Exhibit 99.1
FOR IMMEDIATE
RELEASE: DRAFT January 30, 2009 Media Contact: Josh Austin, Overstock.com, Inc. +1 (801) 947-4364 joaustin@overstock.com Investor Contact: Kevin Moon, Overstock.com, Inc. +1 (801) 947-3282 kmoon@overstock.com | | 
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Overstock.com Reports Fourth Quarter and Fiscal Year 2008 Financial Results
SALT LAKE CITY — Overstock.com, Inc. (NASDAQ: OSTK) today reported financial results for the quarterly and annual periods ending December 31, 2008.
Key Q4 2008 metrics (comparison to Q4 2007):
· Revenue: $255.9M vs. $294.5M (a 13% decrease);
· Gross profit %: 17.0% vs. 15.7%;
· Gross profit $: $43.6M vs. $46.4M (a 6% decrease);
· Sales and marketing expense: $16.4M vs. $27.4M (a 40% decrease);
· Contribution (gross profit less sales and marketing): $27.2M vs. $19.0M (a 43% increase);
· G&A/Technology expense: $21.5M vs. $25.8M (a 17% decrease);
· Net income (loss): +$1.0M vs. $(6.5)M (a $7.5M increase);
· EPS: $0.04/share vs. $(0.27)/share (a $0.31/share increase); and
· Adjusted EBITDA: $9.9M vs. $(415,000) (a $10.4M increase).
Key FY 2008 metrics (comparison to FY 2007):
· Revenue: $834.4M vs. $765.9M (a 9% increase);
· Gross profit %: 17.1% vs. 16.3%
· Gross profit $: $142.9M vs. $124.6M (a 15% increase);
· Sales and marketing expense: $57.6M vs. $55.5M (a 4% increase);
· Contribution (gross profit less sales and marketing): $85.3M vs. $69.1M (a 23% increase);
· G&A / Technology expense: $96.2M vs. $101.4M (a 5% decrease);
· Net income (loss): $(12.7)M vs. $(48.0)M (a 74% decrease);
· EPS: $(0.55)/share vs. $(2.03)/share (a $1.48/share increase); and
· Adjusted EBITDA: $15.1M vs. $(10.5)M (a $25.5M increase).
Dear Owner:
After a tough three years, returning to GAAP profitability is a relief.
The fallout from the 2008 holiday season will be severe for the general retail industry. We were impacted like every other retailer in the country, and experienced a decline in sales. Traffic to our site during November and December was comparable to last year, but consumers purchased less frequently. As a result, revenues declined 13% in the fourth quarter, but were up 9% for the year.
Early on in the year, we received a flood of interest from manufacturers and others looking to us to liquidate merchandise, but as the season progressed, mainstream retailers began liquidating on their own through massive promotions and discounting. Retail Nation held a going-out-of-business sale. We chose not to chase revenues through marketing and heavy promotion: the result was a profitable quarter for us in what has been one of the most dreadful retail environments in recent history.
Despite all the hand wringing recently, Overstock did markedly better on a fiscal year basis over last year. Revenues, gross profit and contribution were all higher, and our net loss narrowed considerably.
We are preparing for a glut of supply as companies and stores around the country go out of business or close over the near term. We recently leased a large warehouse in Salt Lake City. We are developing a consignment model, where manufacturers and distributors desirous of reducing costs will be able to consign their slow-moving inventory to us, and we will provide handling, storage, sales and fulfillment for these companies. We have the capacity and the expertise to make this work, and the timing is perfect.
I look forward to speaking with you about your business during the upcoming conference call, and 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 December 31, 2007 and 2008 was $294.5 million and $255.9 million, respectively, a 13% decrease. For the year ended December 31, 2007 and 2008, total revenue was $765.9 million and $834.4 million, respectively, a 9% increase.
Gross profit — Gross profit for the three months ended December 31, 2007 and 2008 was $46.4 million and $43.6 million, respectively, a 6% decrease, representing 15.7% and 17.0% as a percentage of total revenue for those respective periods. For the twelve-month periods, gross profit was $124.6 million in 2007 and $142.9 million in 2008, a 15% increase. Gross profit as a percentage of total revenue was 16.3% and 17.1% for those respective twelve-month periods.
