GlobeNewswire Inc | Oct 29, 2020 08:00AM EDT

October 29, 2020

SALT LAKE CITY, Oct. 29, 2020 (GLOBE NEWSWIRE) -- Overstock.com, Inc. (NASDAQ:OSTK) today reported financial results for the quarter ended September30, 2020.

Third Quarter Financial Highlights

-- Total net revenue was $732 million, an increase of 111% year over year -- Gross profit was $171 million or 23% of total net revenue, an increase of 330 basis points year over year -- Net income attributable to stockholders of Overstock.com, Inc. was $23 million, an improvement of $54 million year over year -- Diluted earnings per share was $0.50, an improvement of $1.39 year over year -- Adjusted EBITDA (non-GAAP) was $40 million, an improvement of $58 million year over year -- YTD net cash provided by operating activities was $199 million, an improvement of $288 million year over year -- YTD free cash flow (non-GAAP) improved $291 million year over year -- At the end of the third quarter, cash and cash equivalents totaled $530 million

"After a record-setting second quarter, we maintained our momentum, continued to outperform expectations, and grew faster than competitors in the third quarter," said Overstock CEO Jonathan Johnson. "Our quarterly gross sales in our Retail business doubled year over year once again and new customers grew 141%. These new customers are making repeat purchases at an increasing rate. Heading into the fourth quarter, I am as confident as ever in our Retail business maintaining sustainable, profitable market share growth."

"Our Medici Ventures blockchain-based businesses also continue to make meaningful advancements," said Johnson. "tZERO received FINRA approval to provide retail brokerage services for digital securities through its subsidiary, tZERO Markets, which officially launched last week. Several of our Medici Ventures companies are raising capital, most are getting products into production, and many are generating revenue. Our organization remains focused and disciplined. We continue to execute against our strategic initiatives that are driving growth and delivering profitability. I look forward to providing an update on our progress and performance during our earnings call."

Other Third Quarter Financial Highlights

-- Retail income before income taxes was $43 million, an improvement of $52 million year over year -- Retail Adjusted EBITDA (non-GAAP) was $50 million, or 7% of Retail net revenue, an improvement of $51 million (or 720 basis points) year over year -- Consolidated G&A expenses increased by $2 million but improved by 470 basis points as a percentage of total net revenue year over year -- tZERO net revenue was $11 million, an increase of 97% year over year, primarily due to SpeedRoute trading volume

Third Quarter Operational Highlights

-- Newly acquired Retail customers increased 141% year over year -- Gross sales from orders placed on a mobile device were 50% of Retail gross sales in the third quarter of 2020 compared to 44% in the third quarter of 2019 -- Volume on the tZERO ATS increased 856% to a record 4 million shares (equivalent to $39 million in value of shares traded)

Capital Raise

During the third quarter, Overstock announced and completed a public offering of common stock. The size of the offering was increased from its initial announcement due to increased demand, and the underwriters fully exercised the over-allotment option. The offering was completed on August 14, 2020, whereby we issued 2,415,000 shares of common stock at a price of $84.50 per share, raising net proceeds of approximately $193 million. The capital raise was opportunistic in nature, and proceeds will be used to support our continued growth trajectory.

COVID-19 Update

Overstock has continued to respond to the challenges and opportunities created by the COVID-19 pandemic. In our Retail business, customer demand continued to increase significantly in the third 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. Our Retail gross sales again grew more than 100% year over year in Q3. Our online-only platform and partner network with thousands of fulfillment centers has enabled us to meet this increase in demand. Our three warehouses have remained operational based on our sustained implementation of sound safety measures, including staggered shifts and social distancing. We are also hiring in key areas throughout the company to support our current and expected growth. We continue to face challenges created by the sharp increase in volume, in customer service channels and in fulfillment and delivery, stemming from capacity issues from shipping carriers and some suppliers, including out-of-stock positions on some of our top performing products. Most of our Medici Ventures blockchain companies have seen relatively little disruption, and several are working on solutions to problems exacerbated by the global pandemic. We have evaluated and implemented a phased re-entry plan for our offices; 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 required us to reduce our capital expenditures.

