2014

Overstock.com Reports Q1 2012 Results Net income of $2.7M

SALT LAKE CITY, April 19, 2012 /PRNewswire/ -- Overstock.com, Inc. (NASDAQ: OSTK) today reported financial results for the quarter ended March 31, 2012.

Key Q1 2012 metrics (comparison to Q1 2011):

  • Revenue:  $262.4M vs. $265.5M (1% decrease);
  • Gross margin: 18.1% vs. 18.9% (80 basis point decrease);
  • Gross profit:  $47.5M vs. $50.1M (5% decrease);
  • Sales and marketing expense: $14.5M vs. $15.4M (6% decrease);
  • Contribution (non-GAAP measure): $33.0M vs. $34.7M (5% decrease);
  • G&A/Technology expense: $30.5M vs. $34.6M (12% decrease);
  • Net income (loss): $2.7M vs. $(444,000) ($3.2M increase); and
  • Diluted EPS: $0.12/share vs. $(0.02)/share ($0.14 increase).

The Company will hold a conference call and webcast to discuss its first quarter 2012 financial results on Thursday April 19, 2012 at 11:30 a.m. Eastern Time.

Webcast information

To access the live webcast and presentation slides, please go to http://investors.overstock.com. To listen to the conference call via telephone, dial (866) 551-1816 and enter conference ID 67534233 when prompted.  Participants outside the United States or Canada who do not have Internet access should dial (706) 758-1198 and enter conference ID 67534233 when prompted.

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 2:30 p.m. Eastern Time on Thursday, April 19, 2012, through 11:59 p.m. Eastern Time on Saturday, May 19, 2012.  To listen to the recorded webcast by phone, please dial (800) 585-8367 and enter conference ID 67534233 when prompted.  Outside the U.S. or Canada please dial +1 (404) 537-3406 and enter conference ID 67534233.

Please email questions to Kevin Moon at kmoon@overstock.com prior to the conference call.

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.

Net revenue — Total net revenue for the first fiscal quarter of 2012 and 2011 was $262.4 million and $265.5 million, respectively, a 1.2% decrease. The decline in revenue was primarily due to fewer orders from lower conversion rates. While marketing activities drove 10% more unique visitors to our website this quarter, customer orders decreased by 1% as conversion rates declined. Direct revenue was $40.9 million and $48.2 million for the same periods, a decrease of 15.1%, while fulfillment partner revenue increased by 1.9% to $221.5 million from $217.3 million

Gross profit — Gross profit for Q1 2012 and 2011 was $47.5 million and $50.1 million, respectively, a 5% decrease, representing 18.1% and 18.9% of total revenue for those respective periods. The decrease in gross profit was primarily due to higher fulfillment costs. Gross profit for the direct business decreased 36% to $3.3 million from $5.1 million, representing 8.0% and 10.7% of total direct revenue. Gross profit for the fulfillment partner business declined by 2% to $44.2 million from $45.0 million, representing 20.0% and 20.7% of total fulfillment partner revenue for the same periods.

Contribution (a non-GAAP financial measure) and contribution margin (a non-GAAP financial measure) — Contribution for Q1 2012 and 2011 was $33.0 million and $34.7 million, respectively, a 5% decrease. Contribution margin decreased by 50 basis points to 12.6% from 13.1% for the same periods.    

Contribution (a non-GAAP financial measure) (which we reconcile to "gross profit" in our statement of operations) consists 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. When viewed with our GAAP gross profit less sales and marketing expenses, we believe contribution and contribution margin provides management and users of the financial statements information about our ability to cover our operating costs, such as technology and general and administrative expenses. 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 non-operating income and expenses. Management compensates for these limitations when using this measure by looking at other GAAP measures, such as operating income (loss) and net income (loss). 

For further details on contribution and contribution margin, see the calculation of these non-GAAP financial measures and the reconciliation of contribution to gross profit below (in thousands):



Three months ended March 31,



2012



2011

Total net revenue


$

262,367

100%



$

265,470

100%

Cost of goods sold



214,859

81.9%




215,386

81.1%

Gross profit



47,508

18.1%




50,084

18.9%

Less: Sales and marketing expense



14,475

5.5%




15,425

5.8%

Contribution and contribution margin


$

33,033

12.6%



$

34,659

13.1%

Sales and marketing expenses — Sales and marketing expenses totaled $14.5 million and $15.4 million for Q1 2012 and 2011, respectively, a 6% decrease, and representing 5.5% and 5.8% of total net revenue for those periods. Decreased spending in television advertising and lower compensation-related costs from reduced staffing were the primary reasons for the year-over-year decrease.

Technology expenses — Technology expenses totaled $15.6 million and $16.7 million for Q1 2012 and 2011, respectively, a 6% decrease and representing 6.0% and 6.3% of total net revenue for those periods. The $1.1 million decrease is primarily due to decreases in compensation and recruiting-related costs from reduced staffing.

