SALT LAKE CITY, July 18 /PRNewswire-FirstCall/ -- 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 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.
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.
Trailing Twelve
Three months ended months ended
June 30, 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.
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.
Trailing Twelve
Three months ended 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(R) 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.
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 Six months ended
June 30, June 30,
2007 2008 2007 2008
Cash flows from operating
activities of continuing
operations:
Net loss $(13,768) $(6,463) $(35,151) $(10,372)
Adjustments to reconcile net loss
to cash provided by (used in)
operating activities of continuing
operations:
Loss from discontinued operations 300 - 3,924 -
Depreciation and amortization 7,974 5,887 15,745 12,384
Loss on disposition of property
and equipment 1 - 1 -
Stock-based compensation 1,137 1,068 2,210 2,252
Stock-based compensation to
consultants for services 135 329 140 315
Stock-based compensation relating
to performance share plan - 150 - 300
Issuance of common stock from
treasury for 401(k) matching
contribution 113 - 715 19
Amortization of debt discount and
deferred financing fees 86 85 172 172
Asset impairment and depreciation
(restructuring) 2,169 - 2,169 -
Restructuring charges 4,025 - 10,114 -
Notes receivable accretion - (136) - (272)
Changes in operating assets and
liabilities, net of effect of
discontinued
operations:
Accounts receivable, net (431) (2,144) 3,396 (2,882)
Inventories, net 1,237 3,934 4,849 11,897
Prepaid inventory 477 (80) 117 924
Prepaid expenses 700 (363) (1,262) (2,909)
Other long-term assets, net 176 - 266 -
Accounts payable 5,467 (1,622) (32,592) (39,431)
Accrued liabilities 4,941 428 (18,768) (10,993)
Deferred revenue 200 (771) 654 (1,940)
Other long-term liabilities - 147 - (59)
Net cash provided by
(used in) operating
activities 14,939 449 (43,301) (40,595)
Cash flows from investing
activities of continuing
operations:
Purchases of marketable securities (21,381) (18,823) (21,381) (25,362)
Sales and maturities of marketable
securities 3,400 18,428 3,400 41,339
Expenditures for property and
equipment (1,439) (5,136) (1,916) (6,449)
Proceeds from the sale of
discontinued operations, net of
cash transferred 9,892 - 9,892 -
Collection of note receivable 753 754 4,694 1,256
Decrease in cash resulting from
de-consolidation of variable
entity - - - -
Net cash provided by (used in)
investing activities (8,775) (4,777) (5,311) 10,784
Cash flows from financing
activities of continuing
operations:
Payments on capital lease
obligations (4) (2) (5,251) (3,796)
Drawdown on line of credit - 1,128 1,169 6,396
Payments on line of credit - (1,128) (1,169) (6,396)
Issuance of common stock in
offerings, net of issuance costs - - - -
Purchase of treasury stock - - - (12,000)
Exercise of stock options 768 924 1,921 924
Net cash provided by (used in)
financing activities 764 922 (3,330) (14,872)
Effect of exchange rate changes on
cash 36 (9) 21 (32)
Cash provided by (used in)
operating activities of
discontinued operations (614) - (204) -
Cash used in investing activities
of discontinued operations - - (53) -
Net increase (decrease) in cash
and cash equivalents 6,350 (3,415) (52,178) (44,715)
Change in cash and cash
equivalents from discontinued
operations 614 - 257 -
Cash and cash equivalents,
beginning of period 68,080 60,094 126,965 101,394
Cash and cash equivalents, end of
period $75,044 $56,679 $75,044 $56,679
Twelve months ended June 30,
2007 2008
Cash flows from operating activities
of continuing operations:
Net loss $(105,268) $(20,236)
Adjustments to reconcile net loss
to cash provided by (used in)
operating activities of continuing
operations:
Loss from discontinued operations 8,898 -
Depreciation and amortization 35,046 26,134
Loss on disposition of property
and equipment 1 -
Stock-based compensation 4,284 4,564
Stock-based compensation to
consultants for services 129 364
Stock-based compensation relating
to performance share plan - (250)
Issuance of common stock from
treasury for 401(k) matching
contribution 890 (202)
Amortization of debt discount and
deferred financing fees 311 344
Asset impairment and depreciation
(restructuring) 2,960 -
Restructuring charges 14,997 -
Notes receivable accretion - (544)
Changes in operating assets and
liabilities, net of effect of
discontinued operations:
Accounts receivable, net 5 (7,244)
Inventories, net 53,411 1,389
Prepaid inventory 1,119 (524)
Prepaid expenses 913 (1,746)
Other long-term assets, net 744 205
Accounts payable (2,568) (2,327)
Accrued liabilities (6,033) 878
Deferred revenue (427) 12,130
Other long-term liabilities - (252)
Net cash provided by (used in)
operating activities 9,412 12,683
Cash flows from investing activities
of continuing operations:
Purchases of marketable securities (21,381) (79,198)
Sales and maturities of marketable
securities 3,400 67,197
Expenditures for property and
equipment (13,450) (7,176)
Proceeds from the sale of
discontinued operations, net of
cash transferred 9,892 -
Collection of note receivable 4,694 1,758
Decrease in cash resulting from
de-consolidation of variable entity (102) -
Net cash provided by (used in)
investing activities (16,947) (17,419)
Cash flows from financing activities
of continuing operations:
Payments on capital lease
obligations (5,454) (3,806)
Drawdown on line of credit 14,592 7,650
Payments on line of credit (14,592) (7,650)
Issuance of common stock in
offerings, net of issuance costs 39,406 -
Purchase of treasury stock - (12,000)
Exercise of stock options 2,994 2,233
Net cash provided by (used in)
financing activities 36,946 (13,573)
Effect of exchange rate changes on cash 84 (56)
Cash provided by (used in)
operating activities of
discontinued operations 1,307 -
Cash used in investing activities
of discontinued operations (315) -
Net increase (decrease) in cash and
cash equivalents 30,487 (18,365)
Change in cash and cash equivalents
from discontinued operations (993) -
Cash and cash equivalents,
beginning of period 45,550 75,044
Cash and cash equivalents, end of period $75,044 $56,679
SOURCE Overstock.com, Inc.
