Consolidated revenue of $445 million (3% growth) and pre-tax
loss of ($54.7) millionRetail pre-tax loss of ($33.6) million
(non-GAAP financial measure)Medici pre-tax loss of ($21.2) million
(non-GAAP financial measure)
Overstock.com, Inc. (NASDAQ:OSTK), a tech-driven online retailer
and advancer of blockchain technology, today reported financial
results for the quarter ended March 31, 2018.
Dear Owners, We have had an exciting year. I will use the
opportunity of this letter and today’s earnings call, along with
tomorrow’s (webcast) shareholder meeting, to provide a fulsome
update on our business. While I do not think it is my job to
convince the investing public to think one way or another, I do
believe I have an obligation to turn face-up as many of our cards
as I possibly can, and leave their estimation to the public. In
addition, I will not deny that ours has grown into an increasingly
complex story, demanding of elaboration.
1) tZERO – The opportunity that must be seized by this business
is mindboggling. It is going to be a game of “Who can innovate best
and fastest?” We have sent Saum Noursalehi to be CEO, and I believe
he will be a decisive factor. I will remain Executive Chairman.
2) Overstock.com Retail – We accelerated 16% this quarter (-13%
to +3%), and our operating losses were slightly less than we
previously indicated should be expected. I am looking for two more
good quarters of acceleration and then plan on truing the craft for
that rate of climb. As followers of our story know, where
previously we demonstrated our prowess by showing profits where no
one else did, we have switched to a more growth driven long term
free cash flow strategy, where I believe our prowess will be
demonstrated in other ways.
3) Other Medici Ventures: We have a number of other quite
interesting blockchain investments within Medici Ventures, some of
which could prove quite valuable.
4) Strategic Discussions: We continue active discussion with
various parties including late entrants we are helping to catch up.
This does not of course guarantee a strategic event. We will pursue
the option we believe maximizes shareholder value.
I cannot talk much these days without someone accusing me of
puffery: I worry about that, but I worry more about a Texas Gulf
Sulphur. So I think my duty is simply to explain the opportunity I
see and let the public make up its own mind. There will be much
opportunity for discussion in today’s earnings call and tomorrow’s
shareholder meeting. I look forward to it.
Your humble servant,Patrick M.
Byrne
Key Q1 2018 metrics (comparison to Q1 2017):
- Revenue: $445.3M vs. $432.4M (3% increase);
- Gross profit: $93.9M vs. $86.9M (8% increase);
- Gross margin: 21.1% vs. 20.1% (98 basis point increase);
- Sales and marketing expense: $77.2M vs. $37.6M (105%
increase);
- Contribution (non-GAAP financial measure): $16.7M vs. $50.0M
(67% decrease);
- G&A/Technology expense: $71.0M vs. $51.6M (38%
increase);
- Pre-tax loss: ($54.7M) vs. ($6.6M) ($48.1M increase);° Pre-tax
loss - Overstock retail (non-GAAP financial measure): ($33.6M)°
Pre-tax loss - Medici (non-GAAP financial measure): ($21.2M)
- Net loss*: ($50.9M) vs. ($5.9M) ($45.0M increase);
- Diluted net loss per share: ($1.74)/share vs. ($0.23)/share
($1.51/share increase);
*Net loss refers to Net loss attributable to stockholders of
Overstock.com, Inc.
We will hold a conference call and webcast to discuss our Q1
2018 financial results Tuesday, May 8, 2018, at 4:30 p.m. ET.
Webcast information
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 6077988
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, or on Overstock's YouTube channel, accessible
at https://www.overstock.com/2018-Q1-earnings. An audio replay of
the webcast will be available via telephone starting at 7:30 p.m.
ET on Tuesday, May 8, 2018, through 7:30 p.m. ET on Tuesday, May
22, 2018. 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 all questions in advance of the call to
ir@overstock.com.
Key financial and operating metrics:
Investors 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 was $445.3 million and
$432.4 million for Q1 2018 and 2017, respectively, a 3% increase.
This growth was primarily driven by increased marketing expenses as
we have shifted our retail strategy to more aggressively pursue
revenue growth and new customers. Our increased marketing expenses
resulted in a 6% increase in orders in Q1 2018, and we also had a
3% increase in average order size primarily due to a continued
sales mix shift into home and garden products. These increases were
partially offset by increased promotional activities, including
coupons and site sales (which we recognize as a reduction of
revenue) due to our driving a higher proportion of our sales using
such promotions, and an increase in product sales for which we
record only our commission as revenue.
