EX-99.1 2 a07-27043_1ex99d1.htm EX-99.1

Exhibit 99.1

NEWS RELEASE

 

 

Media Contact:

Judd Bagley, Overstock.com, Inc.

+1 (801) 947-3841or +1 (801) 618-8455

jbagley@overstock.com

 

Investor Contact:

Kevin Moon, Overstock.com, Inc.

+1 (801) 947-3282

kmoon@overstock.com

 

Overstock.com (NASDAQ: OSTK) Reports Financial Results

for the Three- and Nine-month Periods ending September 30, 2007

 

Key metrics (Q3 2007 comparisons to Q3 2006):

•         Revenue:  $161.9M vs. $156.9M (a 3% increase)

•         Gross profits:  $28.3M vs. $21.4M (a 32% increase)

•         Sales and marketing expense: $8.8M vs. $17.3M (a 49% reduction)

•         Contribution profit (gross profit less marketing):  $19.4M vs. $4.1M (a 376% increase)

•         G&A / Technology expense: $24.3M vs. $27.2M (an 11% reduction)

•         Net loss: $4.7M vs. $24.5M (an 81% reduction)

•         EBITDA: positive $4.1M vs. negative $14.3M (an $18.4M increase)

•         TTM Operating cash flow: positive $5.9M vs. negative $20.5M (a $26.4M increase)

 

SALT LAKE CITY

October 19, 2007

 

Dear Investor:

 

In Q3, we generated positive EBITDA for the first time in a non-Q4 quarter.  I believe this validates our view that a profitable business model is emerging, particularly in light of our de minimus capital expenditures ($316K during Q3).

 

We also returned to positive (albeit modest) top-line growth despite halving our marketing expenses.  A year ago, I said that we had a laundry list of projects we were working on to improve our marketing efforts.  Since then, our marketing dollars have become twice as efficient.  We are about one-third of the way through the list; I do not know what the remaining two-thirds will bring.

 

Expenses are drum tight, product selection is strong, operations are humming, and customer satisfaction is extraordinary. We are superbly positioned for the holiday season.

 

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 September 30, 2006 and 2007 of $156.9 million and $161.9 million, respectively, a 3% increase.  For the nine months ended September 30, 2006 and 2007, total revenue was $494.1 million and $468.8 million, respectively, a 5% decrease.

Gross profit and gross margin — Gross profit for the three months ended September 30, 2006 and 2007 was $21.4 million and $28.3 million, respectively, a 32% increase, representing margins of 13.6% and 17.5% for those respective periods.  For the nine-month periods, gross profits were $67.4 million in 2006 and $79.9 million in 2007, an 18% increase.  Gross margins were 13.6% and 17.0% for those respective nine-month periods.

Contribution and contribution margin — “Contribution” (gross profit less sales and marketing expenses) for the three months ended September 30, 2006 and 2007 was $4.1 million (2.6% contribution margin) and $19.4 million (12.0% contribution margin), respectively, a 376% increase.  For the nine months ended September 30, 2006 and 2007, contribution was $25.6 million (5.2% contribution margin) and $51.8 million (11.0% contribution margin), respectively, a 103% increase.

 

 

Three months ended
September 30,

 

Nine months ended
September 30,

 

 

 

2006

 

2007

 

2006

 

2007

 

Total revenue

 

$

156,885

 

$

161,930

 

$

494,121

 

$

468,827

 

Cost of goods sold

 

135,520

 

133,669

 

426,694

 

388,948

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

21,365

 

28,261

 

67,427

 

79,879

 

Less: Sales and marketing expense

 

17,282

 

8,835

 

41,852

 

28,081

 

 

 

 

 

 

 

 

 

 

 

Contribution

 

$

4,083

 

$

19,426

 

$

25,575

 

$

51,798

 

Contribution margin

 

2.6

%

12.0

%

5.2

%

11.0

%

 

Operating loss — Operating losses for the three months ended September 30, 2006 and 2007 were $23.2 million and $4.9 million, respectively. For the nine months ended September 30, 2006 and 2007, operating losses were $52.9 million and $36.1 million, respectively.

