Consolidated revenue of $432 million (3% growth) and pre-tax loss of ($9.7) million
Retail pre-tax loss of ($6.4) million
Medici pre-tax loss of ($3.3) million
Retail Site Launches Cars Tab
Medici's t0 Launches Revolutionary Securities Lending System
SALT LAKE CITY, Aug. 03, 2017 (GLOBE NEWSWIRE) -- Overstock.com, Inc. Common Shares (NASDAQ:OSTK) / Series A
Preferred (Medici Ventures’ t0 platform:OSTKP) / Series B Preferred (OTCQX:OSTBP) today reported financial results
for the quarter ended June 30, 2017.
Key Q2 2017 metrics (comparison to Q2 2016):
- Revenue: $432.0M vs. $418.5M (3% increase);
- Gross profit: $84.2M vs. $76.3M (10% increase);
- Gross margin: 19.5% vs. 18.2% (125 basis point increase);
- Sales and marketing expense: $43.3M vs. $33.4M (30% increase);
- Contribution (non-GAAP measure): $41.4M vs. $46.9M (12% decrease);
- G&A/Technology expense: $50.6M vs. $48.5M (4% increase);
- Pre-tax loss: ($9.7M) vs. ($1.5M) ($8.3M increase);
- Pre-tax loss - OSTK retail (non-GAAP financial measure): ($6.4M)
- Pre-tax loss - Medici (non-GAAP financial measure): ($3.3M)
- Benefit for income taxes: ($2.0M) vs. ($243,000) ($1.7M increase);
- Net loss*: ($7.5M) vs. ($904,000) ($6.6M increase);
- Diluted EPS: ($0.29)/share vs. ($0.04)/share ($0.25/share decrease);
*Net loss refers to Net loss attributable to stockholders of Overstock.com, Inc.
Dear Owner,
The loss on the blockchain side of the business was expected, as we are incurring significant costs building out the most
leading edge applications in blockchain. For example, t0 (our blockchain-meets-capital-markets subsidiary) released the single most
disruptive application of blockchain yet created: a blockchain-based securities lending system, which will enable t0 to compete
with a superior product against the largest prime brokers on Wall Street.
The loss on the retail side was unpleasant, but not as heart-stopping as it might appear. In truth, almost all aspects of our
retail business are running well: our sourcing is expanding (we are up to 3 million products and have a clear path to having 5-10X
that many), our logistics operations are efficient; our site technology is intelligent and is becoming more so through our work in
machine learning; our branding efforts are showing better responsiveness than they have in years; and our digital marketing
channels (with one exception) are run by quants who have finely tuned them.
The one great exception to all this is SEO (search engine optimization). We are traditionally quite good at SEO, and even can be
said to punch above our weight on that score. As a result, a large percentage of our traffic is dependent upon Google. In May,
Google began its annual algorithm adjustments, but this year the volatility introduced and the length of the tuning has been
significantly greater than any previous year of which we are aware. This created tremendous headwind for our business from May
through the summer thus far. We have reorganized a large number of resources around addressing this current challenge, as well as
preventing it from ever occurring again. In recent weeks we believe that, once again, we have found a way through it, with a
variety of innovations and technical improvements, so we are encouraged that we will find ourselves back on the path to market-like
growth with profitability quite soon. It is the only channel of our business that has taken this large hit, but it is a
particularly important channel to us, and the cost of coming off slipping a stitch in this area translated quickly into a loss for
the firm. Q3 has already shown a small bounce back in the right direction, and I believe that by September we will be back on
track.
Respectfully,
Patrick M. Byrne
We will hold a conference call and webcast to discuss our Q2 2017 financial results Thursday, August 3, 2017, 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 51222829 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 7:30 p.m. ET on Thursday, August 3, 2017, through 7:30 p.m. ET on
Thursday, August 17, 2017. 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 for Q2 2017 and 2016 was $432.0 million and $418.5 million, respectively, a 3% increase.
The growth in revenue was primarily due to a 4% increase in average order size, coupled with a 2% increase in orders. 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. Also, we had an increase in sales
for which we record only our commission as revenue. These decreases to revenue were partially offset by a decrease in Club O
Rewards earned due to discontinuing rewards on the Club O Silver program in Q4 2016. In addition, the percentage of revenue we
defer from orders taken but not delivered was lower due to the timing of quarter ends. Our average order size has increased in
recent years due primarily to a sales mix shift into home and garden products. We are uncertain how long this trend will
continue.
