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
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)
|
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 endedJune 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 |
% |
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