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, 2020.
First Quarter Financial Highlights
- Total net revenue was $352 million, a decrease of 4% year over
year
- Gross profit was $76 million or 21.6% of total revenue, an
improvement of 169 basis points year over year
- Net loss attributable to stockholders of Overstock.com, Inc.
was $16 million, an improvement of $23 million year over year
- Net loss per share was $0.40, an improvement of $0.78 year over
year
- Adjusted EBITDA (non-GAAP) improved by 31% year over year
- Net cash used in operating activities was $12 million, an
improvement of $39 million year over year
- Free cash flow (non-GAAP) improved by $40 million year over
year
- At the end of the first quarter, cash and cash equivalents
totaled $141 million
"In a time of great uncertainty, Overstock is performing well,"
said Overstock CEO Jonathan Johnson. "Our retail business, which
was already on track to achieve its first quarter plan before the
COVID-19 crisis hit full bore, has benefited from an increased
demand for home furnishings and other key product categories from
customers looking to shop from the safety of their homes. The
Overstock Retail team is executing its disciplined strategy. I
expect to see continued progress against our goal of realizing
sustainable, profitable growth. Many of our Medici Ventures
blockchain companies are also progressing toward having usable
products in production."
"COVID-19 has altered the landscape for many," Johnson
continued. "Our retail business's April sales are up over 120% year
over year and that growth has occurred mainly in our key home
furnishings categories. Several of our blockchain companies have
received public attention because the problems they are solving
using blockchain technology have been brought into the spotlight in
the current pandemic. Areas like mobile voting, digital identity,
digital currency, and supply chain tracking have become more
important in our COVID-19 world. I am looking forward to the
increase in tZERO platform activity I believe will result from the
upcoming issuance of the Overstock digital dividend. I will provide
a more detailed report on the impact COVID-19 has had on our
businesses and other corporate updates on our earnings call."
"I thank our shareholders for their continued support. I am
confident in our teams' ability to execute and to be the innovative
leader in the e-commerce and blockchain arenas," concluded
Johnson.
Other First Quarter Financial Highlights
- Retail pre-tax loss was $9 million, an improvement of $4
million year over year
- Retail contribution (non-GAAP) was $38 million, or 11.2% of
total retail revenue, an improvement of 40 basis points year over
year
- Retail Adjusted EBITDA (non-GAAP) was ($2) million, an
improvement of 24% year over year
- tZERO revenue was $10 million, an increase of 128% year over
year, primarily due to SpeedRoute trading volume
- MVI other income (expense) included an $11 million gain
recognized on the deconsolidation of the Medici Land Governance
business
- Consolidated G&A expenses decreased by $8 million, or 19%
year over year, primarily due to a $4 million decrease in
consulting expenses and staff-related costs and $3 million in
proceeds from a legal settlement
First Quarter Operational Highlights
- Newly acquired customers increased 9% year over year
- Sales from orders placed on a mobile device were 46.3% of total
sales in the first quarter of 2020, compared to 43.3% in the first
quarter of 2019
- Same day ship confirmations increased 4% in the first quarter
of 2020 compared to the same period last year
- The number of tZERO Crypto app users increased 40% from
December 31, 2019
COVID-19 Update
Overstock has been responsive to the opportunities and
challenges brought by COVID-19. In our retail business, customer
demand has increased significantly, particularly in our key home
furnishings categories. As a result, we have seen an increase in
website traffic and new customers, and our retail sales have
accelerated to over 120% year over year growth in April. Our
online-only platform and partner network of more than 4,500
drop-ship facilities has allowed us to meet this surge in demand
without significant operational disruption. However, we have faced
challenges with increased volume through our customer service
channels and with capacity issues from our shipping carriers. We
have seen little interruption at tZERO and its subsidiaries, but we
recognize potential risks to the platform due to market depression,
volatility, and delays in trading and capital raises. Most of our
Medici Ventures blockchain companies have seen little disruption;
some are working to solve problems exacerbated by the global
pandemic. All corporate staff is working from home and we are
hiring in key areas to support the growth we are experiencing. It
is difficult to predict the duration of these impacts or how the
evolving COVID-19 situation will affect our business in the
future.