Gross profit - Gross profit for Q2 2017 and 2016 was $84.2 million and $76.3 million, respectively, a 10% increase, representing
19.5% and 18.2% gross margin for those respective periods. The increase in gross profit was primarily due to revenue growth. The
increase in gross margin was primarily due to a continued shift in sales mix into higher margin home and garden products, partially
offset by increased promotional activities.
Sales and marketing expenses - Sales and marketing expenses totaled $43.3 million and $33.4 million for Q2 2017 and 2016,
respectively, a 30% increase, and representing 10.0% and 8.0% of total net revenue for those respective periods. The increase in
sales and marketing expenses as a percent of revenue was primarily due to increased spending in sponsored search and display ads on
social media marketing channels.
In Q2 2017 and continuing, we have experienced slowing of our overall revenue growth which we believe is due in part to changes
that Google, Inc. ("Google") has made in its natural search engine algorithms, to which we are responding. While we work to adapt
to Google’s changes, we have increased our emphasis on other marketing channels, such as sponsored search, which has generated
revenue growth but with higher associated marketing expenses than natural search. We expect this trend to continue in the near term
while we work to adapt to these changes.
During Q2, we also experienced slower email channel revenue growth than expected due to some issues we encountered implementing
a new email marketing platform.
We are also experiencing an increasingly competitive digital marketing landscape. We have competitors who are spending
significant amounts on advertising bidding up the cost of certain marketing channels, such as paid keywords. While we may not
choose to match their levels of spending, this has increased our marketing costs in recent quarters. We expect this trend to
continue.
Consolidated contribution (a non-GAAP financial measure) and contribution margin (a non-GAAP financial measure) - Contribution
for Q2 2017 and 2016 was $41.4 million and $46.9 million, respectively, a 12% decrease, representing 9.6% and 11.2% 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 the reductions in revenue that we recognized for Club O Rewards that have
subsequently expired and for gift cards whose redemption is remote. 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
June 30, |
|
Six months ended
June 30, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Total net revenue |
|
$ |
432,024 |
|
|
100 |
% |
|
$ |
418,540 |
|
|
100 |
% |
|
$ |
864,459 |
|
|
100 |
% |
|
$ |
832,217 |
|
|
100 |
% |
Cost of goods sold |
|
347,853 |
|
|
80.5 |
% |
|
342,218 |
|
|
81.8 |
% |
|
693,381 |
|
|
80.2 |
% |
|
678,588 |
|
|
81.5 |
% |
Gross profit |
|
84,171 |
|
|
19.5 |
% |
|
76,322 |
|
|
18.2 |
% |
|
171,078 |
|
|
19.8 |
% |
|
153,629 |
|
|
18.5 |
% |
Less: Sales and marketing expense |
|
43,297 |
|
|
10.0 |
% |
|
33,353 |
|
|
8.0 |
% |
|
80,915 |
|
|
9.4 |
% |
|
64,809 |
|
|
7.8 |
% |
Plus: Club O Rewards and gift card breakage (included in Other income (expense),
net) |
|
561 |
|
|
0.1 |
% |
|
3,916 |
|
|
0.9 |
% |
|
1,232 |
|
|
0.1 |
% |
|
8,085 |
|
|
1.0 |
% |
Contribution and contribution margin |
|
$ |
41,435 |
|
|
9.6 |
% |
|
$ |
46,885 |
|
|
11.2 |
% |
|
$ |
91,395 |
|
|
10.6 |
% |
|
$ |
96,905 |
|
|
11.6 |
% |
Technology expenses - Technology expenses totaled $28.2 million and $25.8 million for Q2 2017 and 2016, respectively,
a 9% increase, and representing 6.5% and 6.2% of total revenue for those respective periods. The increase was primarily due to an
increase in staff related costs of $964,000, an increase in technology licenses and maintenance of $754,000, and an increase in
depreciation of $451,000.
General and administrative ("G&A") expenses - G&A expenses totaled $22.4 million and $22.7 million for Q1 2017 and
2016, respectively, a 1% decrease, and representing 5.2% and 5.4% of total revenue for those respective periods. The decrease was
primarily due to a decrease in legal costs of $1.4 million, partially offset by an increase in staff related costs of $747,000 and
an increase in consulting and outside services of $503,000.