We continue to experience difficulties which we believe are due
in part to changes that Google, Inc. ("Google") has made in its
natural search engine algorithms. It is taking us longer to analyze
and to seek to adapt to the 2017 algorithm adjustments than it took
us to respond to Google's changes in previous years. We have
reorganized a large number of resources around addressing this
challenge, as well as seeking to prevent it from occurring again.
We have implemented a variety of innovations and technical
improvements in this area and expect to continue to do so.
Gross profit - Gross profit was $93.9 million and $86.9 million
for Q1 2018 and 2017, respectively, an 8% increase, representing
21.1% and 20.1% gross margin for those respective periods. The
increase in gross margin was primarily due to a continued shift in
sales mix into higher margin home and garden products and an
increase in marketplace sales (for which we record only our
commission as revenue), partially offset by increased promotional
activities.
Sales and marketing expenses - Sales and marketing expenses
totaled $77.2 million and $37.6 million for Q1 2018 and 2017,
respectively, a 105% increase, and representing 17.3% and 8.7% of
total net revenue for those respective periods. This significant
increase in sales and marketing expenses was primarily due to our
recently adopted retail growth strategy to more aggressively pursue
increased revenue and new customers, and also to help offset the
effects of the Google algorithm changes described above. This
included increased spending in the sponsored search, display ads on
social media, and television marketing channels. We also had a $2.9
million increase in marketing costs at tZERO for employee severance
and a special restricted stock grant which fully vested during the
quarter.
Consolidated contribution (a non-GAAP financial measure) and
contribution margin (a non-GAAP financial measure) - Contribution
for Q1 2018 and 2017 was $16.7 million and $50.0 million,
respectively, a 67% decrease, representing 3.7% and 11.6% of total
net revenue for those respective periods.
Contribution and contribution margin (non-GAAP financial
measures - which we reconcile to "Gross Profit" in our consolidated
statement of operations) consist of gross profit less sales and
marketing expense plus Club O Rewards and gift card breakage and
reflects an additional way of viewing our results. Contribution
margin is contribution as a percentage of total net revenue. We
believe contribution and contribution margin provide management and
users of the financial statements information about our ability to
cover our operating costs, such as technology and general and
administrative expenses, while reflecting the selling costs we
incurred to generate our revenues and adding back Club O Rewards
and gift card breakage. 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 all
non-operating income and expenses. Management compensates for these
limitations when using this measure by looking at other GAAP
measures, such as operating income and net income. You should
review our financial statements and publicly-filed reports in their
entirety and not rely on any single financial measure. For
additional information about our non-GAAP financial measures,
including “Retail pre-tax income” and “Medici pre-tax loss” please
see the "Additional Non-GAAP Financial Measure Reconciliations"
section below.
Our calculation of our consolidated contribution and
contribution margin is set forth below (in thousands):
|
|
Three months ended March
31, |
|
|
2018 |
|
2017 |
Total net revenue |
|
$ |
445,331 |
|
100% |
|
$ |
432,435 |
|
100% |
Cost of goods sold |
|
351,462 |
|
78.9% |
|
345,528 |
|
79.9% |
Gross profit |
|
93,869 |
|
21.1% |
|
86,907 |
|
20.1% |
Less: Sales and
marketing expense |
|
77,214 |
|
17.3% |
|
37,618 |
|
8.7% |
Plus: Club O Rewards
and gift card breakage (1) |
|
— |
|
—% |
|
671 |
|
0.2% |
Contribution and
contribution margin |
|
$ |
16,655 |
|
3.7% |
|
$ |
49,960 |
|
11.6% |
___________________________________________
(1) — Effective January 1, 2018, we made a change in accounting
principle to present Club O Rewards and gift card breakage in
Partner and other revenue instead of Other expense, net on our
consolidated statements of operations. This change impacts the
presentation of Revenue, net, Gross profit and Other expense, net,
but does not impact the calculation of contribution.
Technology expenses - Technology expenses totaled
$31.3 million and $29.0 million for Q1 2018 and 2017,
respectively, an 8% increase, and representing 7.0% and 6.7% of
total revenue for those respective periods. The increase was
primarily due to an increase in staff related costs of $2.5 million
and an increase in technology licenses and maintenance costs of
$1.7 million, partially offset by a decrease in depreciation of
$1.3 million.