Digital Dividend
On July 30, 2019, we announced that our Board of Directors had
declared a dividend (the "Dividend") payable in shares of our
Series A-1 Preferred Stock. The Dividend is payable at a ratio of
1:10, meaning that one share of Series A-1 Preferred Stock will be
issued for every ten shares of OSTK common stock, ten shares of
Series A-1 Preferred Stock, or ten shares of Series B Preferred
Stock held by all holders of such shares as of the record date for
the Dividend. The record date for the Dividend was April 27, 2020,
and the distribution date for the Dividend will be May 19,
2020.
Earnings 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 9463937
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,
April 30, 2020, through 11:30 a.m. ET on Thursday,
May 14, 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 nearly 40 million 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, Main Street
Revolution, 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 April 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, competition, and the effects of the departure
of key business personnel. 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, 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 or
contemplated by our projections, estimates and other
forward-looking statements.
ContactsInvestor Relations:Alexis
Callahan801-947-5126ir@overstock.com |
Media:Overstock Media
Relations801-947-3564pr@overstock.com |
Overstock.com, Inc.Consolidated
Balance Sheets (Unaudited)(in thousands, except
per share data)
|
March 31, 2020 |
|
December 31, 2019 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
141,260 |
|
|
$ |
112,266 |
|
Restricted cash |
2,661 |
|
|
2,632 |
|
Marketable securities at fair value |
3,838 |
|
|
10,308 |
|
Accounts receivable, net |
37,664 |
|
|
24,728 |
|
Inventories, net |
4,678 |
|
|
5,840 |
|
Prepaids and other current assets |
20,783 |
|
|
21,589 |
|
Total current assets |
210,884 |
|
|
177,363 |
|
Property and equipment,
net |
126,621 |
|
|
130,028 |
|
Intangible assets, net |
10,837 |
|
|
11,756 |
|
Goodwill |
27,120 |
|
|
27,120 |
|
Equity securities |
53,840 |
|
|
42,043 |
|
Operating lease right-of-use
assets |
23,726 |
|
|
25,384 |
|
Other long-term assets,
net |
3,707 |
|
|
4,033 |
|
Total assets |
$ |
456,735 |
|
|
$ |
417,727 |
|
Liabilities and Stockholders’ Equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
74,254 |
|
|
$ |
75,416 |
|
Accrued liabilities |
88,457 |
|
|
88,197 |
|
Deferred revenue |
54,143 |
|
|
41,821 |
|
Operating lease liabilities, current |
5,968 |
|
|
6,603 |
|
Other current liabilities |
5,826 |
|
|
3,962 |
|
Total current liabilities |
228,648 |
|
|
215,999 |
|
Long-term debt, net |
43,739 |
|
|
— |
|
Operating lease liabilities,
non-current |
20,409 |
|
|
21,554 |
|
Other long-term
liabilities |
2,284 |
|
|
2,319 |
|
Total liabilities |
295,080 |
|
|
239,872 |
|
Commitments and
contingencies |
|
|
|
Stockholders' equity: |
|
|
|
Preferred stock, $0.0001 par value, authorized shares - 5,000 |
|
|
|
Series A-1, issued and outstanding - 4,210 and 4,210 (including
4,085 shares declared as a stock dividend, not yet
distributed) |
— |
|
|
— |
|
Series B, issued and outstanding - 357 and 357 |
— |
|
|
— |
|
Common stock, $0.0001 par value, authorized shares - 100,000 |
|
|
|
Issued shares - 43,877 and 42,790 |
|
|
|
Outstanding shares - 40,326 and 39,464 |
4 |
|
|
4 |
|
Additional paid-in capital |
768,055 |
|
|
764,845 |
