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Overstock.com Announces GAAP Revenue of $29 Million for the Second Quarter 2003

SALT LAKE CITY, Jul 30, 2003 /PRNewswire-FirstCall via COMTEX/ --

Overstock.com, Inc. (Nasdaq: OSTK) today announced its financial results for the second quarter ended June 30, 2003.

The Company reported GAAP total revenue of $28.8 million for the quarter, a 101% increase over the $14.4 million recorded in the same period a year ago. Net loss for the second quarter was $1.1 million or $0.07 loss per share compared to $2.4 million or $0.20 loss per share a year earlier.

"The year-over-year growth remained strong, and we significantly narrowed our loss this quarter compared to first quarter," said Patrick Byrne, CEO of Overstock.com(R). "Several factors contributed to our improved bottom line: In April we reduced our corporate payroll by 15% to better align expenses with revenues; we restructured or eliminated underperforming marketing programs, which has helped lower our marketing spend; and we improved our gross margins. In short, if this was a four round fight I'd say we were unexpectedly dropped to the canvas at the end of the first round, but we got our knees back under us in the second, and we are getting up on our toes again now."

    New streamlined return process results in change in revenue recognition

Overstock.com has changed its customer service and return policies and procedures to improve the shopping experience for customers. As a result, the way Overstock.com records revenue on some of its sales will change in the third quarter and thereafter.

As of July 1, 2003, the majority of customer returns will be handled through the Company's Salt Lake City warehouse, regardless of whether they were originally shipped by Overstock.com or shipped by an Overstock.com fulfillment partner. In addition, returned products that Overstock.com resells will be shipped to consumers from the Company's warehouse in Utah. As a result of this change, starting with its third quarter 2003 results, Overstock.com will record revenues generated from the Company's fulfillment partners on a gross basis instead of on a net basis as was previously the case. (Prior to the customer service and return policies and procedures change, Overstock.com GAAP gross sales included only the commission portion earned on products shipped by fulfillment partners.)

"We have always been committed to delivering a seamless customer experience, and I believe this change is good for Overstock.com's customers because it enables us to exercise comprehensive oversight of the entire consumer experience," said Byrne. "This change in operating procedures is causing us to switch our accounting from net treatment to gross treatment on products that are drop-shipped on our behalf. Therefore, we anticipate third- quarter GAAP revenues will increase dramatically. I emphasize, however, that this does not change the underlying economics of our business one iota, though it may help investors better understand those economics."


    Key Financial and Operating Metrics

GAAP total revenue -- Overstock.com reported GAAP revenue of $28.8 million, a 101% increase over the $14.4 million recorded in the same period a year ago.

GAAP gross profit -- Overstock.com reported GAAP gross profit was $4.8 million, an 88% increase over the $2.5 million recorded in the same period a year ago.

GAAP gross margins -- GAAP gross margins were 17% compared to 18% for second quarter 2002.

GAAP net loss -- Overstock.com reported a GAAP net loss of $1.1 million or $0.07 loss per share compared to $2.4 million or $0.20 loss per share a year earlier.

Gross merchandise sales -- Gross merchandise sales (non-GAAP) were $51.3 million, a 94% increase over the $26.5 million recorded in the same period a year ago. Gross merchandise sales represents the gross sales price of all sales transactions, including those for which the company only records a commission under generally accepted accounting principles, and therefore differs from GAAP revenue. The following table reconciles total revenue to gross merchandise sales:


                                    Three months ended
                                        (millions)
                                   ----------------- -----
                                   June 30,       June 30,
                                   2002           2003
                                   -------- -------- -----
     Total revenue                 $14.4          $28.8
      Add: Obligations payable to
       third parties upon sale
       of third-party merchandise  $9.5           $19.4
      Add: Sales returns and
       discounts                   $2.6           $3.1
                                   -------- -------- ------
     Gross merchandise sales
      (non-GAAP)                   $26.5          $51.3

Overstock.com had cash and marketable securities of $31.7 million at quarter end compared to $32.7 million on December 31, 2002.

About Overstock.com

Overstock.com Inc. is an online "closeout" retailer offering discount, brand-name merchandise for sale 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. Overstock.com is a publicly traded company listed on the NASDAQ National Market System, headquartered in Salt Lake City, and can be found online at www.overstock.com. Overstock.com is a registered trademark of Overstock.com, Inc.

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 the company's growth, future performance, and customer service enhancements. 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, 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, including our Form 10-K for the year ended December 31, 2002, and our Prospectus dated February 12, 2003, 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.