General and administrative ("G&A") expenses - G&A
expenses totaled $39.8 million and $22.6 million for Q1 2018
and 2017, respectively, a 76% increase, and representing 8.9% and
5.2% of total revenue for those respective periods. The increase
was primarily due to an $8.8 million increase in impairment losses
on cryptocurrency holdings due to larger than normal cryptocurrency
holdings as of March 31, 2018 (primarily related to the tZERO
security token offering) and a large decrease in market values
during Q1 2018, partially offset by an increase in realized gains
on the sale of cryptocurrencies of $1.5 million. We also had an
increase in stock compensation expense of $4.4 million, including
$3.4 million for a special tZERO restricted stock grant which fully
vested during the quarter. In addition, we had an increase in staff
related costs of $2.4 million and an increase in legal fees and
consulting costs of $2.3 million, including $1.0 million due to the
write-off of costs associated with an equity offering that we
terminated in late March 2018, as well as costs related to an SEC
inquiry.
We continue to seek opportunities for growth, in our retail
business and through our Medici blockchain and financial technology
initiatives and through other means. As a result of these
initiatives, we will continue to incur additional expenses and
expect to purchase interests in, or make acquisitions of, other
technologies and businesses. We anticipate that our initiatives
will cause us to incur losses in the foreseeable future. These
losses, additional expenses, acquisitions or purchases may be
material, and, coupled with existing marketing expense trends,
increased marketing and branding expenditures, and strategic
changes in our retail business, may lead to increased consolidated
losses in some periods, and to reduced liquidity. Additionally, we
may recognize additional impairment charges from our ownership
interest in other entities.
Other expense, net - Other expense, net totaled $9,000 and $3.7
million for Q1 2018 and 2017, respectively. The decrease is
primarily due to a decrease in asset impairment charges of $4.5
million.
Net cash (used in) provided by operating activities - Net cash
(used in) provided by operating activities was ($22.3) million and
$51.0 million for the twelve months ended March 31, 2018 and 2017,
respectively. The $73.3 million decrease is primarily due to
increased losses.
Free cash flow (a non-GAAP financial measure) - Free cash flow
totaled ($38.6) million and ($13.1) million for the twelve months
ended March 31, 2018 and 2017, respectively. The $25.5 million
decrease was due to a $73.3 million decrease in operating cash
flow, partially offset by a $47.8 million decrease in capital
expenditures including costs related to the development of our new
corporate headquarters.
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 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. Also, we believe free cash flow is a useful measure to
evaluate our business since purchases of fixed assets, including
internal-use software and website development, are a necessary
component of ongoing operations and free cash flow measures the
amount of cash we have available for mandatory debt service and
financing obligations, changes in our capital structure, and future
investments, after we have paid our operating 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):
|
|
Three months ended March
31, |
|
Twelve months ended March
31, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Net cash (used in)
provided by operating activities |
|
$ |
(10,182 |
) |
|
$ |
(23,097 |
) |
|
$ |
(22,306 |
) |
|
$ |
50,970 |
|
Expenditures for fixed
assets, including internal-use software and website
development |
|
(4,029 |
) |
|
(11,344 |
) |
|
(16,271 |
) |
|
(64,033 |
) |
Free cash flow |
|
$ |
(14,211 |
) |
|
$ |
(34,441 |
) |
|
$ |
(38,577 |
) |
|
$ |
(13,063 |
) |
Cash - We had cash and cash equivalents of $259.6 million and
$203.2 million at March 31, 2018 and December 31, 2017,
respectively. These increases are primarily due to proceeds
received from our tZERO security token offering and the exercise of
a stock warrant in Q1 2018, partially offset by cash used for
acquisitions and other investments.
About Overstock.comOverstock.com, Inc. Common
Shares (NASDAQ:OSTK) / Series A Preferred (Medici Ventures’ tZERO
platform:OSTKP) / Series B Preferred (OTCQX:OSTBP) is an online
retailer based in Salt Lake City, Utah that sells a broad range of
products at low prices, including furniture, décor, rugs, bedding,
and home improvement. In addition to home goods, Overstock.com
offers a variety of products including jewelry, electronics,
apparel, and more, as well as a marketplace providing customers
access to hundreds of thousands of products from third-party
sellers. Additional stores include Worldstock.com, dedicated to
selling artisan-crafted products from around the world. Forbes
ranked Overstock in its list of the Top 100 Most Trustworthy
Companies in 2014. Overstock regularly posts information about the
company and other related matters under Investor Relations on its
website.
