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Overstock.com Announces 3Q 2003 Financial Results

SALT LAKE CITY, Oct 29, 2003 /PRNewswire-FirstCall via COMTEX/ -- Overstock.com(R) (Nasdaq: OSTK) today announced financial results for the third quarter ended September 30, 2003.

The Company reported year-over-year gross merchandise sales grew 57% to $61.0 million this quarter from $38.8 million for the same period last year. GAAP total revenue was $57.8 million for the quarter. Net loss for the third quarter was $3.7 million or $0.23 loss per share compared to $371,000 or $0.03 loss per share a year earlier.

"While our revenue took a sharp turn upward this quarter, I am concerned by our loss; however, much of our incremental expenses during the quarter reflect investments in the business that I believe make us a much stronger company," said Patrick M. Byrne, president and CEO of Overstock.com.

"Clearly I executed poorly in some areas: we have addressed our internal processes and I will discuss these in detail in the call. In addition, my decision to super-size our systems to support growth creates drag on gross margins at our current size. Lastly, in the Q2 conference call I alluded to four Q3 projects: the first three were a new search engine, our first nationwide radio and television advertising campaign, and a travel tab (alas, the fourth project is not quite ready to be unveiled). I believe the investments we made this quarter in scale and in these projects are the right decisions for creating long-term shareholder value."

More information about the strategic initiatives mentioned above can be found at the following links:

     Overstock.com Announces Second Quarter Results
     

     Overstock.com Enhances Website with Advanced Search Technology
     
     Overstock.com Launches National Advertising Campaign
     
     Overstock.com Launches Discount Travel Store
    

Key financial and operating metrics

Note: Due to a change in Overstock.com customer return policies and procedures announced last quarter, we will record revenue from sales transactions from our fulfillment partners on a gross basis instead of on a net basis. As a result, GAAP revenue increased significantly and gross margins decreased significantly this reporting period compared to previous reporting periods. Therefore, gross merchandise sales comparisons year-over-year may be more relevant than GAAP revenue comparisons. Moreover, we believe gross profit dollar comparisons year-over-year may be more relevant than gross margin comparisons.

GAAP total revenue -- Overstock.com reported GAAP revenue of $57.8 million for the three-month period ending September 30, 2003.

GAAP gross profit -- Overstock.com reported GAAP gross profit of $4.3 million for the three-month period ending September 30, 2003, a 7% decrease compared to the $4.6 million recorded in the same period a year ago.

GAAP gross margins -- GAAP gross margins were 7% for the three-month period ending September 30, 2003.

GAAP net loss -- Overstock.com reported a GAAP net loss of $3.7 million or $0.23 loss per share for the three-month period ending September 30, 2003, compared to $371,000 million or $0.03 loss per share for the same period a year earlier.

Overstock.com had cash and marketable securities of $20.7 million as of September 30, 2003.

Gross merchandise sales (non-GAAP) -- Overstock.com reported gross merchandise sales (GMS) of $61.0 million for the third quarter 2003, a 57% increase over the $38.8 million GMS reported for the third quarter 2002, and a 19% increase over the $51.3 million GMS reported in the second quarter 2003.

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)

                                                Sept. 30,      Sept. 30,
                                                  2002            2003

    Total revenue                                 $23.8          $57.8
     Add: Obligations payable to
      third parties upon sale
      of third-party merchandise                  $12.5            --
     Add: Sales returns and
      discounts                                   $2.5           $3.2

    Gross merchandise sales
     (non-GAAP)                                   $38.8          $61.0


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 strength and growth, future performance and value for customers and shareholders, 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
                            Sept. 30,  Dec. 31,  Mar. 31,  Jun. 30,  Sept. 30,
                             2002        2002      2003      2003      2003

     Direct revenue          $20,759    $35,302   $24,962   $25,159   $29,011
     Commission revenue        2,857      5,633     3,966     3,431    28,504
     Warehouse revenue           192        594       236       243       273

      Total revenue           23,808     41,529    29,164    28,833    57,788

     Cost of goods sold       19,238     32,382    24,539    24,030    53,537

       Gross profit            4,570      9,147     4,625     4,803     4,251

     Operating expenses:
      Sales and marketing
       expenses                2,083      4,054     3,848     2,572    3,855
      General and
       administrative expenses 2,372      3,456     4,545     3,367    4,059
      Amortization of
       stock-based compensation  674        577       328       112      171

      Total operating
       expenses                5,129      8,087     8,721     6,051    8,085

     Operating income (loss)    (559)     1,060    (4,096)   (1,248)  (3,834)

     Interest income             229        103       152       142       98
     Interest expense             (7)       (10)       (7)      (55)      (8)
     Other income
      (expense), net              63        (66)       10        25       79

     Net income (loss)          (274)     1,087    (3,941)   (1,136)  (3,665)
     Deemed dividend
      related to redeemable
      common stock               (97)       (92)      (77)      (78)     (59)

     Net income (loss)
      attributable to common
      shares                   $(371)      $995   $(4,018)  $(1,214) $(3,724)

     Net income (loss)
      per share
      - basic                  $(0.03)     $0.07    $(0.26)   $(0.07)  $(0.23)
      - diluted                $(0.03)     $0.06    $(0.26)   $(0.07)  $(0.23)
     Weighted average common
      shares outstanding
      - basic                  14,447     14,486    15,486    16,384   16,419
      - diluted                14,447     15,696    15,486    16,384   16,419

     Reconciliation of
      total revenue (GAAP)
      to gross merchandise
      sales (non-GAAP)
     Total revenue            $23,808    $41,529   $29,164   $28,833  $57,788
      Add:  Obligations
       payable to third
       parties upon sale of
       third-party
       merchandise             12,488     21,969    20,527    19,399       --
      Add:  Sales returns
       and discounts            2,476      3,719     2,579     3,083    3,230

     Gross merchandise
      sales (non-GAAP)        $38,772    $67,217   $52,270   $51,315  $61,018



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

                                                        Nine months ended
                                                           September 30,
                                                       2002            2003

     Direct revenue                                  $42,641          $79,132
     Commission revenue                                6,746           35,901
     Warehouse revenue                                   868              752

         Total revenue                                50,255          115,785

     Cost of goods sold                               41,059          102,106

     Gross profit                                      9,196           13,679

     Operating expenses:
         Sales and marketing expenses                  4,615           10,275
         General and administrative
          expenses                                     7,369           11,971
         Amortization of stock-based
          compensation                                 2,326              611

              Total operating expenses                14,310           22,857

     Operating loss                                   (5,114)          (9,178)

     Interest income                                     300              392
     Interest expense                                   (455)             (70)
     Other income (expense), net                        (378)             114

     Net loss                                         (5,647)          (8,742)

     Deemed dividend related to redeemable
      common stock                                      (314)            (214)
     Deemed dividend related to beneficial
      conversion feature of preferred stock           (6,607)              --

     Net loss attributable to common shares         $(12,568)         $(8,956)

     Net loss per common share                        $(0.99)          $(0.56)
     Weighted average common shares outstanding       12,644           16,100



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

                                            December 31,     September 30,
                                                2002              2003

    Cash and marketable securities            $32,662           $20,714
    Inventories, net                           13,954            24,945
    Working capital                            35,679            49,459
    Total liabilities                          20,322            14,088
    Total stockholders' equity                 39,271            57,553


SOURCE Overstock.com

investors, 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
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PRN Photo Desk, photodesk@prnewswire.com
http://www.overstock.com

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