Exhibit 99.1
FOR IMMEDIATE RELEASE: October 27, 2011 | | |
Media Contact:
Roger Johnson, Overstock.com, Inc.
+1 (801) 947-4430
rojohnson@overstock.com
Investor Contact:
Kevin Moon, Overstock.com, Inc.
+1 (801) 947-3282
kmoon@overstock.com
O.co (aka Overstock.com) Reports Q3 2011 Results
Company will host conference call and webcast today at 11:30 AM EDT
SALT LAKE CITY — Overstock.com, Inc. (NASDAQ: OSTK) today reported financial results for the quarter ended September 30, 2011.
Key Q3 2011 metrics (comparison to Q3 2010):
· Revenue: $239.7M vs. $245.4M (2% decrease);
· Gross margin: 16.0% vs. 16.9% (90 basis point decrease);
· Gross profit: $38.4M vs. $41.4M (7% decrease);
· Sales and marketing expense: $13.8M vs. $15.6M (12% decrease);
· Contribution (non-GAAP measure): $24.6M vs. $25.8M (5% decrease);
· G&A/Technology expense: $32.5M vs. $28.9M (12% increase);
· Net loss: $(7.8)M vs. $(3.4)M ($4.4M increase); and
· Diluted EPS: $(0.33)/share vs. $(0.15)/share ($0.18 loss per share increase).
The Company will hold a conference call and webcast to discuss its third quarter 2011 financial results on Thursday, October 27, 2011 at 11:30 a.m. Eastern Time.
Webcast information
To access the live webcast and presentation slides, please go to http://investors.overstock.com. To listen to the conference call via telephone, dial (866) 551-1816 and enter conference ID 21393510 when prompted. Participants outside the United States or Canada who do not have Internet access should dial +1 (706) 758-1198 and enter conference ID 21393510 when prompted.
Replay
A replay of the conference call will be available at http://investors.overstock.com starting 2 hours after the live call has ended. An audio replay of the webcast will be available via telephone starting at 12:30 p.m. Eastern Time on Thursday, October 27, 2011, through 11:59 p.m. Eastern Time on Thursday, November 3, 2011. To listen to the recorded webcast by phone, please dial (855) 859-2056 and enter conference ID 21393510 when prompted. Outside the U.S. or Canada please dial +1 (404) 537-3406 and enter conference ID 21393510 when prompted.
Please email questions to Kevin Moon at kmoon@overstock.com prior to the conference call.
Key financial and operating metrics discussion:
You should review our financial statements and publicly-filed reports in their entirety and not rely on any single financial measure.
Total net revenue — Total net revenue for the third quarter of 2011 and 2010 was $239.7 million and $245.4 million, respectively, a 2% decrease. The primary reasons for shrinking revenue for the three months ended September 30, 2011 were visits to our website were up slightly, conversion rates were lower, resulting in fewer orders, and an 8% decrease in new customers compared to last year. We believe that the decline in revenue is partially the result of a decrease in site wide promotions and email and affiliate channel couponing we did to shift resources to promoting our Club O loyalty program. We also believe that our current efforts to rebrand ourselves from Overstock.com to O.co may have contributed to the decline in revenue.
Gross profit — Gross profit for the third quarter of 2011 and 2010 was $38.4 million and $41.4 million, respectively, a 7% decrease. Gross profit represents 16.0% and 16.9% of total net revenue for those respective periods. Competitive pricing initiatives were the primary reason for lower gross profit. Higher freight and warehouse related costs as a percentage of revenue, offset in part by a favorable sales mix shift into higher margin categories such as Home & Garden also had an impact.
Contribution (a non-GAAP financial measure) and contribution margin (a non-GAAP financial measure) — Contribution for the third quarter of 2011 and 2010 was $24.6 million (10.2% contribution margin) and $25.8 million (10.5% contribution margin), respectively, a 5% decrease in contribution (a 30 basis point decrease in contribution margin).