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Contribution and contribution margin — “Contribution” (gross profit less sales and marketing expenses) for the three months ended December 31, 2007 and 2008 was $19.0 million (6.5% contribution margin) and $27.2 million (10.6% contribution margin), respectively, a 43% increase. For the twelve months ended December 31, 2007 and 2008, contribution was $69.1 million (9.0% contribution margin) and $85.3 million (10.2% contribution margin), respectively, a 23% increase.
| | Three months ended
December 31, | | Twelve months ended
December 31, | |
(amounts in thousands) | | 2007 | | 2008 | | 2007 | | 2008 | |
Total revenue | | $ | 294,516 | | $ | 255,862 | | $ | 765,902 | | $ | 834,367 | |
Cost of goods sold | | 248,134 | | 212,252 | | 641,352 | | 691,458 | |
| | | | | | | | | |
Gross profit | | 46,382 | | 43,610 | | 124,550 | | 142,909 | |
Less: Sales and marketing expense | | 27,377 | | 16,437 | | 55,458 | | 57,634 | |
| | | | | | | | | |
Contribution | | $ | 19,005 | | $ | 27,173 | | $ | 69,092 | | $ | 85,275 | |
Contribution margin | | 6.5 | % | 10.6 | % | 9.0 | % | 10.2 | % |
Operating income (loss) — Operating loss for the three months ended December 31, 2007 was $(6.8) million compared to operating income of $5.7 million for the three months ended December 31, 2008. For the twelve months ended December 31, 2007 and 2008, operating loss was $(44.6) million and $(10.9) million, respectively.
Net income (loss) — Net loss for the three months ended December 31, 2007 was $(6.5) million, or $(0.27) loss per common share, compared to net income of $1.0 million, or $0.04 per common share in 2008. For the twelve months ended December 31, 2007 and 2008, net losses totaled $(48.0) million and $(12.7) million, respectively, or $(2.03) and $(0.55) loss per common share for those respective periods. For the twelve months ended December 31, 2007 net loss included restructuring charges of $12.3 million and loss from discontinued operations of $3.9 million.
Adjusted EBITDA — Adjusted EBITDA (a non-GAAP measure) for the three months ended December 31, 2007 and 2008 was $(415,000) and $9.9 million, respectively. For the twelve months ended December 31, 2007 and 2008, Adjusted EBITDA was $(10.5) million and $15.1 million, respectively. Adjusted EBITDA, which we reconcile to “Net income (loss)” below, is an additional way of viewing our results that, when viewed together with our GAAP results, provides a more complete understanding of factors affecting our results. We believe that discussing Adjusted EBITDA is useful to us and investors because it approximates actual cash used or cash generated by the continuing operations of the business. Our calculation of Adjusted EBITDA is set forth below:
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| | Three months ended
December 31, | | Twelve months ended
December 31, | |
(amounts in thousands) | | 2007 | | 2008 | | 2007 | | 2008 | |
Net income (loss) | | $ | (6,470 | ) | $ | 1,014 | | $ | (48,036 | ) | $ | (12,658 | ) |
Add back amounts for computation of Adjusted EBITDA: | | | | | | | | | |
Depreciation and amortization, including internal-use software and website development | | 6,670 | | 4,703 | | 29,495 | | 22,667 | |
Stock-based compensation expense to employees and directors | | 1,136 | | 780 | | 4,522 | | 4,022 | |
Stock-based compensation to consultants for service | | (91 | ) | 78 | | 189 | | 259 | |
Stock-based compensation related to performance share plan | | (900 | ) | (1,300 | ) | (550 | ) | (1,000 | ) |
Treasury stock issued from treasury for 401(k) matching contribution | | (434 | ) | — | | 494 | | 19 | |
Interest (income) expense, net | | (326 | ) | 371 | | (600 | ) | 299 | |
Other income (expense), net | | — | | 4,297 | | 92 | | 1,446 | |
Loss from discontinued operations | | — | | — | | 3,924 | | — | |
| | | | | | | | | |
Adjusted EBITDA | | $ | (415 | ) | $ | 9,943 | | $ | (10,470 | ) | $ | 15,054 | |
Free Cash Flow (a non-GAAP measure) — Free cash flow for the three months ended December 31, 2007 and 2008 totaled $55.3 million and $39.4 million, respectively. For the years ended December 31, 2007 and 2008, free cash flow was $7.3 million and $(16.7) 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 “Net cash provided by operating activities from continuing operations,” is cash flow from operations reduced by “Expenditures for fixed assets, including internal-use software and website development.” 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.
