Overstock Reports Q3 2020 Financial Results

SALT LAKE CITY, Oct. 29, 2020 (GLOBE NEWSWIRE) -- Overstock.com, Inc. (NASDAQ:OSTK) today reported financial results for the quarter ended September 30, 2020.

Third Quarter Financial Highlights

  • Total net revenue was $732 million, an increase of 111% year over year
  • Gross profit was $171 million or 23% of total net revenue, an increase of 330 basis points year over year
  • Net income attributable to stockholders of Overstock.com, Inc. was $23 million, an improvement of $54 million year over year
  • Diluted earnings per share was $0.50, an improvement of $1.39 year over year
  • Adjusted EBITDA (non-GAAP) was $40 million, an improvement of $58 million year over year
  • YTD net cash provided by operating activities was $199 million, an improvement of $288 million year over year
  • YTD free cash flow (non-GAAP) improved $291 million year over year
  • At the end of the third quarter, cash and cash equivalents totaled $530 million

"After a record-setting second quarter, we maintained our momentum, continued to outperform expectations, and grew faster than competitors in the third quarter," said Overstock CEO Jonathan Johnson. "Our quarterly gross sales in our Retail business doubled year over year once again and new customers grew 141%. These new customers are making repeat purchases at an increasing rate. Heading into the fourth quarter, I am as confident as ever in our Retail business maintaining sustainable, profitable market share growth."

"Our Medici Ventures blockchain-based businesses also continue to make meaningful advancements," said Johnson. "tZERO received FINRA approval to provide retail brokerage services for digital securities through its subsidiary, tZERO Markets, which officially launched last week. Several of our Medici Ventures companies are raising capital, most are getting products into production, and many are generating revenue. Our organization remains focused and disciplined. We continue to execute against our strategic initiatives that are driving growth and delivering profitability. I look forward to providing an update on our progress and performance during our earnings call."

Other Third Quarter Financial Highlights

  • Retail income before income taxes was $43 million, an improvement of $52 million year over year
  • Retail Adjusted EBITDA (non-GAAP) was $50 million, or 7% of Retail net revenue, an improvement of $51 million (or 720 basis points) year over year
  • Consolidated G&A expenses increased by $2 million but improved by 470 basis points as a percentage of total net revenue year over year
  • tZERO net revenue was $11 million, an increase of 97% year over year, primarily due to SpeedRoute trading volume

Third Quarter Operational Highlights

  • Newly acquired Retail customers increased 141% year over year
  • Gross sales from orders placed on a mobile device were 50% of Retail gross sales in the third quarter of 2020 compared to 44% in the third quarter of 2019
  • Volume on the tZERO ATS increased 856% to a record 4 million shares (equivalent to $39 million in value of shares traded)

Capital Raise

During the third quarter, Overstock announced and completed a public offering of common stock. The size of the offering was increased from its initial announcement due to increased demand, and the underwriters fully exercised the over-allotment option. The offering was completed on August 14, 2020, whereby we issued 2,415,000 shares of common stock at a price of $84.50 per share, raising net proceeds of approximately $193 million. The capital raise was opportunistic in nature, and proceeds will be used to support our continued growth trajectory.

COVID-19 Update

Overstock has continued to respond to the challenges and opportunities created by the COVID-19 pandemic. In our Retail business, customer demand continued to increase significantly in the third quarter, particularly in our key home furnishings categories. We have seen a substantial year-over-year increase in our website traffic and number of new customers. Our Retail gross sales again grew more than 100% year over year in Q3. Our online-only platform and partner network with thousands of fulfillment centers has enabled us to meet this increase in demand. Our three warehouses have remained operational based on our sustained implementation of sound safety measures, including staggered shifts and social distancing. We are also hiring in key areas throughout the company to support our current and expected growth. We continue to face challenges created by the sharp increase in volume, in customer service channels and in fulfillment and delivery, stemming from capacity issues from shipping carriers and some suppliers, including out-of-stock positions on some of our top performing products. Most of our Medici Ventures blockchain companies have seen relatively little disruption, and several are working on solutions to problems exacerbated by the global pandemic. We have evaluated and implemented a phased re-entry plan for our offices; most of our corporate employees continue to work from home without incident. We cannot predict how the COVID-19 pandemic will unfold in the coming months. Nevertheless, the challenges arising from the pandemic have not adversely affected our liquidity, revenues, or capacity to service our debt, nor have these conditions required us to reduce our capital expenditures.

