02-08-2006, 10:21 AM
full earnings release: http://www.sec.gov/Archives/edgar/data/1...ex99d1.htm
Quote:EX-99.1 2 a06-4428_1ex99d1.htm EXHIBIT 99.1
Exhibit 99.1
OVERSTOCK.COM REPORTS Q4 REVENUE AND FULL YEAR 2005
FINANCIAL RESULTS
SALT LAKE CITY February 7, 2006 Overstock.com® (NASDAQ: OSTK) today reported fourth quarter revenue and financial results for the full year 2005.
Summary of results:
Total Q4 revenue: $318 million, up 44% versus 2004
Total 2005 revenue: $804 million, up 63% versus 2004
2005 Gross profits: $121 million, up 83% versus 2004
2005 Gross margins: 15.0%, up from 13.3% in 2004
2005 Net loss: $(25) million or $(1.29) earnings per share
2005 Cash flow from operations: $(6) million outflow
Dear Owners,
At the close of Q3, I mentioned the issue of capitalizing inbound freight in inventory, saying that our then-current system made Q2 and Q3 margins look worse than they really were (as we built inventory), but would make Q4 better than it really would be (assuming we flushed out inventory). With our new systems in place, starting in Q4 we now have the ability to account for inbound freight by capitalizing it and expensing it as the related inventory sells. However, this creates a knotty problem regarding 2005 (one quarter of 2005 has a $2 million benefit as a result: to which of the other 2005 quarters does it belong?) that we are still working through with our auditors. However, we can provide top-line numbers for Q4 at the moment and I will discuss full year 2005 results here and on the conference call.
I said that my goals in 2005 were to grow revenue 60-100% and break even +/- 1%. We achieved the first, but I failed on the second. 2005 started fairly well, but ended weakly. I take responsibility, of course, and will give more color on this in my conference call, but the rough sketch is as follows: we started with a good set of priorities for the year, and with an aggressive internal plan to cross the $1 billion mark at a profit. However, we discovered that some of our systems were more shopworn than we had anticipated, and went on a crash program to replace them. Unfortunately, I underspeced them and underestimated the time it would take to complete them by a large factor. Meanwhile, the systems they were replacing were increasingly unstable, so that our ships were burned behind us and we had to march forward. As the execution of these projects faltered, we had to shift more and more resources from other groups to support them. This squeezed out projects that our business leaders needed to continue generating and servicing hyper-growth. The result was not only that good things did not happen (lift and functionality within the site), but that a bad thing also happened (while our systems survived, it was with great effort from the entire company). The upshot is that we are slowing down development of any new projects, and will just focus on our basic shopping experience (namely, our outlet shopping and BMVG tabs) until things are right.
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I am terribly sorry, and disappointed as are my colleagues. While we have staunched the bleeding, I anticipate it will take six to nine months to rehabilitate the patient and get him running again.
During this time that we are hardening our new systems, we will reduce growth to industry rates. Our emphasis in 2006 will be on an improved customer experience even if at the expense of growth. Our technology department is under new leadership with a conservative 2006 plan in place. We will make limited investments in technology but at far lower levels than 2005, and focus on personalization, site design, and functionality. None of these are new projects, and each should help us improve our customers shopping experience and our conversion.
Conducting 2006 as a rebuilding year is also a financially conservative thing to do. I expect growth to be industry standard for at least two to three quarters: depreciation should more than cover actual capital expenditures, and our inventory, which we beefed up too much for Q4, is shrinking nicely: taken collectively, cash flows should be comfortable for the entire year.
Last year I closed saying, this was the first Q4 surge we handled without a mad scramble. We did not make enough money in Q4 to break even for 2004, but did make $2.5 million, generated a lot of cash, and are up on a plane from which I believe only our own inattention or mistakes will knock us for some time. In 2005, however, we handled Q4 only with the maddest of scrambles, lost money, and came off the plane due to my own mistakes. We need two to three quarters to recover. Expect slower growth from us in 2006, but also expect us to end 2006 as a stronger and more focused company.
Respectfully submitted,
Patrick M. Byrne
Key financial and operating metrics
Total revenueFor the year ended December 31, 2005, Overstock.com reported total revenue of $803.8 million, a 63% increase from the $494.6 million reported in 2004.
Gross profit and gross marginsFor the year ended December 31, 2005, Overstock.com reported gross profit of $120.6 million (15.0% margins), an 83% increase from the $65.8 million (13.3% margins) reported in 2004.
Net income (loss)For the year ended December 31, 2005, Overstock.com reported net loss of $24.9 million, or $1.29 loss per share, compared to $5.0 million, or 29 cent loss per share, reported last year.
Overstock.com had cash and marketable securities of $112.0 million and working capital of $78.9 million on December 31, 2005.
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Gross bookings (excluding auctions and travel)For the year ended December 31, 2005, Overstock.com reported gross bookings of $868.0 million, a 62% increase from the $535.7 million reported last year.
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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® is a registered trademark of Overstock.com, Inc. All other trademarks are the property of their respective companies.
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 slowing down on new projects, focusing on the core shopping business, the number of quarters it will take the company to recover, systems improvement, growth rates, improvements in our customer experience and customer service scores, the size, cost and scope of technology investments and their possible results, improvements in conversion, the strength and focus of the company, and such other risks as identified in our Form 10-K for the year ended December 31, 2004, 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.
Quote:Overstock.com, Inc.