Contribution (a non-GAAP financial measure) (which we reconcile to “gross profit” in our statement of operations) consists of gross profit less sales and marketing expense and reflects an additional way of viewing our results. Contribution margin is contribution as a percentage of total net revenue. When viewed with our GAAP gross profit less sales and marketing expenses, we believe contribution and contribution margin provides management and users of the financial statements information about our ability to cover our fixed operating costs, such as technology and general and administrative expenses. Contribution and contribution margin are used in addition to and in conjunction with results presented in accordance with GAAP and should not be relied upon to the exclusion of GAAP financial measures. The material limitation associated with the use of
contribution is that it is an incomplete measure of profitability as it does not include all operating expenses or non-operating income and expenses. Management compensates for these limitations when using this measure by looking at other GAAP measures, such as operating income (loss) and net income (loss).
For further details on contribution, see the calculation of this non-GAAP financial measure below (in thousands):
| | Three months ended
September 30, | | Nine months ended
September 30, | |
| | 2011 | | 2010 | | 2011 | | 2010 | |
Total revenue | | $ | 239,738 | | $ | 245,420 | | $ | 740,200 | | $ | 741,003 | |
Cost of goods sold | | 201,365 | | 204,042 | | 611,973 | | 610,775 | |
Gross profit | | 38,373 | | 41,378 | | 128,227 | | 130,228 | |
Less: Sales and marketing expense | | 13,822 | | 15,626 | | 42,902 | | 44,084 | |
Contribution | | $ | 24,551 | | $ | 25,752 | | $ | 85,325 | | $ | 86,144 | |
Contribution margin | | 10.2 | % | 10.5 | % | 11.5 | % | 11.6 | % |
Sales and marketing expenses — Sales and marketing expenses totaled $13.8 million and $15.6 million for the third quarter of 2011 and 2010, respectively, a 12% decrease, and representing 5.8% and 6.4% of total net revenue for those respective periods. The decrease in sales and marketing expenses as a percentage of revenue for this period was primarily related to the shift away from traditional advertising campaigns, into Club O loyalty program promotions that are accounted for as a reduction of revenue.
Technology expenses — Technology expenses totaled $17.2 million and $14.2 million for the third quarter of 2011 and 2010, respectively, a 21% increase, and representing 7.2% and 5.8% of total net revenue for those respective periods. The $3.0 million increase is primarily due to a $1.3 million increase in compensation expense (primarily due to increases in staffing) and approximately $470,000 in increased depreciation expense due to higher technology capital spending last year.
General and administrative (“G&A”) expenses — G&A expenses totaled $15.3 million and $14.7 million for the third quarter of 2011 and 2010, respectively, a 4% increase, and representing 6.4% and 6.0% of total net revenue for those respective periods. The $579,000 increase is primarily due to an increase of $870,000 in legal fees, partially offset by a reduction of $455,000 in compensation expense (primarily due to decreases in staffing).
Operating loss — Operating loss for the third quarter of 2011 was $(7.9) million compared to $(3.2) million for 2010, a $4.7 million increase.
Interest income — Interest income for the third quarter of 2011 and 2010 was $23,000 and $55,000, respectively.
Interest expense —Interest expense was $662,000 and $668,000 for the third quarter of 2011 and 2010, respectively, and is largely related to interest incurred on our Senior Notes, our finance obligations and our capital leases.
Other income, net — Other income, net for the third quarter of 2011 and 2010 was $553,000 and $387,000, respectively. The increase in other income, net is primarily due to increased gift card breakage, offset in part by no extinguishments of Senior Notes with accompanying gains on the buyback.
Net loss — Net loss for the third quarter of 2011 was $(7.8) million, or $(0.33) per share, compared to net loss of $(3.4) million, or $(0.15) per share for the third quarter of 2010.
Free cash flow (a non-GAAP financial measure) — Free cash flow for the twelve months ending September 30, 2011 and 2010 was $24.2 million and $14.1 million, respectively.