Earnings Webcast Information

The company will hold a conference call and webcast to discuss its Q3 2020 financial results on Thursday, October 29, 2020, at 8:30 a.m. ET. To access the live webcast and presentation slides, go to http://investors.overstock.com. To listen to the conference call via telephone, dial (877) 673-5346 and enter conference ID 4293477 when prompted. Participants outside the U.S. or Canada who do not have Internet access should dial +1 (724) 498-4326 then enter the conference ID provided above.

A replay of the conference call will be available at http://investors.overstock.com starting two hours after the live call has ended. An audio replay of the webcast will be available via telephone starting at 11:30 a.m. ET on Thursday, October 29, 2020, through 11:30 a.m. ET on Thursday, November 12, 2020. To listen to the recorded webcast by phone, dial (855) 859-2056 then enter the conference ID provided above. Outside the U.S. or Canada dial +1 (404) 537-3406 and enter the conference ID provided above.

Questions may be emailed in advance of the call to ir@overstock.com.

About Overstock.com

Overstock.com, Inc. Common Shares (NASDAQ:OSTK) / Digital Voting Series A-1 Preferred Stock (Medici Ventures' tZERO platform:OSTKO) / Series B Preferred (OTCQX:OSTBP) is an online retailer and technology company based in Salt Lake City, Utah. Its leading e-commerce website sells a broad range of new home products at low prices, including furniture, décor, rugs, bedding, home improvement, and more. The online shopping site, which is visited by tens of millions of customers a month, also features a marketplace providing customers access to millions of products from third-party sellers. Overstock was the first major retailer to accept cryptocurrency in 2014, and in the same year founded Medici Ventures, its wholly owned subsidiary dedicated to the development and acceleration of blockchain technologies to democratize capital, eliminate middlemen, and re-humanize commerce. Overstock regularly posts information about the Company and other related matters on the Newsroom and Investor Relations pages on its website, Overstock.com.

O, Overstock.com, O.com, Club O, and Worldstock are registered trademarks of Overstock.com, Inc. Other service marks, trademarks and trade names which may be referred to herein are the property of their respective owners.

Cautionary Note Regarding Forward-Looking Statements

This press release and the October 29, 2020 conference call and webcast to discuss our financial results may contain forward-looking statements within the meaning of the federal securities laws. Such forward-looking statements include all statements other than statements of historical fact, including forecasts of trends. These forward-looking statements are inherently difficult to predict. Actual results could differ materially for a variety of reasons, including but not limited to, the duration of the COVID-19 pandemic and its ultimate impact on our business and results of operations, adverse tax, regulatory or legal developments, and competition. Other risks and uncertainties include, among others, the inherent risks associated with the businesses that Medici Ventures and tZERO are pursuing, our continually evolving business model, and difficulties we may have with our infrastructure, our fulfillment partners or our payment processors, including cyber-attacks or data breaches affecting us or any of them, and difficulties we may have with our search engine optimization results. More information about factors that could potentially affect our financial results are included in our Form 10-K for the year ended December 31, 2019, our Form 10-Q for the quarter ended March 31, 2020, and our Form 10-Q for the quarter ended June 30, 2020, which were filed with the Securities and Exchange Commission on March 13, 2020, May 7, 2020, and August 6, 2020, respectively, and in our subsequent filings with the Securities and Exchange Commission. The Form 10-K, 10-Q's, and our subsequent filings with the Securities and Exchange Commission identify important factors that could cause our actual results to differ materially from those contained in or contemplated by our projections, estimates and other forward-looking statements.