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 may continue to incur additional expenses or make
investments in, or acquisitions of other technologies and businesses. We also anticipate that our Medici initiatives will incur
losses in the near term. These losses, additional expenses, acquisitions or investments may be material, and, coupled with existing
marketing expense trends and the seasonality of our business, may lead to reduced consolidated income or losses in some periods,
and to reduced liquidity. Additionally, we may recognize additional impairment charges from our investments. We are also
considering other alternatives for Medici, including raising capital.
Other income, net - Other income, net totaled $593,000 and $4.0 million for Q2 2017 and 2016, respectively. The decrease is
primarily due to decreased Club O Rewards breakage of $3.4 million due to discontinuing our Club O Silver rewards program in Q4
2016.
Net cash provided by operating activities - Net cash provided by operating activities was $20.1 million and $75.4 million for
the twelve months ended June 30, 2017 and 2016, respectively. The $55.3 million decrease is primarily due to slowing revenue
growth, decreased contribution and decreased net income, and the timing of payments. Net cash provided by operating activities for
the twelve months ended June 30, 2016 includes litigation settlement proceeds of $19.5 million.
Free cash flow (a non-GAAP financial measure) - Free cash flow totaled ($25.8) million and ($7.9) million for the twelve months
ended June 30, 2017 and 2016, respectively. The $17.9 million decrease was due to a $55.3 million decrease in operating cash flow,
partially offset by a $37.4 million decrease in capital expenditures including costs related to the development of our recently
completed 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 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):
|
|
Six months ended
June 30, |
|
Twelve months ended
June 30, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Net cash provided by (used in) operating activities |
|
$ |
(46,445 |
) |
|
$ |
(26,982 |
) |
|
$ |
20,101 |
|
|
$ |
75,401 |
|
Expenditures for fixed assets, including internal-use software and website
development |
|
(16,450 |
) |
|
(42,848 |
) |
|
(45,883 |
) |
|
(83,322 |
) |
Free cash flow |
|
$ |
(62,895 |
) |
|
$ |
(69,830 |
) |
|
$ |
(25,782 |
) |
|
$ |
(7,921 |
) |
Cash and working capital - We had cash and cash equivalents of $104.0 million and $183.1 million and working capital of ($30.3)
million and ($4.8) million at June 30, 2017 and December 31, 2016, respectively.
About Overstock.com
Overstock.com, Inc. Common Shares (NASDAQ:OSTK) / Series A Preferred (Medici Ventures’ t0 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 August 3, 2017 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, the potential effects on our financial results of new accounting standards we will be required
to adopt no later than January 1, 2018, relating to revenue recognition, 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-Q for
the quarter ended June 30, 2017 which was filed with the Securities and Exchange Commission on August 3, 2017. Our Form 10-Q and
