Overstock.com, Inc. (NASDAQ:OSTK) today reported financial results for the quarter ended June 30, 2021.

Second Quarter 2021 Financial Highlights, from continuing operations

Total net revenue was $795 million, an increase of 4% year over year
Gross profit was $175 million or 22.0% of total net revenue
Income from continuing operations was $82 million
Diluted earnings per share was $1.72
Adjusted EBITDA (non-GAAP) was $44 million, which represents 5.6% of net revenue
YTD net cash provided by operating activities was $120 million
At the end of the second quarter, cash and cash equivalents totaled $536 million

"In a significant quarter for the company, I am proud to report Overstock delivered both growth and profitability in the second quarter of 2021 as we lapped the start of the pandemic," said Overstock CEO Jonathan Johnson. "Our strong and consistent results stem from foundational operational improvements in the business, a disciplined strategy, and intense focus. The furniture and home furnishings market is large and growing. We expect this market to benefit from strong and sustained demand, and to continue to migrate online over time. Overstock remains well positioned to capture market share and sustain its profitable trajectory through the remainder of 2021 and beyond."

"In addition to our solid operating results, Overstock recorded two significant accounting items in the second quarter," continued Johnson. "First, based on our consistent profitability and current go-forward outlook, we have released $47 million of our tax valuation allowance. This release illustrates confidence in our ability to continue to deliver sustainable, profitable market share growth. Second, in conjunction with the closing of the transaction with Pelion Venture Partners, we recognized a $228 million net gain, included in discontinued operations. It is great to have the Pelion transaction closed and the Pelion team focused on the Medici Ventures Fund companies."

Second Quarter 2021 Operational Highlights

Active customers reached 9.2 million as of June 30, 2021, an increase of 31% year over year
LTM net revenue per active customer was $310 as of June 30, 2021, an increase of 20% year over year
Orders delivered in the second quarter of 2021 were 3.7 million, a decrease of 22% year over year
Average order value was $213 for the second quarter of 2021, an increase of 33% year over year
Orders per active customer, measured as LTM orders divided by active customers, was 1.69 for the second quarter of 2021, compared to 1.62 for the second quarter of 2020
Orders placed on a mobile device were 49.9% of gross merchandise sales in the second quarter of 2021, compared to 52.7% for the second quarter of 2020

Partnership with Pelion Ventures Partners

On April 23, 2021, we entered into a Limited Partnership Agreement with Pelion MV GP, L.L.C. ("Pelion"), in which Pelion became the sole general partner, holding a 1% equity interest in the partnership, and Overstock became a limited partner, holding a 99% equity interest in the partnership. Commensurate with closing, we recognized a $228 million gain during the quarter, net of income taxes, as part of income from discontinued operations, as we recorded the fair value of our retained equity method investments in the partnership and tZERO. Additionally, our retained equity interest in the limited partnership and tZERO were recognized as equity method investments on our consolidated balance sheets in the amount of $330 million.

Financial Reporting Presentation in Accordance with the Pelion Transaction

Medici Ventures' blockchain businesses, including tZERO, met the criteria to be reported as held for sale and discontinued operations as of March 31, 2021, due to their anticipated deconsolidation. As a result of closing the transaction during the second quarter of 2021, these businesses' operating results for the periods prior to deconsolidation have been reflected in our consolidated statements of income as discontinued operations. Additionally, the related assets and liabilities of these businesses associated with the prior periods are classified as discontinued operations in our consolidated balance sheets. As a result of closing this transaction, Overstock has reorganized its remaining businesses into a single reportable operating segment, Retail. Corporate-related overhead costs are included in Retail continuing operations.

Release of Tax Valuation Allowance

Each quarter we assess the recoverability of our deferred tax assets. In our assessment for the period ended June 30, 2021, we concluded it is more likely than not that our deferred tax assets related to United States federal income and all states with the exception of Utah will be realizable, therefore, we released approximately $47 million of our valuation allowance. We still maintain a valuation allowance against our deferred tax assets for capital losses and the state of Utah.

Earnings Webcast Information

Overstock will hold a conference call and webcast to discuss its second quarter 2021 financial results on Thursday, July 29, 2021, 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 9394705 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 29, 2021, through 11:30 a.m. ET on Thursday, August 12, 2021. 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.

Questions may be emailed in advance of the call to ir@overstock.com.

About Overstock.com

Overstock.com, Inc. (Common Stock (NASDAQ:OSTK) / Series A-1 Preferred Stock (tZERO ATS:OSTKO) / Series B Preferred Stock (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, area rugs, bedding and bath, 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. In 2014, Overstock was the first major retailer to accept cryptocurrency as a form of payment and continues to do so. 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 29, 2021 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, and statements regarding expectations with respect to the performance of Pelion in managing the limited partnership. 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, including how such factors will be impacted at such time as the pandemic subsides throughout the country and globally. 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 are included in our Form 10-K for the year ended December 31, 2020, which was filed with the Securities and Exchange Commission on February 26, 2021, in our Form 10-Q for the quarter ended March 31, 2021, which was filed with the Securities and Exchange Commission on May 6, 2021, 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.

ContactsInvestor Relations:Alexis Callahan801-947-5126ir@overstock.com Media Relations:Megan Herrick801-947-3564pr@overstock.com
Overstock.com, Inc.Consolidated Balance Sheets (Unaudited)(in thousands, except per share data)
  June 30,2021   December 31,2020
Assets      
Current assets:      
Cash and cash equivalents $ 536,445     $ 495,425  
Restricted cash 1,208     1,197  
Accounts receivable, net 33,008     22,867  
Inventories 7,009     6,243  
Prepaids and other current assets 27,554     22,879  
Current assets of discontinued operations     34,129  
Total current assets 605,224     582,740  
Property and equipment, net 109,693     113,767  
Deferred tax assets, net 33,252     37  
Goodwill 6,160     6,160  
Equity securities 330,778     1,412  
Operating lease right-of-use assets 14,242     17,297  
Other long-term assets, net 2,376     2,646  
Long-term assets of discontinued operations     106,155  
Total assets $ 1,101,725     $ 830,214  
Liabilities and Stockholders' Equity      
Current liabilities:      
Accounts payable $ 166,671     $ 109,759  
Accrued liabilities 112,683     123,646  
Unearned revenue 84,447     72,165  
Operating lease liabilities, current 4,612     5,152  
Other current liabilities 3,413     2,935  
Current liabilities of discontinued operations     13,924  
Total current liabilities 371,826     327,581  
Long-term debt, net 39,676     41,334  
Operating lease liabilities, non-current 10,364     13,206  
Other long-term liabilities 3,679     4,082  
Long-term liabilities of discontinued operations     7,685  
Total liabilities 425,545     393,888  
Stockholders' equity:      
Preferred stock, $0.0001 par value, authorized shares - 5,000      
Series A-1, issued and outstanding - 4,204 and 4,204      
Series B, issued and outstanding - 357 and 357      
Common stock, $0.0001 par value, authorized shares - 100,000      
Issued shares - 46,607 and 46,331      
Outstanding shares - 43,012 and 42,768 4     4  
Additional paid-in capital 954,518     970,873  
Accumulated deficit (199,229 )   (525,233 )
Accumulated other comprehensive loss (545 )   (553 )
Treasury stock at cost - 3,595 and 3,563 (78,568 )   (71,399 )
Equity attributable to stockholders of Overstock.com, Inc. 676,180     373,692  
  Equity attributable to noncontrolling interests     62,634  
    Total stockholders' equity 676,180     436,326  
      Total liabilities and stockholders' equity $ 1,101,725     $ 830,214  
Overstock.com, Inc.Consolidated Statements of Income (Unaudited)(in thousands, except per share data)
  Three months endedJune 30,   Six months endedJune 30,
  2021   2020   2021   2020
Net revenue $ 794,536     $ 766,956     $ 1,454,397     $ 1,106,554  
Cost of goods sold 619,710     589,044     1,126,047     854,436  
Gross profit 174,826     177,912     328,350     252,118  
Operating expenses              
Sales and marketing 85,272     79,215     158,810     115,560  
Technology 30,383     29,063     60,906     56,344  
General and administrative 22,660     20,837     45,531     44,722  
Total operating expenses 138,315     129,115     265,247     216,626  
Operating income 36,511     48,797     63,103     35,492  
Interest expense, net (130 )   (364 )   (285 )   (375 )
Other income (expense), net 298     246     72     (41 )