Investor Relations:
Alexis Callahan

Media Relations:
Megan Herrick

Overstock.com, Inc.
Consolidated Balance Sheets (Unaudited)
(in thousands, except per share data)

 September 30,
 December 31,
Current assets:   
Cash and cash equivalents$529,710  $112,266 
Restricted cash2,570  2,632 
Marketable securities at fair value1,355  10,308 
Accounts receivable, net of allowance for credit losses of $2,053 and $2,474 at September 30, 2020 and December 31, 2019, respectively35,403  24,728 
Inventories6,867  5,840 
Prepaids and other current assets19,704  21,589 
Total current assets595,609  177,363 
Property and equipment, net125,142  130,028 
Intangible assets, net9,009  11,756 
Goodwill27,120  27,120 
Equity securities48,983  42,043 
Operating lease right-of-use assets25,402  25,384 
Other long-term assets, net11,717  4,033 
Total assets$842,982  $417,727 
Liabilities and Stockholders' Equity   
Current liabilities:   
Accounts payable$119,663  $75,416 
Accrued liabilities145,668  88,197 
Unearned revenue78,757  41,821 
Operating lease liabilities, current5,959  6,603 
Other current liabilities3,803  3,962 
Total current liabilities353,850  215,999 
Long-term debt, net42,148   
Operating lease liabilities, non-current21,640  21,554 
Other long-term liabilities6,038  2,319 
Total liabilities423,676  239,872 
Commitments and contingencies   
Stockholders' equity:   
Preferred stock, $0.0001 par value, authorized shares - 5,000   
Series A-1, issued and outstanding - 4,204 and 4,210   
Series B, issued and outstanding - 357 and 357   
Common stock, $0.0001 par value, authorized shares - 100,000   
Issued shares - 46,317 and 42,790   
Outstanding shares - 42,758 and 39,4644  4 
Additional paid-in capital966,299  764,845 
Accumulated deficit(537,089) (580,390)
Accumulated other comprehensive loss(556) (568)
Treasury stock at cost - 3,559 and 3,326(71,124) (68,807)
Equity attributable to stockholders of Overstock.com, Inc.357,534  115,084 
Equity attributable to noncontrolling interests61,772  62,771 
Total stockholders' equity419,306  177,855 
Total liabilities and stockholders' equity$842,982  $417,727 

Overstock.com, Inc.
Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)
 Three months ended September 30, Nine months ended
September 30,
 2020 2019 2020 2019
Revenue, net       
Retail$717,695  $340,798  $1,824,249  $1,070,898 
Other13,956  6,301  41,519  17,639 
Total net revenue731,651  347,099  1,865,768  1,088,537 
Cost of goods sold       
Retail548,982  272,545  1,403,418  858,169 
Other11,901  5,006  35,860  13,797 
Total cost of goods sold560,883  277,551  1,439,278  871,966 
Gross profit170,768  69,548  426,490  216,571 
Operating expenses:       
Sales and marketing72,010  34,215  188,562  102,252 
Technology34,984  32,782  101,458  101,368 
General and administrative34,225  32,681  94,022  104,877 
Total operating expenses141,219  99,678  384,042  308,497 
Operating income (loss)29,549  (30,130) 42,448  (91,926)
Interest income402  449  1,288  1,482 
Interest expense(579) (57) (1,367) (289)
Other income (expense), net(7,526) (4,781) (5,014) (14,048)
Income (loss) before income taxes21,846  (34,519) 37,355  (104,781)
Provision for income taxes620  23  1,313  279 
Net income (loss)21,226  (34,542) 36,042  (105,060)
Less: Net loss attributable to noncontrolling interests(2,165) (3,604) (7,372) (10,197)
Net income (loss) attributable to stockholders of Overstock.com, Inc.$23,391  $(30,938) $43,414  $(94,863)
Net income (loss) per share of common stock:       
Net income (loss) attributable to common shares—basic$0.50  $(0.89) $1.00  $(2.74)
Net income (loss) attributable to common shares—diluted$0.50  $(0.89) $0.99  $(2.74)
Weighted average shares of common stock outstanding:       
Basic41,595  35,241  40,697  34,289 
Diluted42,202  35,241  41,030  34,289 