our other 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.
Overstock.com, Inc. |
Consolidated Balance Sheets
(Unaudited) |
(in thousands) |
|
|
June 30,
2017 |
|
December 31,
2016 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
103,952 |
|
|
$ |
183,098 |
|
Restricted cash |
543 |
|
|
430 |
|
Accounts receivable, net |
20,751 |
|
|
28,142 |
|
Inventories, net |
15,152 |
|
|
18,937 |
|
Prepaid inventories, net |
1,215 |
|
|
2,112 |
|
Prepaids and other current assets |
20,089 |
|
|
11,654 |
|
Total current assets |
161,702 |
|
|
244,373 |
|
Fixed assets, net |
134,563 |
|
|
134,552 |
|
Precious metals |
9,946 |
|
|
9,946 |
|
Deferred tax assets, net |
68,396 |
|
|
56,266 |
|
Intangible assets, net |
9,171 |
|
|
10,913 |
|
Goodwill |
14,698 |
|
|
14,698 |
|
Other long-term assets, net |
14,399 |
|
|
14,328 |
|
Total assets |
$ |
412,875 |
|
|
$ |
485,076 |
|
Liabilities and Stockholders’ Equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
75,736 |
|
|
$ |
106,337 |
|
Accrued liabilities |
72,296 |
|
|
96,216 |
|
Deferred revenue |
39,137 |
|
|
41,780 |
|
Finance obligations, current |
3,297 |
|
|
3,256 |
|
Other current liabilities, net |
1,548 |
|
|
1,627 |
|
Total current liabilities |
192,014 |
|
|
249,216 |
|
Long-term debt, net |
43,663 |
|
|
44,179 |
|
Finance obligations, non-current |
10,168 |
|
|
11,831 |
|
Other long-term liabilities |
7,099 |
|
|
6,890 |
|
Total liabilities |
252,944 |
|
|
312,116 |
|
Stockholders’ equity: |
|
|
|
Preferred stock, $0.0001 par value, authorized shares - 5,000 |
|
|
|
Series A, issued and outstanding - 127 |
— |
|
|
— |
|
Series B, issued and outstanding - 569 |
— |
|
|
— |
|
Common stock, $0.0001 par value |
|
|
|
Authorized shares - 100,000 |
|
|
|
Issued shares - 28,131 and 27,895 |
|
|
|
Outstanding shares - 25,000 and 25,432 |
3 |
|
|
3 |
|
Additional paid-in capital |
385,987 |
|
|
383,348 |
|
Accumulated deficit |
(157,926 |
) |
|
(153,898 |
) |
Accumulated other comprehensive loss |
(1,472 |
) |
|
(1,540 |
) |
Treasury stock: |
|
|
|
Shares at cost - 3,131 and 2,463 |
(63,672 |
) |
|
(52,587 |
) |
Equity attributable to stockholders of Overstock.com, Inc. |
162,920 |
|
|
175,326 |
|
Equity attributable to noncontrolling interests |
(2,989 |
) |
|
(2,366 |
) |
Total equity |
159,931 |
|
|
172,960 |
|
Total liabilities and stockholders’ equity |
$ |
412,875 |
|
|
$ |
485,076 |
|
Overstock.com, Inc. |
Consolidated Statements of Operations
(Unaudited) |
(in thousands, except per share
data) |
|
|
Three months ended
June 30, |
|
Six months ended
June 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Revenue, net |
|
|
|
|
|
|
|
Direct |
$ |
22,099 |
|
|
$ |
24,630 |
|
|
$ |
44,927 |
|
|
$ |
51,281 |
|
Partner and other |
409,925 |
|
|
393,910 |
|
|
819,532 |
|
|
780,936 |
|
Total net revenue |
432,024 |
|
|
418,540 |
|
|
864,459 |
|
|
832,217 |
|
Cost of goods sold |
|
|
|
|
|
|
|
Direct |
21,147 |
|
|
23,098 |
|
|
42,110 |
|
|
48,504 |
|
Partner and other |
326,706 |
|
|
319,120 |
|
|
651,271 |
|
|
630,084 |
|
Total cost of goods sold |
347,853 |
|
|
342,218 |
|
|
693,381 |
|
|
678,588 |
|
Gross profit |
84,171 |
|
|
76,322 |
|
|
171,078 |
|
|
153,629 |
|
Operating expenses: |
|
|
|
|
|
|
|
Sales and marketing |
