Overstock.com Reports Q2 2020 Financial Results

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

Second Quarter Financial Highlights

  • Total net revenue was $783 million, an increase of 109% year over year
  • Gross profit was $180 million or 23.0% of total net revenue, an improvement of 321 basis points year over year
  • Net income attributable to stockholders of Overstock.com, Inc. was $36 million, an improvement of $61 million year over year
  • Diluted earnings per share was $0.84, an improvement of $1.53 year over year
  • Adjusted EBITDA (non-GAAP) was $42 million, an improvement of $55 million year over year
  • YTD net cash provided by operating activities was $170 million, an improvement of $236 million year over year
  • YTD free cash flow (non-GAAP) improved $237 million year over year
  • At the end of the second quarter, cash and cash equivalents totaled $319 million

"In a rapidly shifting and challenging environment, Overstock continues to perform exceptionally well," said Overstock CEO Jonathan Johnson. "Second quarter gross sales in our Overstock Retail business more than doubled year over year. The number of new customers more than tripled year over year. Importantly, our customers are buying our core products—home furnishings—from the safety of their homes as part of the country's new normal. If business continues as I expect, our Overstock Retail business will achieve sustainable, profitable growth this year."

"tZERO and our other Medici Ventures blockchain-based businesses continue to make progress, with several of those companies attracting media attention for their solutions to problems the country now faces," continued Johnson. "As an organization, Overstock remains focused, disciplined, and resilient as our employees execute against our strategic initiatives. I am proud of the progress we have made, and I am confident that we can continue along this profitable trajectory. I look forward to providing a full update on our progress and performance during our earnings call."

Other Second Quarter Financial Highlights

  • Retail income before income taxes was $53 million, an improvement of $62 million year over year
  • Retail contribution (non-GAAP) was $99 million, or 12.9% of Retail net revenue, an improvement of 239 basis points year over year
  • Retail Adjusted EBITDA (non-GAAP) was $53 million, an improvement of $51 million year over year
  • tZERO net revenue was $13 million, an increase of 129% year over year, primarily due to SpeedRoute trading volume
  • Consolidated G&A expenses decreased by $5 million primarily due to the Delaware Supreme Court reversing an $8.6 million judgment against the company, and improved by 506 basis points as a percentage of total net revenue year over year

Second Quarter Operational Highlights

  • Retail gross sales were $1 billion, an increase of 114% year over year
  • Newly acquired Retail customers increased 205% year over year
  • Gross sales from orders placed on a mobile device were 50.8% of Retail gross sales in the second quarter of 2020, compared to 43.9% in the second quarter of 2019
  • tZERO ATS trading volume was a record 931,000 shares, a 231% increase year over year
  • Total number of tZERO Crypto app users increased 42% from March 31, 2020, and 100% YTD

COVID-19 Update

Overstock has responded effectively to the challenges and opportunities created by the COVID-19 pandemic. In our Retail business, customer demand increased significantly in the second 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, and our Retail gross sales grew more than 100% year over year in Q2. Our online-only platform and partner network with thousands of fulfillment centers has enabled us to meet this increase in demand without significant operational disruptions. Our warehouses have remained operational based on our implementation of sound safety measures, including staggered shifts and social distancing. We also are hiring in key areas to support our current and expected growth. We have faced challenges from the sharply increased volume throughout our customer service channels and capacity issues from shipping carriers and some suppliers, including out-of-stock positions on some of our top performing products. We also have faced challenges at tZERO and its subsidiaries, as market volatility has delayed capital raises by potential issuers. Most of our Medici Ventures blockchain companies have seen little disruption, and several are working on solutions to problems arising from the global pandemic. We have evaluated and implemented a phased re-entry plan for our offices while 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 forced us to reduce our capital expenditures.

Digital Dividend

On May 19, 2020, we completed the distribution of our announced digital dividend (the "Dividend") payable in shares of our Series A-1 preferred stock. The Dividend was paid out at a ratio of 1:10, so that one share of Series A-1 preferred stock was issued for every ten shares of OSTK common stock, for every ten shares of Series A-1 preferred stock, and for every ten shares of Series B preferred stock held by all holders of such shares as of April 27, 2020, the record date for the Dividend.

Earnings Webcast Information

The company will hold a conference call and webcast to discuss its Q2 2020 financial results on Thursday, July 30, 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 9798319 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, July 30, 2020, through 11:30 a.m. ET on Thursday, August 13, 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.

Please email questions 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 July 30, 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 is included in our Form 10-K for the year ended December 31, 2019, which was filed with the Securities and Exchange Commission on March 13, 2020, in our Form 10-Q for the quarter ended March 31, 2020, which was filed with the Securities and Exchange Commission on May 7, 2020, and in our subsequent filings with the Securities and Exchange Commission. The Form 10-K, 10-Q, 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.