General and administrative ("G&A") expenses — G&A expenses totaled $14.8 million and $18.0 million for Q1 2012 and 2011, respectively, an 18% decrease, and representing approximately 5.6% and 6.8% of total net revenue for those periods. The $3.2 million decrease is largely due to decreases in legal fees and compensation-related costs from reduced staffing.

Restructuring — Restructuring costs were $98,000 in Q1 2012 and $0 in Q1 2011. The $98,000 was primarily due to ceasing the use of our office space in Provo, Utah.

Operating income — Operating income for Q1 2012 was $2.5 million compared to $13,000 in Q1 2011, a $2.5 million increase.   

Interest income — Interest income for Q1 2012 and Q1 2011 was $29,000 and $52,000, respectively.

Interest expense — Interest expense for Q1 2012 and Q1 2011 was $208,000 and $676,000 respectively, a decrease of 69%. The decrease in interest expense is primarily the result of the extinguishment of our Senior Notes and US Bank finance obligations in 2011.

Other income, net — Other income, net for Q1 2012 and Q1 2011 was $432,000 and $189,000, respectively. The increase was primarily due to increased gift card and Club O rewards breakage.

Income taxes — The income tax provision for Q1 2012 and Q1 2011 was $9,000 and $22,000, respectively. This income tax provision is for state minimum tax payments and certain income tax uncertainties, including interest and penalties.  

Net income (loss) — Net income for Q1 2012 was $2.7 million, or $0.12 per share on a fully diluted basis, compared to net loss of $(444,000), or $(0.02) per share on a fully diluted basis for Q1 2011.

Free cash flow (a non-GAAP financial measure) — Free cash flow for the twelve months ended March 31, 2012 and 2011 totaled $3.5 million and $17.5 million, respectively.  The $14.0 million year over year decrease was primarily due to a $22.6 million decrease in operating cash flows and an $8.5 million reduction in capital expenditures from the twelve month periods ending Q1 2012 compared to Q1 2011.  

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 (used in) 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. However, 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 future investment, debt retirement or other changes to our capital structure after we have paid all of our expenses. Therefore, we believe it is important to view free cash flow as a complement to our entire consolidated statements of cash flows. 

Our calculation of free cash flow is set forth below (in thousands):



Three months ended  

March 31,


Twelve months ended

March 31,



2012


2011


2012


2011

Net cash provided by (used in) operating activities


$

(22,234)


$

(9,228)


$

12,657


$

35,260

Expenditures for fixed assets, including internal-use software and website development



(2,127)



(1,676)



(9,192)



(17,721)

Free cash flow


$

(24,361)


$

(10,904)


$

3,465


$

17,539

Cash and working capital — We had cash and cash equivalents of $72.1 million and $97.0 million and working capital of $(9.0) million and $(14.1) million at March 31, 2012 and December 31, 2011, respectively. 

About Overstock.com Overstock.com is a technology-based retail company offering customers a wide variety of high-quality products, at great value, with superior customer service. The company provides its customers with the opportunity to shop for bargains by offering suppliers an alternative inventory distribution channel. Headquartered in Salt Lake City, Overstock.com is a publicly traded company listed on the NASDAQ Global Market System and can be found online at http://www.overstock.com and http://www.o.co.  Overstock.com regularly posts information about the company and other related matters on its website under the heading "Investor Relations."

Overstock.com®, O.co®, Worldstock Fair Trade® and Club O Rewards® are registered trademarks of Overstock.com, Inc.  O.info™, Club O™, and Club O Rewards Dollars™ and Your Savings Engine™ are trademarks of Overstock.com, Inc. All other trademarks are the property of their respective owners.

This press release contains certain 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. Our Annual Report on Form 10-K for the year ended December 31, 2011 that was filed on March 2, 2012, 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 or forward-looking statements.

Overstock.com, Inc.

Consolidated Statements of Operations  and 

Comprehensive Income (Loss) (Unaudited)

(in thousands, except per share data)










Three months ended                  March 31,



2012


2011

Revenue, net





Direct 


$

40,897


$

48,161

Fulfillment partner 



221,470



217,309

Total net revenue



262,367



265,470

Cost of goods sold







Direct 



37,630



43,030

Fulfillment partner



177,229



172,356

Total cost of goods sold



214,859



215,386

Gross profit



47,508



50,084

Operating expenses:







Sales and marketing



14,475



15,425

Technology



15,638



16,660

General and administrative



14,822



17,986

Restructuring



98



-

Total operating expenses



45,033



50,071

Operating income



2,475



13

Interest income



29



52

Interest expense



(208)



(676)

Other income, net



432



189

Income (loss) before income taxes



2,728



(422)

Provision for income taxes



9



22

Net income (loss)


$

2,719


$

(444)

Deemed dividend related to redeemable common stock


-



(10)

Net income (loss) attributable to common shares


$

2,719


$

(454)

Net income (loss) per common share—basic:







Net income (loss) attributable to common shares—basic


$

0.12


$

(0.02)

Weighted average common shares outstanding—basic 



23,392



23,215

Net income (loss) per common share—diluted:







Net income (loss) attributable to common shares—diluted


$

0.12


$

(0.02)

Weighted average common shares outstanding—diluted



23,414



23,215








Comprehensive income (loss)


$

2,719


$

(444)








Other data:





Gross bookings


$

291,981


$

294,213

 

Overstock.com, Inc.