 

2


 

EBITDA — EBITDA (a non-GAAP measure) for the three months ended September 30, 2006 and 2007 was $(14.4) million and $4.1 million, respectively. For the nine months ended September 30, 2006 and 2007, EBITDA was $(28.4) million and ($8.3) 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
September 30,

 

Nine months ended
September 30,

 

 

 

2006

 

2007

 

2006

 

2007

 

Operating loss

 

$

(23,152

)

$

(4,874

)

$

(52,881

)

$

(36,113

)

Add:Depreciation and amortization

 

7,776

 

7,080

 

20,802

 

22,825

 

Stock-based compensation expense

 

1,042

 

1,176

 

3,088

 

3,386

 

Stock-based compensation to consultants for service

 

(3

)

140

 

31

 

280

 

Stock-based compensation relating to performance shares

 

—

 

350

 

—

 

350

 

Treasury stock issued to employees as compensation

 

67

 

213

 

679

 

928

 

EBITDA

 

$

(14,270

)

$

4,085

 

$

(28,281

)

$

(8,344

)

 

Net loss — Net loss for the three months ended September 30, 2006, was $24.5 million, or $1.16 loss per share, compared to $4.7 million, or $0.20 loss per share in 2007. For the nine months ended September 30, 2006 and 2007, net losses totaled $56.2 million and $39.9 million, respectively, or $2.67 and $1.52 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.  For the nine months ended September 30, 2006 net loss did not have any restructuring charges, but included $2.6 million loss from discontinued operations.

Cash and working capital — At September 30, 2007, Overstock.com had cash, cash equivalents and marketable securities of $91.0 million and working capital of $69.0 million.

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.

 

3


 

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 emergence of a profitable business model, results of marketing changes, customer satisfaction, expense controls, amounts of future capital expenditures, and the company’s positioning for the holiday season.  Our Form 10-K for the year ended December 31, 2006, our subsequent quarterly reports on Form 10-Q, 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

 

Nine months ended

 

 

 

September 30,

 

September 30,

 

 

 

2006

 

2007

 

2006

 

2007

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

Direct

 

$

56,564

 

$

39,446

 

$

205,044

 

$

128,725

 

Fulfillment partner

 

100,321

 

122,484

 

289,077

 

340,102

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

156,885

 

161,930

 

494,121

 

468,827

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

 

 

 

 

 

 

 

Direct

 

51,037

 

33,160

 

183,213

 

108,801

 

Fulfillment partner

 

84,483

 

100,509

 

243,481

 

280,147

 

 

 

 

 

 

 

 

 

 

 

Total cost of goods sold

 

135,520

 

133,669

 

426,694

 

388,948

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

21,365

 

28,261

 

67,427

 

79,879

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Sales and marketing

 

17,282

 

8,835

 

41,852

 

28,081

 

Technology

 

16,157

 

14,576

 

44,478

 

44,786

 

General and administrative

 

11,078

 

9,724

 

33,978

 

30,842

 

Restructuring

 

—

 

—

 

—

 

12,283

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

44,517

 

33,135

 

120,308

 

115,992

 

 

 

 

 

 

 

 

 

 

 

Operating loss

 

(23,152

)

(4,874

)

(52,881

)

(36,113

)

 

 

 

 

 

 

 

 

 

 

Interest income

 

459

 

1,291

 

2,989

 

3,359

 

Interest expense

 

(1,096

)

(1,029

)

(3,638

)

(3,085

)

Other income, net

 

(6

)

(92

)

(7

)

(92

)

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations

 

(23,795

)

(4,704

)

(53,537

)

(35,931

)

Discontinued operations:

 

 

 

 

 

 

 

 

 

Loss from discontinued operations

 

(708

)

—

 

(2,615

)

(3,924

)

 

 

 

 

 

 

 

 

 

 

Net loss

 

(24,503

)

(4,704

)

(56,152

)

(39,855

)

Deemed dividend related to redeemable common stock

 

(33

)

—

 

(99

)

—

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to common shares

 

$

(24,536

)

$

(4,704

)

$

(56,251

)

$

(39,855

)

 

 

 

 

 

 

 

 

 

 

Net loss per common share - basic and diluted:

 

 

 

 

 

 

 

 

 

Loss from continuing operations

 