43,297 |
|
|
33,353 |
|
|
80,915 |
|
|
64,809 |
|
Technology |
28,244 |
|
|
25,800 |
|
|
57,236 |
|
|
51,510 |
|
General and administrative |
22,361 |
|
|
22,678 |
|
|
44,971 |
|
|
44,526 |
|
Litigation settlement |
— |
|
|
— |
|
|
— |
|
|
(19,520 |
) |
Total operating expenses |
93,902 |
|
|
81,831 |
|
|
183,122 |
|
|
141,325 |
|
Operating income (loss) |
(9,731 |
) |
|
(5,509 |
) |
|
(12,044 |
) |
|
12,304 |
|
Interest income |
136 |
|
|
64 |
|
|
261 |
|
|
155 |
|
Interest expense |
(716 |
) |
|
(5 |
) |
|
(1,426 |
) |
|
(7 |
) |
Other income (expense), net |
593 |
|
|
3,992 |
|
|
(3,131 |
) |
|
8,148 |
|
Income (loss) before income taxes |
(9,718 |
) |
|
(1,458 |
) |
|
(16,340 |
) |
|
20,600 |
|
Provision (benefit) for income taxes |
(1,975 |
) |
|
(243 |
) |
|
(2,315 |
) |
|
8,721 |
|
Net Income (Loss) |
$ |
(7,743 |
) |
|
$ |
(1,215 |
) |
|
$ |
(14,025 |
) |
|
$ |
11,879 |
|
Less: Net loss attributable to noncontrolling interests |
(244 |
) |
|
(311 |
) |
|
(623 |
) |
|
(646 |
) |
Net income (loss) attributable to stockholders of Overstock.com, Inc. |
$ |
(7,499 |
) |
|
$ |
(904 |
) |
|
$ |
(13,402 |
) |
|
$ |
12,525 |
|
Net income (loss) per common share—basic: |
|
|
|
|
|
|
|
Net income (loss) attributable to common shares—basic |
$ |
(0.29 |
) |
|
$ |
(0.04 |
) |
|
$ |
(0.52 |
) |
|
$ |
0.49 |
|
Weighted average common shares outstanding—basic |
24,996 |
|
|
25,341 |
|
|
25,035 |
|
|
25,311 |
|
Net income (loss) per common share—diluted: |
|
|
|
|
|
|
|
Net income (loss) attributable to common shares—diluted |
$ |
(0.29 |
) |
|
$ |
(0.04 |
) |
|
$ |
(0.52 |
) |
|
$ |
0.49 |
|
Weighted average common shares outstanding—diluted |
24,996 |
|
|
25,341 |
|
|
25,035 |
|
|
25,350 |
|
Overstock.com, Inc. |
Consolidated Statements of Cash Flows
(Unaudited) |
(in thousands) |
|
|
Six months ended
June 30, |
|
Twelve months ended
June 30, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Cash flows from operating activities: |
|
|
|
|
|
|
|
Consolidated net income (loss) |
$ |
(14,025 |
) |
|
$ |
11,879 |
|
|
$ |
(14,656 |
) |
|
$ |
9,125 |
|
Adjustments to reconcile net income (loss) to net cash (used in)
provided by operating activities: |
|
|
|
|
|
|
|
Depreciation of fixed assets |
14,909 |
|
|
12,296 |
|
|
29,896 |
|
|
24,660 |
|
Amortization of intangible assets |
1,891 |
|
|
2,222 |
|
|
3,637 |
|
|
3,741 |
|
Stock-based compensation to employees and directors |
1,985 |
|
|
2,715 |
|
|
4,161 |
|
|
4,503 |
|
Deferred income taxes, net |
(2,796 |
) |
|
7,368 |
|
|
(2,445 |
) |
|
5,548 |
|
Loss on investment in precious metals |
— |
|
|
— |
|
|
(201 |
) |
|
1,131 |
|
Loss on investment in cryptocurrency |
— |
|
|
— |
|
|
— |
|
|
46 |
|
Impairment of cost method investment |
4,500 |
|
|
— |
|
|
7,350 |
|
|
— |
|
Ineffective portion of loss on cash flow hedge |
— |
|
|
— |
|
|
— |
|
|
124 |
|
Termination costs of cryptobond financing |
— |
|
|
— |
|
|
— |
|
|
850 |
|
Other |
65 |
|
|
(2 |
) |
|
423 |
|
|
25 |
|
Changes in operating assets and liabilities, net of
acquisitions: |
|
|
|
|
|
|
|
Restricted cash |
(188 |
) |
|
(27 |
) |
|
(161 |
) |
|
(27 |
) |
Accounts receivable, net |
7,391 |
|
|
(1,169 |
) |
|
(1,446 |
) |
|
(826 |
) |
Inventories, net |
3,785 |
|
|
2,524 |
