Exhibit 99.1
NEWS RELEASE April 28, 2006 | | 
|
Media Contact:
Scott Blevins, Overstock.com, Inc.
+1 (801) 947-3133
sblevins@overstock.com
Investor Contact:
Kevin Moon, Overstock.com, Inc.
+1 (801) 947-3282
kmoon@overstock.com
Overstock.com Reports First Quarter 2006 Financial Results
Summary of results:
• Q1 Total revenue: $180.2 million, up 9% versus 2005
• Q1 Gross profits: $25.2 million, up 2% versus 2005
• Q1 Gross margins: 14.0% compared to 14.9% in 2005
• Q1 Net loss: $(15.9) million or $(0.82) earnings per share
SALT LAKE CITY — Overstock.com, Inc. (NASDAQ: OSTK) today reported financial results for its first quarter ended March 31, 2006.
| “Chop wood, carry water.” | |
| - Wu Li | |
Dear Owners,
We lost $15.9 million in Q1. I anticipate Q2 will look about the same, before we start climbing out of this hole in the second half of 2006. Our theme for this year is to slow growth during the first half of the year so we can work on improving internal business processes in preparation for stronger performance in Q4 and beyond. We continue to anticipate things will look better in Q3, and to be out of the ditch by Q4. Nothing that has happened recently suggests to me that we should change course.
Sales and operating expenses in Q1 were just what I expected, though margins were a bit lower than I anticipated. The lower margins are a function of a couple of things. Part of it stemmed from warehouse costs that were simply carryover from the systems problems that plagued us in the last part of 2005. We are currently working on an improved build-out of our Salt Lake City fulfillment warehouse, and I am hopeful
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that when we finish this in June, we will see a drop in our variable handling costs immediately. Additionally, a small amount comes from customer service costs, which again, were inflated due to our systemic problems in 2005, but also because we are emphasizing quality over cost: when our new customer service application goes live in June, I expect a significant drop in these costs.
Again, I believe that Q2 will look like this past quarter. It is going to take until Q3 to start seeing the benefits of the various technologies and platforms we have spent the last year building. I believe that our expense management (how much it costs to handle a package, a customer service call, etc.) will be much better starting in June and July. Other corporate expense management looks good. But gross margins will likely remain where they are in Q2 for other reasons. As a result of improvements in our inventory management systems, I believe we are carrying more inventory than we really need, and we plan to bring it down another $15-20 million over the next few months.
We ended Q1 with $52 million in cash and marketable securities, including $20 million of borrowings on our inventory lines. We have an additional $30 million of availability on our lines, and are continuing to reduce inventory to turn it back into cash.
In summary, I’m committed to stay the course: slowing growth while we improve our systems and enhance the service we provide to our customers. Unfortunately, Q2 will be another disappointing quarter at the bottom line; then the tide should start coming back in by Q3 and we should be afloat in Q4.
Your humble servant,
Patrick
Key financial and operating metrics
Total revenue—For the quarter ended March 31, 2006, Overstock.com reported total revenue of $180.2 million, a 9% increase from the $165.9 million reported in 2005.
Gross profit and gross margins—For the quarter ended March 31, 2006, Overstock.com reported gross profit of $25.2 million (14.0% margins), a 2% increase from the $24.8 million (14.9% margins) reported in 2005.
Net income (loss)—For the quarter ended March 31, 2006, Overstock.com reported net loss of $15.9 million, or $0.82 loss per share, compared to $4.3 million, or $0.22 loss per share, reported last year.
Overstock.com had cash and marketable securities of $51.8 million and working capital of $66.8 million on March 31, 2006.
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Gross bookings (excluding auctions and travel)—For the quarter ended March 31, 2006, Overstock.com reported gross bookings of $200.9 million, a 9% increase from the $184.2 million reported last year.
