Overstock.com Reports Fourth Quarter and Year End 2006 Financial Results
SALT LAKE CITY, Feb. 5 /PRNewswire-FirstCall/ -- Overstock.com, Inc.
(Nasdaq: OSTK) (www.overstock.com) today reported financial results for its
fourth quarter and fiscal year ended December 31, 2006.
* Total Q4 revenue: $297.5 million, down 6% versus 2005
* Total 2006 revenue: $796.4 million, down 1% versus 2005
* 2006 gross profits: $101.6 million, down 16% versus 2005
* 2006 gross margins: 12.8% compared to 15.0% in 2005
* 2006 net loss: $(96.9) million or $(4.77) loss per share
Dear Owners:
The fourth quarter was a difficult end to a tough rebuilding year. While
there are plenty of negatives to report, I believe the company has fixed the
problems that began in Q4 2005, and we are entering 2007 with a fresh start.
We lost $41 million for the quarter and $97 million for the year; we paid
the price for hastily implemented system upgrades of 2005 and the subsequent
troubles caused by them. Q4 sales declined 6%, the same percentage decline we
experienced in Q3. Lower traffic was partly to blame and we didn't improve
conversion (turning visitors into purchasers) enough to achieve positive
growth. In addition, we consciously and aggressively discounted old inventory
during the quarter, and as a result, our gross margins were negatively
impacted. However, we did this to significantly clean and reduce our
inventory, and we were successful in doing so. This was painful, but it was a
necessary step in improving our direct business. The company is healthier as
a result.
We ended the year with $20 million of inventory, significantly lower than
the $93 million we had at the end of 2005. From this lower inventory level,
we expect to turn our inventory much more efficiently. We entered 2007 with
more attractive, higher margin inventory, and as a result, we expect our gross
margins to increase significantly in 2007 -- in similar magnitude as they did
a few years ago. In addition to converting much of our inventory into cash,
we also raised $40 million in common equity in December (for a total of
$64 million for the year), greatly improving our cash position.
We built the infrastructure to handle continued hyper-growth just as it
ended. We recognize that the days of hyper-growth are behind us and that our
poor execution of the building of our infrastructure contributed to the end of
that hyper-growth. Our expense structure is higher than it should be, and
because of that, we have had to right-size our expense structure for our
current sales level. We've reduced our headcount and we've terminated an
expensive computer facility co-location lease. We are in the process of
significantly reducing additional facilities lease costs and other expenses.
Based on our preliminary January numbers and our internal 2007 plan, I
expect our 2007 results to improve. Specifically, we should:
* Achieve immediate and substantial gross margin improvements;
* Reduce sales and marketing as a percentage of revenue; and
* Reduce technology and G&A expenses from 2006 levels.
Two last comments: (1) Our NPS scores stayed high during Q4; our customers
remain fanatics about us. (2) The poorly implemented system upgrades that
caused so much trouble last year hummed through this Q4, like well oiled
machines, and I couldn't be happier about that.
As always, I look forward to discussing this in more detail with you on
the conference call.
Humbly submitted,
Patrick M. Byrne
P.S. If you have any questions, please feel free to email them to Kevin
Moon at kmoon@overstock.com before the conference call, so we may address
them.
Key financial and operating metrics
Total revenue -- Overstock.com reported total revenue for the quarter
ended December 31, 2006 of $297.5 million, a 6% decrease from the
$318.0 million reported in 2005. For the year ended December 31, total
revenue decreased 1%, from $803.8 million in 2005 to $796.4 million in 2006.
Gross profit and gross margins -- Gross profit for the quarter ended
December 31, 2006 was $30.5 million (10.3% margins), a 34% decrease from the
$46.5 million (14.6% margins) reported in 2005. For the year ended
December 31, gross profit decreased 16%, from $120.6 million (15.0% gross
margins) in 2005 to $101.6 million (12.8% gross margins) in 2006.
Net loss -- Net loss for the quarter ended December 31, 2006, was
$40.7 million, or $1.92 loss per share, compared to $6.3 million, or
$0.33 loss per share in 2005. For the year ended December 31, 2006, net loss
was $96.9 million, or $4.77 loss per share, compared to $24.9 million, or
$1.29 loss per share.