O, Overstock.com, O.com, O.co, Club O, Main Street
Revolution, Worldstock and OVillage are registered
trademarks of Overstock.com, Inc. O.biz and
Space Shift are also 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.
This press release and the May 8, 2018 conference call and
webcast to discuss our financial results may contain
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, including forecasts of
trends. These forward-looking statements are inherently difficult
to predict. Actual results could differ materially for a variety of
reasons, including the amount and timing of our capital
expenditures, the mix of products we sell, the results of legal
proceedings and claims and the amounts we spend relating to them,
the extent to which we owe income taxes, competition, fluctuations
in operating results, Google and other search engine companies
changing their natural search engine algorithms periodically
resulting in lower ranking of our products, any inability to raise
capital if needed on acceptable terms, our efforts to expand both
domestically and internationally, risks of inventory management and
seasonality. Other risks and uncertainties include, among others,
risks related to new products and services we may offer, and
difficulties with our infrastructure, our fulfillment partners or
our payment processors, including cyber-attacks or data breaches
affecting us or any of them. More information about factors that
could potentially affect our financial results is included in our
Form 10-K for the year ended December 31, 2017 which was filed with
the Securities and Exchange Commission on March 15, 2018, and in
our subsequent filings with the Securities and Exchange Commission.
The Form 10-K 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 our
projections, estimates and other forward-looking statements.
Average order size is measured at the time of order, before
promotional discounts and shipping revenue.
|
Overstock.com, Inc. |
Consolidated Balance Sheets
(Unaudited) |
(in thousands) |
|
|
|
|
|
March 31, 2018 |
|
December 31, 2017 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and
cash equivalents |
$ |
259,569 |
|
|
$ |
203,215 |
|
Restricted cash |
447 |
|
|
455 |
|
Accounts
receivable, net |
21,798 |
|
|
30,080 |
|
Inventories, net |
12,471 |
|
|
13,703 |
|
Prepaid
inventories, net |
858 |
|
|
1,625 |
|
Prepaids
and other current assets |
22,091 |
|
|
16,119 |
|
Total
current assets |
317,234 |
|
|
265,197 |
|
Fixed assets, net |
126,765 |
|
|
129,343 |
|
Intangible assets,
net |
24,653 |
|
|
7,337 |
|
Goodwill |
22,058 |
|
|
14,698 |
|
Other long-term assets,
net |
35,564 |
|
|
17,240 |
|
Total
assets |
$ |
526,274 |
|
|
$ |
433,815 |
|
Liabilities and Stockholders’ Equity |
|
|
|
Current
liabilities: |
|
|
|
Accounts
payable |
$ |
89,666 |
|
|
$ |
85,406 |
|
Accrued
liabilities |
92,105 |
|
|
82,611 |
|
Deferred
revenue |
41,712 |
|
|
46,468 |
|
Other
current liabilities, net |
182 |
|
|
178 |
|
Total
current liabilities |
223,665 |
|
|
214,663 |
|
Long-term debt, net -
related party |
39,977 |
|
|
39,909 |
|
Other long-term
liabilities |
6,539 |
|
|
7,120 |
|
Total
liabilities |
270,181 |
|
|
261,692 |
|
Stockholders’
equity: |
|
|
|
Preferred
stock, $0.0001 par value, authorized shares - 5,000 |
|
|
|
Series A,
issued and outstanding - 127 and 127 |
— |
|
|
— |
|
Series B,
issued and outstanding - 555 and 555 |
— |
|
|
— |
|
Common