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 and liquidity. Free cash flow, which we reconcile to “net cash provided by (used in) operating activities,” is cash flow from operations reduced by “expenditures for fixed assets, including internal-use software and website development.” We believe that cash flows from operating activities is an important measure, since it includes both the cash impact of the continuing operations of the business and changes in the balance sheet that impact cash. However, 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 and free cash flow measures the amount of cash we have available for future investment, debt retirement or other changes to our capital structure after we have paid all of our expenses. Therefore, we believe it is important to view free cash flow as a complement to our entire consolidated statements of cash flows.
Our calculation of free cash flow is set forth below (in thousands):
| | Nine months ended
September 30, | | Twelve months ended
September 30, | |
| | 2011 | | 2010 | | 2011 | | 2010 | |
Net cash provided by (used in) operating activities | | $ | (16,300 | ) | $ | (31,722 | ) | $ | 31,744 | | $ | 34,654 | |
Expenditures for fixed assets, including internal-use software and website development | | (6,344 | ) | (19,317 | ) | (7,538 | ) | (20,583 | ) |
Free cash flow | | $ | (22,644 | ) | $ | (51,039 | ) | $ | 24,206 | | $ | 14,071 | |
Cash and working capital — At September 30, 2011, Overstock.com had cash and cash equivalents (including restricted cash) of $81.5 million. Working capital was $18.4 million and $14.7 million at September 30, 2011 and December 31, 2010, respectively.
About O.co (also known as Overstock.com) O.co, also known as Overstock.com, is Your Savings Engine offering brand-name products. The company offers its customers an opportunity to shop for bargains conveniently, while offering its suppliers an alternative inventory distribution channel. O.co, 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 and http://www.o.co. O.co 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. O.co™ and Your Savings Engine™ are trademarks of Overstock.com, Inc., 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 all statements other than statements of historical fact. Our Annual Report on Form 10-K for the year ended December 31, 2010 as filed with the SEC on February 28, 2011, our Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 as filed with the SEC on July 28, 2011, or any amendments thereto, and our other subsequent filings with the SEC 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 data)
| | Three months ended
September 30, | | Nine months ended
September 30, | |
| | 2011 | | 2010 | | 2011 | | 2010 | |
Revenue, net | | | | | | | | | |
Direct | | $ | 34,749 | | $ | 47,508 | | $ | 116,353 | | $ | 140,458 | |
Fulfillment partner | | 204,989 | | 197,912 | | 623,847 | | 600,545 | |
Total net revenue | | 239,738 | | 245,420 | | 740,200 | | 741,003 | |
Cost of goods sold | | | | | | | | | |
Direct | | 32,472 | | 43,174 | | 105,733 | | 124,192 | |
Fulfillment partner | | 168,893 | | 160,868 | | 506,240 | | 486,583 | |
Total cost of goods sold | | 201,365 | | 204,042 | | 611,973 | | 610,775 | |
Gross profit | | 38,373 | | 41,378 | | 128,227 | | 130,228 | |
Operating expenses: | | | | | | | | | |
Sales and marketing | | 13,822 | | 15,626 | | 42,902 | | 44,084 | |
Technology | | 17,171 | | 14,186 | | 50,639 | | 42,312 | |
General and administrative | | 15,321 | | 14,742 | | 50,032 | | 44,151 | |
