Overstock Announces Third Quarter 2022 Financial Results

"Despite a challenging retail environment, our business continues to be profitable for the tenth consecutive quarter, and we ended the quarter with a strong balance sheet and cash position," said Overstock CEO Jonathan Johnson. "Our sales trends improved in late-Q3, including a successful Labor Day event that culminated into our biggest sales day of the year thus far. We improved gross margin by leveraging our differentiated asset-light business model, supported our vendor partners to move through ample inventory, and continued to provide smart value to our customers in a highly promotional time. We accomplished this while navigating shifting consumer spending preferences, high inflation and macro headwinds that put pressure on our industry."

"We launched our new national brand campaign in early October centered around our vision of 'Making Dream Homes Come True'," continued Johnson. "This campaign supports our efforts to increase the association of Overstock's high brand-name awareness with 'home' and positions us well to grow market share into the future. We are managing through near-term challenges while focusing on efforts that I expect will help drive long-term growth. I am pleased with the team’s ability to balance both. I look forward to providing a full update on our third quarter 2022 performance during our earnings call."

Third Quarter 2022 Operational Highlights*

*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.

Earnings Webcast and Replay Information

Overstock will hold a conference call and webcast to discuss its third quarter 2022 financial results on Thursday, October 27, 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 ir@overstock.com.

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 furniture and home furnishings retailer and technology-focused innovator 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 October 27, 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, the impact of our national marketing campaign, 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 ultimate impact of the COVID-19 pandemic on our business and results of operations, the ongoing 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 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, our Form 10-Q for the quarter ended March 31, 2022, and our Form 10-Q for the quarter ended June 30, 2022, which were filed with the SEC on February 25, 2022, May 4, 2022, and August 2, 2022, respectively, and in our subsequent filings with the SEC. The Form 10-K, 10-Qs, 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
ir@overstock.com

Media Relations:
Sarah Factor
pr@overstock.com Overstock.com, Inc.
Consolidated Balance Sheets (Unaudited)
(in thousands, except per share data) September 30,
2022 December 31,
2021Assets Current assets: Cash and cash equivalents$427,530 $503,341 Restricted cash 204 25 Accounts receivable, net 20,753 21,190 Inventories 6,070 5,137 Prepaids and other current assets 20,746 22,097 Total current assets 475,303 551,790 Property and equipment, net 107,180 109,479 Deferred tax assets, net 40,726 40,035 Goodwill 6,160 6,160 Equity securities 311,356 342,682 Operating lease right-of-use assets 8,790 12,584 Other long-term assets, net 2,720 3,236 Total assets$952,235 $1,065,966 Liabilities and Stockholders' Equity Current liabilities: Accounts payable$84,650 $102,293 Accrued liabilities 88,834 101,902 Unearned revenue 51,052 59,387 Operating lease liabilities, current 5,283 5,402 Other current liabilities 3,467 3,349 Total current liabilities 233,286 272,333 Long-term debt, net 35,369 37,984 Operating lease liabilities, non-current 4,138 7,960 Other long-term liabilities 2,797 3,303 Total liabilities 275,590 321,580 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 - 51,071 and 46,625 Outstanding shares - 45,740 and 43,023 5 4 Additional paid-in capital 977,790 960,544 Accumulated deficit (158,318) (136,590)Accumulated other comprehensive loss (525) (537)Treasury stock at cost - 5,331 and 3,602 (142,307) (79,035)Total stockholders' equity 676,645 744,386 Total liabilities and stockholders' equity$952,235 $1,065,966 Overstock.com, Inc.
Consolidated Statements of Income (Unaudited)
(in thousands, except per share data) Three months ended
September 30, Nine months ended
September 30, 2022 2021 2022 2021 Net revenue$460,279 $689,390 $1,524,438 $2,143,787 Cost of goods sold 352,807 532,682 1,170,649 1,658,729 Gross profit 107,472 156,708 353,789 485,058 Operating expenses Sales and marketing 53,520 75,650 169,973 234,460 Technology 29,628 31,178 93,159 92,084 General and administrative 18,665 21,031 61,002 66,562 Total operating expenses 101,813 127,859 324,134 393,106 Operating income 5,659 28,849 29,655 91,952 Interest income (expense), net 976 (139) 966 (424)Other expense, net (46,283) (79) (48,378) (7)Income (loss) from continuing operations before income taxes (39,648) 28,631 (17,757) 91,521 Provision (benefit) for income taxes (2,653) (1,795) 1,968 (47,328)Income (loss) from continuing operations (36,995) 30,426 (19,725) 138,849 Income from discontinued operations, net of income taxes — — — 217,246 Consolidated net income (loss) (36,995) 30,426 (19,725) 356,095 Less: Net loss attributable to noncontrolling interests—discontinued operations — — — (335)Net income (loss) attributable to stockholders of Overstock.com, Inc.$(36,995) $30,426 $(19,725) $356,430 Consolidated net income (loss) per share of common stock: Net income (loss) attributable to common shares—basic Continuing operations$(0.81) $0.64 $(0.46) $2.91 Discontinued operations — — — 4.58 Total$(0.81) $0.64 $(0.46) $7.49 Net income (loss) attributable to common shares—diluted Continuing operations$(0.81) $0.63 $(0.46) $2.89 Discontinued operations — — — 4.54 Total$(0.81) $0.63 $(0.46) $7.43 Weighted average shares of common stock outstanding: Basic 45,708 43,014 43,954 42,970 Diluted 45,708 43,324 43,954 43,320 Overstock.com, Inc.
Consolidated Statements of Cash Flows (Unaudited)
(in thousands) Nine months ended
September 30, 2022
2021
Cash flows from operating activities: Consolidated net income (loss)$(19,725) $356,095 Income from discontinued operations, net of income taxes — (217,246)Adjustments to reconcile consolidated net income (loss) to net cash provided by operating activities: Depreciation and amortization 12,480 14,332 Non-cash operating lease cost 4,138 3,758 Stock-based compensation to employees and directors 13,390 7,649 Increase in deferred income taxes, net (691) (51,749)Loss from equity method securities 49,227 711 Other non-cash adjustments 97 689 Changes in operating assets and liabilities: Accounts receivable, net 745 (2,305)Inventories (933) 461 Prepaids and other current assets 1,991 3,259 Other long-term assets, net (1,004) (1,050)Accounts payable (17,360) 14,831 Accrued liabilities (11,633) (19,945)Unearned revenue (8,335) (6,959)Operating lease liabilities (4,285) (3,891)Other long-term liabilities (506) 1,444 Net cash provided by continuing operating activities 17,596 100,084 Net cash used in discontinued operating activities — (17,128) Net cash provided by operating activities 17,596 82,956 Cash flows from investing activities: Purchase of equity securities (18,920) — Contributions for capital calls — (41,122)Capital distribution from investment 1,224 — Expenditures for property and equipment (9,724) (9,658)Other investing activities, net (584) (1,281)Net cash used in continuing investing activities (28,004) (52,061)Net cash used in discontinued investing activities — (29,703) Net cash used in investing activities (28,004) (81,764)Cash flows from financing activities: Repurchase of shares (60,077) — Payments on long-term debt (2,570) (2,191)Payments of taxes withheld upon vesting of employee stock awards (3,501) (7,850)Proceeds from employee stock purchase plan 924 — Other financing activities, net — (1)Net cash used in continuing financing activities (65,224) (10,042)Net cash provided by discontinued financing activities — 2,085 Net cash used in financing activities (65,224) (7,957)Net decrease in cash, cash equivalents, and restricted cash (75,632) (6,765)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 period, inclusive of cash balances of discontinued operations 427,734 512,416 Less: Cash, cash equivalents, and restricted cash of discontinued operations — — Cash, cash equivalents, and restricted cash, end of period$427,734 $512,416         