Overstock.com had cash and cash equivalents of $128.3 million and working
capital of $65.5 million on December 31, 2006.
Gross bookings (excluding auctions and travel) -- Gross bookings for the
three months ended December 31, 2006 totaled $309.9 million, a 9% decrease
from the $340.5 million reported last year. For the year ended December 31,
2006, gross bookings were $838.9, a 3% decrease from the $868.0 reported in
2005.
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, headquartered in Salt Lake City, is a publicly traded company
listed on the NASDAQ National Market System and can be found online at
http://www.overstock.com.
Overstock.com(R) is a registered trademark 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, but
are not limited to, statements regarding the health of the company, the
company's ability to turn inventory in the future, future increases in gross
margins, further expense reductions, future reductions of expenses, as well as
all such other risks as identified in our Form 10-K for the year ended
December 31, 2005, and all our 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.
Overstock.com, Inc.
Consolidated Statements of Operations (unaudited)
(in thousands, except per share amounts)
Three months ended Twelve months ended
December 31, December 31,
2005 2006 2005 2006
Revenue
Direct $128,478 $98,158 $324,875 $303,202
Fulfillment partner 189,502 199,308 478,947 493,165
Total revenue 317,980 297,466 803,822 796,367
Cost of goods sold
Direct 113,385 101,276 282,383 284,489
Fulfillment partner 158,068 165,671 400,889 410,255
Total cost of goods sold 271,453 266,947 683,272 694,744
Gross profit 46,527 30,519 120,550 101,623
Operating expenses:
Sales and marketing 30,371 29,622 79,655 72,785
Technology 9,861 25,313 28,143 70,234
General and administrative 11,649 15,823 36,546 54,338
Total operating expenses 51,881 70,758 144,344 197,357
Operating income (loss) (5,354) (40,239) (23,794) (95,734)
Interest income (120) 577 (270) 3,566
Interest expense (1,356) (1,127) (5,582) (4,765)
Other income (expense), net 547 88 4,728 81
Net income (loss) (6,283) (40,701) (24,918) (96,852)
Deemed dividend related to
redeemable common stock (45) -- (185) (99)
Net income (loss) attributable
to common shares $(6,328) $(40,701) $(25,103) $(96,951)
Net income (loss) per share
- basic $(0.33) $(1.92) $(1.29) $(4.77)
- diluted $(0.33) $(1.92) $(1.29) $(4.77)
Weighted average common shares
outstanding
- basic 19,311 21,163 19,429 20,332
- diluted 19,311 21,163 19,429 20,332
Other data:
Shopping bookings (in 000s) $340,489 $309,887 $867,959 $838,934
Travel bookings (in 000s) $15,505 $19,069 $29,579 $48,265
Auction gross merchandise
volume (in 000s) $9,458 $7,180 $29,724 $28,869
Average customer acquisition
cost (shopping) $20.35 $25.56 $21.05 $25.46
Average registrant acquisition
cost (auctions) $4.68 $1.88 $6.73 $0.59
Overstock.com, Inc.
Consolidated Balance Sheets (unaudited)
(in thousands, except per share amounts)
December 31,
2005 2006
Assets
Current assets:
Cash and cash equivalents $56,224 $128,330
Marketable securities 55,799 --
Cash, cash equivalents and marketable
securities 112,023 128,330
Accounts receivable, net 11,695 14,905
Notes receivable -- 6,702
Inventories, net 93,269 20,274
Prepaid inventory 9,633 2,241
Prepaid expenses 8,508 7,559
Total current assets 235,128 180,011
Restricted cash 253 --
Property and equipment, net 63,914 57,413
Goodwill 13,169 13,169
Other long-term assets, net 13,449 10,032
Total assets $325,913 $260,625
Liabilities, Redeemable Securities
and Stockholders' Equity
Current liabilities:
Accounts payable $101,436 $68,986
Accrued liabilities 46,847 40,425
Capital lease obligations, current 6,683 5,074
Total current liabilities 154,966 114,485
Capital lease obligations, non-current 3,058 3,983
Convertible senior notes 74,935 75,279
Total liabilities 232,959 193,747
Redeemable common stock 3,205 --
Stockholders' equity:
Common stock 2 2
Additional paid-in capital 250,939 325,771
Accumulated deficit (96,829) (193,780)
Treasury stock (65,325) (64,983)
Accumulated other comprehensive gain (loss) 962 (132)
Total stockholders' equity 89,749 66,878
Total liabilities, redeemable securities
and stockholders' equity $325,913 $260,625
Overstock.com, Inc.