| | Three months ended
December 31, | | Twelve months ended
December 31, | |
(amounts in thousands) | | 2007 | | 2008 | | 2007 | | 2008 | |
| | | | | | | | | |
Net cash provided by operating activities from continuing operations | | $ | 55,734 | | $ | 42,830 | | $ | 9,977 | | $ | 1,960 | |
Expenditures for fixed assets, including internal-use software and website development | | (411 | ) | (3,432 | ) | (2,643 | ) | (18,690 | ) |
| | | | | | | | | |
Free cash flow | | $ | 55,323 | | $ | 39,398 | | $ | 7,334 | | $ | (16,730 | ) |
Cash and working capital — At December 31, 2008, Overstock.com had cash, cash equivalents and marketable securities of $109.6 million and working capital of $39.7 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
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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 regularly posts information about the company and other related matters on its website under the heading “Investor Relations.”
# # #
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 fallout from the 2008 holiday season, future supply, the fate of other companies, the company’s ability to execute on a consignment model, and its timing. Our Form 10-K/A for the year ended December 31, 2007, our subsequent quarterly reports on Form 10-Q and Form 10-Q/A, including our Form 10-Q for the quarter ended September 30, 2008, 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.
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Overstock.com, Inc.
Consolidated Statements of Operations (unaudited)
(in thousands, except per share amounts)
| | Three months ended | | Twelve months ended | |
| | December 31, | | December 31, | |
| | 2007 | | 2008 | | 2007 | | 2008 | |
Revenue | | | | | | | | | |
Direct revenue | | $ | 67,170 | | $ | 48,432 | | $ | 197,088 | | $ | 174,203 | |
Fulfillment partner revenue | | 227,346 | | 207,430 | | 568,814 | | 660,164 | |
| | | | | | | | | |
Total revenue | | 294,516 | | 255,862 | | 765,902 | | 834,367 | |
| | | | | | | | | |
Cost of goods sold | | | | | | | | | |
Direct | | 56,815 | | 44,194 | | 168,008 | | 154,501 | |
Fulfillment partner | | 191,319 | | 168,058 | | 473,344 | | 536,957 | |
| | | | | | | | | |
Total cost of goods sold | | 248,134 | | 212,252 | | 641,352 | | 691,458 | |
| | | | | | | | | |
Gross profit | | 46,382 | | 43,610 | | 124,550 | | 142,909 | |
| | | | | | | | | |
Operating expenses: | | | | | | | | | |
Sales and marketing | | 27,377 | | 16,437 | | 55,458 | | 57,634 | |
Technology | | 14,667 | | 13,869 | | 59,453 | | 57,815 | |
General and administrative | | 11,134 | | 7,622 | | 41,976 | | 38,373 | |
Restructuring | | — | | — | | 12,283 | | — | |
| | | | | | | | | |
Total operating expenses | | 53,178 | | 37,928 | | 169,170 | | 153,822 | |
| | | | | | | | | |
Operating income (loss) | | (6,796 | ) | 5,682 | | (44,620 | ) | (10,913 | ) |
| | | | | | | | | |
Interest income | | 1,429 | | 455 | | 4,788 | | 3,163 | |
Interest expense | | (1,103 | ) | (826 | ) | (4,188 | ) | (3,462 | ) |
Other income (expense), net | | — | | (4,297 | ) | (92 | ) | (1,446 | ) |
| | | | | | | | | |
Income (loss) from continuing operations | | (6,470 | ) | 1,014 | | (44,112 | ) | (12,658 | ) |
Discontinued operations: | | | | | | | | | |
Loss from discontinued operations | | — | | — | | (3,924 | ) | — | |
| | | | | | | | | |
Net income (loss) | | $ | (6,470 | ) | $ | 1,014 | | $ | (48,036 | ) | $ | (12,658 | ) |
| | | | | | | | | |
Net income (loss) per common share - basic: | | | | | | | | | |
Income (loss) from continuing operations | | $ | (0.27 | ) | $ | 0.04 | | $ | (1.86 | ) | $ | (0.55 | ) |
Loss from discontinued operations | | $ | — | | $ | — | | $ | (0.17 | ) | $ | — | |
Net income (loss) per common share - basic | | $ | (0.27 | ) | $ | 0.04 | | $ | (2.03 | ) | $ | (0.55 | ) |
Net income (loss) per common share - diluted: | | | | | | | | | |
Income (loss) from continuing operations | | $ | (0.27 | ) | $ | 0.04 | | $ | (1.86 | ) | $ | (0.55 | ) |
Loss from discontinued operations | | $ | — | | $ | — | | $ | (0.17 | ) | $ | — | |
Net income (loss) per common share - diluted | | $ | (0.27 | ) | $ | 0.04 | | $ | (2.03 | ) | $ | (0.55 | ) |
| | | | | | | | | |
Weighted average common shares outstanding - basic | | 23,807 | | 22,745 | | 23,704 | | 22,901 | |
Weighted average common shares outstanding - diluted | | 23,807 | | 22,827 | | 23,704 | | 22,901 | |
| | | | | | | | | |
Other data: | | | | | | | | | |
Shopping bookings (in 000s) | | $ | 336,340 | | $ | 285,648 | | $ | 853,136 | | $ | 916,210 | |
Auction gross merchandise volume (in 000s) | | $ | 3,183 | | $ | 4,435 | | $ | 14,259 | | $ | 11,540 | |
Average customer acquisition cost (shopping) | | $ | 24.79 | | $ | 17.67 | | $ | 22.60 | | $ | 22.26 | |
Overstock.com, Inc.