Earnings Webcast Information

The company will hold a conference call and webcast to discuss its Q3 2020 financial results on Thursday, October29, 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 4293477 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.comstarting 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, October29, 2020, through 11:30 a.m. ET on Thursday, November12, 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.

Questions may be emailed 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' tZEROplatform: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, dcor, 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 trademarksof Overstock.com, Inc.Other service marks, trademarks and trade names which may be referred to hereinare the property of their respective owners.

Cautionary Note Regarding Forward-Looking Statements

This press release and the October 29, 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 are included in our Form 10-K for the year ended December 31, 2019, our Form 10-Q for the quarter ended March 31, 2020, and our Form 10-Q for the quarter ended June 30, 2020, which were filed with the Securities and Exchange Commission on March 13, 2020, May 7, 2020, and August 6, 2020, respectively, and in our subsequent filings with the Securities and Exchange Commission. The Form 10-K, 10-Q's, 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: Media Relations:Alexis Callahan Megan Herrick801-947-5126 801-947-3564ir@overstock.com pr@overstock.com

Overstock.com,Inc.Consolidated Balance Sheets (Unaudited)(in thousands, except per share data)

September30, December31, 2020 2019Assets Current assets: Cash and cash equivalents $ 529,710 $ 112,266 Restricted cash 2,570 2,632 Marketable securities at fair value 1,355 10,308 Accounts receivable, net of allowance for creditlosses of $2,053 and $2,474 at September 30, 2020 35,403 24,728 and December 31, 2019, respectivelyInventories 6,867 5,840 Prepaids and other current assets 19,704 21,589 Total current assets 595,609 177,363 Property and equipment, net 125,142 130,028 Intangible assets, net 9,009 11,756 Goodwill 27,120 27,120 Equity securities 48,983 42,043 Operating lease right-of-use assets 25,402 25,384 Other long-term assets, net 11,717 4,033 Total assets $ 842,982 $ 417,727 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 119,663 $ 75,416 Accrued liabilities 145,668 88,197 Unearned revenue 78,757 41,821 Operating lease liabilities, current 5,959 6,603 Other current liabilities 3,803 3,962 Total current liabilities 353,850 215,999 Long-term debt, net 42,148 ? Operating lease liabilities, non-current 21,640 21,554 Other long-term liabilities 6,038 2,319 Total liabilities 423,676 239,872 Commitments and contingencies Stockholders' equity: Preferred stock, $0.0001 par value, authorized shares - 5,000Series A-1, issued and outstanding - 4,204 and ? ? 4,210Series B, issued and outstanding - 357 and 357 ? ? Common stock, $0.0001 par value, authorized shares - 100,000Issued shares - 46,317 and 42,790 Outstanding shares - 42,758 and 39,464 4 4 Additional paid-in capital 966,299 764,845 Accumulated deficit (537,089 ) (580,390 )Accumulated other comprehensive loss (556 ) (568 )Treasury stock at cost - 3,559 and 3,326 (71,124 ) (68,807 )Equity attributable to stockholders of 357,534 115,084 Overstock.com, Inc.Equity attributable to noncontrolling interests 61,772 62,771 Total stockholders' equity 419,306 177,855 Total liabilities and stockholders' equity $ 842,982 $ 417,727