Overstock.com, Inc.
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
 Nine months ended
September 30,
 2020 2019
Cash flows from operating activities:   
Consolidated net income (loss)$36,042  $(105,060)
Adjustments to reconcile consolidated net income (loss) to net cash provided by (used in) operating activities:   
Depreciation and amortization22,709  23,033 
Non-cash operating lease cost4,379  4,940 
Stock-based compensation to employees and directors8,356  13,623 
Impairment of equity securities813  6,964 
Losses on equity method securities11,909  4,922 
Gain on disposal of business(10,705)  
Impairments on intangible assets  1,406 
Other non-cash adjustments2,587  1,978 
Changes in operating assets and liabilities, net of acquisitions:   
  Accounts receivable, net(15,715) 12,858 
  Inventories(1,027) 6,864 
  Prepaids and other current assets(42) 5,473 
  Other long-term assets, net26  (1,046)
  Accounts payable44,101  (42,110)
  Accrued liabilities59,657  (8,683)
  Unearned revenue37,161  (10,066)
  Operating lease liabilities(4,954) (4,086)
  Other long-term liabilities3,413  (205)
    Net cash provided by (used in) operating activities198,710  (89,195)
Cash flows from investing activities:   
Purchase of equity securities(1,553) (5,106)
Proceeds from sale of equity securities and marketable securities6,306  7,082 
Acquisitions of businesses, net of cash acquired  4,886 
Expenditures for property and equipment(15,067) (17,902)
Deconsolidation of cash of Medici Land Governance, Inc.(4,056)  
Other investing activities, net(1,061) (3,219)
Net cash used in investing activities(15,431) (14,259)
Cash flows from financing activities:   
Payments on long-term debt(1,566) (3,141)
Proceeds from long-term debt47,500   
Proceeds from sale of common stock, net of offering costs195,540  52,112 
Payments of taxes withheld upon vesting of restricted stock(2,317) (1,373)
Other financing activities, net(5,054) (1,161)
Net cash provided by financing activities234,103  46,437 
Net increase (decrease) in cash, cash equivalents and restricted cash417,382  (57,017)
Cash, cash equivalents and restricted cash, beginning of period114,898  142,814 
Cash, cash equivalents and restricted cash, end of period$532,280  $85,797 

Segment Financial Information

The following table summarizes information about reportable segments and includes a reconciliation to consolidated net income (loss) (in thousands):

 Three months ended September 30,
 Retail tZERO MVI Other Total
Net revenue$717,695  $11,151  $2,805  $  $731,651 
Cost of goods sold548,982  9,098  2,803    560,883 
Gross profit168,713  2,053  2    170,768 
Operating expenses125,458  10,613  2,923  2,225  141,219 
Interest and other expense, net(205) (3,848) (3,650)   (7,703)
Income (loss) before income taxes$43,050  $(12,408) $(6,571) $(2,225) 21,846 
Provision for income taxes        620 
Net income        $21,226 
Net revenue$340,798  $5,662  $639  $  $347,099 
Cost of goods sold272,545  4,367  639    277,551 
Gross profit68,253  1,295      69,548 
Operating expenses77,641  14,114  4,427  3,496  99,678 
Interest and other income (expense), net137  (475) (4,057) 6  (4,389)
Loss before income taxes$(9,251) $(13,294) $(8,484) $(3,490) (34,519)
Provision for income taxes        23 
Net loss        $(34,542)
 Nine months ended September 30,
 Retail tZERO MVI Other Total
Net revenue$1,824,249  $34,127  $7,230  $162  $1,865,768 
Cost of goods sold1,403,418  28,634  7,226    1,439,278 
Gross profit420,831  5,493  4  162  426,490 
Operating expenses333,284  34,087  8,374  8,297  384,042 
Interest and other income (expense), net(621) (6,898) 2,423  3  (5,093)
Income (loss) before income taxes$86,926  $(35,492) $(5,947) $(8,132) 37,355 
Provision for income taxes        1,313 
Net income        $36,042 
Net revenue$1,070,898  $15,709  $1,930  $  $1,088,537 
Cost of goods sold858,169  11,867  1,930    871,966 
Gross profit212,729  3,842      216,571 
Operating expenses244,571  41,410  11,583  10,933  308,497 
Interest and other income (expense), net312  (1,098) (12,068) (1) (12,855)
Loss before income taxes$(31,530) $(38,666) $(23,651) $(10,934) (104,781)
Provision for income taxes        279 
Net loss        $(105,060)