Consolidated Statements of Operations
(in thousands, except per share amounts)
Twelve months ended
December 31,
2004 2005
Revenue
Direct $213,210 $324,875
Fulfillment partner 281,425 478,947
Total revenue 494,635 803,822
Cost of goods sold
Direct 185,390 282,322
Fulfillment partner 243,468 400,889
Total cost of goods sold 428,858 683,211
Gross profit 65,777 120,611
Operating expenses:
Sales and marketing 40,533 79,651
Technology 8,449 28,132
General and administrative 21,786 36,495
Amortization of stock-based
compensation 360 72
Total operating expenses 71,128 144,350
Operating income (loss) (5,351) (23,739)
Interest income 1,173 (270)
Interest expense (775) (5,582)
Other income (expense), net (49) 4,728
Net income (loss) (5,002) (24,863)
Deemed dividend related to redeemable
common stock (188) (185)
Net income (loss) attributable to
common shares $(5,190) $(25,048)
Net income (loss) per share
- basic $(0.29) $(1.29)
- diluted $(0.29) $(1.29)
Weighted average common shares
outstanding
- basic 17,846 19,468
- diluted 17,846 19,468
Other data:
Shopping bookings (in 000s) $535,738 $867,999
Travel bookings (in 000s) $2,299 $29,579
Auction gross merchandise volume
(in 000s) $7,148 $29,724
Average customer acquisition cost
(shopping) $15.79 $21.05
Average registrant acquisition cost
(auctions) $7.80 $6.73
Overstock.com, Inc.
Consolidated Balance Sheets
(in thousands, except per share amounts)
December 31,
2004 2005
Assets
Current assets:
Cash and cash equivalents $198,678 $56,224
Marketable securities 88,802 55,799
Cash, cash equivalents and
marketable securities 287,480 112,023
Accounts receivable, net 5,715 11,695
Inventories, net 45,279 92,045
Prepaid inventory 12,322 9,633
Prepaid expenses & other assets 3,444 8,508
Total current assets 354,240 233,904
Restricted cash 1,602 254
Property and equipment, net 16,122 61,914
Goodwill 2,784 13,168
Other long-term assets, net 1,516 15,449
Total assets $376,264 $324,689
Liabilities, Redeemable Securities
and Stockholders' Equity
Current liabilities:
Accounts payable $64,060 $101,436
Accrued liabilities 22,917 46,847
Capital lease obligations, current 595 6,683
Total current liabilities 87,572 154,966
Capital lease obligations,
non-current 743 3,058
Convertible senior notes 116,251 74,935
Total liabilities 204,566 232,959
Redeemable common stock 3,166 3,205
Stockholders' equity:
Common stock 2 2
Additional paid-in capital 243,131 251,244
Accumulated deficit (73,005) (98,053)
Unearned stock-based compensation (1,301) (305)
Treasury stock (100) (65,325)
Accumulated other comprehensive gain
(loss) (195) 962
Stockholders' equity 168,532 88,525
Total liabilities, redeemable
securities and stockholders'
equity $376,264 $324,689
Overstock.com, Inc.
Consolidated Statements of Cash Flows (unaudited)
(in thousands)
Twelve months ended
December 31,
2004 2005
Cash flows from operating
activities:
Net loss $(5,002) $(24,863)
Adjustments to reconcile net loss
to cash provided by
(used in) operating activities
Depreciation and amortization 3,937 15,614
Realized (gain) loss from
marketable securities (2) 3,351
Loss on disposition of property
and equipment 34 1,457
Amortization of unearned
stock-based compensation 360 72
Stock options issued to
consultants for services 1,278 (389)
Issuance of common stock from
treasury -- 443
Amortization of debt discount and
deferred financing fees 147 620
Gain from retirement of
convertible senior notes -- (6,158)
Changes in operating assets and
liabilities:
Accounts receivable 4,468 (5,109)
Inventories (15,353) (46,766)
Prepaid inventory (9,376) 2,689
Prepaid expenses and other
assets (1,807) (4,939)
Other long-term assets, net (944) (2,151)
Accounts payable 33,697 36,455
Accrued liabilities 13,601 23,566
Net cash provided by (used in)
operating activities 25,038 (6,108)
Cash flows from investing
activities:
(Increase) decrease in restricted
cash (1,602) 1,348
Investments in marketable
securities (92,877) (185,543)
Sales of marketable securities 15,373 216,266
Expenditures for property and
equipment (8,734) (44,740)
Acquisition of Ski West (net of
cash acquired) -- (24,620)
Proceeds from the sale of property
and equipment 20 1
Net cash used in investing
activities (87,820) (37,288)
Cash flows from financing
activities:
Payments on capital lease
obligations (658) (7,086)
Borrowings on line of credit 1,000 11,868
Payments on line of credit (1,000) (11,868)
Proceeds from the issuance of
common stock 113,064 --
Proceeds from the issuance of
convertible senior notes 116,199 --
Payments of deferred financing
fees (301) --
Payments to retire convertible
senior notes -- (35,670)
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 and
warrants 4,288 7,315
Net provided by (used in)
financing activities 232,592 (99,144)
Effect of exchange rate changes on
cash 22 86
Net increase (decrease) in cash
and cash equivalents 169,832 (142,454)
Cash and cash equivalents,
beginning of period 28,846 198,678
Cash and cash equivalents, end of
period $198,678 $56,224
Supplemental cash flow information:
Interest paid $165 $5,016
Deemed dividend on redeemable
common shares $188 $182
Forfeitures on unearned stock-
based compensation $(198) $(69)
Lapse of rescission rights on
redeemable common stock $-- $146
Settlement of purchased call
options for treasury stock $-- $41,121
Equipment and software acquired
under capital leases $1,835 $15,438
Supplemental disclosure of non-cash
activities:
Fair value of assets acquired, net
of cash acquired $25,956
Fair value of liabilities assumed (1,336)
Cash paid to purchase businesses $24,620