Overstock.com Investor

Press Release

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July 29, 2002 at 12:00 AM EDT
Overstock.com Announces Second Quarter 2002 Results

SALT LAKE CITY--(BUSINESS WIRE)--July 29, 2002--

  • Gross Merchandise Sales $26.1 Million, Up 102% -- -- GAAP Revenue $14.4 Million, Up 94% --
  • GAAP Gross Profit $2.5 Million, Up 240% -- -- GAAP Gross Margins Increased from 10% to 18% --
  • CPA (B2C) Decreased from $25.15 to $9.68 --

Overstock.com Inc. (Nasdaq:OSTK - News), a leading closeout retailer, today announced financial results for the second quarter ended June 30, 2002.

For the quarter, Overstock.com reported gross merchandise sales of $26.1 million, a 102% increase over the $12.9 million recorded in the same period a year ago and up 22% from Q1 2002. Gross merchandise sales represents the gross sales price of goods sold by the company, which varies from GAAP revenue.

GAAP revenue was $14.4 million, a 94% increase over the $7.4 million recorded in the same period a year ago and up 19% from Q1 2002. GAAP gross profit was $2.5 million, a 240% increase over the $749,000 recorded in the same period a year ago and up 23% from Q1 2002. GAAP gross margins for the quarter improved to 18% compared to 10% for the same period last year and 17% during the first quarter of 2002.

Loss from operations, excluding amortization of stock-based compensation, for the second quarter was $959,000 or $0.08 loss per share, compared to $3.9 million or $0.35 loss per share a year earlier. GAAP net loss for the second quarter was $2.4 million or $0.20 loss per share compared to $3.8 million or $0.35 loss per share, a year earlier.

Patrick M. Byrne, CEO of Overstock.com stated, "First, I welcome our new shareholders and to them commit this: I intend to set the gold standard in communicating our results (good and bad) transparently and honestly, while striving to enable you to understand the business you bought."

Continuing, Byrne said, "The second quarter was marked by rapid revenue acceleration and improving operating metrics. These results reflect operating discipline, a solid infrastructure, and a dedicated team. In addition, we raised $28 million in an IPO conducted in a hostile business environment. I am satisfied with this quarter's results, but see opportunities to improve."

Key Financial and Operating Metrics

Gross Merchandise Sales -- Overstock.com reported gross merchandise sales of $26.1 million for the quarter, a 102% increase over the $12.9 million posted in Q2 2001.

GAAP Revenue -- Overstock.com reported GAAP revenue in the quarter of $14.4 million, up 94% from the $7.4 million recorded in Q2 2001.

GAAP Gross Profit -- Overstock.com reported GAAP gross profit of $2.5 million in Q2 2002, a 240% year-over-year increase from the $749,000 posted in Q2 2001.

GAAP Gross Margin -- During the quarter, Overstock.com reported GAAP gross margin of 18%, an 8% improvement as compared to 10% recorded in Q2 2001.

Sales & Marketing (%) -- Overstock.com reported that sales and marketing as a percentage of sales was 9% for the quarter, down from the 23% posted in Q2 2001.

Direct and Commission Revenue -- Overstock.com reported that direct revenue and commission revenue were 82% and 16% of total revenue, respectively. This compares to direct revenue of 91% and commission revenue of 9% in Q2 2001.

Byrne continued, "We have consistently stated that gross merchandise sales and gross profit dollars are our two most important financial metrics. Gross merchandise sales increased in the second quarter by 102% compared to prior year, versus a 35% year-over-year growth rate in the first quarter. GAAP gross profit dollars were up 240% compared to prior year.

"We attribute the growth in gross merchandise sales to improved product selection and value for the consumer, and the fact that small retailers who compete with big-box chain stores are discovering the advantages that OverstockB2B.com offers them. We attribute the 240% gain in gross profit dollars to the increase in gross merchandise sales combined with tight operating discipline."

Byrne concluded, "We reduced our CPA (Cost Per Customer Acquisition) to $9.68 vs. $25.15 last year. We did this by eliminating marketing theory from our marketing department."

"Our focus in the third quarter is, first, finding large marketing deals. Typical of such deals are our recently announced iVillage `Powered-By Overstock' shopping site, and a large marketing agreement we have forged with MSN.

"While we are pursuing such large marketing deals, we will not become undisciplined: we will continue to structure marketing deals where we can make money on the customer's first buy. Second, we will continue to improve our value proposition, as evidenced by the values found in the expanded watch department we unveiled this weekend."

In conjunction with its second quarter earnings release, Overstock.com will broadcast its conference call live over the Internet on July 29, 2002 at 4:30 p.m. ET. Interested parties are invited to listen by logging on to http://www.shareholder.com/overstock/MediaList.cfm.

About Overstock.com

Overstock.com Inc. is a leading online "closeout" retailer offering discount, brand-name merchandise over the Internet. The company offers its customers an opportunity to shop for bargains conveniently, while offering its suppliers an alternative inventory liquidation distribution channel.

Note Regarding Forward-Looking Statements

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, but are not limited to, statements regarding our intentions to enter into marketing relationships, our intentions with respect to the communication of our results, expected benefits resulting from our agreements with iVillage Inc. and Microsoft, and the expected results of our B2B operations.

These forward-looking statements involve certain risks and uncertainties that could cause actual results to differ, including, but not limited to, our limited operating history, our ability to manage growth, any deterioration of our relationships with iVillage Inc. and Microsoft, market acceptance of our B2B services, a general downturn in economic conditions, and such other risks as identified in our Prospectus dated May 29, 2002, filed with the Securities and Exchange Commission and all subsequent filings with the Securities and Exchange Commission, which contain and identify important factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements.