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Navigated ongoing macroeconomic and geopolitical volatility to deliver another profitable quarter

Continued share repurchases and ended the quarter with a strong cash position

SALT LAKE CITY, July 28, 2022 (GLOBE NEWSWIRE) — Overstock.com, Inc. (NASDAQ:OSTK) today reported financial results for the quarter ended June 30, 2022.

Second Quarter 2022 Financial Highlights, from continuing operations

Total net revenue of $528 million, a decrease of 34% year over year
Gross profit of $121 million or 22.9% of total net revenue
Income from continuing operations of $7 million
Diluted earnings per share of $0.12
Adjusted EBITDA (non-GAAP) of $21 million, which represents 3.9% of net revenue
Cash and cash equivalents totaled $443 million at the end of the second quarter

“Our disciplined execution and differentiated asset-light operating model allowed us to remain profitable for the ninth consecutive quarter, even with weak consumer sentiment, ongoing macroeconomic and geopolitical volatility, higher inflation, and significant competitive pressures including competitors liquidating their excess owned inventory,” said Overstock CEO Jonathan Johnson. “While the retail environment was challenging throughout the second quarter and sales results were below my expectations, we continued to deliver smart value to our customers, make progress on our strategic initiatives, and provide our partners with an efficient and effective channel to increase their unit sales. Our continued profitability and strong balance sheet support that our business model is a winning one, able to withstand jolts in the market.”

“Over a year ago, we strategically embarked on the path to become a 100% e-commerce furniture and home furnishings retailer. We accomplished this goal at the end of the second quarter, on our targeted timeframe. Overstock remains well positioned to serve the evolving home furnishings needs of our customers and capture market share in a large and growing addressable market. In these unprecedented times, we have chosen to stay the course, focusing on our strategic initiatives and operating our business under the same financial discipline as we have over the last two years,” continued Johnson. “I look forward to providing a full update on our second quarter 2022 performance during our earnings call.”

Second Quarter 2022 Operational Highlights*

Active customers of 6.5 million, a decrease of 29% year over year
Last Twelve Months (LTM) net revenue per active customer of $365, an increase of 18% year over year
Orders delivered of 2.1 million, a decrease of 43% year over year
Average order value of $247, an increase of 16% year over year
Orders per active customer, measured as LTM orders divided by active customers, of 1.65, a decrease of 2% year over year
Orders placed on a mobile device were 50% of gross merchandise sales

*Certain terms, such as active customers, LTM net revenue per active customer, orders delivered, average order value, and orders per active customer are defined under “Supplemental Operational Data” below.

Share Repurchases

On August 17, 2021, we announced that our Board of Directors had approved a stock repurchase program (the “Repurchase Program”), pursuant to which we may, from time to time, purchase shares of our outstanding common stock for an aggregate repurchase price not to exceed $100.0 million at any time through December 31, 2023. On March 9, 2022, we announced that our Board of Directors expanded the Repurchase Program to permit us, from time to time, to purchase outstanding shares of our Digital Voting Series A-1 Preferred Stock and/or our Voting Series B Preferred Stock in addition to outstanding shares of our common stock.

During the three months ended June 30, 2022, we repurchased $34.9 million of our common stock and $50,000 of our Series A-1 preferred stock under the Repurchase Program at an average price of $30.69 and $31.30 per share, respectively. As of June 30, 2022, we had approximately $39.9 million remaining under the current Repurchase Program authorization.

Preferred Share Conversion

On May 12, 2022, our shareholders voted to approve the amendment of the Amended and Restated Certificate of Designation for both classes of our preferred stock to provide that each share of our Series A-1 and Series B preferred stock would be automatically converted into 0.90 of a share of our common stock (the “Conversion”). On June 10, 2022, in connection with the completion of the Conversion, we issued 4,097,697 shares of our common stock in exchange for the outstanding Series A-1 and Series B preferred stock on that date. As the fair value of our common stock issued exceeded the fair value of the Series A-1 and Series B preferred stock exchanged on Conversion date, we recognized a non-cash dividend of $1.7 million due to the excess fair value per share compared to the conversion ratio. Following the Conversion, we eliminated the Series A-1 and Series B preferred stock class by filing Certificates of Elimination with the Delaware Secretary of State.