|
Accumulated deficit |
(596,723 |
) |
|
(580,390 |
) |
Accumulated other comprehensive loss |
(564 |
) |
|
(568 |
) |
Treasury stock at cost - 3,551 and 3,326 |
(70,493 |
) |
|
(68,807 |
) |
Equity attributable to stockholders of Overstock.com, Inc. |
100,279 |
|
|
115,084 |
|
Equity attributable to noncontrolling interests |
61,376 |
|
|
62,771 |
|
Total stockholders' equity |
161,655 |
|
|
177,855 |
|
Total liabilities and stockholders' equity |
$ |
456,735 |
|
|
$ |
417,727 |
|
Overstock.com, Inc.Consolidated
Statements of Operations (Unaudited)(in thousands,
except per share data) |
|
Three months ended March 31, |
|
2020 |
|
2019 |
Revenue, net |
|
|
|
Retail |
$ |
339,598 |
|
|
$ |
362,625 |
|
Other |
11,975 |
|
|
5,104 |
|
Total net revenue |
351,573 |
|
|
367,729 |
|
Cost of goods sold |
|
|
|
Retail |
265,392 |
|
|
290,640 |
|
Other |
10,341 |
|
|
3,965 |
|
Total cost of goods sold |
275,733 |
|
|
294,605 |
|
Gross profit |
75,840 |
|
|
73,124 |
|
Operating expenses: |
|
|
|
Sales and marketing |
36,762 |
|
|
33,477 |
|
Technology |
32,796 |
|
|
35,433 |
|
General and administrative |
32,426 |
|
|
40,232 |
|
Total operating expenses |
101,984 |
|
|
109,142 |
|
Operating loss |
(26,144 |
) |
|
(36,018 |
) |
Interest income |
272 |
|
|
403 |
|
Interest expense |
(200 |
) |
|
(127 |
) |
Other income (expense),
net |
6,683 |
|
|
(6,272 |
) |
Loss before income taxes |
(19,389 |
) |
|
(42,014 |
) |
Provision for income
taxes |
176 |
|
|
878 |
|
Net loss |
(19,565 |
) |
|
(42,892 |
) |
Less: Net loss attributable to noncontrolling interests |
(3,232 |
) |
|
(3,648 |
) |
Net loss attributable to
stockholders of Overstock.com, Inc. |
$ |
(16,333 |
) |
|
$ |
(39,244 |
) |
Net loss per common
share—basic: |
|
|
|
Net loss attributable to
common shares—basic |
$ |
(0.40 |
) |
|
$ |
(1.18 |
) |
Weighted average common shares
outstanding—basic |
40,158 |
|
|
32,370 |
|
Net loss per common
share—diluted: |
|
|
|
Net loss attributable to
common shares—diluted |
$ |
(0.40 |
) |
|
$ |
(1.18 |
) |
Weighted average common shares
outstanding—diluted |
40,158 |
|
|
32,370 |
|
Overstock.com, Inc.Consolidated
Statements of Cash Flows (Unaudited)(in
thousands) |
|
Three months ended March 31, |
|
2020 |
|
2019 |
Cash flows from operating activities: |
|
|
|
Consolidated
net loss |
$ |
(19,565 |
) |
|
$ |
(42,892 |
) |
Adjustments to reconcile consolidated net loss to net cash used in
operating activities: |
|
|
|
Depreciation of property and equipment |
6,646 |
|
|
6,575 |
|
Amortization of intangible assets |
923 |
|
|
1,481 |
|
Non-cash operating lease cost |
1,630 |
|
|
1,667 |
|
Stock-based compensation to employees and directors |
3,268 |
|
|
3,985 |
|
Deferred income taxes, net |
8 |
|
|
895 |
|
(Gain)/loss on sale of cryptocurrencies |
(219 |
) |
|
9 |
|
Impairment of cryptocurrencies |
21 |
|
|
318 |
|
Impairment of equity securities |
— |
|
|
2,958 |
|
Losses on equity method securities |
2,468 |
|
|
1,025 |
|
Gain on disposal of business |
(10,705 |
) |
|
— |
|
Other non-cash adjustments |
1,625 |
|
|
1,858 |
|
Changes in operating assets and liabilities, net of
acquisitions: |
|
|
|
Accounts receivable, net |
(11,141 |
) |
|
14,068 |
|
Inventories, net |
1,162 |
|
|
554 |
|
Prepaids and other current assets |
1,542 |
|
|
3,106 |
|
Other long-term assets, net |
457 |
|
|
(189 |
) |
Accounts payable |
(1,310 |
) |
|
(28,023 |
) |
Accrued liabilities |
338 |
|
|
(6,962 |
) |
Deferred revenue |
12,547 |
|