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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 National 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 amount of the loss we are likely to incur in the second quarter of 2006, the build-out of our Salt Lake City fulfillment warehouse, potential decreases in our supply chain costs and customer service costs, the potential benefits of the various technologies and platforms we have been building, our expense management (how much it costs to handle a package, or a customer service call, etc.), and other corporate expense management, our gross margins, the appropriate level of our inventory and our plans to reduce the amount of our inventory, the possibility that we may reduce prices, and the possibility that the tide should start coming back in by Q3 and we should be afloat in Q4, as well as all such other risks as identified in our Form 10-K for the year ended December 31, 2005, 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.
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Overstock.com, Inc.
Consolidated Statements of Operations (unaudited)
(in thousands, except per share amounts)
| | | | Three months ended March 31, | |
| | | | 2005 | | 2006 | |
Revenue | | | | | | | |
Direct | | | | $ | 67,884 | | $ | 79,710 | |
Fulfillment partner | | | | 97,997 | | 100,496 | |
| | | | | | | |
Total revenue | | | | 165,881 | | 180,206 | |
| | | | | | | |
Cost of goods sold | | | | | | | |
Direct | | | | 58,262 | | 70,703 | |
Fulfillment partner | | | | 82,857 | | 84,341 | |
| | | | | | | |
Total cost of goods sold | | | | 141,119 | | 155,044 | |
| | | | | | | |
Gross profit | | | | 24,762 | | 25,162 | |
| | | | | | | |
Operating expenses: | | | | | | | |
Sales and marketing | | | | 16,826 | | 13,177 | |
Technology | | | | 4,099 | | 13,589 | |
General and administrative | | | | 7,346 | | 13,354 | |
| | | | | | | |
Total operating expenses | | | | 28,271 | | 40,120 | |
| | | | | | | |
Operating income (loss) | | | | (3,509 | ) | (14,958 | ) |
| | | | | | | |
Interest income | | | | 644 | | 315 | |
Interest expense | | | | (1,445 | ) | (1,267 | ) |
| | | | | | | |
Net income (loss) | | | | (4,310 | ) | (15,910 | ) |
Deemed dividend related to redeemable common stock | | | | (46 | ) | (33 | ) |
| | | | | | | |
Net income (loss) attributable to common shares | | | | $ | (4,356 | ) | $ | (15,943 | ) |
| | | | | | | |
Net income (loss) per share | | | | | | | |
- basic | | | | $ | (0.22 | ) | $ | (0.82 | ) |
- diluted | | | | $ | (0.22 | ) | $ | (0.82 | ) |
Weighted average common shares outstanding | | | | | | | |
- basic | | | | 19,862 | | 19,385 | |
- diluted | | | | 19,862 | | 19,385 | |
| | | | | | | |
Other data: | | | | | | | |
Shopping bookings (in 000s) | | | | $ | 184,215 | | $ | 200,900 | |
Travel bookings (in 000s) | | | | $ | 1,649 | | $ | 10,611 | |
Auction gross merchandise volume (in 000s) | | | | $ | 5,602 | | $ | 8,079 | |
Average customer acquisition cost (shopping) | | | | $ | 19.50 | | $ | 19.40 | |
Average registrant acquisition cost (auctions) | | | | $ | 8.26 | | $ | 2.94 | |
Overstock.com, Inc.