                             Overstock.com, Inc.
                    Consolidated Statements of Operations
                   (in thousands, except per share amounts)

                                              Three months ended
                                Jun. 30, Sept. 30, Dec. 31, Mar. 31,  Jun. 30,
                                  2002     2002     2002     2003      2003

    Direct revenue              $11,853  $20,759  $35,302   $24,962   $25,159
    Commission revenue            2,230    2,857    5,633     3,966     3,431
    Warehouse revenue               297      192      594       236       243

     Total revenue               14,380   23,808   41,529    29,164    28,833

    Cost of goods sold           11,831   19,238   32,382    24,539    24,030

      Gross profit                2,549    4,570    9,147     4,625     4,803

    Operating expenses:
     Sales and marketing
      expenses                    1,313    2,083    4,054     3,848     2,572
     General and
      administrative expenses     2,195    2,372    3,456     4,545     3,367
     Amortization of stock-based
      compensation                  806      674      577       328       112

      Total operating expenses    4,314    5,129    8,087     8,721     6,051

    Operating income (loss)      (1,765)    (559)   1,060    (4,096)   (1,248)

    Interest income                  49      229      103       152       142
    Interest expense               (208)      (7)     (10)       (7)      (55)
    Other income (expense), net    (442)      63      (66)       10        25

    Net income (loss)            (2,366)    (274)   1,087    (3,941)   (1,136)
    Deemed dividend related to
     redeemable common stock       (106)     (97)     (92)      (77)      (78)

    Net income (loss)
     attributable to common
     shares                     $(2,472)   $(371)    $995   $(4,018)  $(1,214)

    Net income (loss) per share
     - basic                     $(0.20)  $(0.03)   $0.07    $(0.26)   $(0.07)
     - diluted                   $(0.20)  $(0.03)   $0.06    $(0.26)   $(0.07)
    Weighted average common
     shares outstanding
     - basic                     12,280   14,447   14,486    15,486    16,384
     - diluted                   12,280   14,447   15,696    15,486    16,384

    Reconciliation of total revenue (GAAP)
     to gross merchandise sales (non-GAAP)
    Total revenue               $14,380  $23,808  $41,529   $29,164   $28,833
     Add:  Obligations payable to
      third parties upon sale
      of third-party merchandise  9,474   12,488   21,969    20,527    19,399
     Add:  Sales returns and
      discounts                   2,651    2,476    3,719     2,579     3,083

    Gross merchandise sales
     (non-GAAP)                 $26,505  $38,772  $67,217   $52,270   $51,315



                             Overstock.com, Inc.
                    Consolidated Statements of Operations
                   (in thousands, except per share amounts)

                                                    Six months ended June 30,
                                                     2002               2003

    Direct revenue                                  $21,882           $50,121
    Commission revenue                                3,889             7,397
    Warehouse revenue                                   676               479

        Total revenue                                26,447            57,997

    Cost of goods sold                               21,821            48,569

    Gross profit                                      4,626             9,428

    Operating expenses:
        Sales and marketing expenses                  2,532             6,420
        General and administrative expenses           4,997             7,912
        Amortization of stock-based compensation      1,652               440

             Total operating expenses                 9,181            14,772

    Operating loss                                   (4,555)           (5,344)

    Interest income                                      71               294
    Interest expense                                   (448)              (62)
    Other income (expense), net                        (441)               35

    Net loss                                         (5,373)           (5,077)

    Deemed dividend related to redeemable
     common stock                                      (217)             (155)
    Deemed dividend related to beneficial
     conversion feature of preferred stock           (6,607)              -

    Net loss attributable to common shares         $(12,197)          $(5,232)

    Net loss per common share                        $(1.04)           $(0.33)
    Weighted average common shares
     outstanding                                     11,728            15,938


                             Overstock.com, Inc.
                       Consolidated Balance Sheet Data
                                (in thousands)

                                                 December 31,        June 30,
                                                     2002              2003

    Cash and marketable securities                 $32,662           $31,664
    Inventories, net                                13,954            19,475
    Working capital                                 35,679            55,154
    Total liabilities                               20,322            11,804
    Total stockholders' equity                      39,271            60,437

SOURCE Overstock.com, Inc.

Investor, Kathryn Huang, Investor Relations, +1-801-947-3282,
khuang@overstock.com, or Media, Scott Blevins, Public Relations,
+1-801-947-3133, sblevins@overstock.com, both of Overstock.com, Inc.
/Photo:  http://www.newscom.com/cgi-bin/prnh/20030520/LATU020LOGO-a
AP Archive:  http://photoarchive.ap.org
PRN Photo Desk, 888-776-6555 or 212-782-2840
http://www.overstock.com

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