stock, $0.0001 par value |
|
|
|
Authorized shares - 100,000 |
|
|
|
Issued
shares - 32,048 and 30,632 |
|
|
|
Outstanding shares - 28,866 and 27,497 |
3 |
|
|
3 |
|
Additional paid-in capital |
547,184 |
|
|
494,732 |
|
Accumulated deficit |
(300,561 |
) |
|
(254,692 |
) |
Accumulated other comprehensive loss |
(595 |
) |
|
(599 |
) |
Treasury
stock: |
|
|
|
Shares at
cost - 3,182 and 3,135 |
(66,170 |
) |
|
(63,816 |
) |
Equity
attributable to stockholders of Overstock.com, Inc. |
179,861 |
|
|
175,628 |
|
Equity
attributable to noncontrolling interests |
76,232 |
|
|
(3,505 |
) |
Total
equity |
256,093 |
|
|
172,123 |
|
Total
liabilities and stockholders’ equity |
$ |
526,274 |
|
|
$ |
433,815 |
|
|
|
|
|
|
|
|
|
|
Overstock.com, Inc. |
Consolidated Statements of Operations
(Unaudited) |
(in thousands, except per share
data) |
|
|
Three months ended March
31, |
|
2018 |
|
2017 |
Revenue, net |
|
|
|
Direct |
$ |
16,270 |
|
|
$ |
22,828 |
|
Partner
and other |
429,061 |
|
|
409,607 |
|
Total net
revenue |
445,331 |
|
|
432,435 |
|
Cost of goods sold |
|
|
|
Direct |
14,772 |
|
|
20,963 |
|
Partner
and other |
336,690 |
|
|
324,565 |
|
Total
cost of goods sold |
351,462 |
|
|
345,528 |
|
Gross
profit |
93,869 |
|
|
86,907 |
|
Operating
expenses: |
|
|
|
Sales and
marketing |
77,214 |
|
|
37,618 |
|
Technology |
31,294 |
|
|
28,992 |
|
General
and administrative |
39,755 |
|
|
22,610 |
|
Total
operating expenses |
148,263 |
|
|
89,220 |
|
Operating loss |
(54,394 |
) |
|
(2,313 |
) |
Interest income |
544 |
|
|
125 |
|
Interest expense |
(874 |
) |
|
(710 |
) |
Other expense, net |
(9 |
) |
|
(3,724 |
) |
Loss
before income taxes |
(54,733 |
) |
|
(6,622 |
) |
Benefit from income
taxes |
(277 |
) |
|
(340 |
) |
Net loss |
$ |
(54,456 |
) |
|
$ |
(6,282 |
) |
Less: Net
loss attributable to noncontrolling interests |
(3,547 |
) |
|
(379 |
) |
Net loss attributable
to stockholders of Overstock.com, Inc. |
$ |
(50,909 |
) |
|
$ |
(5,903 |
) |
Net loss per common
share—basic: |
|
|
|
Net loss attributable
to common shares—basic |
$ |
(1.74 |
) |
|
$ |
(0.23 |
) |
Weighted average common
shares outstanding—basic |
28,566 |
|
|
25,290 |
|
Net loss per common
share—diluted: |
|
|
|
Net loss attributable
to common shares—diluted |
$ |
(1.74 |
) |
|
$ |
(0.23 |
) |
Weighted average common
shares outstanding—diluted |
28,566 |
|
|
25,290 |
|
|
|
|
|
|
|
|
Overstock.com, Inc. |
Consolidated Statements of Cash Flows
(Unaudited) |
(in thousands) |
|
|
Three months ended March
31, |
|
Twelve months ended March
31, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Cash flows from operating activities: |
|
|
|
|
|
|
|
Consolidated net loss |
$ |
(54,456 |
) |
|
$ |
(6,282 |
) |
|
$ |
(160,096 |
) |
|
$ |
(8,128 |
) |
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities: |
|
|
|
|
|
|
|
Depreciation of fixed assets |
6,581 |
|
|
7,698 |
|
|
27,731 |
|
|
28,792 |
|
Amortization of intangible assets |
918 |
|
|
945 |
|
|
3,972 |
|
|
3,815 |
|
Stock-based compensation to employees and directors |
6,435 |
|
|
940 |
|
|
9,572 |
|
|
4,863 |
|
Deferred
income taxes, net |
(267 |
) |
|
(806 |
) |
|
65,738 |
|
|
(771 |
) |
Gain on
investment in precious metals |
— |
|
|
— |
|
|
(1,971 |
) |
|
(201 |
) |
Impairment of cryptocurrencies |
8,793 |
|
|
— |
|
|
8,793 |
|
|
— |
|
Gain on
sale of cryptocurrencies |
(1,529 |
) |
|
— |
|
|
(3,524 |
) |
|
— |
|
Impairment of equity investment |
— |
|
|
4,500 |
|