Income from continuing operations before income taxes 36,679     48,679     62,890     35,076  
Provision (benefit) for income taxes (45,726 )   840     (45,533 )   1,003  
Income from continuing operations 82,405     47,839     108,423     34,073  
Income (loss) from discontinued operations, net of income taxes 227,372     (13,458 )   217,246     (19,257 )
Consolidated net income 309,777     34,381     325,669     14,816  
Less: Net loss attributable to noncontrolling interests—discontinued operations (134 )   (1,975 )   (335 )   (5,207 )
Net income attributable to stockholders of Overstock.com, Inc. $ 309,911     $ 36,356     $ 326,004     $ 20,023  
Net income per share of common stock:              
Net income (loss) attributable to common shares—basic              
Continuing operations $ 1.73     $ 1.12     $ 2.27     $ 0.82  
Discontinued operations 4.78     (0.27 )   4.58     (0.34 )
Total $ 6.51     $ 0.85     $ 6.85     $ 0.48  
Net income (loss) attributable to common shares—diluted              
Continuing operations $ 1.72     $ 1.11     $ 2.26     $ 0.81  
Discontinued operations 4.75     (0.27 )   4.54     (0.34 )
Total $ 6.47     $ 0.84     $ 6.80     $ 0.47  
Weighted average shares of common stock outstanding:              
Basic 43,009     40,329     42,948     40,243  
Diluted 43,314     40,590     43,317     40,440  
Overstock.com, Inc.Consolidated Statements of Cash Flows (Unaudited)(in thousands)
  Six months endedJune 30,
  2021   2020
Cash flows from operating activities:      
Consolidated net income $ 325,669     $ 14,816  
(Income) loss from discontinued operations, net of income taxes (217,246 )   19,257  
Adjustments to reconcile consolidated net income to net cash provided by operating activities:      
Depreciation and amortization 9,949     10,978  
Non-cash operating lease cost 2,528     2,632  
Stock-based compensation to employees and directors 5,107     4,633  
Increase in deferred income taxes, net (47,046 )   20  
Other non-cash adjustments 721     173  
Changes in operating assets and liabilities:      
     Accounts receivable, net (10,141 )   (19,787 )
     Inventories (766 )   (500 )
     Prepaids and other current assets (3,452 )   (3,302 )
     Other long-term assets, net (368 )   8  
     Accounts payable 56,543     54,434  
     Accrued liabilities (10,651 )   57,679  
     Unearned revenue 12,282     48,470  
     Operating lease liabilities (2,812 )   (3,363 )
     Other long-term liabilities (270 )   1,217  
       Net cash provided by continuing operating activities 120,047     187,365  
       Net cash used in discontinued operating activities (17,128 )   (16,922 )
         Net cash provided by operating activities 102,919     170,443  
Cash flows from investing activities:      
Contributions for capital calls (41,122 )    
Expenditures for property and equipment (5,620 )   (7,388 )
Other investing activities, net (908 )   (159 )
Net cash used in continuing investing activities (47,650 )   (7,547 )
Net cash used in discontinued investing activities (29,703 )   (431 )
  Net cash used in investing activities (77,353 )   (7,978 )
Cash flows from financing activities:      
Payments on long-term debt (1,366 )   (779 )
Proceeds from long-term debt     47,500  
Proceeds from sale of common stock, net of offering costs     2,848  
Payments of taxes withheld upon vesting of restricted stock (7,812 )   (1,730 )
Other financing activities, net (1 )   (3,992 )
Net cash provided by (used in) continuing financing activities (9,179 )   43,847  
Net cash provided by discontinued financing activities 2,085      
  Net cash provided by (used in) financing activities (7,094 )   43,847  
Net increase in cash, cash equivalents, and restricted cash 18,472     206,312  
Cash, cash equivalents, and restricted cash, beginning of period, inclusive of cash balances of discontinued operations 519,181     114,898  
Cash, cash equivalents, and restricted cash, end of period, inclusive of cash balances of discontinued operations 537,653     321,210  
Less: Cash, cash equivalents, and restricted cash of discontinued operations     19,082  
Cash, cash equivalents, and restricted cash, end of period $ 537,653     $ 302,128  

Supplemental Operational Data

We measure our business using operational metrics, in addition to the financial metrics shown above and the non-GAAP financial measures explained below. We believe these metrics provide investors with additional information regarding our financial results, including indicators of our growth, customer purchasing patterns, and the mix of products purchased by our customers.

