 

 

Interest income

 

1,078

 

740

 

2,068

 

2,044

 

Interest expense

 

(1,027

)

(888

)

(2,056

)

(1,789

)

Other income, net

 

 

2

 

 

2

 

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations

 

(13,468

)

(6,463

)

(31,227

)

(10,372

)

Discontinued operations:

 

 

 

 

 

 

 

 

 

Loss from discontinued operations

 

(300

)

 

(3,924

)

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(13,768

)

$

(6,463

)

$

(35,151

)

$

(10,372

)

 

 

 

 

 

 

 

 

 

 

Net loss per common share - basic and diluted:

 

 

 

 

 

 

 

 

 

Loss from continuing operations

 

$

(0.57

)

$

(0.28

)

$

(1.32

)

$

(0.45

)

Loss from discontinued operations

 

$

(0.01

)

$

 

$

(0.17

)

$

 

Net loss per common share - basic and diluted

 

$

(0.58

)

$

(0.28

)

$

(1.49

)

$

(0.45

)

Weighted average common shares outstanding - basic and diluted

 

23,689

 

22,750

 

23,642

 

23,048

 

 

 

 

 

 

 

 

 

 

 

Other data:

 

 

 

 

 

 

 

 

 

Shopping bookings (in 000s)

 

$

161,852

 

$

202,600

 

$

328,005

 

$

418,921

 

Auction gross merchandise volume (in 000s)

 

$

3,753

 

$

1,964

 

$

8,448

 

$

4,574

 

Average customer acquisition cost (shopping)

 

$

20.21

 

$

27.61

 

$

22.20

 

$

26.32

 

 



 

Overstock.com, Inc.

Consolidated Balance Sheets (unaudited)

(in thousands)

 

 

 

December 31,

 

June 30,

 

 

 

2007

 

2008

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

101,394

 

$

56,679

 

Marketable securities

 

46,000

 

30,020

 

 

 

 

 

 

 

Cash, cash equivalents and marketable securities

 

147,394

 

86,699

 

Accounts receivable, net

 

12,304

 

15,186

 

Note receivable

 

1,506

 

250

 

Inventories, net

 

25,933

 

14,036

 

Prepaid inventory

 

3,572

 

2,648

 

Prepaid expenses

 

7,572

 

10,481

 

 

 

 

 

 

 

Total current assets

 

198,281

 

129,300

 

Property and equipment, net

 

27,197

 

21,318

 

Goodwill

 

2,784

 

2,784

 

Other long-term assets, net

 

86

 

30

 

Note receivable

 

4,181

 

4,453

 

 

 

 

 

 

 

Total assets

 

$

232,529

 

$

157,885

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

70,648

 

$

31,217

 

Accrued liabilities

 

35,241

 

24,248

 

Deferred revenue

 

17,357

 

15,417

 

Capital lease obligations, current

 

3,796

 

 

 

 

 

 

 

 

Total current liabilities

 

127,042

 

70,882

 

Other long-term liabilities

 

3,034

 

2,975

 

Convertible senior notes

 

75,623

 

75,795

 

 

 

 

 

 

 

Total liabilities

 

205,699

 

149,652

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Common stock

 

2

 

2

 

Additional paid-in capital

 

333,909

 

337,659

 

Accumulated deficit

 

(243,709

)

(254,081

)

Treasury stock

 

(63,278

)

(75,218

)

Accumulated other comprehensive loss

 

(94

)

(129

)

 

 

 

 

 

 

Total stockholders’ equity

 

26,830

 

8,233

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

232,529

 

$

157,885

 

 



 

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,

 

 

 

2007

 

2008

 

2007

 

2008

 

2007

 

2008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from operating activities of continuing operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(13,768

)

$

(6,463

)

$

(35,151

)

$

(10,372

)

$

(105,268

)

$

(20,236

)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from discontinued operations

 

300

 

 

3,924

 

 

8,898

 

 

Depreciation and amortization

 

7,974

 

5,887

 

15,745

 

12,384

 

35,046

 

26,134

 

Loss on disposition of property and equipment

 

1

 

 

1

 

 