Earnings Webcast and Replay Information

Overstock will hold a conference call and webcast to discuss its second quarter 2022 financial results on Thursday, July 28, 2022, at 8:30 a.m. ET. To access the live webcast and presentation slides, go to http://investors.overstock.com. To participate in the conference call via telephone, please register at the link available at http://investors.overstock.com/events. Registrants will receive dial-in information and a unique PIN to access the live call. Questions may be emailed in advance of the call to [email protected].

A replay of the conference call will be available at http://investors.overstock.com, starting two hours after the live call has ended.

About Overstock.com

Overstock.com, Inc. (NASDAQ:OSTK) is an online retailer and technology company based in Salt Lake City, Utah. Its leading e-commerce website sells a broad range of new home products at low prices, including furniture, décor, area rugs, bedding and bath, home improvement, and more. The online shopping site features millions of products that tens of millions of customers visit each month. Overstock regularly posts information about the Company and other related matters on the Newsroom and Investor Relations pages on its website, Overstock.com.

O, Overstock.com, O.com, and Club O are registered trademarks of Overstock.com, Inc. Other service marks, trademarks and trade names which may be referred to herein are the property of their respective owners.

Cautionary Note Regarding Forward-Looking Statements

This press release and the July 28, 2022 conference call and webcast to discuss our financial results may contain forward-looking statements within the meaning of the federal securities laws. Such forward-looking statements include all statements other than statements of historical fact, including forecasts of trends, market conditions, and other factors that could impact our results of operations. You should not place undue reliance on any forward-looking statements, which speak only as of the date they were made. We undertake no obligation to update any forward-looking statements as a result of any new information, future developments, or otherwise. These forward-looking statements are inherently difficult to predict. Actual results could differ materially for a variety of reasons, including but not limited to, macroeconomic changes, including higher inflation and rising interest rates, and difficulties we may have with our fulfillment partners, supply chain, access to products, shipping costs, competition, attraction/retention of employees, search engine optimization results, and/or payment processors. Other risks and uncertainties include, among others, the duration of the COVID-19 pandemic and its ultimate impact on our business and results of operations, the current conflict between Russia and Ukraine and its related geopolitical impacts, problems with our infrastructure, including cyber-attacks or data breaches affecting us, adverse tax, regulatory or legal developments, any restrictions on the use of “cookies” or other tracking technologies, any negative business impacts associated with our strategy to exit from non-home categories, and whether our partnership with Pelion Venture Partners will be able to achieve its objectives. More information about factors that could potentially affect our financial results are included in our Form 10-K for the year ended December 31, 2021, which was filed with the SEC on February 25, 2022, in our Form 10-Q for the quarter ended March 31, 2022, which was filed with the SEC on May 4, 2022, and in our subsequent filings with the SEC. The Form 10-K, 10-Q, and our subsequent filings with the SEC identify important factors that could cause our actual results to differ materially from those contained in or contemplated by our projections, estimates and other forward-looking statements.

Contacts

Investor Relations:
Lavesh Hemnani
[email protected]

Media Relations:
Sarah Factor
[email protected]