|
987 |
|
|
7,350 |
|
Early
extinguishment costs of long term debts |
— |
|
|
— |
|
|
2,464 |
|
|
— |
|
Other |
185 |
|
|
38 |
|
|
1,023 |
|
|
381 |
|
Changes
in operating assets and liabilities, net of acquisitions: |
|
|
|
|
|
|
|
Accounts
receivable, net |
8,282 |
|
|
6,527 |
|
|
(183 |
) |
|
(2,528 |
) |
Inventories, net |
1,232 |
|
|
1,211 |
|
|
5,255 |
|
|
1,713 |
|
Prepaid
inventories, net |
767 |
|
|
(626 |
) |
|
1,880 |
|
|
(1,536 |
) |
Prepaids
and other current assets |
1,471 |
|
|
(1,173 |
) |
|
(642 |
) |
|
(1,891 |
) |
Other
long-term assets, net |
(2,261 |
) |
|
(404 |
) |
|
(4,164 |
) |
|
(1,202 |
) |
Accounts
payable |
4,325 |
|
|
(20,456 |
) |
|
3,786 |
|
|
6,236 |
|
Accrued
liabilities |
9,274 |
|
|
(13,689 |
) |
|
10,652 |
|
|
16,583 |
|
Deferred
revenue |
284 |
|
|
(1,593 |
) |
|
6,565 |
|
|
(2,625 |
) |
Other
long-term liabilities |
(216 |
) |
|
73 |
|
|
(144 |
) |
|
119 |
|
Net cash
(used in) provided by operating activities |
(10,182 |
) |
|
(23,097 |
) |
|
(22,306 |
) |
|
50,970 |
|
Cash flows from
investing activities: |
|
|
|
|
|
|
|
Purchase
of intangible assets |
(9,181 |
) |
|
— |
|
|
(9,604 |
) |
|
— |
|
Proceeds
from sale of precious metals |
— |
|
|
— |
|
|
11,917 |
|
|
1,610 |
|
Investment in precious metals |
— |
|
|
— |
|
|
— |
|
|
(1,633 |
) |
Disbursement of note receivable |
— |
|
|
(250 |
) |
|
(500 |
) |
|
(1,068 |
) |
Investments in equity securities |
(16,970 |
) |
|
(777 |
) |
|
(21,381 |
) |
|
(5,527 |
) |
Acquisitions of businesses, net of cash acquired |
(11,769 |
) |
|
— |
|
|
(11,769 |
) |
|
43 |
|
Expenditures for fixed assets, including internal-use software and
website development |
(4,029 |
) |
|
(11,344 |
) |
|
(16,271 |
) |
|
(64,033 |
) |
Other |
(1 |
) |
|
(118 |
) |
|
187 |
|
|
(92 |
) |
Net cash
used in investing activities |
(41,950 |
) |
|
(12,489 |
) |
|
(47,421 |
) |
|
(70,700 |
) |
Cash flows from
financing activities: |
|
|
|
|
|
|
|
Payments
on capital lease obligations |
(123 |
) |
|
— |
|
|
(206 |
) |
|
— |
|
Payments
on finance obligations |
— |
|
|
(817 |
) |
|
(14,499 |
) |
|
(2,348 |
) |
Payments
on interest swap |
— |
|
|
— |
|
|
(1,535 |
) |
|
(422 |
) |
Proceeds
from finance obligations |
— |
|
|
— |
|
|
— |
|
|
7,978 |
|
Proceeds
from long-term debt |
— |
|
|
— |
|
|
40,000 |
|
|
25,150 |
|
Payments
on long-term debt |
— |
|
|
(187 |
) |
|
(45,579 |
) |
|
(187 |
) |
Payments
of preferred dividends |
— |
|
|
— |
|
|
(109 |
) |
|
— |
|
Proceeds
from exercise of stock options |
— |
|
|
654 |
|
|
10 |
|
|
1,473 |
|
Proceeds
from rights offering, net of offering costs |
— |
|
|
— |
|
|
— |
|
|
7,591 |
|
Proceeds
from issuance of stock warrants |
— |
|
|
— |
|
|
6,462 |
|
|
— |
|
Proceeds
from exercise of stock warrants |
50,562 |
|
|
— |
|
|
150,562 |
|
|
— |
|
Proceeds
from security token offering, net of offering costs |
62,073 |
|
|
— |
|
|
62,978 |
|
|
— |
|
Purchase
of treasury stock |
— |
|
|
(10,000 |
) |
|
— |
|
|
(10,000 |
) |
Payments
of taxes withheld upon vesting of restricted stock |
(4,034 |
) |
|
(822 |
) |
|
(4,441 |
) |
|
(1,354 |
) |
Payment
of debt issuance costs |
— |
|
|
— |
|
|
(670 |
) |
|
— |
|
Net cash
provided by (used in) financing activities |
108,478 |
|
|
(11,172 |
) |
|
192,973 |
|
|
27,881 |
|
Net increase (decrease)
in cash, cash equivalents and restricted cash |
56,346 |
|
|
(46,758 |
) |
|
123,246 |
|
|
8,151 |
|
Cash, cash equivalents
and restricted cash, beginning of period |