Consolidated Balance Sheets (unaudited)
(in thousands)
| | December 31, | |
| | 2007 | | 2008 | |
Assets | | | | | |
Current assets: | | | | | |
Cash and cash equivalents | | $ | 101,394 | | $ | 100,577 | |
Marketable securities | | 46,000 | | 8,989 | |
| | | | | |
Cash, cash equivalents and marketable securities | | 147,394 | | 109,566 | |
Accounts receivable, net | | 12,122 | | 6,985 | |
Notes receivable | | 1,506 | | 1,250 | |
Inventories, net | | 25,643 | | 17,723 | |
Prepaid inventory, net | | 2,938 | | 761 | |
Prepaid expenses | | 7,572 | | 9,694 | |
| | | | | |
Total current assets | | 197,175 | | 145,979 | |
Fixed assets, net | | 27,197 | | 23,144 | |
Goodwill | | 2,784 | | 2,784 | |
Other long-term assets, net | | 86 | | 538 | |
Notes receivable | | 4,181 | | — | |
| | | | | |
Total assets | | $ | 231,423 | | $ | 172,445 | |
| | | | | |
Liabilities and Stockholders’ Equity | | | | | |
Current liabilities: | | | | | |
Accounts payable | | $ | 70,358 | | $ | 62,120 | |
Accrued liabilities | | 37,435 | | 25,154 | |
Deferred revenue | | 22,965 | | 19,026 | |
Capital lease obligations | | 3,796 | | — | |
| | | | | |
Total current liabilities | | 134,554 | | 106,300 | |
Other long-term liabilities | | 3,034 | | 2,572 | |
Convertible senior notes | | 75,623 | | 66,558 | |
| | | | | |
Total liabilities | | 213,211 | | 175,430 | |
| | | | | |
Stockholders’ equity (deficit): | | | | | |
Common stock | | 2 | | 2 | |
Additional paid-in capital | | 333,909 | | 338,620 | |
Accumulated deficit | | (252,327 | ) | (264,985 | ) |
Treasury stock | | (63,278 | ) | (76,670 | ) |
Accumulated other comprehensive income (loss) | | (94 | ) | 48 | |
| | | | | |
Total stockholders’ equity (deficit) | | 18,212 | | (2,985 | ) |
| | | | | |
Total liabilities and stockholders’ equity (deficit) | | $ | 231,423 | | $ | 172,445 | |
Overstock.com, Inc.