Overstock.com,Inc.Consolidated Statements of Operations (Unaudited)(in thousands, except per share data) Three months ended Nine months ended September 30, September 30, 2020 2019 2020 2019Revenue, net Retail $ 717,695 $ 340,798 $ 1,824,249 $ 1,070,898 Other 13,956 6,301 41,519 17,639 Total net revenue 731,651 347,099 1,865,768 1,088,537 Cost of goods sold Retail 548,982 272,545 1,403,418 858,169 Other 11,901 5,006 35,860 13,797 Total cost of goods 560,883 277,551 1,439,278 871,966 soldGross profit 170,768 69,548 426,490 216,571 Operating expenses: Sales and marketing 72,010 34,215 188,562 102,252 Technology 34,984 32,782 101,458 101,368 General and 34,225 32,681 94,022 104,877 administrativeTotal operating 141,219 99,678 384,042 308,497 expensesOperating income 29,549 (30,130 ) 42,448 (91,926 )(loss)Interest income 402 449 1,288 1,482 Interest expense (579 ) (57 ) (1,367 ) (289 )Other income (7,526 ) (4,781 ) (5,014 ) (14,048 )(expense), netIncome (loss) before 21,846 (34,519 ) 37,355 (104,781 )income taxesProvision for income 620 23 1,313 279 taxesNet income (loss) 21,226 (34,542 ) 36,042 (105,060 )Less: Net lossattributable to (2,165 ) (3,604 ) (7,372 ) (10,197 )noncontrollinginterestsNet income (loss)attributable to $ 23,391 $ (30,938 ) $ 43,414 $ (94,863 )stockholders ofOverstock.com, Inc.Net income (loss) pershare of common stock:Net income (loss)attributable to $ 0.50 $ (0.89 ) $ 1.00 $ (2.74 )common shares?basicNet income (loss)attributable to $ 0.50 $ (0.89 ) $ 0.99 $ (2.74 )common shares?dilutedWeighted averageshares of common stock outstanding:Basic 41,595 35,241 40,697 34,289 Diluted 42,202 35,241 41,030 34,289

Overstock.com,Inc.Consolidated Statements of Cash Flows (Unaudited)(in thousands) Nine months ended September 30, 2020 2019Cashflowsfromoperatingactivities: Consolidated net income (loss) $ 36,042 $ (105,060 )Adjustments to reconcile consolidated net income(loss) to net cash provided by (used in) operating activities:Depreciation and amortization 22,709 23,033 Non-cash operating lease cost 4,379 4,940 Stock-based compensation to employees and directors 8,356 13,623 Impairment of equity securities 813 6,964 Losses on equity method securities 11,909 4,922 Gain on disposal of business (10,705 ) ? Impairments on intangible assets ? 1,406 Other non-cash adjustments 2,587 1,978 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable, net (15,715 ) 12,858 Inventories (1,027 ) 6,864 Prepaids and other current assets (42 ) 5,473 Other long-term assets, net 26 (1,046 ) Accounts payable 44,101 (42,110 ) Accrued liabilities 59,657 (8,683 ) Unearned revenue 37,161 (10,066 ) Operating lease liabilities (4,954 ) (4,086 ) Other long-term liabilities 3,413 (205 ) Net cash provided by (used in) operating 198,710 (89,195 )activitiesCash flows from investing activities: Purchase of equity securities (1,553 ) (5,106 )Proceeds from sale of equity securities and 6,306 7,082 marketable securitiesAcquisitions of businesses, net of cash acquired ? 4,886 Expenditures for property and equipment (15,067 ) (17,902 )Deconsolidation of cash of Medici Land Governance, (4,056 ) ? Inc.Other investing activities, net (1,061 ) (3,219 )Net cash used in investing activities (15,431 ) (14,259 )Cash flows from financing activities: Payments on long-term debt (1,566 ) (3,141 )Proceeds from long-term debt 47,500 ? Proceeds from sale of common stock, net of offering 195,540 52,112 costsPayments of taxes withheld upon vesting of (2,317 ) (1,373 )restricted stockOther financing activities, net (5,054 ) (1,161 )Net cash provided by financing activities 234,103 46,437 Net increase (decrease) in cash, cash equivalents 417,382 (57,017 )and restricted cashCash, cash equivalents and restricted cash, 114,898 142,814 beginning of periodCash, cash equivalents and restricted cash, end of $ 532,280 $ 85,797 period

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 September 30, Retail tZERO MVI Other Total2020 Net revenue $ 717,695 $ 11,151 $ 2,805 $ ? $ 731,651 Cost of 548,982 9,098 2,803 ? 560,883 goods soldGross profit 168,713 2,053 2 ? 170,768 Operating 125,458 10,613 2,923 2,225 141,219 expensesInterest andother (205 ) (3,848 ) (3,650 ) ? (7,703 )expense, netIncome(loss) $ 43,050 $ (12,408 ) $ (6,571 ) $ (2,225 ) 21,846 beforeincome taxesProvisionfor income 620 taxesNet income $ 21,226 2019 Net revenue $ 340,798 $ 5,662 $ 639 $ ? $ 347,099 Cost of 272,545 4,367 639 ? 277,551 goods soldGross profit 68,253 1,295 ? ? 69,548 Operating 77,641 14,114 4,427 3,496 99,678 expensesInterest andother income 137 (475 ) (4,057 ) 6 (4,389 )(expense),netLoss before $ (9,251 ) $ (13,294 ) $ (8,484 ) $ (3,490 ) (34,519 )income taxesProvisionfor income 23 taxesNet loss $ (34,542 )