1

 

 

Stock-based compensation

 

1,137

 

1,068

 

2,210

 

2,252

 

4,284

 

4,564

 

Stock-based compensation to consultants for services

 

135

 

329

 

140

 

315

 

129

 

364

 

Stock-based compensation relating to performance share plan

 

 

150

 

 

300

 

 

(250

)

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

 

113

 

 

715

 

19

 

890

 

(202

)

Amortization of debt discount and deferred financing fees

 

86

 

85

 

172

 

172

 

311

 

344

 

Asset impairment and depreciation (restructuring)

 

2,169

 

 

2,169

 

 

2,960

 

 

Restructuring charges

 

4,025

 

 

10,114

 

 

14,997

 

 

Notes receivable accretion

 

 

(136

)

 

(272

)

 

(544

)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

(431

)

(2,144

)

3,396

 

(2,882

)

5

 

(7,244

)

Inventories, net

 

1,237

 

3,934

 

4,849

 

11,897

 

53,411

 

1,389

 

Prepaid inventory

 

477

 

(80

)

117

 

924

 

1,119

 

(524

)

Prepaid expenses

 

700

 

(363

)

(1,262

)

(2,909

)

913

 

(1,746

)

Other long-term assets, net

 

176

 

 

266

 

 

744

 

205

 

Accounts payable

 

5,467

 

(1,622

)

(32,592

)

(39,431

)

(2,568

)

(2,327

)

Accrued liabilities

 

4,941

 

428

 

(18,768

)

(10,993

)

(6,033

)

878

 

Deferred revenue

 

200

 

(771

)

654

 

(1,940

)

(427

)

12,130

 

Other long-term liabilities

 

 

147

 

 

(59

)

 

(252

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

 

14,939

 

449

 

(43,301

)

(40,595

)

9,412

 

12,683

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities of continuing operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of marketable securities

 

(21,381

)

(18,823

)

(21,381

)

(25,362

)

(21,381

)

(79,198

)

Sales and maturities of marketable securities

 

3,400

 

18,428

 

3,400

 

41,339

 

3,400

 

67,197

 

Expenditures for property and equipment

 

(1,439

)

(5,136

)

(1,916

)

(6,449

)

(13,450

)

(7,176

)

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

 

9,892

 

 

9,892

 

 

9,892

 

 

Collection of note receivable

 

753

 

754

 

4,694

 

1,256

 

4,694

 

1,758

 

Decrease in cash resulting from de-consolidation of variable entity

 

 

 

 

 

(102

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) investing activities

 

(8,775

)

(4,777

)

(5,311

)

10,784

 

(16,947

)

(17,419

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities of continuing operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

Payments on capital lease obligations

 

(4

)

(2

)

(5,251

)

(3,796

)

(5,454

)

(3,806

)

Drawdown on line of credit

 

 

1,128

 

1,169

 

6,396

 

14,592

 

7,650

 

Payments on line of credit

 

 

(1,128

)

(1,169

)

(6,396

)

(14,592

)

(7,650

)

Issuance of common stock in offerings, net of issuance costs

 

 

 

 

 

39,406

 

 

Purchase of treasury stock

 

 

 

 

(12,000

)

 

(12,000

)

Exercise of stock options

 

768

 

924

 

1,921

 

924

 

2,994

 

2,233

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) financing activities

 

764

 

922

 

(3,330

)

(14,872

)

36,946

 

(13,573

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

36

 

(9

)

21

 

(32

)

84

 

(56

)

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

 

(614

)

 

(204

)

 

1,307

 

 

Cash used in investing activities of discontinued operations

 

 

 

(53

)

 

(315

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

6,350

 

(3,415

)

(52,178

)

(44,715

)

30,487

 

(18,365

)

Change in cash and cash equivalents from discontinued operations

 

614

 

 

257

 

 

(993

)

 

Cash and cash equivalents, beginning of period

 

68,080

 

60,094

 

126,965

 

101,394

 

45,550

 

75,044

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

 

$

75,044

 

$

56,679

 

$

75,044

 

$

56,679

 

$

75,044

 

$

56,679