OSTBP - Overstock.com Reports Q2 2020 Financial Results

July, 30 2020 08:00 AM Overstock.com Inc Pfd Vtg Ser B

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 cash
2,637


2,632

Marketable securities at fair value
2,122


10,308

Accounts receivable, net of allowance for credit losses of $1,534 and $2,474 at June 30, 2020 and December 31, 2019, respectively
47,765


24,728

Inventories
6,340


5,840

Prepaids and other current assets
22,769


21,589

Total current assets
400,206


177,363

Property and equipment, net
126,795


130,028

Intangible assets, net
9,919


11,756

Goodwill
27,120


27,120

Equity securities
50,542


42,043

Operating lease right-of-use assets
23,387


25,384

Other long-term assets, net
7,173


4,033

Total assets
$
645,142


$
417,727

Liabilities and Stockholders’ Equity



Current liabilities:



Accounts payable
$
131,101


$
75,416

Accrued liabilities
144,110


88,197

Unearned revenue
89,705


41,821

Operating lease liabilities, current
4,785


6,603

Other current liabilities
4,332


3,962

Total current liabilities
374,033


215,999

Long-term debt, net
42,948


—

Operating lease liabilities, non-current
20,791


21,554

Other long-term liabilities
4,022


2,319

Total liabilities
441,794


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 39,464
4


4

Additional paid-in capital
770,984


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 interests
63,937


62,771

Total stockholders' equity
203,348


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

Other
15,588


6,234


27,563


11,338

Total net revenue
782,544


373,709


1,134,117


741,438

Cost of goods sold







Retail
589,044


294,984


854,436


585,624

Other
13,618


4,826


23,959


8,791

Total cost of goods sold
602,662


299,810


878,395


594,415

Gross profit
179,882


73,899


255,722


147,023

Operating expenses:







Sales and marketing
79,790


34,560


116,552


68,037

Technology
33,678


33,153


66,474


68,586

General and administrative
27,371


31,964


59,797


72,196

Total operating expenses
140,839


99,677


242,823


208,819

Operating income (loss)
39,043


(25,778
)

12,899


(61,796
)
Interest income
614


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 taxes
34,898


(28,248
)

15,509


(70,262
)
Provision (benefit) for income taxes
517


(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—basic
40,329


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—diluted
40,590


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 amortization
15,117


15,518

Non-cash operating lease cost
3,029


2,992

Stock-based compensation to employees and directors
5,733


9,156

Impairment of equity securities
—


4,214

Losses on equity method securities
6,013


3,058

Gain on disposal of business
(10,705
)

—

Other non-cash adjustments
1,960


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, net
171


(547
)
Accounts payable
54,952


(31,722
)
Accrued liabilities
61,625


(5,317
)
Unearned revenue
48,109


(9,628
)
Operating lease liabilities
(3,612
)

(2,340
)
Other long-term liabilities
1,565


85

Net cash provided by (used in) operating activities
170,443


(65,852
)
Cash flows from investing activities:



Purchase of equity securities
(170
)

(2,500
)
Proceeds from sale of equity securities and marketable securities
6,306


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 debt
47,500


—

Proceeds from sale of common stock, net of offering costs
2,848


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 activities
43,847


49,760

Net increase (decrease) in cash, cash equivalents and restricted cash
206,312


(19,207
)
Cash, cash equivalents and restricted cash, beginning of period
114,898


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 sold
589,044


10,769


2,849


—


602,662

Gross profit
177,912


1,968


2


—


179,882

Operating expenses
124,991


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 sold
294,984


4,143


683


—


299,810

Gross profit
72,491


1,408


—


—


73,899

Operating expenses
81,596


11,743


2,903


3,435


99,677

Interest and other income (expense), net
40


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 sold
854,436


19,536


4,423


—


878,395

Gross profit
252,118


3,440


2


162


255,722

Operating expenses
207,826


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 sold
585,624


7,500


1,291


—


594,415

Gross profit
144,476


2,547


—


—


147,023

Operating expenses
166,929


27,297


7,157


7,436


208,819

Interest and other income (expense), net
175


(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 compensation
2,465


5,171


5,733


9,156

Interest income, net
(26
)

(525
)

(98
)

(801
)
Other expense, net
4,171


2,995


(2,512
)

9,267

Provision (benefit) for income taxes
517


(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 sold
589,044


294,984

Gross profit
177,912


72,491

Less: Sales and marketing expense
79,158


33,947

Contribution
$
98,754


$
38,544

Contribution margin
12.9
%

10.5
%

Company Name:	Overstock.com Inc Pfd Vtg Ser B
Stock Symbol:	OSTBP
Market:	OTC
Website:	overstock.com

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