Contacts

Investor Relations:
Alexis Callahan
801-947-5126
ir@overstock.com
 

Media:
Overstock Media Relations
801-947-3564
pr@overstock.com


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

 June 30,
2020
 December 31,
2019
Assets   
Current assets:   
Cash and cash equivalents$318,573  $112,266 
Restricted cash2,637  2,632 
Marketable securities at fair value2,122  10,308 
Accounts receivable, net of allowance for credit losses of $1,534 and $2,474 at June 30, 2020 and December 31, 2019, respectively47,765  24,728 
Inventories6,340  5,840 
Prepaids and other current assets22,769  21,589 
Total current assets400,206  177,363 
Property and equipment, net126,795  130,028 
Intangible assets, net9,919  11,756 
Goodwill27,120  27,120 
Equity securities50,542  42,043 
Operating lease right-of-use assets23,387  25,384 
Other long-term assets, net7,173  4,033 
    Total assets$645,142  $417,727 
Liabilities and Stockholders’ Equity   
Current liabilities:   
Accounts payable$131,101  $75,416 
Accrued liabilities144,110  88,197 
Unearned revenue89,705  41,821 
Operating lease liabilities, current4,785  6,603 
Other current liabilities4,332  3,962 
Total current liabilities374,033  215,999 
Long-term debt, net42,948   
Operating lease liabilities, non-current20,791  21,554 
Other long-term liabilities4,022  2,319 
Total liabilities441,794  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 - 43,885 and 42,790   
Outstanding shares - 40,332 and 39,4644  4 
Additional paid-in capital770,984  764,845 
Accumulated deficit(560,480) (580,390)
Accumulated other comprehensive loss(560) (568)
Treasury stock at cost - 3,553 and 3,326(70,537) (68,807)
Equity attributable to stockholders of Overstock.com, Inc.139,411  115,084 
Equity attributable to noncontrolling interests63,937  62,771 
Total stockholders' equity203,348  177,855 
    Total liabilities and stockholders' equity$645,142  $417,727 


Overstock.com, Inc.
Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)
 Three months ended
June 30,
 Six months ended
June 30,
 2020 2019 2020 2019
Revenue, net       
Retail$766,956  $367,475  $1,106,554  $730,100 
Other15,588  6,234  27,563  11,338 
Total net revenue782,544  373,709  1,134,117  741,438 
Cost of goods sold       
Retail589,044  294,984  854,436  585,624 
Other13,618  4,826  23,959  8,791 
Total cost of goods sold602,662  299,810  878,395  594,415 
Gross profit179,882  73,899  255,722  147,023 
Operating expenses:       
Sales and marketing79,790  34,560  116,552  68,037 
Technology33,678  33,153  66,474  68,586 
General and administrative27,371  31,964  59,797  72,196 
Total operating expenses140,839  99,677  242,823  208,819 
Operating income (loss)39,043  (25,778) 12,899  (61,796)
Interest income614  630  886  1,033 
Interest expense(588) (105) (788) (232)
Other income (expense), net(4,171) (2,995) 2,512  (9,267)
Income (loss) before income taxes34,898  (28,248) 15,509  (70,262)
Provision (benefit) for income taxes517  (622) 693  256 
Net income (loss)34,381  (27,626) 14,816  (70,518)
Less: Net loss attributable to noncontrolling interests(1,975) (2,945) (5,207) (6,593)
Net income (loss) attributable to stockholders of Overstock.com, Inc.$36,356  $(24,681) $20,023  $(63,925)
Net income (loss) per common share—basic:       
Net income (loss) attributable to common shares—basic$0.85  $(0.69) $0.48  $(1.85)
Weighted average common shares outstanding—basic40,329  35,225  40,243  33,806 
Net income (loss) per common share—diluted:       
Net income (loss) attributable to common shares—diluted$0.84  $(0.69) $0.47  $(1.85)
Weighted average common shares outstanding—diluted40,590  35,225  40,440  33,806 


Overstock.com, Inc.
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
 Six months ended
June 30,
 2020 2019
Cash flows from operating activities:   
Consolidated net income (loss)$14,816  $(70,518)
Adjustments to reconcile consolidated net income (loss) to net cash provided by (used in) operating activities:   
Depreciation and amortization15,117  15,518 
Non-cash operating lease cost3,029  2,992 
Stock-based compensation to employees and directors5,733  9,156 
Impairment of equity securities  4,214 
Losses on equity method securities6,013  3,058 
Gain on disposal of business(10,705)  
Other non-cash adjustments1,960  1,360 
Changes in operating assets and liabilities, net of acquisitions:   
Accounts receivable, net(24,652) 12,295 
Inventories(500) 2,231 
Prepaids and other current assets(3,178) 3,311 
Other long-term assets, net171  (547)
Accounts payable54,952  (31,722)
Accrued liabilities61,625  (5,317)
Unearned revenue48,109  (9,628)
Operating lease liabilities(3,612) (2,340)
Other long-term liabilities1,565  85 
Net cash provided by (used in) operating activities170,443  (65,852)
Cash flows from investing activities:   
Purchase of equity securities(170) (2,500)
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(9,399) (10,586)
Deconsolidation of cash of Medici Land Governance, Inc.(4,056)  
Other investing activities, net(659) (1,997)
Net cash used in investing activities(7,978) (3,115)
Cash flows from financing activities:   
Payment on long-term debt(779)  
Proceeds from long-term debt47,500   
Proceeds from sale of common stock, net of offering costs2,848  52,112 
Payments of taxes withheld upon vesting of restricted stock(1,730) (1,346)
Other financing activities, net(3,992) (1,006)
Net cash provided by financing activities43,847  49,760 
Net increase (decrease) in cash, cash equivalents and restricted cash206,312  (19,207)
Cash, cash equivalents and restricted cash, beginning of period114,898  142,814 
Cash, cash equivalents and restricted cash, end of period$321,210  $123,607 