Consolidated Statements of Cash Flows (unaudited)
(in thousands)
| | Three months ended December 31, | | Twelve months ended December 31, | |
| | 2007 | | 2008 | | 2007 | | 2008 | |
Cash flows from operating activities of continuing operations: | | | | | | | | | |
Net income (loss) | | $ | (6,470 | ) | $ | 1,014 | | $ | (48,036 | ) | $ | (12,658 | ) |
Adjustments to reconcile net loss to cash provided by operating activities of continuing operations: | | | | | | | | | |
Loss from discontinued operations | | — | | — | | 3,924 | | — | |
Depreciation and amortization, including internal use software and website development | | 6,670 | | 4,703 | | 29,495 | | 22,667 | |
Stock-based compensation to employees and directors | | 1,136 | | 780 | | 4,522 | | 4,022 | |
Stock-based compensation to consultants for services | | (91 | ) | 78 | | 189 | | 259 | |
Stock-based compensation relating to performance share plan | | (900 | ) | (1,300 | ) | (550 | ) | (1,000 | ) |
Issuance of common stock from treasury for 401(k) matching contribution | | (434 | ) | — | | 494 | | 19 | |
Loss from marketable securities | | — | | 334 | | — | | 334 | |
Loss from disposition of fixed assets | | — | | 140 | | 1 | | 140 | |
Amortization of debt discount | | 86 | | 77 | | 344 | | 334 | |
Notes receivable accretion | | (136 | ) | (137 | ) | (272 | ) | (545 | ) |
Gain from early extinguishment of debt | | — | | — | | — | | (2,849 | ) |
Loss from settlement of notes receivable | | — | | 3,929 | | — | | 3,929 | |
Asset impairment and depreciation (other non-cash restructuring) | | — | | — | | 2,169 | | — | |
Restructuring charges | | — | | — | | 10,114 | | — | |
Changes in operating assets and liabilities, net of effect of acquisition and discontinued operations: | | | | | | | | | |
Accounts receivable, net | | (2,151 | ) | 3,570 | | 5,604 | | 4,769 | |
Inventories, net | | (1,925 | ) | (242 | ) | (1,773 | ) | 7,920 | |
Prepaid inventory, net | | 1,446 | | 3,304 | | (1,316 | ) | 2,177 | |
Prepaid expenses | | 2,685 | | 1,241 | | (99 | ) | (2,122 | ) |
Other long-term assets, net | | 105 | | (516 | ) | 471 | | (516 | ) |
Accounts payable | | 38,048 | | 27,461 | | 11,849 | | (8,238 | ) |
Accrued liabilities | | 12,903 | | (832 | ) | (6,705 | ) | (12,281 | ) |
Deferred revenue | | 4,841 | | (704 | ) | (255 | ) | (3,939 | ) |
Other long-term liabilities | | (79 | ) | (70 | ) | (193 | ) | (462 | ) |
| | | | | | | | | |
Net cash provided by operating activities of continuing operations | | 55,734 | | 42,830 | | 9,977 | | 1,960 | |
| | | | | | | | | |
Cash flows from investing activities of continuing operations: | | | | | | | | | |
Purchases of marketable securities | | (46,053 | ) | — | | (75,217 | ) | (35,548 | ) |
Maturities of marketable securities | | 16,934 | | 9,905 | | 29,258 | | 64,542 | |
Sales of marketable securities | | — | | 7,740 | | — | | 7,740 | |
Expenditures for fixed assets, including internal-use software and website development | | (411 | ) | (3,432 | ) | (2,643 | ) | (18,690 | ) |
Proceeds from the sale of discontinued operations, net of cash transferred | | — | | — | | 9,892 | | — | |
Collection of note receivable | | — | | — | | 5,196 | | 1,506 | |
| | | | | | | | | |
Net cash provided by (used in) investing activities of continuing operations | | (29,530 | ) | 14,213 | | (33,514 | ) | 19,550 | |
| | | | | | | | | |
Cash flows from financing activities of continuing operations: | | | | | | | | | |
Payments on capital lease obligations | | (5 | ) | — | | (5,261 | ) | (3,796 | ) |
Drawdowns on line of credit | | 1,254 | | 5,241 | | 2,423 | | 12,963 | |
Paydowns on line of credit | | (1,254 | ) | (5,241 | ) | (2,423 | ) | (12,963 | ) |
Payments to retire convertible senior notes | | — | | — | | — | | (6,550 | ) |
Purchase of treasury stock | | | | | | | | (13,452 | ) |
Exercise of stock options | | 1,048 | | — | | 3,230 | | 1,471 | |
| | | | | | | | | |
Net cash provided by (used in) financing activities of continuing operations | | 1,043 | | — | | (2,031 | ) | (22,327 | ) |
| | | | | | | | | |
Effect of exchange rate changes on cash | | 2 | | 9 | | (3 | ) | — | |
Cash used in operating activities of discontinued operations | | — | | — | | (204 | ) | — | |
Cash used in investing activities of discontinued operations | | — | | — | | (53 | ) | — | |
| | | | | | | | | |
Net increase (decrease) in cash and cash equivalents | | 27,249 | | 57,052 | | (25,828 | ) | (817 | ) |
Change in cash and cash equivalents from discontinued operations | | — | | — | | 257 | | — | |
Cash and cash equivalents, beginning of period | | 74,145 | | 43,525 | | 126,965 | | 101,394 | |
| | | | | | | | | |
Cash and cash equivalents, end of period | | $ | 101,394 | | $ | 100,577 | | $ | 101,394 | | $ | 100,577 | |