|
(10,640 |
) |
Operating lease liabilities |
(1,751 |
) |
|
(1,249 |
) |
Other long-term liabilities |
(171 |
) |
|
27 |
|
Net cash used in operating activities |
(12,227 |
) |
|
(51,429 |
) |
Cash flows from investing activities: |
|
|
|
Purchase of equity securities |
(85 |
) |
|
(2,500 |
) |
Proceeds from sale of equity securities and marketable
securities |
2,179 |
|
|
5,535 |
|
Disbursement for notes receivable |
(300 |
) |
|
(2,000 |
) |
Acquisitions of businesses, net of cash acquired |
— |
|
|
4,885 |
|
Expenditures for property and equipment |
(3,638 |
) |
|
(4,144 |
) |
Deconsolidation of cash of Medici Land Governance, Inc. |
(4,056 |
) |
|
— |
|
Other investing activities, net |
(99 |
) |
|
(2 |
) |
Net cash provided by (used in) investing activities |
(5,999 |
) |
|
1,774 |
|
|
Continued on the
following page |
|
|
Three months ended March 31, |
|
2020 |
|
2019 |
Cash flows from financing activities: |
|
|
|
Proceeds from long-term debt |
47,500 |
|
|
— |
|
Proceeds from sale of common stock, net of offering costs |
2,848 |
|
|
30,957 |
|
Payments of taxes withheld upon vesting of restricted stock |
(1,686 |
) |
|
(1,353 |
) |
Other financing activities, net |
(1,413 |
) |
|
(648 |
) |
Net cash provided by financing activities |
47,249 |
|
|
28,956 |
|
Net increase (decrease) in cash, cash equivalents and
restricted cash |
29,023 |
|
|
(20,699 |
) |
Cash, cash equivalents and restricted cash, beginning of
year |
114,898 |
|
|
142,814 |
|
Cash, cash
equivalents and restricted cash, end of year |
$ |
143,921 |
|
|
$ |
122,115 |
|
|
|
|
|
Supplemental disclosures of cash flow
information: |
|
|
|
Cash paid during the period: |
|
|
|
Interest paid, net of amounts capitalized |
$ |
32 |
|
|
$ |
86 |
|
Income taxes paid, net |
4 |
|
|
130 |
|
Non-cash investing and financing
activities: |
|
|
|
Property and equipment financed through accounts payable and
accrued liabilities |
$ |
190 |
|
|
$ |
304 |
|
Common stock repurchased through business combination |
— |
|
|
643 |
|
Receivables converted to equity securities |
186 |
|
|
359 |
|
Recognition of ROU Asset and Liabilities for new lease
(Operating) |
41 |
|
|
30,968 |
|
Recognition of ROU Asset and Liabilities for new lease
(Financing) |
517 |
|
|
— |
|
Proceeds from sale of common stock included in accounts
receivable |
— |
|
|
8,957 |
|
Proceeds from the sale of marketable securities included in
accounts receivable |
3,081 |
|
|
— |
|
Deposit applied to business combination purchase price |
— |
|
|
7,347 |
|
Equity method security applied to business combination purchase
price |
— |
|
|
3,707 |
|
Segment Financial Information
Our Retail segment primarily consists of amounts earned through
e-commerce sales through our Website, excluding intercompany
transactions eliminated in consolidation.
Our tZERO segment primarily consists of amounts earned through
securities transactions through our broker-dealers and costs
incurred to execute our tZERO business initiatives, excluding
intercompany transactions eliminated in consolidation.
Our MVI segment primarily consists of costs incurred to create
or foster a set of products and solutions that leverage blockchain
technology to generate efficiencies and increase security and
control, excluding intercompany transactions eliminated in
consolidation.
Our Other segment consists of Medici Land Governance, which was
deconsolidated beginning February 22, 2020, and our unallocated
corporate support costs.