$

(1.16

)

$

(0.20

)

$

(2.67

)

$

(1.52

)

Loss from discontinued operations

 

$

(0.03

)

$

—

 

$

(0.13

)

$

(0.16

)

Net loss per common share - basic and diluted

 

$

(1.19

)

$

(0.20

)

$

(2.80

)

$

(1.68

)

Weighted average common shares outstanding - basic and diluted

 

20,600

 

23,726

 

20,052

 

23,671

 

 

 

 

 

 

 

 

 

 

 

Other data:

 

 

 

 

 

 

 

 

 

Shopping bookings (in 000s)

 

$

170,590

 

$

177,226

 

$

543,582

 

$

513,270

 

Auction gross merchandise volume (in 000s)

 

$

6,751

 

$

2,628

 

$

21,690

 

$

11,076

 

Average customer acquisition cost (shopping)

 

$

31.49

 

$

18.17

 

$

24.62

 

$

20.76

 

 

5


 

Overstock.com, Inc.

Consolidated Balance Sheets (unaudited)

(in thousands)

 

 

 

 

December 31,

 

September 30,

 

 

 

2006

 

2007

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

126,965

 

$

74,145

 

Marketable securities

 

—

 

16,842

 

 

 

 

 

 

 

Cash, cash equivalents and marketable securities

 

126,965

 

90,987

 

Accounts receivable, net

 

11,638

 

7,607

 

Notes receivable

 

6,702

 

1,506

 

Inventories, net

 

20,274

 

22,400

 

Prepaid inventory

 

2,241

 

5,003

 

Prepaid expenses

 

7,473

 

10,257

 

Current assets of held for sale subsidiary

 

4,718

 

—

 

 

 

 

 

 

 

Total current assets

 

180,011

 

137,760

 

Property and equipment, net

 

56,198

 

33,450

 

Goodwill

 

2,784

 

2,784

 

Other long-term assets, net

 

578

 

197

 

Note receivable

 

—

 

4,045

 

Long-term assets of held for sale subsidiary

 

16,594

 

—

 

 

 

 

 

 

 

Total assets

 

$

256,165

 

$

178,236

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

66,039

 

$

38,504

 

Accrued liabilities

 

40,142

 

26,499

 

Capital lease obligations, current

 

5,074

 

3,801

 

Current liabilities of held for sale subsidiary

 

3,684

 

—

 

 

 

 

 

 

 

Total current liabilities

 

114,939

 

68,804

 

Capital lease obligations, non-current

 

3,983

 

—

 

Other long-term liabilities

 

—

 

3,113

 

Convertible senior notes

 

75,279

 

75,537

 

 

 

 

 

 

 

Total liabilities

 

194,201

 

147,454

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Common stock

 

2

 

2

 

Additional paid-in capital

 

325,771

 

332,899

 

Accumulated deficit

 

(198,694

)

(238,549

)

Treasury stock

 

(64,983

)

(63,435

)

Accumulated other comprehensive loss

 

(132

)

(135

)

 

 

 

 

 

 

Total stockholders’ equity

 

61,964

 

30,782

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

256,165

 

$

178,236

 

 

6


 

Overstock.com, Inc.

Consolidated Statements of Cash Flows (unaudited)

(in thousands)

 

 

 

Three months ended
September 30,

 

Nine months ended
September 30,

 

Twelve months ended
September 30,

 

 

 

2006

 

2007

 

2006

 

2007

 

2006

 

2007

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from operating activities of continuing operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(24,502

)

$

(4,704

)

$

(56,151

)

$

(39,855

)

$

(62,434

)

$

(85,470

)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from discontinued operations

 

708

 

—

 

2,615

 

3,924

 

3,830

 

8,191

 

Depreciation and amortization

 

7,776

 

7,080

 

20,802

 

22,825

 

25,447

 

34,350

 

Realized gain from marketable securities

 

—

 

—

 

(2,085

)

—

 

(1,095

)

—

 

Realized loss on disposition of property and equipment

 

—

 

—

 

599

 

1

 

2,056

 

1

 

Stock-based compensation

 

1,042

 

1,176

 

3,088

 

3,386

 

3,095

 

4,418

 

Stock-based compensation to consultants for services

 