Nine months ended September 30, Retail tZERO MVI Other Total2020 Net revenue $ 1,824,249 $ 34,127 $ 7,230 $ 162 $ 1,865,768 Cost of 1,403,418 28,634 7,226 ? 1,439,278 goods soldGross profit 420,831 5,493 4 162 426,490 Operating 333,284 34,087 8,374 8,297 384,042 expensesInterest andother income (621 ) (6,898 ) 2,423 3 (5,093 )(expense),netIncome(loss) $ 86,926 $ (35,492 ) $ (5,947 ) $ (8,132 ) 37,355 beforeincome taxesProvisionfor income 1,313 taxesNet income $ 36,042 2019 Net revenue $ 1,070,898 $ 15,709 $ 1,930 $ ? $ 1,088,537 Cost of 858,169 11,867 1,930 ? 871,966 goods soldGross profit 212,729 3,842 ? ? 216,571 Operating 244,571 41,410 11,583 10,933 308,497 expensesInterest andother income 312 (1,098 ) (12,068 ) (1 ) (12,855 )(expense),netLoss before $ (31,530 ) $ (38,666 ) $ (23,651 ) $ (10,934 ) (104,781 )income taxesProvisionfor income 279 taxesNet loss $ (105,060 )

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, Free cash flow, Retail Contribution and Retail Contribution as a percentage of Retail 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 is a non-GAAP financial measure that is calculated as net income (loss) before depreciation and amortization, stock-based compensation, interest and other income (expense), provision (benefit) for income taxes, and special items. We 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 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.

Retail Contribution and Retail 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 Nine months ended September 30, September 30, 2020 2019 2020 2019 Net income (loss) $ 21,226 $ (34,542 ) $ 36,042 $ (105,060 )Depreciation and 7,592 7,518 22,709 21,596 amortization (1)Stock-based compensation 2,623 4,467 8,356 13,623 Interest (income) expense, 177 (392 ) 79 (1,193 )netOther expense, net 7,526 4,781 5,014 14,048 Provision for income taxes 620 23 1,313 279 Special items (see table 288 185 (8,087 ) 1,942 below)Adjusted EBITDA $ 40,052 $ (17,960 ) $ 65,426 $ (54,765 ) Segment Adjusted EBITDA Retail $ 50,249 $ (575 ) $ 101,395 $ (1,452 )tZERO (5,675 ) (11,233 ) (20,977 ) (33,169 )MVI (2,470 ) (2,691 ) (7,053 ) (9,285 )Other (2,052 ) (3,461 ) (7,939 ) (10,859 )Adjusted EBITDA $ 40,052 $ (17,960 ) $ 65,426 $ (54,765 ) Special items: Special legal charges (2) $ ? $ (1,221 ) $ (9,773 ) $ (1,221 )Severance 288 ? 1,686 1,757 Impairment on Intangible ? 1,406 ? 1,406 Assets $ 288 $ 185 $ (8,087 ) $ 1,942

__________________________________________(1) Depreciation and amortization for the nine months ended September 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):

Nine months ended September 30, 2020 2019Net cash provided by (used in) operating $ 198,710 $ (89,195 )activitiesExpenditures for property and equipment (15,067 ) (17,902 )Free cash flow $ 183,643 $ (107,097 )

The following table reflects the reconciliation of Retail Contribution to Retail Gross profit (in thousands):

Three months ended September 30, 2020 2019Retail: Net revenue $ 717,695 $ 340,798 Cost of goods sold 548,982 272,545 Gross profit 168,713 68,253 Less: Sales and marketing expense 71,231 33,551 Contribution $ 97,482 $ 34,702 Contribution margin 13.6 % 10.2 %