|
|
2,366 |
|
|
10,010 |
|
Prepaid inventories, net |
897 |
|
|
93 |
|
|
3 |
|
|
1,230 |
|
Prepaids and other current assets |
(9,213 |
) |
|
(3,015 |
) |
|
(3,809 |
) |
|
994 |
|
Other long-term assets, net |
(147 |
) |
|
(204 |
) |
|
(729 |
) |
|
(563 |
) |
Accounts payable |
(30,601 |
) |
|
(46,297 |
) |
|
(3,127 |
) |
|
8,189 |
|
Accrued liabilities |
(22,391 |
) |
|
(9,033 |
) |
|
3,578 |
|
|
7,413 |
|
Deferred revenue |
(2,643 |
) |
|
(6,874 |
) |
|
(4,933 |
) |
|
(1,770 |
) |
Other long-term liabilities |
136 |
|
|
542 |
|
|
194 |
|
|
998 |
|
Net cash (used in) provided by operating activities |
(46,445 |
) |
|
(26,982 |
) |
|
20,101 |
|
|
75,401 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
Proceeds from sale of precious metals |
— |
|
|
— |
|
|
1,610 |
|
|
— |
|
Investment in precious metals |
— |
|
|
— |
|
|
(1,633 |
) |
|
— |
|
Disbursement of note receivable |
(250 |
) |
|
(3,050 |
) |
|
(868 |
) |
|
(8,050 |
) |
Cost method investments |
(1,188 |
) |
|
(4,000 |
) |
|
(1,938 |
) |
|
(4,000 |
) |
Equity method investment |
(2,000 |
) |
|
— |
|
|
(2,000 |
) |
|
38 |
|
Acquisitions of businesses, net of cash acquired |
— |
|
|
1,220 |
|
|
28 |
|
|
(9,381 |
) |
Expenditures for fixed assets, including internal-use software and
website development |
(16,450 |
) |
|
(42,848 |
) |
|
(45,883 |
) |
|
(83,322 |
) |
Other |
(115 |
) |
|
30 |
|
|
(118 |
) |
|
(91 |
) |
Net cash used in investing activities |
(20,003 |
) |
|
(48,648 |
) |
|
(50,802 |
) |
|
(104,806 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
Paydown on direct financing arrangement |
— |
|
|
(54 |
) |
|
— |
|
|
(212 |
) |
Payments on finance obligations |
(1,622 |
) |
|
(797 |
) |
|
(2,731 |
) |
|
(901 |
) |
Payments on interest swap |
— |
|
|
(339 |
) |
|
(224 |
) |
|
(396 |
) |
Proceeds from finance obligations |
— |
|
|
6,074 |
|
|
5,325 |
|
|
11,772 |
|
Proceeds from short-term debt |
— |
|
|
— |
|
|
— |
|
|
5,000 |
|
Payments on short-term debt |
— |
|
|
— |
|
|
— |
|
|
(750 |
) |
Proceeds from long-term debt |
— |
|
|
23,652 |
|
|
12,621 |
|
|
33,140 |
|
Payments on long-term debt |
(469 |
) |
|
— |
|
|
(469 |
) |
|
— |
|
Change in restricted cash |
75 |
|
|
— |
|
|
75 |
|
|
75 |
|
Proceeds from exercise of stock options |
654 |
|
|
— |
|
|
1,473 |
|
|
— |
|
Proceeds from rights offering, net of offering costs |
— |
|
|
— |
|
|
7,591 |
|
|
— |
|
Purchase of treasury stock |
(11,085 |
) |
|
(602 |
) |
|
(11,323 |
) |
|
(607 |
) |
Payment of debt issuance costs |
(251 |
) |
|
— |
|
|
(251 |
) |
|
(621 |
) |
Net cash (used in) provided by financing activities |
(12,698 |
) |
|
27,934 |
|
|
12,087 |
|
|
46,500 |
|
Net (decrease) increase in cash and cash equivalents |
(79,146 |
) |
|
(47,696 |
) |
|
(18,614 |
) |
|
17,095 |
|
Cash and cash equivalents, beginning of period |
183,098 |
|
|
170,262 |
|
|
122,566 |
|
|
105,471 |
|
Cash and cash equivalents, end of period |
$ |
103,952 |
|
|
$ |
122,566 |
|
|
$ |
103,952 |
|
|
$ |
122,566 |
|
|
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.
OSTK 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 includes Medici and equity method investments. We do not allocate assets between our segments for our internal management
purposes.