Restructuring | | — | | — | | — | | (136 | ) |
Total operating expenses | | 46,314 | | 44,554 | | 143,573 | | 130,411 | |
Operating loss | | (7,941 | ) | (3,176 | ) | (15,346 | ) | (183 | ) |
Interest income | | 23 | | 55 | | 121 | | 111 | |
Interest expense | | (662 | ) | (668 | ) | (1,968 | ) | (2,230 | ) |
Other income, net | | 553 | | 387 | | 962 | | 1,410 | |
Loss before income taxes | | (8,027 | ) | (3,402 | ) | (16,231 | ) | (892 | ) |
Provision (benefit) for income taxes | | (240 | ) | (44 | ) | (202 | ) | 78 | |
Net loss | | $ | (7,787 | ) | $ | (3,358 | ) | $ | (16,029 | ) | $ | (970 | ) |
Deemed dividend related to redeemable common stock | | — | | (23 | ) | (12 | ) | (99 | ) |
Net loss attributable to common shares | | $ | (7,787 | ) | $ | (3,381 | ) | $ | (16,041 | ) | $ | (1,069 | ) |
Net loss per common share—basic: | | | | | | | | | |
Net loss attributable to common shares—basic | | $ | (0.33 | ) | $ | (0.15 | ) | $ | (0.69 | ) | $ | (0.05 | ) |
Weighted average common shares outstanding—basic | | 23,276 | | 23,060 | | 23,253 | | 23,006 | |
Net loss per common share—diluted: | | | | | | | | | |
Net loss attributable to common shares—diluted | | $ | (0.33 | ) | $ | (0.15 | ) | $ | (0.69 | ) | $ | (0.05 | ) |
Weighted average common shares outstanding—diluted | | 23,276 | | 23,060 | | 23,253 | | 23,006 | |
| | | | | | | | | |
Other data: | | | | | | | | | |
Gross bookings | | $ | 262,564 | | 270,922 | | 814,928 | | 815,745 | |
Average customer acquisition cost (in dollars) | | 19.64 | | 20.34 | | 20.17 | | 18.44 | |
Overstock.com, Inc.
Consolidated Balance Sheets (Unaudited)
(in thousands)
| | September 30, | | December 31, | |
| | 2011 | | 2010 | |
Assets | | | | | |
Current assets: | | | | | |
Cash and cash equivalents | | $ | 79,138 | | $ | 124,021 | |
Restricted cash | | 2,383 | | 2,542 | |
Accounts receivable, net | | 8,445 | | 13,560 | |
Inventories, net | | 19,210 | | 32,114 | |
Prepaid inventories, net | | 1,415 | | 2,082 | |
Prepaids and other assets | | 15,254 | | 11,651 | |
Total current assets | | 125,845 | | 185,970 | |
Fixed assets, net | | 27,085 | | 27,800 | |
Goodwill | | 2,784 | | 2,784 | |
Other long-term assets, net | | 2,261 | | 1,405 | |
Total assets | | $ | 157,975 | | $ | 217,959 | |
Liabilities and Stockholders’ Equity | | | | | |
Current liabilities: | | | | | |
Accounts payable | | $ | 42,552 | | $ | 67,311 | |
Accrued liabilities | | 37,684 | | 40,751 | |
Deferred revenue | | 21,180 | | 24,027 | |
Convertible senior notes, net | | — | | 34,484 | |
Finance obligations, current | | 5,844 | | 3,922 | |
Capital lease obligations, current | | 185 | | 729 | |
Total current liabilities | | 107,445 | | 171,224 | |
Capital lease obligations, non-current | | 3 | | 113 | |
Finance obligations, non-current | | 14,485 | | 12,219 | |
Long-term debt | | 17,000 | | — | |
Other long-term liabilities | | 3,034 | | 3,175 | |
Total liabilities | | 141,967 | | 186,731 | |
| | | | | |
Redeemable common stock | | — | | 570 | |
| | | | | |
Stockholders’ equity: | | | | | |
Common stock | | 2 | | 2 | |
Additional paid-in capital | | 352,728 | | 349,747 | |
Accumulated deficit | | (258,356 | ) | (242,327 | ) |
Treasury stock | | (78,366 | ) | (76,764 | ) |
Total stockholders’ equity | | 16,008 | | 30,658 | |
Total liabilities and stockholders’ equity | | $ | 157,975 | | $ | 217,959 | |
Overstock.com, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
| | Nine months ended
September 30, | | Twelve months ended
September 30, | |