The following table summarizes information about reportable
segments and includes a reconciliation to consolidated net loss (in
thousands):
|
Three months ended March 31, |
|
Retail |
|
tZERO |
|
MVI |
|
Other |
|
Total |
2020 |
|
|
|
|
|
|
|
|
|
Total net revenue |
$ |
339,598 |
|
|
$ |
10,239 |
|
|
$ |
1,574 |
|
|
$ |
162 |
|
|
$ |
351,573 |
|
Cost of goods sold |
265,392 |
|
|
8,767 |
|
|
1,574 |
|
|
— |
|
|
275,733 |
|
Gross profit |
74,206 |
|
|
1,472 |
|
|
— |
|
|
162 |
|
|
75,840 |
|
Operating expenses |
82,835 |
|
|
12,258 |
|
|
2,908 |
|
|
3,983 |
|
|
101,984 |
|
Interest and other income
(expense), net (1) (2) |
(299 |
) |
|
(1,782 |
) |
|
8,833 |
|
|
3 |
|
|
6,755 |
|
Pre-tax income (loss) |
$ |
(8,928 |
) |
|
$ |
(12,568 |
) |
|
$ |
5,925 |
|
|
$ |
(3,818 |
) |
|
(19,389 |
) |
Provision for income
taxes |
|
|
|
|
|
|
|
|
176 |
|
Net loss (3) |
|
|
|
|
|
|
|
|
$ |
(19,565 |
) |
|
|
|
|
|
|
|
|
|
|
2019 |
|
|
|
|
|
|
|
|
|
Total net revenue |
$ |
362,625 |
|
|
$ |
4,496 |
|
|
$ |
608 |
|
|
$ |
— |
|
|
$ |
367,729 |
|
Cost of goods sold |
290,640 |
|
|
3,357 |
|
|
608 |
|
|
— |
|
|
294,605 |
|
Gross profit |
71,985 |
|
|
1,139 |
|
|
— |
|
|
— |
|
|
73,124 |
|
Operating expenses |
85,336 |
|
|
15,553 |
|
|
4,253 |
|
|
4,000 |
|
|
109,142 |
|
Interest and other income
(expense), net (1) |
135 |
|
|
(963 |
) |
|
(5,164 |
) |
|
(4 |
) |
|
(5,996 |
) |
Pre-tax loss |
$ |
(13,216 |
) |
|
$ |
(15,377 |
) |
|
$ |
(9,417 |
) |
|
$ |
(4,004 |
) |
|
(42,014 |
) |
Provision for income
taxes |
|
|
|
|
|
|
|
|
878 |
|
Net loss (3) |
|
|
|
|
|
|
|
|
$ |
(42,892 |
) |
_____________________________________(1) Excludes
intercompany transactions eliminated in consolidation, which
consist primarily of service fees and interest. The net amounts of
these intercompany transactions were $1.1 million and $415,000 for
the three months ended March 31, 2020 and 2019,
respectively.(2) Upon deconsolidation of Medici Land
Governance, we recognized our retained equity interest in Medici
Land Governance as an equity method security held by our MVI
segment which resulted in a $10.7 million gain included in Interest
and other income (expense), net for our MVI segment for the three
months ended March 31, 2020.(3) Net loss presented for
segment reporting purposes is before any adjustments attributable
to noncontrolling interests.
Non-GAAP Financial Measures and
Reconciliations
We are providing certain non-GAAP financial measures in this
release because we believe that these figures are helpful in
allowing investors to more accurately assess the ongoing nature of
our operations and measure our performance more consistently across
periods. The presentation of this additional non-GAAP financial
information is not intended to be considered in isolation or as a
substitute for the financial information prepared and presented in
accordance with GAAP. The following tables provide reconciliations
of these non-GAAP items to the most nearly equivalent GAAP
measures, our rationale and a discussion of the limitations of
these non-GAAP measures.
Adjusted EBITDA
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 have included Adjusted EBITDA in this earnings release because
it reflects an additional way of viewing the operating performance
at both the consolidated and segment level that is used internally
in analyzing our financial results and we believe it is useful to
investors as a supplement to GAAP measures in evaluating our
ongoing operational performance. In particular, 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. We have provided a reconciliation below of our
segment and consolidated Adjusted EBITDA to net income (loss), the
most directly comparable GAAP financial measure.
Adjusted EBITDA is 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.