Consolidated Balance Sheets (unaudited)
(in thousands, except per share amounts)
| | December 31,
2005 | | March 31,
2006 | |
Assets | | | | | |
Current assets: | | | | | |
Cash and cash equivalents | | $ | 56,224 | | $ | 2,618 | |
Marketable securities | | 55,799 | | 49,220 | |
| | | | | |
Cash, cash equivalents and marketable securities | | 112,023 | | 51,838 | |
Accounts receivable, net | | 11,695 | | 8,266 | |
Inventories, net | | 93,269 | | 81,351 | |
Prepaid inventory | | 9,633 | | 8,839 | |
Prepaid expenses | | 8,508 | | 10,388 | |
| | | | | |
Total current assets | | 235,128 | | 160,682 | |
Restricted cash | | 253 | | 55 | |
Property and equipment, net | | 63,914 | | 66,279 | |
Goodwill | | 13,169 | | 13,169 | |
Other long-term assets, net | | 13,449 | | 12,770 | |
| | | | | |
Total assets | | $ | 325,913 | | $ | 252,955 | |
| | | | | |
Liabilities, Redeemable Securities and Stockholders’ Equity | | | | | |
Current liabilities: | | | | | |
Accounts payable | | $ | 101,436 | | $ | 37,101 | |
Accrued liabilities | | 46,847 | | 31,167 | |
Line of credit | | — | | 20,000 | |
Capital lease obligations, current | | 6,683 | | 5,618 | |
| | | | | |
Total current liabilities | | 154,966 | | 93,886 | |
Capital lease obligations, non-current | | 3,058 | | 3,969 | |
Convertible senior notes | | 74,935 | | 75,021 | |
| | | | | |
Total liabilities | | 232,959 | | 172,876 | |
| | | | | |
Redeemable common stock | | 3,205 | | 2,684 | |
| | | | | |
Stockholders’ equity: | | | | | |
Common stock | | 2 | | 2 | |
Additional paid-in capital | | 250,939 | | 253,976 | |
Accumulated deficit | | (96,829 | ) | (112,772 | ) |
Treasury stock | | (65,325 | ) | (65,273 | ) |
Accumulated other comprehensive gain (loss) | | 962 | | 1,462 | |
| | | | | |
Total stockholders’ equity | | 89,749 | | 77,395 | |
| | | | | |
Total liabilities, redeemable securities and stockholders’ equity | | $ | 325,913 | | $ | 252,955 | |
Overstock.com, Inc.
Consolidated Statements of Cash Flows (unaudited)
(in thousands)
| | Three months ended March 31, | | Twelve months ended March 31, | |
| | 2005 | | 2006 | | 2005 | | 2006 | |
| | | | | | | | | |
Cash flows from operating activities: | | | | | | | | | |
Net loss | | $ | (4,310 | ) | $ | (15,910 | ) | $ | (6,597 | ) | $ | (36,518 | ) |
Adjustments to reconcile net loss to cash provided by (used in) operating activities | | | | | | | | | |
Depreciation and amortization | | 1,635 | | 6,835 | | 4,816 | | 20,814 | |
Realized (gain) loss from marketable securities | | (1 | ) | (217 | ) | (3 | ) | 3,135 | |
Loss on disposition of property and equipment | | — | | 598 | | 34 | | 2,055 | |
Stock-based compensation | | 20 | | 958 | | 245 | | 1,010 | |
Stock options issued to consultants for services | | (400 | ) | 43 | | 598 | | 54 | |
Issuance of common stock from treasury as compensation | | 251 | | 507 | | 251 | | 699 | |
Amortization of debt discount and deferred financing fees | | 307 | | 139 | | 454 | | 452 | |
Gain from retirement of convertible senior notes | | — | | — | | — | | (6,158 | ) |
Changes in operating assets and liabilities: | | | | | | | | | |
Accounts receivable, net | | (752 | ) | 3,429 | | 4,732 | | (928 | ) |
Inventories, net | | (3,570 | ) | 11,918 | | (16,798 | ) | (31,223 | ) |
Prepaid inventory | | 2,415 | | 794 | | (6,697 | ) | 1,068 | |
Prepaid expenses | | (6,302 | ) | (1,880 | ) | (8,283 | ) | (517 | ) |
Other long-term assets, net | | (614 | ) | 47 | | (172 | ) | (1,490 | ) |