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 June 30,
 Retail tZERO MVI Other Total
2020         
Net revenue$766,956  $12,737  $2,851  $  $782,544 
Cost of goods sold589,044  10,769  2,849    602,662 
Gross profit177,912  1,968  2    179,882 
Operating expenses124,991  11,216  2,543  2,089  140,839 
Interest and other expense, net(117) (1,268) (2,760)   (4,145)
Income (loss) before income taxes$52,804  $(10,516) $(5,301) $(2,089) 34,898 
Provision for income taxes        517 
Net income        $34,381 
          
2019         
Net revenue$367,475  $5,551  $683  $  $373,709 
Cost of goods sold294,984  4,143  683    299,810 
Gross profit72,491  1,408      73,899 
Operating expenses81,596  11,743  2,903  3,435  99,677 
Interest and other income (expense), net40  340  (2,847) (3) (2,470)
Loss before income taxes$(9,065) $(9,995) $(5,750) $(3,438) (28,248)
Benefit for income taxes        (622)
Net loss        $(27,626)
 
 Six months ended June 30,
 Retail tZERO MVI Other Total
2020         
Net revenue$1,106,554  $22,976  $4,425  $162  $1,134,117 
Cost of goods sold854,436  19,536  4,423    878,395 
Gross profit252,118  3,440  2  162  255,722 
Operating expenses207,826  23,474  5,451  6,072  242,823 
Interest and other income (expense), net(416) (3,050) 6,073  3  2,610 
Income (loss) before income taxes$43,876  $(23,084) $624  $(5,907) 15,509 
Provision for income taxes        693 
Net income        $14,816 
          
2019         
Net revenue$730,100  $10,047  $1,291  $  $741,438 
Cost of goods sold585,624  7,500  1,291    594,415 
Gross profit144,476  2,547      147,023 
Operating expenses166,929  27,297  7,157  7,436  208,819 
Interest and other income (expense), net175  (623) (8,011) (7) (8,466)
Loss before income taxes$(22,278) $(25,373) $(15,168) $(7,443) (70,262)
Provision for income taxes        256 
Net loss        $(70,518)


Supplemental Operational Data

Retail gross merchandise sales (“Retail GMS” or “Retail gross sales”) is calculated as the amount paid by customers for products and shipping, measured at the time of order, before coupons and discounts, without reductions for estimated returns. We believe that GMS provides a useful measure of the overall volume of sales transactions that flow through our online platform in a given period.

 Three months ended
June 30,
 2020 2019
Retail Gross Merchandise Sales$1,009,146  $471,354 


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, Adjusted EBITDA as a percentage of total net revenue (“Adjusted EBITDA margin”), Free cash flow, Contribution and Contribution as a percentage of total 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 and Adjusted EBITDA margin are non-GAAP financial measures that are 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 and Adjusted EBITDA margin 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.

Contribution and 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
June 30,
 Six months ended
June 30,
 2020 2019 2020 2019
        
Net income (loss)$34,381  $(27,626) $14,816  $(70,518)
Depreciation and amortization (1)7,548  7,464  15,117  14,078 
Stock-based compensation2,465  5,171  5,733  9,156 
Interest income, net(26) (525) (98) (801)
Other expense, net4,171  2,995  (2,512) 9,267 
Provision (benefit) for income taxes517  (622) 693  256 
Special items (see table below)(7,272)   (8,375) 1,757 
Adjusted EBITDA$41,784  $(13,143) $25,374  $(36,805)
        
Segment Adjusted EBITDA       
Retail$53,011  $1,581  $51,146  $(876)
tZERO(7,052) (8,729) (15,302) (21,937)
MVI(2,085) (2,586) (4,583) (6,595)
Other(2,090) (3,409) (5,887) (7,397)
Adjusted EBITDA$41,784  $(13,143) $25,374  $(36,805)
        
Special items:       
Special legal charges (2)$(7,272) $  $(9,773) $ 
Severance    1,398  1,757 
 $(7,272) $  $(8,375) $1,757 

__________________________________________
            (1) — Depreciation and amortization for the six months ended June 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):

 Six months ended
June 30,
 2020 2019
Net cash provided by (used in) operating activities$170,443  $(65,852)
Expenditures for property and equipment(9,399) (10,586)
Free cash flow$161,044  $(76,438)


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

 Three months ended
June 30,
 2020 2019
Retail:   
Net revenue$766,956  $367,475 
Cost of goods sold589,044  294,984 
Gross profit177,912  72,491 
Less: Sales and marketing expense79,158  33,947 
Contribution$98,754  $38,544 
Contribution margin12.9% 10.5%

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