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 progress. 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 our key operating metrics:
(in thousands, except for LTM net revenue per active customer, average order value and orders per active customer) Three months ended
September 30, 2022 2021Active customers5,791 8,657LTM net revenue per active customer369 325Orders delivered1,894 3,217Average order value243 214Orders per active customer1.62 1.68

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 is calculated as net income (loss) from continuing operations less the income or losses recognized from our equity method securities, net of related tax. We believe that this adjustment to our net income (loss) 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 (loss) 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
September 30, 2022 Diluted EPS Less: equity
method
income
(loss)1 Adjusted
Diluted EPSNumerator: Net income (loss) from continuing operations attributable to common stockholders$(36,995) $(42,861) $5,866 Denominator: Weighted average shares of common stock outstanding—diluted 45,708 45,708 45,708 Net income (loss) from continuing operations per share of common stock: Diluted$(0.81) $(0.94) $0.13

1 Inclusive of estimated tax impact from equity method activity

The following table reflects the reconciliation of adjusted EBITDA to income (loss) from continuing operations (in thousands): Three months ended
September 30, Nine months ended
September 30, 2022 2021 2022 2021 Income (loss) from continuing operations$(36,995) $30,426 $(19,725) $138,849 Depreciation and amortization 4,130 4,383 12,480 14,332 Stock-based compensation 4,056 2,542 13,390 7,649 Interest (income) expense, net (976) 139 (966) 424 Other expense, net 46,283 79 48,378 7 Provision (benefit) for income taxes (2,653) (1,795) 1,968 (47,328)Special items (see table below) 923 305 1,451 361 Adjusted EBITDA$14,768 $36,079 $56,976 $114,294 Special items: Special legal charges and other$27 $1 $498 $(186)Severance 878 253 878 253 Transaction costs 18 51 75 294 $923 $305 $1,451 $361                 

The following table reflects the reconciliation of free cash flow to net cash provided by continuing operating activities (in thousands): Nine months ended
September 30, 2022 2021 Net cash provided by continuing operating activities$17,596 $100,084 Expenditures for property and equipment (9,724) (9,658)Free cash flow$7,872 $90,426