Consolidated Balance Sheets (Unaudited)

(in thousands)










March 31,


December 31,



2012


2011

Assets




Current assets:





Cash and cash equivalents


$

72,105


$

96,985

Restricted cash



2,053



2,036

Accounts receivable, net



11,941



13,501

Inventories, net



16,645



22,993

Prepaid inventories, net



1,910



1,027

Prepaids and other assets



9,140



12,651

Total current assets



113,794



149,193

Fixed assets, net

23,345



25,322

Goodwill



2,784



2,784

Other long-term assets, net



1,792



2,260

Total assets


$

141,715


$

179,559

Liabilities and Stockholders' Equity






Current liabilities:







Accounts payable


$

42,804


$

70,332

Accrued liabilities



36,127



47,902

Deferred revenue



26,814



27,978

Line of credit



17,000



17,000

Capital lease obligations, current



33



110

Total current liabilities



122,778



163,322

Capital lease obligations, non-current



2



2

Other long-term liabilities



2,630



2,998

Total liabilities



125,410



166,322








Stockholders' equity:





Common stock


2



2

Additional paid-in capital



354,181



353,368

Accumulated deficit



(259,046)



(261,765)

Treasury stock


(78,832)



(78,368)

Total stockholders' equity



16,305



13,237

Total liabilities and stockholders' equity


$

141,715


$

179,559

 

Overstock.com, Inc.

Consolidated Statements of Cash Flows

 (Unaudited)

(in thousands)
















Three months ended 

March 31,


Twelve months ended 

March 31,



2012


2011


2012


2011

Cash flows from operating activities:











Net income (loss)


$

2,719


$

(444)


$

(16,275)


$

9,715

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:













Depreciation and amortization



4,034



3,999



16,385



15,485

Realized gain from sale of marketable securities



(7)



-



(7)



-

Loss on disposition of fixed asset



85



-



85



-

Stock-based compensation to employees and directors



813



876



2,988



4,717

Amortization of deferred loan costs and debt discount



35



34



128



322

(Gain) loss from early extinguishment of debt



-



27



1,226



(319)

Restructuring charges (reversals)



98



-



98



(433)

Changes in operating assets and liabilities:













Restricted cash



(17)



159



330



646

Accounts receivable, net



1,560



5,679



(4,060)



530

Inventories, net



6,348



11,951



3,518



(522)

Prepaid inventories, net



(883)



296



(124)



1,684

Prepaids and other assets



3,156



1,119



1,581



106

Other long-term assets, net



694



290



244



1,101

Accounts payable



(27,587)



(28,029)



3,386



724

Accrued liabilities



(12,211)



(3,307)



(1,952)



755

Deferred revenue



(1,164)



(1,908)



4,695



924

Other long-term liabilities



93



30



411



(175)

Net cash provided by (used in) operating activities



(22,234)



(9,228)



12,657



35,260

Cash flows from investing activities:













Purchases of marketable securities



(38)



(39)



(159)



(145)

Purchases of intangible assets



-



-



(4)



(396)

Sale of marketable securities 



117



-



117



-

Investment in precious metals



-



-



-



(1,657)

Expenditures for fixed assets, including internal-use software and website development



(2,127)



(1,676)



(9,192)



(17,721)

Net cash used in investing activities



(2,048)



(1,715)



(9,238)



(19,919)

Cash flows from financing activities:













Payments on capital lease obligations



(77)



(72)



(735)



(509)

Drawdowns on line of credit



-



-



17,000



-

Capitalized financing costs



-



-



(140)



-

Proceeds from finance obligations



-



-



1,429



16,383

Payments on finance obligations



-



(979)



(23,939)



(1,820)

Paydown on direct financing arrangement



(57)



(52)



(221)



(201)

Payments to retire convertible senior notes



-



(10,110)



(24,505)



(34,975)

Purchase of redeemable stock



-



-



-



(26)

Purchase of treasury stock



(464)



(1,589)



(479)



(1,622)

Exercise of stock options



-



-



-



1,503

Net cash used in financing activities



(598)



(12,802)



(31,590)



(21,267)

Net decrease in cash and cash equivalents



(24,880)



(23,745)



(28,171)



(5,926)

Cash and cash equivalents, beginning of period



96,985



124,021



100,276



106,202

Cash and cash equivalents, end of period 


$

72,105


$

100,276


$

72,105


$

100,276

SOURCE Overstock.com, Inc.



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