Non-GAAP Financial Measures and Reconciliations

We are providing certain non-GAAP financial measures in this release and related earnings conference call, including Adjusted EBITDA, Free cash flow, Retail Contribution and Retail Contribution as a percentage of Retail net revenue ("Contribution margin"). We use these non-GAAP measures internally in analyzing our financial results at both the consolidated and segment level and we believe they are useful to investors, as a supplement to GAAP measures, in evaluating our ongoing operational performance in the same manner as our management and board of directors. We have provided reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures in this earnings release. These Non-GAAP financial measures should be used in addition to and in conjunction with the results presented in accordance with GAAP and should not be relied upon to the exclusion of GAAP financial measures.

Adjusted EBITDA is a non-GAAP financial measure that is calculated as net income (loss) before depreciation and amortization, stock-based compensation, interest and other income (expense), provision (benefit) for income taxes, and special items. We believe the exclusion of certain expenses in calculating Adjusted EBITDA facilitates operating performance comparisons on a period-to-period basis. Exclusion of items in the non-GAAP presentation should not be construed as an inference that these items are unusual, infrequent or non-recurring.

Free cash flow is a non-GAAP financial measure that is calculated as net cash provided by or used in operating activities reduced by expenditures for property and equipment. We believe free cash flow is a useful measure to evaluate the cash impact of the continuing operations of the business including purchases of property and equipment which are a necessary component of our ongoing operations.

Retail Contribution and Retail Contribution margin are non-GAAP financial measures that are calculated as gross profit less sales and marketing expense. We believe contribution and contribution margin provide information relevant to our Retail business about our ability to cover our Retail operating costs, such as technology and general and administrative expenses, while reflecting the selling costs we incurred to generate our Retail revenues.

The following table reflects the reconciliation of Adjusted EBITDA to net income (loss) (in thousands):

 Three months ended
September 30,
 Nine months ended
September 30,
 2020 2019 2020 2019
Net income (loss)$21,226  $(34,542) $36,042  $(105,060)
Depreciation and amortization (1)7,592  7,518  22,709  21,596 
Stock-based compensation2,623  4,467  8,356  13,623 
Interest (income) expense, net177  (392) 79  (1,193)
Other expense, net7,526  4,781  5,014  14,048 
Provision for income taxes620  23  1,313  279 
Special items (see table below)288  185  (8,087) 1,942 
Adjusted EBITDA$40,052  $(17,960) $65,426  $(54,765)
Segment Adjusted EBITDA       
Retail$50,249  $(575) $101,395  $(1,452)
tZERO(5,675) (11,233) (20,977) (33,169)
MVI(2,470) (2,691) (7,053) (9,285)
Other(2,052) (3,461) (7,939) (10,859)
Adjusted EBITDA$40,052  $(17,960) $65,426  $(54,765)
Special items:       
Special legal charges (2)$  $(1,221) $(9,773) $(1,221)
Severance288    1,686  1,757 
Impairment on Intangible Assets  1,406    1,406 
 $288  $185  $(8,087) $1,942 

        (1) — Depreciation and amortization for the nine months ended September 30, 2019 includes a $1.4 million adjustment related to finalizing our preliminary purchase price accounting for Mac Warehouse.
        (2) — Includes amounts associated with the resolution for and adjustments to various legal contingencies.

The following table reflects the reconciliation of Free cash flow to Net cash provided by or used in operating activities (in thousands):

 Nine months ended
September 30,
 2020 2019
Net cash provided by (used in) operating activities$198,710  $(89,195)
Expenditures for property and equipment(15,067) (17,902)
Free cash flow$183,643  $(107,097)

The following table reflects the reconciliation of Retail Contribution to Retail Gross profit (in thousands):

 Three months ended
September 30,
 2020 2019
Net revenue$717,695  $340,798 
Cost of goods sold548,982  272,545 
Gross profit168,713  68,253 
Less: Sales and marketing expense71,231  33,551 
Contribution$97,482  $34,702 
Contribution margin13.6% 10.2%

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