Accounts payable | | (24,200 | ) | (64,335 | ) | 25,275 | | (3,680 | ) |
Accrued liabilities | | 346 | | (15,680 | ) | 13,795 | | 7,540 | |
| | | | | | | | | |
Net cash provided by (used in) operating activities | | (35,175 | ) | (72,754 | ) | 11,650 | | (43,687 | ) |
| | | | | | | | | |
Cash flows from investing activities: | | | | | | | | | |
(Increase) decrease in restricted cash | | 590 | | 198 | | (1,012 | ) | 957 | |
Investments in marketable securities | | (125,944 | ) | — | | (216,263 | ) | (59,599 | ) |
Sales of marketable securities | | 59,262 | | 7,281 | | 73,444 | | 164,284 | |
Expenditures for property and equipment | | (13,030 | ) | (6,845 | ) | (21,364 | ) | (38,555 | ) |
Acquisition of Ski West (net of cash acquired) | | — | | — | | — | | (24,620 | ) |
Other investments | | — | | (100 | ) | — | | (100 | ) |
Proceeds from the sale of property and equipment | | — | | — | | 20 | | 1 | |
| | | | | | | | | |
Net cash provided by (used in) investing activities | | (79,122 | ) | 534 | | (165,175 | ) | 42,368 | |
| | | | | | | | | |
Cash flows from financing activities: | | | | | | | | | |
Payments on capital lease obligations | | (151 | ) | (2,428 | ) | (789 | ) | (9,363 | ) |
Borrowings on line of credit | | — | | 30,728 | | 1,000 | | 42,596 | |
Payments on line of credit | | — | | (10,728 | ) | (1,000 | ) | (22,596 | ) |
Proceeds from the issuance of convertible senior notes | | — | | — | | 116,199 | | — | |
Payments of deferred financing fees | | — | | — | | (301 | ) | — | |
Payments to retire convertible senior notes | | — | | — | | — | | (35,670 | ) |
Proceeds from the issuance of common stock | | — | | — | | 113,064 | | — | |
Purchase of treasury stock | | — | | — | | — | | (24,133 | ) |
Purchased call options for purchase of treasury stock | | (47,507 | ) | — | | (47,507 | ) | — | |
Settlement of call options for cash | | — | | — | | — | | 7,937 | |
Exercise of stock options | | 906 | | 1,027 | | 3,027 | | 7,436 | |
| | | | | | | | | |
Net provided by (used in) financing activities | | (46,752 | ) | 18,599 | | 183,693 | | (33,793 | ) |
| | | | | | | | | |
Effect of exchange rate changes on cash | | (18 | ) | 15 | | 5 | | 119 | |
| | | | | | | | | |
Net increase (decrease) in cash and cash equivalents | | (161,067 | ) | (53,606 | ) | 30,173 | | (34,993 | ) |
Cash and cash equivalents, beginning of period | | 198,678 | | 56,224 | | 7,438 | | 37,611 | |
| | | | | | | | | |
Cash and cash equivalents, end of period | | $ | 37,611 | | $ | 2,618 | | $ | 37,611 | | $ | 2,618 | |
| | | | | | | | | |
Supplemental cash flow information: | | | | �� | | | | | |
Interest paid | | $ | 586 | | $ | 278 | | $ | 735 | | $ | 4,800 | |
Deemed dividend on redeemable common shares | | $ | 46 | | $ | 33 | | $ | 186 | | $ | 172 | |
Lapse of rescission rights on redeemable common stock | | $ | — | | $ | 554 | | $ | — | | $ | 700 | |
Settlement of purchased call options for treasury stock | | $ | — | | $ | — | | $ | — | | $ | 41,121 | |
Equipment and software acquired under capital leases | | $ | 15,197 | | $ | 2,582 | | $ | 17,012 | | $ | 2,823 | |
Supplemental disclosure of non-cash activities: | | | | | | | | | |
Fair value of assets acquired, net of cash acquired | | $ | — | | $ | — | | $ | — | | $ | 25,956 | |
Fair value of liabilities assumed | | — | | — | | — | | (1,336 | ) |
| | | | | | | | | |
Cash paid to purchase businesses | | $ | — | | $ | — | | $ | — | | $ | 24,620 | |