203,670 |
|
|
183,528 |
|
|
136,770 |
|
|
128,619 |
|
Cash, cash equivalents
and restricted cash, end of period |
$ |
260,016 |
|
|
$ |
136,770 |
|
|
$ |
260,016 |
|
|
$ |
136,770 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Overstock.com, Inc. |
Consolidated Statements of Cash Flows
(Unaudited) |
(Continued) |
(in thousands) |
|
|
|
|
|
Three months ended March
31, |
|
Twelve months ended March
31, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Supplemental
disclosures of cash flow information: |
|
|
|
|
|
|
|
Cash paid
during the period: |
|
|
|
|
|
|
|
Interest
paid, net of amounts capitalized |
$ |
789 |
|
|
$ |
646 |
|
|
$ |
3,083 |
|
|
$ |
1,636 |
|
Income
taxes paid, net of refunds |
7 |
|
|
— |
|
|
494 |
|
|
859 |
|
Non-cash investing and financing activities: |
|
|
|
|
|
|
|
Fixed
assets, including internal-use software and website development,
costs financed through accounts payable and accrued
liabilities |
$ |
965 |
|
|
$ |
1,317 |
|
|
$ |
965 |
|
|
$ |
1,317 |
|
Equipment
acquired under capital lease obligations |
— |
|
|
— |
|
|
1,421 |
|
|
— |
|
Capitalized interest cost |
— |
|
|
— |
|
|
— |
|
|
66 |
|
Change in
value of cash flow hedge |
— |
|
|
(240 |
) |
|
(1,498 |
) |
|
(2,493 |
) |
Note
receivable converted to equity investment |
200 |
|
|
— |
|
|
1,568 |
|
|
2,850 |
|
Cryptocurrency received in security token offering |
13,878 |
|
|
— |
|
|
13,878 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional Non-GAAP Financial Measure
Reconciliations
As described above, contribution and contribution margin
(non-GAAP financial measures - which we reconcile to "Gross Profit"
in our consolidated statement of operations) consist of gross
profit less sales and marketing expense plus Club O Rewards and
gift card breakage and reflects an additional way of viewing our
results. Contribution margin is contribution as a percentage of
total net revenue.
Retail and Medici pre-tax income or loss (non-GAAP financial
measures - which we reconcile to Consolidated pre-tax income or
loss) consist of income or loss before taxes of our Retail and
Medici businesses, excluding intercompany transactions eliminated
in consolidation. We believe these measures provide management and
users of the financial statements useful information, because they
provide financial results for our separate businesses which are
distinct in nature. The material limitation associated with these
measures is that they are an incomplete measure of our consolidated
operations.
We determined our segments based on how we manage our business,
which, in our view, consists primarily of our Retail and Medici
businesses. Our Retail business consists of our Direct and Partner
reportable segments. We use gross profit as the measure to
determine our reportable segments because there is not discrete
financial information available below gross profit for our Direct
and Partner segments. As a result, our Medici business is not
significant as compared to our Direct and Partner segments. Our
Other segment consists of Medici. We do not allocate assets between
our segments for our internal management purposes.
Contribution, contribution margin, Retail pre-tax income or loss
and Medici pre-tax income or loss 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. You should review our financial statements and
publicly-filed reports in their entirety and not rely on any single
financial measure.