(3

)

140

 

31

 

280

 

(20

)

272

 

Stock-based compensation relating to performance share plan

 

—

 

350

 

—

 

350

 

—

 

350

 

Treasury stock issued to employees as compensation

 

67

 

213

 

679

 

928

 

720

 

1,036

 

Amortization of debt discount and deferred financing fees

 

139

 

86

 

417

 

258

 

435

 

258

 

Gain from retirement of convertible senior notes

 

—

 

—

 

—

 

—

 

(1,988

)

—

 

Restructuring

 

—

 

—

 

—

 

12,283

 

—

 

17,957

 

Notes receivable accretion

 

—

 

(136

)

—

 

(136

)

—

 

(136

)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net

 

1,541

 

335

 

2,880

 

3,731

 

(461

)

(1,201

)

Inventories, net

 

6,040

 

(6,975

)

24,487

 

(2,126

)

29,352

 

40,396

 

Prepaid inventory

 

(781

)

(2,879

)

5,605

 

(2,762

)

8,578

 

(979

)

Prepaid expenses

 

455

 

(1,522

)

(716

)

(2,784

)

22

 

(1,064

)

Other long-term assets

 

(123

)

100

 

(105

)

366

 

(1,821

)

967

 

Accounts payable

 

11,745

 

4,960

 

(53,479

)

(27,632

)

(358

)

(9,353

)

Accrued liabilities

 

(3,340

)

(856

)

(26,909

)

(18,970

)

(25,838

)

(3,978

)

Other long-term liabilities

 

—

 

(114

)

—

 

(114

)

—

 

(114

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

 

764

 

(2,746

)

(78,242

)

(46,047

)

(20,480

)

5,901

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities of continuing operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in restricted cash

 

—

 

—

 

253

 

—

 

633

 

—

 

Purchases of marketable securities

 

—

 

(7,783

)

—

 

(29,164

)

(2,000

)

(29,164

)

Sales of marketable securities

 

—

 

8,924

 

56,756

 

12,324

 

76,280

 

12,324

 

Expenditures for property and equipment

 

(7,769

)

(316

)

(19,675

)

(2,232

)

(27,851

)

(5,998

)

Proceeds from the sale of property and equipment

 

1

 

—

 

1

 

—

 

1

 

—

 

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

 

—

 

—

 

—

 

9,892

 

—

 

9,892

 

Paydown of note receivable

 

—

 

502

 

—

 

5,196

 

—

 

5,196

 

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

 

(7,768

)

1,327

 

37,235

 

(3,984

)

46,963

 

(7,852

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities of continuing operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

Payments on capital lease obligations

 

(124

)

(5

)

(2,878

)

(5,256

)

(6,730

)

(5,335

)

Borrowings on line of credit

 

5,245

 

—

 

78,503

 

1,169

 

86,003

 

9,347

 

Payments on line of credit

 

(5,245

)

—

 

(78,503

)

(1,169

)

(90,371

)

(9,347

)

Payments to retire convertible senior notes

 

—

 

—

 

—

 

—

 

(7,735

)

—

 

Proceeds from the issuance of common stock

 

—

 

—

 

25,000

 

—

 

25,000

 

39,406

 

Exercise of stock options

 

806

 

551

 

2,267

 

2,472

 

2,701

 

2,739

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) financing activities

 

682

 

546

 

24,389

 

(2,784

)

8,868

 

36,810

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash

 

40

 

(26

)

11

 

(5

)

(14

)

18

 

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

 

42

 

—

 

112

 

(204

)

67

 

1,265

 

Cash used in investing activities of discontinued operations

 

(39

)

—

 

(343

)

(53

)

(441

)

(276

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

(6,279

)

(899

)

(16,838

)

(53,077

)

34,963

 

35,866

 

Change in cash and cash equivalents from discontinued operations

 

(3

)

—

 

231

 

257

 

374

 

(989

)

Cash and cash equivalents, beginning of period

 

45,550

 

75,044

 

55,875

 

126,965

 

3,931

 

39,268

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

 

$

39,268

 

$

74,145

 

$

39,268

 

$

74,145

 

$

39,268

 

$

74,145

 

 

7