| | 2011 | | 2010 | | 2011 | | 2010 | |
Cash flows from operating activities: | | | | | | | | | |
Net income (loss) | | $ | (16,029 | ) | $ | (970 | ) | $ | (1,170 | ) | $ | 11,757 | |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | | | | | | | | | |
Depreciation and amortization | | 12,472 | | 10,471 | | 16,581 | | 13,312 | |
Realized loss on marketable securities | | — | | — | | — | | 9 | |
(Gain) loss on disposition of fixed assets | | — | | 14 | | (14 | ) | 13 | |
Stock-based compensation to employees and directors | | 2,411 | | 3,770 | | 3,697 | | 5,092 | |
Amortization of debt discount | | 77 | | 306 | | 162 | | 367 | |
(Gain) loss from early extinguishment of debt | | 54 | | (346 | ) | 54 | | (346 | ) |
Restructuring reversals | | — | | (136 | ) | (433 | ) | (136 | ) |
Changes in operating assets and liabilities: | | | | | | | | | |
Restricted cash | | 159 | | 1,872 | | 159 | | 1,743 | |
Accounts receivable, net | | 5,115 | | 3,252 | | (57 | ) | 1,012 | |
Inventories, net | | 12,904 | | (11,018 | ) | 15,183 | | (12,358 | ) |
Prepaid inventories, net | | 667 | | 168 | | 1,296 | | 905 | |
Prepaids and other assets | | (3,218 | ) | (1,176 | ) | (1,674 | ) | (852 | ) |
Other long-term assets, net | | 12 | | (474 | ) | 271 | | (514 | ) |
Accounts payable | | (24,775 | ) | (30,837 | ) | (3,253 | ) | 12,056 | |
Accrued liabilities | | (3,507 | ) | (6,649 | ) | 567 | | 1,098 | |
Deferred revenue | | (2,847 | ) | 85 | | 430 | | 1,550 | |
Other long-term liabilities | | 205 | | (54 | ) | (55 | ) | (54 | ) |
Net cash provided by (used in) operating activities | | (16,300 | ) | (31,722 | ) | 31,744 | | 34,654 | |
| | | | | | | | | |
Cash flows from investing activities: | | | | | | | | | |
Purchases of marketable securities | | (119 | ) | (100 | ) | (155 | ) | (100 | ) |
Purchases of intangible assets | | (7 | ) | (380 | ) | (23 | ) | (380 | ) |
Sale of marketable securities prior to maturity | | — | | — | | — | | (9 | ) |
Investment in precious metals | | — | | (1,657 | ) | — | | (1,657 | ) |
Expenditures for fixed assets, including internal-use software and website development | | (6,344 | ) | (19,317 | ) | (7,538 | ) | (20,583 | ) |
Net cash used in investing activities | | (6,470 | ) | (21,454 | ) | (7,716 | ) | (22,729 | ) |
| | | | | | | | | |
Cash flows from financing activities: | | | | | | | | | |
Payments on capital lease obligations | | (654 | ) | (422 | ) | (722 | ) | (472 | ) |
Capitalized financing costs | | (121 | ) | — | | (121 | ) | (245 | ) |
Proceeds from finance obligations | | 1,429 | | 14,577 | | 3,235 | | 14,577 | |
Payments on finance obligations | | (3,390 | ) | — | | (4,231 | ) | — | |
Paydown on direct financing arrangement | | (160 | ) | (146 | ) | (211 | ) | (205 | ) |
Proceeds from long-term debt | | 17,000 | | — | | 17,000 | | — | |
Payments to retire convertible senior notes | | (34,615 | ) | (24,865 | ) | (34,615 | ) | (24,865 | ) |
Purchase of redeemable stock | | — | | — | | (26 | ) | — | |
Purchase of treasury stock | | (1,602 | ) | (821 | ) | (1,606 | ) | (828 | ) |
Exercise of stock options | | — | | 1,504 | | (1 | ) | 1,530 | |
Net cash used in financing activities | | (22,113 | ) | (10,173 | ) | (21,298 | ) | (10,508 | ) |
Net increase (decrease) in cash and cash equivalents | | (44,883 | ) | (63,349 | ) | 2,730 | | 1,417 | |
Cash and cash equivalents, beginning of period | | 124,021 | | 139,757 | | 76,408 | | 74,991 | |
Cash and cash equivalents, end of period | | $ | 79,138 | | $ | 76,408 | | $ | 79,138 | | $ | 76,408 | |