Overstock.com, Inc.
Consolidated Balance Sheets (Unaudited)
(in thousands, except share data)
  June 30,
2022
  December 31,
2021
Assets      
Current assets:      
Cash and cash equivalents $ 442,603     $ 503,341  
Restricted cash   184       25  
Accounts receivable, net   23,088       21,190  
Inventories   5,666       5,137  
Prepaids and other current assets   20,233       22,097  
Total current assets   491,774       551,790  
Property and equipment, net   108,041       109,479  
Deferred tax assets, net   37,413       40,035  
Goodwill   6,160       6,160  
Equity securities   350,580       342,682  
Operating lease right-of-use assets   10,192       12,584  
Other long-term assets, net   2,790       3,236  
Total assets $ 1,006,950     $ 1,065,966  
Liabilities and Stockholders’ Equity      
Current liabilities:      
Accounts payable $ 96,232     $ 102,293  
Accrued liabilities   91,794       101,902  
Unearned revenue   56,554       59,387  
Operating lease liabilities, current   5,636       5,402  
Other current liabilities   3,428       3,349  
Total current liabilities   253,644       272,333  
Long-term debt, net   36,248       37,984  
Operating lease liabilities, non-current   5,220       7,960  
Other long-term liabilities   3,128       3,303  
Total liabilities   298,240       321,580  
Stockholders’ equity:      
Preferred stock, $0.0001 par value, authorized shares – 5,000      
Series A-1, issued and outstanding – 0 and 4,204          
Series B, issued and outstanding – 0 and 357          
Common stock, $0.0001 par value, authorized shares – 100,000      
Issued shares – 51,026 and 46,625      
Outstanding shares – 45,695 and 43,023   5       4  
Additional paid-in capital   972,845       960,544  
Accumulated deficit   (121,323 )     (136,590 )
Accumulated other comprehensive loss   (529 )     (537 )
Treasury stock at cost – 5,331 and 3,602   (142,288 )     (79,035 )
Total stockholders’ equity   708,710       744,386  
Total liabilities and stockholders’ equity $ 1,006,950     $ 1,065,966  

Overstock.com, Inc.
Consolidated Statements of Income (Unaudited)
(in thousands, except per share data)
  Three months ended
June 30,
  Six months ended
June 30,
    2022       2021       2022       2021  
Net revenue $ 528,122     $ 794,536     $ 1,064,159     $ 1,454,397  
Cost of goods sold   407,017       619,710       817,842       1,126,047  
Gross profit   121,105       174,826       246,317       328,350  
Operating expenses              
Sales and marketing   57,940       85,272       116,453       158,810  
Technology   30,542       30,383       63,531       60,906  
General and administrative   21,081       22,660       42,337       45,531  
Total operating expenses   109,563       138,315       222,321       265,247  
Operating income   11,542       36,511       23,996       63,103  
Interest income (expense), net   115       (130 )     (10 )     (285 )
Other income (expense), net   (1,981 )     298       (2,095 )     72  
Income before income taxes from continuing operations   9,676       36,679       21,891       62,890  
Provision (benefit) for income taxes   2,529       (45,726 )     4,621       (45,533 )
Income from continuing operations   7,147       82,405       17,270       108,423  
Income from discontinued operations, net of income taxes         227,372             217,246  
Consolidated net income   7,147       309,777       17,270       325,669  
Less: Net loss attributable to noncontrolling interests—discontinued operations         (134 )           (335 )
Net income attributable to stockholders of Overstock.com, Inc. $ 7,147     $ 309,911     $ 17,270     $ 326,004  
Consolidated net income per share of common stock:              
Net income attributable to common shares—basic              
Continuing operations $ 0.12     $ 1.73     $ 0.33     $ 2.27  
Discontinued operations         4.78             4.58  
Total $ 0.12     $ 6.51     $ 0.33     $ 6.85  
Net income attributable to common shares—diluted              
Continuing operations $ 0.12     $ 1.72     $ 0.33     $ 2.26  
Discontinued operations         4.75             4.54  
Total $ 0.12     $ 6.47     $ 0.33     $ 6.80  
Weighted average shares of common stock outstanding:              
Basic   43,072       43,009       43,062       42,948  
Diluted   43,159       43,314       43,221       43,317  