Our calculations of our contribution and contribution margin by
Retail Total (which consists of Direct and Partner) and Other
(which consists of Medici) are set forth below (in thousands):
|
Three months ended March
31, |
|
Direct |
Partner |
Retail Total |
|
Other |
|
Total |
2018 |
|
|
|
|
|
|
|
Total net revenue |
$ |
16,270 |
|
$ |
423,726 |
|
$ |
439,996 |
|
|
$ |
5,335 |
|
|
$ |
445,331 |
|
Cost of goods sold |
14,772 |
|
332,808 |
|
347,580 |
|
|
3,882 |
|
|
351,462 |
|
Gross profit |
$ |
1,498 |
|
$ |
90,918 |
|
$ |
92,416 |
|
|
$ |
1,453 |
|
|
$ |
93,869 |
|
Less: Sales and
marketing expense |
|
|
73,917 |
|
|
3,297 |
|
|
77,214 |
|
Contribution |
|
|
$ |
18,499 |
|
|
$ |
(1,844 |
) |
|
$ |
16,655 |
|
Contribution
margin |
|
|
4.2 |
% |
|
(34.6 |
)% |
|
3.7 |
% |
|
|
|
|
|
|
|
|
2017 |
|
|
|
|
|
|
|
Total net revenue |
$ |
22,828 |
|
$ |
405,261 |
|
$ |
428,089 |
|
|
$ |
4,346 |
|
|
$ |
432,435 |
|
Cost of goods sold |
20,963 |
|
321,297 |
|
342,260 |
|
|
3,268 |
|
|
345,528 |
|
Gross profit |
$ |
1,865 |
|
$ |
83,964 |
|
$ |
85,829 |
|
|
$ |
1,078 |
|
|
$ |
86,907 |
|
Less: Sales and
marketing expense |
|
|
37,325 |
|
|
293 |
|
|
37,618 |
|
Plus: Club O Rewards
and gift card breakage (included in Other expense, net) |
|
|
671 |
|
|
— |
|
|
671 |
|
Contribution |
|
|
$ |
49,175 |
|
|
$ |
785 |
|
|
$ |
49,960 |
|
Contribution
margin |
|
|
11.5 |
% |
|
18.1 |
% |
|
11.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
Our calculations of Retail Total (which consists of Direct and
Partner) and Other (which consists of Medici) pre-tax income or
loss are set forth below excluding intercompany transactions
eliminated in consolidation (in thousands):
|
Three months ended March
31, |
|
Direct |
Partner |
Retail Total |
|
Other |
|
Total |
2018 |
|
|
|
|
|
|
|
Revenue, net |
$ |
16,270 |
|
$ |
423,726 |
|
$ |
439,996 |
|
|
$ |
5,335 |
|
|
$ |
445,331 |
|
Cost of goods sold |
14,772 |
|
332,808 |
|
347,580 |
|
|
3,882 |
|
|
351,462 |
|
Gross profit |
$ |
1,498 |
|
$ |
90,918 |
|
$ |
92,416 |
|
|
$ |
1,453 |
|
|
$ |
93,869 |
|
Operating expenses |
|
|
125,532 |
|
|
22,731 |
|
|
148,263 |
|
Interest and other
expense, net |
|
|
(455 |
) |
|
116 |
|
|
(339 |
) |
Pre-tax loss |
|
|
(33,571 |
) |
|
(21,162 |
) |
|
(54,733 |
) |
Benefit from income
taxes |
|
|
(88 |
) |
|
(189 |
) |
|
(277 |
) |
Net loss |
|
|
$ |
(33,483 |
) |
|
$ |
(20,973 |
) |
|
$ |
(54,456 |
) |
|
|
|
|
|
|
|
|
2017 |
|
|
|
|
|
|
|
Revenue, net |
$ |
22,828 |
|
$ |
405,261 |
|
$ |
428,089 |
|
|
$ |
4,346 |
|
|
$ |
432,435 |
|
Cost of goods sold |
20,963 |
|
321,297 |
|
342,260 |
|
|
3,268 |
|
|
345,528 |
|
Gross profit |
$ |
1,865 |
|
$ |
83,964 |
|
$ |
85,829 |
|
|
$ |
1,078 |
|
|
$ |
86,907 |
|
Operating expenses |
|
|
84,538 |
|
|
4,682 |
|
|
89,220 |
|
Interest and other
income (expense), net |
|
|
102 |
|
|
(4,411 |
) |
|
(4,309 |
) |
Pre-tax income
(loss) |
|
|
1,393 |
|
|
(8,015 |
) |
|
(6,622 |
) |
Provision for (benefit
from) income taxes |
|
|
889 |
|
|
(1,229 |
) |
|
(340 |
) |
Net income (loss) |
|
|
$ |
504 |
|
|
$ |
(6,786 |
) |
|
$ |
(6,282 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Media Contact:Mark Delcorps, Overstock.com,
Inc.+1 (801) 947-3564pr@overstock.com
Investor Contact:Brian Keller, Overstock.com,
Inc.+1 (801) 947-5374ir@overstock.com
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