The following table reflects the reconciliation of Adjusted
EBITDA to net income (loss) for each of the periods indicated (in
thousands):
|
Three months ended March 31, |
|
2020 |
|
2019 |
|
|
|
|
Net loss |
$ |
(19,565 |
) |
|
$ |
(42,892 |
) |
Depreciation and amortization |
7,569 |
|
|
6,614 |
|
Stock-based compensation |
3,268 |
|
|
3,985 |
|
Interest income, net |
(72 |
) |
|
(276 |
) |
Other (income) expense, net |
(6,683 |
) |
|
6,272 |
|
Provision for income taxes |
176 |
|
|
878 |
|
Special items (see table below) |
(1,103 |
) |
|
1,757 |
|
Adjusted
EBITDA |
$ |
(16,410 |
) |
|
$ |
(23,662 |
) |
|
|
|
|
Segment Adjusted
EBITDA |
|
|
|
Retail |
$ |
(1,865 |
) |
|
$ |
(2,460 |
) |
tZERO |
(8,250 |
) |
|
(13,207 |
) |
MVI |
(2,498 |
) |
|
(4,008 |
) |
Other |
(3,797 |
) |
|
(3,987 |
) |
Adjusted
EBITDA |
$ |
(16,410 |
) |
|
$ |
(23,662 |
) |
|
|
|
|
Special items: |
|
|
|
Severance |
$ |
1,398 |
|
|
$ |
1,757 |
|
Gain on legal settlement |
(2,501 |
) |
|
— |
|
|
$ |
(1,103 |
) |
|
$ |
1,757 |
|
Free Cash Flow
Free cash flow is a non-GAAP financial measure that 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 below to "Net cash
used in operating activities," the nearest GAAP financial measure,
is net cash used in operating activities reduced by "Expenditures
for property and equipment." We believe that net cash used in
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. We believe free
cash flow is a useful measure to evaluate our business since
purchases of property and equipment 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 purchases of property and equipment. Free cash
flow measures have limitations as they omit certain components of
the overall consolidated statement of cash flows and do not
represent the residual cash flow available for discretionary
expenditures. Free cash flow should not be considered a
substitute for net income or cash flow data prepared in accordance
with GAAP and may not be comparable to similarly titled measures
used by other companies. Therefore, we believe it is important to
view free cash flow as a complement to our entire consolidated
statements of cash flows as reconciled below (in thousands):
|
Three months ended March 31, |
|
2020 |
|
2019 |
Net cash used in operating activities |
$ |
(12,227 |
) |
|
$ |
(51,429 |
) |
Expenditures for property and
equipment |
(3,638 |
) |
|
(4,144 |
) |
Free cash flow |
$ |
(15,865 |
) |
|
$ |
(55,573 |
) |
Contribution and Contribution Margin
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 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.
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. You should review our financial statements and
publicly-filed reports in their entirety and not rely on any single
financial measure.
Our calculation of our contribution and contribution margin is
set forth below (in thousands):
|
Three months ended March 31, |
|
Retail |
|
Other (1) |
|
Total |
2020 |
|
|
|
|
|
Total net revenue |
$ |
339,598 |
|
|
$ |
11,975 |
|
|
$ |
351,573 |
|
Cost of goods sold |
265,392 |
|
|
10,341 |
|
|
275,733 |
|
Gross profit |
74,206 |
|
|
1,634 |
|
|
75,840 |
|
Less: Sales and marketing
expense |
36,290 |
|
|
472 |
|
|
36,762 |
|
Contribution |
$ |
37,916 |
|
|
$ |
1,162 |
|
|
$ |
39,078 |
|
Contribution margin |
11.2 |
% |
|
9.7 |
% |
|
11.1 |
% |
|
|
|
|
|
|
2019 |
|
|
|
|
|
Total net revenue |
$ |
362,625 |
|
|
$ |
5,104 |
|
|
$ |
367,729 |
|
Cost of goods sold |
290,640 |
|
|
3,965 |
|
|
294,605 |
|
Gross profit |
71,985 |
|
|
1,139 |
|
|
73,124 |
|
Less: Sales and marketing
expense |
32,933 |
|
|
544 |
|
|
33,477 |
|
Contribution |
$ |
39,052 |
|
|
$ |
595 |
|
|
$ |
39,647 |
|
Contribution margin |
10.8 |
% |
|
11.7 |
% |
|
10.8 |
% |
__________________________________________(1) Other
includes our tZERO, MVI, and Other segments.
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