Consolidated Statements of Cash Flows (unaudited)
(in thousands)
Three months ended Twelve months ended
December 31, December 31,
2005 2006 2005 2006
Cash flows from operating
activities:
Net loss $(6,283) $(40,701) $(24,918) $(96,852)
Adjustments to reconcile
net loss to cash provided
by (used in) operating
activities
Depreciation and
amortization 6,148 12,391 15,614 35,404
Realized (gain) loss from
marketable securities 990 -- 3,351 (2,085)
Loss on disposition of
property and equipment 1,457 -- 1,457 599
Stock-based compensation
expense from employee
options 7 1,032 72 4,120
Stock options issued to
consultants for services (51) (8) (389) 23
Treasury stock issued to
employees as compensation 41 108 443 787
Amortization of debt discount
and deferred financing fees 18 -- 620 417
Gain from retirement of
convertible senior notes (1,988) -- (6,158) --
Changes in operating assets
and liabilities:
Accounts receivable, net (4,144) (3,749) (5,109) (3,645)
Inventories, net 4,865 42,522 (46,711) 67,009
Prepaid inventory 2,973 1,783 2,689 7,388
Prepaid expenses 821 1,781 (4,939) 1,053
Other long-term assets,
net (1,716) 601 (2,151) 496
Accounts payable 54,366 18,219 36,455 (32,450)
Accrued liabilities 1,569 19,543 23,566 (6,872)
Net cash provided by
(used in) operating
activities 59,073 53,522 (6,108) (24,608)
Cash flows from investing
activities:
Decrease in restricted cash 380 -- 1,349 253
Investments in marketable
securities (2,000) -- (185,543) --
Sales of marketable
securities 20,015 -- 216,265 56,756
Expenditures for property
and equipment (8,274) (3,989) (44,740) (24,007)
Proceeds from the sale of
property and equipment 1 -- 1 1
Acquisition of Ski West
(net of cash acquired) -- -- (24,620) --
Other investments -- -- -- (100)
Decrease in cash resulting
from de-consolidation of
variable entity -- (102) -- (102)
Net cash provided by
(used in) investing
activities 10,122 (4,091) (37,288) 32,801
Cash flows from financing
activities:
Payments on capital lease
obligations (3,852) (183) (7,086) (3,061)
Borrowings on line of credit 7,500 8,178 11,868 86,681
Payments on line of credit (11,868) (8,178) (11,868) (86,681)
Proceeds from the issuance
of convertible senior notes -- -- -- --
Payments to retire convertible
senior notes (7,735) -- (35,670) --
Payments of deferred financing
fees -- -- -- --
Proceeds from the issuance of
common stock -- 39,406 -- 64,406
Purchase of treasury stock -- -- (24,133) --
Purchased call options for
purchase of treasury stock -- -- (47,507) --
Settlement of call options for
cash -- -- 7,937 --
Exercise of stock options 434 267 7,315 2,534
Net cash provided by
(used in)
financing activities (15,521) 39,490 (99,144) 63,879
Effect of exchange rate
changes on cash (25) 23 86 34
Net increase (decrease) in
cash and cash equivalents 53,649 88,944 (142,454) 72,106
Cash and cash equivalents,
beginning of period 2,575 39,386 198,678 56,224
Cash and cash equivalents,
end of period $56,224 $128,330 $56,224 $128,330
SOURCE Overstock.com, Inc.
02/05/2007
CONTACT: Media, Jared Matkin, +1-801-947-3880, jmatkin@overstock.com, or
Investors, Kevin Moon, +1-801-947-3282, kmoon@overstock.com, both of
Overstock.com, Inc.
.