Active customers represents the total number of unique customers who have made at least one purchase during the prior twelve-month period. This metric captures both the inflow of new customers and the outflow of existing customers who have not made a purchase during the prior twelve-month period.

LTM net revenue per active customer represents total net revenue in a twelve-month period divided by the total number of active customers for the same twelve-month period.

Orders delivered represents the total number of orders delivered in any given period, including orders that may eventually be returned. As we ship a large volume of packages through multiple carriers, actual delivery dates may not always be available, and in those circumstances we estimate delivery dates based on historical data.

Average order value is defined as total net revenue in any given period divided by the total number of orders delivered in that period.

Orders per active customer is defined as orders delivered in a twelve-month period divided by active customers for the same twelve-month period.

The following table provides key operating metrics for the Retail business:(in thousands, except for LTM net revenue per active customer, average order value and orders per active customer)

  Three months endedJune 30,
  2021   2020
Active customers 9,165     7,011  
LTM net revenue per active customer 310     258  
Orders delivered 3,736     4,784  
Average order value 213     160  
Orders per active customer 1.69     1.62  

Non-GAAP Financial Measures and Reconciliations

We are providing certain non-GAAP financial measures in this release and related earnings conference call, including adjusted diluted earnings per share from continuing operations, adjusted EBITDA, and free cash flow. We use these non-GAAP measures internally in analyzing our financial results 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 diluted earnings per share for continuing operations is a non-GAAP financial measure that we calculate as net income from continuing operations less the benefit for income taxes associated with our tax valuation allowance release. We believe that this adjustment to our adjusted diluted net income before calculating per share amounts for the current period presented provides a useful comparison between our operating results from period to period.

Adjusted EBITDA is a non-GAAP financial measure that is calculated as income from continuing operations 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 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 continuing 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.

The following table reflects the reconciliation of adjusted diluted earnings per share from continuing operations to diluted earnings per share from continuing operations (in thousands, except per share data):

  Three months ended June 30, 2021
  Diluted EPS   Less: tax valuation allowance release   Adjusted Diluted EPS
Numerator:          
Income from continuing operations $ 82,405     $ 47,046     $ 35,359  
Less: Preferred stock dividends—accumulated 182         182  
Undistributed income from continuing operations 82,223     47,046     35,177  
Less: Undistributed income allocated to participating securities 7,882     4,510     3,372  
Net income from continuing operations attributable to common stockholders $ 74,341     $ 42,536     $ 31,805  
           
Denominator:          
Weighted average shares of common stock outstanding—diluted 43,314     43,314     43,314  
           
Net income from continuing operations per share of common stock:          
Diluted $ 1.72     $ 0.99     $ 0.73  

The following table reflects the reconciliation of adjusted EBITDA to income from continuing operations (in thousands):

  Three months endedJune 30,   Six months endedJune 30,
  2021   2020   2021   2020
               
Income from continuing operations $ 82,405     $ 47,839     $ 108,423     $ 34,073  
Depreciation and amortization 4,803     5,409     9,949     10,978  
Stock-based compensation 2,802     1,952     5,107     4,633  
Interest expense, net 130     364     285     375  
Other (income) expense, net (298 )   (246 )   (72 )   41  
Provision (benefit) for income taxes (45,726 )   840     (45,533 )   1,003  
Special items (see table below) 243     (7,272 )   56     (8,758 )
Adjusted EBITDA $ 44,359     $ 48,886     $ 78,215     $ 42,345  
               
Special items:              
Special legal charges $     $ (7,272 )   $ (187 )   $ (9,773 )
Severance             1,015  
Transaction costs 243         243      
  $ 243     $ (7,272 )   $ 56     $ (8,758 )

The following table reflects the reconciliation of free cash flow to net cash provided by continuing operating activities (in thousands):

  Six months endedJune 30,
  2021   2020
Net cash provided by continuing operating activities $ 120,047     $ 187,365  
Expenditures for property and equipment (5,620 )   (7,388 )
Free cash flow $ 114,427     $ 179,977  

 

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