Overstock.com, Inc.
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
  Six months ended
June 30,
    2022       2021  
Cash flows from operating activities:      
Consolidated net income $ 17,270     $ 325,669  
Income from discontinued operations, net of income taxes         (217,246 )
Adjustments to reconcile consolidated net income to net cash provided by operating activities:      
Depreciation and amortization   8,350       9,949  
Non-cash operating lease cost   2,736       2,528  
Stock-based compensation to employees and directors   9,334       5,107  
Decrease (increase) in deferred income taxes, net   2,622       (47,046 )
Loss from equity method securities   2,583        
Other non-cash adjustments   (114 )     721  
Changes in operating assets and liabilities:      
Accounts receivable, net   (1,504 )     (10,141 )
Inventories   (529 )     (766 )
Prepaids and other current assets   2,318       (3,452 )
Other long-term assets, net   (943 )     (368 )
Accounts payable   (6,104 )     56,543  
Accrued liabilities   (8,339 )     (10,651 )
Unearned revenue   (2,833 )     12,282  
Operating lease liabilities   (2,850 )     (2,812 )
Other long-term liabilities   (175 )     (270 )
Net cash provided by continuing operating activities   21,822       120,047  
Net cash used in discontinued operating activities         (17,128 )
Net cash provided by operating activities   21,822       102,919  
Cash flows from investing activities:      
Purchase of equity securities   (11,420 )      
Contributions for capital calls         (41,122 )
Capital distribution from investment   1,162        
Expenditures for property and equipment   (6,406 )     (5,620 )
Other investing activities, net   (505 )     (908 )
Net cash used in continuing investing activities   (17,169 )     (47,650 )
Net cash used in discontinued investing activities         (29,703 )
Net cash used in investing activities   (17,169 )     (77,353 )
Cash flows from financing activities:      
Repurchase of shares   (60,077 )      
Payments on long-term debt   (1,707 )     (1,366 )
Payments of taxes withheld upon vesting of employee stock awards   (3,482 )     (7,812 )
Other financing activities, net   34       (1 )
Net cash used in continuing financing activities   (65,232 )     (9,179 )
Net cash provided by discontinued financing activities         2,085  
Net cash used in financing activities   (65,232 )     (7,094 )
Net increase (decrease) in cash, cash equivalents, and restricted cash   (60,579 )     18,472  
Cash, cash equivalents, and restricted cash, beginning of year, inclusive of cash balances of discontinued operations   503,366       519,181  
Cash, cash equivalents, and restricted cash, end of year, inclusive of cash balances of discontinued operations   442,787       537,653  
Less: Cash, cash equivalents, and restricted cash of discontinued operations          
Cash, cash equivalents, and restricted cash, end of year $ 442,787     $ 537,653  

Financial Reporting Presentation in Accordance with the Pelion Transaction

Upon closing the Pelion transaction during the second quarter of 2021, we deconsolidated the Medici Ventures’ blockchain businesses, including tZERO. The operating results for these businesses for the periods prior to deconsolidation have been reflected in our consolidated statements of income as discontinued operations. Overstock reorganized its remaining businesses, including corporate-related overhead costs, into a single reportable operating segment.

Supplemental Operational Data

We measure our business using operational metrics, in addition to the financial metrics shown above and the non-GAAP financial measures explained below. We believe these metrics provide investors with additional information regarding our financial results and provide key performance indicators to track our growth. These indicators include changes in customer order patterns and the mix of products purchased by our customers.

Active customers represent the total number of unique customers who have made at least one purchase during the prior twelve-month period. This metric captures both the inflow of new customers and the outflow of existing customers who have not made a purchase during the prior twelve-month period.

LTM net revenue per active customer represents total net revenue in a twelve-month period divided by the total number of active customers for the same twelve-month period.

Orders delivered represents the total number of orders delivered in any given period, including orders that may eventually be returned. As we ship a large volume of packages through multiple carriers, actual delivery dates may not always be available, and in those circumstances, we estimate delivery dates based on historical data.

Average order value is defined as total net revenue in any given period divided by the total number of orders delivered in that period.

Orders per active customer is defined as orders delivered in a twelve-month period divided by active customers for the same twelve-month period.