Contribution, contribution margin, OSTK 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 includes Medici and equity method investments) are set forth below (in thousands):
|
Three months ended
June 30, |
|
Direct |
Partner |
Retail Total |
|
Other |
|
Total |
2017 |
|
|
|
|
|
|
|
Total net revenue |
$ |
22,099 |
|
$ |
405,856 |
|
$ |
427,955 |
|
|
$ |
4,069 |
|
|
$ |
432,024 |
|
Cost of goods sold |
21,147 |
|
323,892 |
|
345,039 |
|
|
2,814 |
|
|
347,853 |
|
Gross profit |
$ |
952 |
|
$ |
81,964 |
|
$ |
82,916 |
|
|
$ |
1,255 |
|
|
$ |
84,171 |
|
Less: Sales and marketing expense |
|
|
43,077 |
|
|
220 |
|
|
43,297 |
|
Plus: Club O Rewards and gift card breakage (included in Other income (expense),
net) |
|
|
561 |
|
|
— |
|
|
561 |
|
Contribution |
|
|
$ |
40,400 |
|
|
$ |
1,035 |
|
|
$ |
41,435 |
|
Contribution margin |
|
|
9.4 |
% |
|
25.4 |
% |
|
9.6 |
% |
|
|
|
|
|
|
|
|
2016 |
|
|
|
|
|
|
|
Total net revenue |
$ |
24,630 |
|
$ |
390,143 |
|
$ |
414,773 |
|
|
$ |
3,767 |
|
|
$ |
418,540 |
|
Cost of goods sold |
23,098 |
|
316,623 |
|
339,721 |
|
|
2,497 |
|
|
342,218 |
|
Gross profit |
$ |
1,532 |
|
$ |
73,520 |
|
$ |
75,052 |
|
|
$ |
1,270 |
|
|
$ |
76,322 |
|
Less: Sales and marketing expense |
|
|
33,192 |
|
|
161 |
|
|
33,353 |
|
Plus: Club O Rewards and gift card breakage (included in Other income (expense),
net) |
|
|
3,916 |
|
|
— |
|
|
3,916 |
|
Contribution |
|
|
$ |
45,776 |
|
|
$ |
1,109 |
|
|
$ |
46,885 |
|
Contribution margin |
|
|
11.0 |
% |
|
29.4 |
% |
|
11.2 |
% |
|
Six months ended
June 30, |
|
Direct |
Partner |
Retail Total |
|
Other |
|
Total |
2017 |
|
|
|
|
|
|
|
Total net revenue |
$ |
44,927 |
|
$ |
811,117 |
|
$ |
856,044 |
|
|
$ |
8,415 |
|
|
$ |
864,459 |
|
Cost of goods sold |
42,110 |
|
645,189 |
|
687,299 |
|
|
6,082 |
|
|
693,381 |
|
Gross profit |
$ |
2,817 |
|
$ |
165,928 |
|
$ |
168,745 |
|
|
$ |
2,333 |
|
|
$ |
171,078 |
|
Less: Sales and marketing expense |
|
|
80,402 |
|
|
513 |
|
|
80,915 |
|
Plus: Club O Rewards and gift card breakage (included in Other income (expense),
net) |
|
|
1,232 |
|
|
— |
|
|
1,232 |
|
Contribution |
|
|
$ |
89,575 |
|
|
$ |
1,820 |
|
|
$ |
91,395 |
|
Contribution margin |
|
|
10.5 |
% |
|
21.6 |
% |
|
10.6 |
% |
|
|
|
|
|
|
|
|
2016 |
|
|
|
|
|
|
|
Total net revenue |
$ |
51,281 |
|
$ |
774,412 |
|
$ |
825,693 |
|
|
$ |
6,524 |
|
|
$ |
832,217 |
|
Cost of goods sold |
48,504 |
|
625,920 |
|
674,424 |
|
|
4,164 |
|
|
678,588 |
|
Gross profit |
$ |
2,777 |
|
$ |
148,492 |
|
$ |
151,269 |
|
|
$ |
2,360 |
|
|
$ |
153,629 |
|
Less: Sales and marketing expense |
|
|
64,503 |
|
|
306 |
|
|
64,809 |
|
Plus: Club O Rewards and gift card breakage (included in Other income (expense),
net) |
|
|
8,085 |
|
|
— |
|
|
8,085 |
|
Contribution |
|
|
$ |
94,851 |
|
|
$ |
2,054 |
|
|
$ |
96,905 |
|
Contribution margin |
|
|
11.5 |
% |
|
31.5 |
% |
|
11.6 |
% |
|
Our calculations of OSTK Retail Total (which consists of Direct and Partner) and Other (which includes Medici and equity method
investments) pre-tax income or loss are set forth below excluding intercompany transactions eliminated in consolidation (in
thousands):
|
Three months ended
June 30, |
|