The following table provides key operating metrics for the Retail business:
(in thousands, except for LTM net revenue per active customer, average order value and orders per active customer)

  Three months ended
June 30,
  2022   2021
Active customers 6,490   9,165
LTM net revenue per active customer 365   310
Orders delivered 2,138   3,736
Average order value 247   213
Orders per active customer 1.65   1.69

Non-GAAP Financial Measures and Reconciliations

We are providing certain non-GAAP financial measures in this release and related earnings conference call, including adjusted diluted earnings per share from continuing operations, adjusted EBITDA, and free cash flow. We use these non-GAAP measures internally in analyzing our financial results and we believe they are useful to investors, as a supplement to GAAP measures, in evaluating our ongoing operational performance in the same manner as our management and board of directors. We have provided reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures in this earnings release. These non-GAAP financial measures should be used in addition to and in conjunction with the results presented in accordance with GAAP and should not be relied upon to the exclusion of GAAP financial measures.

Adjusted diluted earnings per share for continuing operations is a non-GAAP financial measure that we calculate as net income from continuing operations less the income recognized from our equity method securities, net of related tax and the non-cash preferred stock conversion dividend. We believe that this adjustment to our net income before calculating per share amounts for the current period presented provides a useful comparison between our operating results from period to period.

Adjusted EBITDA is a non-GAAP financial measure that is calculated as income from continuing operations before depreciation and amortization, stock-based compensation, interest and other income (expense), provision (benefit) for income taxes, and special items. We believe the exclusion of certain benefits and expenses in calculating adjusted EBITDA facilitates operating performance comparisons on a period-to-period basis. Exclusion of items in the non-GAAP presentation should not be construed as an inference that these items are unusual, infrequent or non-recurring.

Free cash flow is a non-GAAP financial measure that is calculated as net cash provided by or used in continuing operating activities reduced by expenditures for property and equipment. We believe free cash flow is a useful measure to evaluate the cash impact of the continuing operations of the business including purchases of property and equipment which are a necessary component of our ongoing operations.

The following table reflects the reconciliation of adjusted diluted earnings per share from continuing operations to diluted earnings per share from continuing operations (in thousands, except per share data):

  Three months ended
June 30,
  2022
  Diluted EPS   Less: non-cash
preferred stock dividend
1
  Less: equity method
income (loss)
2
  Adjusted
Diluted EPS
Numerator:              
Income from continuing operations $ 7,147   $     $ (1,793 )   $ 8,940
Less: Preferred stock dividends—issued   1,697     1,697            
Undistributed income from continuing operations   5,450     (1,697 )     (1,793 )     8,940
Less: Undistributed income allocated to participating securities   410     (128 )     (135 )     673
Net income from continuing operations attributable to common stockholders $ 5,040   $ (1,569 )   $ (1,658 )   $ 8,267
               
Denominator:              
Weighted average shares of common stock outstanding—diluted   43,159     43,159       43,159       43,159
               
Net income from continuing operations per share of common stock:              
Diluted $ 0.12   $ (0.03 )   $ (0.04 )   $ 0.19

1 Non-cash dividend as a result of preferred stock conversion
2 Inclusive of estimated tax impact from equity method activity

The following table reflects the reconciliation of adjusted EBITDA to income from continuing operations (in thousands):

  Three months ended
June 30,
  Six months ended
June 30,
    2022       2021       2022     2021  
               
Income from continuing operations $ 7,147     $ 82,405     $ 17,270   $ 108,423  
Depreciation and amortization   4,043       4,803       8,350     9,949  
Stock-based compensation   4,695       2,802       9,334     5,107  
Interest (income) expense, net   (115 )     130       10     285  
Other (income) expense, net   1,981       (298 )     2,095     (72 )
Provision (benefit) for income taxes   2,529       (45,726 )     4,621     (45,533 )
Special items (see table below)   475       243       528     56  
Adjusted EBITDA $ 20,755     $ 44,359     $ 42,208   $ 78,215  
               
Special items:              
Special legal charges and other $ 471     $     $ 471   $ (187 )
Transaction costs   4       243       57     243  
  $ 475     $ 243     $ 528   $ 56  

The following table reflects the reconciliation of free cash flow to net cash provided by continuing operating activities (in thousands):

  Six months ended
June 30,
    2022       2021  
Net cash provided by continuing operating activities $ 21,822     $ 120,047  
Expenditures for property and equipment   (6,406 )     (5,620 )
Free cash flow $ 15,416     $ 114,427  

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