Direct |
Partner |
Retail Total |
|
Other |
|
Total |
2017 |
|
|
|
|
|
|
|
Revenue, net |
$ |
22,099 |
|
$ |
405,856 |
|
$ |
427,955 |
|
|
$ |
4,069 |
|
|
$ |
432,024 |
|
Cost of goods sold |
21,147 |
|
323,892 |
|
345,039 |
|
|
2,814 |
|
|
347,853 |
|
Gross profit |
$ |
952 |
|
$ |
81,964 |
|
$ |
82,916 |
|
|
$ |
1,255 |
|
|
$ |
84,171 |
|
Operating expenses |
|
|
89,325 |
|
|
4,577 |
|
|
93,902 |
|
Interest and other income (expense), net |
|
|
13 |
|
|
— |
|
|
13 |
|
Pre-tax loss |
|
|
(6,396 |
) |
|
(3,322 |
) |
|
(9,718 |
) |
Benefit for income taxes |
|
|
(176 |
) |
|
(1,799 |
) |
|
(1,975 |
) |
Net loss |
|
|
$ |
(6,220 |
) |
|
$ |
(1,523 |
) |
|
$ |
(7,743 |
) |
|
|
|
|
|
|
|
|
2016 |
|
|
|
|
|
|
|
Revenue, net |
$ |
24,630 |
|
$ |
390,143 |
|
$ |
414,773 |
|
|
$ |
3,767 |
|
|
$ |
418,540 |
|
Cost of goods sold |
23,098 |
|
316,623 |
|
339,721 |
|
|
2,497 |
|
|
342,218 |
|
Gross profit |
$ |
1,532 |
|
$ |
73,520 |
|
$ |
75,052 |
|
|
$ |
1,270 |
|
|
$ |
76,322 |
|
Operating expenses |
|
|
77,625 |
|
|
4,206 |
|
|
81,831 |
|
Interest and other income (expense), net |
|
|
3,987 |
|
|
64 |
|
|
4,051 |
|
Pre-tax income (loss) |
|
|
1,414 |
|
|
(2,872 |
) |
|
(1,458 |
) |
Provision (benefit) for income taxes |
|
|
868 |
|
|
(1,111 |
) |
|
(243 |
) |
Net income (loss) |
|
|
$ |
546 |
|
|
$ |
(1,761 |
) |
|
$ |
(1,215 |
) |
|
Six months ended
June 30, |
|
Direct |
Partner |
Retail Total |
|
Other |
|
Total |
2017 |
|
|
|
|
|
|
|
Revenue, net |
$ |
44,927 |
|
$ |
811,117 |
|
$ |
856,044 |
|
|
$ |
8,415 |
|
|
$ |
864,459 |
|
Cost of goods sold |
42,110 |
|
645,189 |
|
687,299 |
|
|
6,082 |
|
|
693,381 |
|
Gross profit |
$ |
2,817 |
|
$ |
165,928 |
|
$ |
168,745 |
|
|
$ |
2,333 |
|
|
$ |
171,078 |
|
Operating expenses |
|
|
173,863 |
|
|
9,259 |
|
|
183,122 |
|
Interest and other income (expense), net (1) |
|
|
115 |
|
|
(4,411 |
) |
|
(4,296 |
) |
Pre-tax loss |
|
|
(5,003 |
) |
|
(11,337 |
) |
|
(16,340 |
) |
Benefit for income taxes |
|
|
713 |
|
|
(3,028 |
) |
|
(2,315 |
) |
Net loss |
|
|
$ |
(5,716 |
) |
|
$ |
(8,309 |
) |
|
$ |
(14,025 |
) |
|
|
|
|
|
|
|
|
2016 |
|
|
|
|
|
|
|
Revenue, net |
$ |
51,281 |
|
$ |
774,412 |
|
$ |
825,693 |
|
|
$ |
6,524 |
|
|
$ |
832,217 |
|
Cost of goods sold |
48,504 |
|
625,920 |
|
674,424 |
|
|
4,164 |
|
|
678,588 |
|
Gross profit |
$ |
2,777 |
|
$ |
148,492 |
|
$ |
151,269 |
|
|
$ |
2,360 |
|
|
$ |
153,629 |
|
Operating expenses |
|
|
133,005 |
|
|
8,320 |
|
|
141,325 |
|
Interest and other income (expense), net |
|
|
8,232 |
|
|
64 |
|
|
8,296 |
|
Pre-tax income (loss) |
|
|
26,496 |
|
|
(5,896 |
) |
|
20,600 |
|
Provision (benefit) for income taxes |
|
|
10,913 |
|
|
(2,192 |
) |
|
8,721 |
|
Net income (loss) |
|
|
$ |
15,583 |
|
|
$ |
(3,704 |
) |
|
$ |
11,879 |
|
___________________________________________
(1) — Interest and other income (expense), net for the Other segment includes a $4.5 million impairment charge related to a
cost method investment.
Media Contact: Mark Delcorps, Overstock.com, Inc. +1 (801) 947-3564 pr@overstock.com Investor Contact: Brian Keller, Overstock.com, Inc. +1 (801) 947-5374 ir@overstock.com
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