SOURCE: Overstock.com

October 19, 2007 08:00 ET

Overstock.com Reports Financial Results for the Three- and Nine-Month Periods Ending September 30, 2007

SALT LAKE CITY, UT--(Marketwire - October 19, 2007) - Overstock.com (NASDAQ: OSTK)

Key metrics (Q3 2007 comparisons to Q3 2006):

--  Revenue: $161.9M vs. $156.9M (a 3% increase)
--  Gross profits: $28.3M vs. $21.4M (a 32% increase)
--  Sales and marketing expense: $8.8M vs. $17.3M (a 49% reduction)
--  Contribution profit (gross profit less marketing): $19.4M vs. $4.1M (a
    376% increase)
--  G&A / Technology expense: $24.3M vs. $27.2M (an 11% reduction)
--  Net loss: $4.7M vs. $24.5M (an 81% reduction)
--  EBITDA: positive $4.1M vs. negative $14.3M (an $18.4M increase)
--  TTM Operating cash flow: positive $5.9M vs. negative $20.5M (a $26.4M
    increase)
    

Dear Investor:

In Q3, we generated positive EBITDA for the first time in a non-Q4 quarter. I believe this validates our view that a profitable business model is emerging, particularly in light of our de minimus capital expenditures ($316K during Q3).

We also returned to positive (albeit modest) top-line growth despite halving our marketing expenses. A year ago, I said that we had a laundry list of projects we were working on to improve our marketing efforts. Since then, our marketing dollars have become twice as efficient. We are about one-third of the way through the list; I do not know what the remaining two-thirds will bring.

Expenses are drum tight, product selection is strong, operations are humming, and customer satisfaction is extraordinary. We are superbly positioned for the holiday season.

I look forward to our call, and as always, remain,

                                        Your humble servant,

                                        Patrick M. Byrne

P.S. Please email Kevin Moon at kmoon@overstock.com with questions prior to the call.

Key financial and operating metrics

Total revenue - Overstock.com reported total revenue for the three months ended September 30, 2006 and 2007 of $156.9 million and $161.9 million, respectively, a 3% increase. For the nine months ended September 30, 2006 and 2007, total revenue was $494.1 million and $468.8 million, respectively, a 5% decrease.

Gross profit and gross margin - Gross profit for the three months ended September 30, 2006 and 2007 was $21.4 million and $28.3 million, respectively, a 32% increase, representing margins of 13.6% and 17.5% for those respective periods. For the nine-month periods, gross profits were $67.4 million in 2006 and $79.9 million in 2007, an 18% increase. Gross margins were 13.6% and 17.0% for those respective nine-month periods.

Contribution and contribution margin - "Contribution" (gross profit less sales and marketing expenses) for the three months ended September 30, 2006 and 2007 was $4.1 million (2.6% contribution margin) and $19.4 million (12.0% contribution margin), respectively, a 376% increase. For the nine months ended September 30, 2006 and 2007, contribution was $25.6 million (5.2% contribution margin) and $51.8 million (11.0% contribution margin), respectively, a 103% increase.

                                 Three months ended    Nine months ended
                                     September 30,        September 30,
                                --------------------  --------------------
                                   2006       2007       2006       2007
                                ---------  ---------  ---------  ---------
Total revenue                   $ 156,885  $ 161,930  $ 494,121  $ 468,827
Cost of goods sold                135,520    133,669    426,694    388,948
                                ---------  ---------  ---------  ---------

Gross profit                       21,365     28,261     67,427     79,879
Less: Sales and marketing
 expense                           17,282      8,835     41,852     28,081
                                ---------  ---------  ---------  ---------

Contribution                    $   4,083  $  19,426  $  25,575  $  51,798
                                =========  =========  =========  =========
Contribution margin                   2.6%      12.0%       5.2%      11.0%


Operating loss - Operating losses for the three months ended September 30, 2006 and 2007 were $23.2 million and $4.9 million, respectively. For the nine months ended September 30, 2006 and 2007, operating losses were $52.9 million and $36.1 million, respectively.

EBITDA - EBITDA (a non-GAAP measure) for the three months ended September 30, 2006 and 2007 was $(14.4) million and $4.1 million, respectively. For the nine months ended September 30, 2006 and 2007, EBITDA was $(28.4) million and ($8.3) million, respectively. We believe that, because our current capital expenditures are significantly lower than our depreciation levels, discussing EBITDA at this stage of our business is useful to us and investors because it approximates actual cash used or cash generated by the operations of the business.

                              Three months ended      Nine months ended
                                 September 30,          September 30,
                            ----------------------- -----------------------
                               2006        2007        2006        2007
                            ----------- ----------- ----------- -----------
Operating loss              $  (23,152) $   (4,874) $  (52,881) $  (36,113)
Add:Depreciation and
 amortization                     7,776       7,080      20,802      22,825
  Stock-based compensation
   expense                        1,042       1,176       3,088       3,386
  Stock-based compensation
   to consultants for
   service                          (3)         140          31         280
  Stock-based compensation
   relating to performance
   shares                            --         350          --         350
  Treasury stock issued to
   employees as
   compensation                      67         213         679         928
                            ----------- ----------- ----------- -----------
EBITDA                      $  (14,270) $     4,085 $  (28,281) $   (8,344)
                            =========== =========== =========== ===========



Net loss - Net loss for the three months ended September 30, 2006, was $24.5 million, or $1.16 loss per share, compared to $4.7 million, or $0.20 loss per share in 2007. For the nine months ended September 30, 2006 and 2007, net losses totaled $56.2 million and $39.9 million, respectively, or $2.67 and $1.52 loss per share for those respective periods. Net loss in 2007 includes restructuring of $12.3 million and loss from discontinued operations of $3.9 million. For the nine months ended September 30, 2006 net loss did not have any restructuring charges, but included $2.6 million loss from discontinued operations.

Cash and working capital - At September 30, 2007, Overstock.com had cash, cash equivalents and marketable securities of $91.0 million and working capital of $69.0 million.

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 Global 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 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 emergence of a profitable business model, results of marketing changes, customer satisfaction, expense controls, amounts of future capital expenditures, and the company's positioning for the holiday season. Our Form 10-K for the year ended December 31, 2006, our subsequent quarterly reports on Form 10-Q, and our other subsequent filings with the Securities and Exchange Commission identify important factors that could cause our actual results to differ materially from those contained in our projections, estimates or forward-looking statements.



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


                                 Three months ended     Nine months ended
                                    September 30,         September 30,
                                --------------------  --------------------
                                  2006       2007       2006       2007
                                ---------  ---------  ---------  ---------

Revenue
  Direct                        $  56,564  $  39,446  $ 205,044  $ 128,725
  Fulfillment partner             100,321    122,484    289,077    340,102
                                ---------  ---------  ---------  ---------

    Total revenue                 156,885    161,930    494,121    468,827
                                ---------  ---------  ---------  ---------

Cost of goods sold
  Direct                           51,037     33,160    183,213    108,801
  Fulfillment partner              84,483    100,509    243,481    280,147
                                ---------  ---------  ---------  ---------

    Total cost of goods sold      135,520    133,669    426,694    388,948
                                ---------  ---------  ---------  ---------

Gross profit                       21,365     28,261     67,427     79,879
                                ---------  ---------  ---------  ---------

Operating expenses:
  Sales and marketing              17,282      8,835     41,852     28,081
  Technology                       16,157     14,576     44,478     44,786
  General and administrative       11,078      9,724     33,978     30,842
  Restructuring                         -          -          -     12,283
                                ---------  ---------  ---------  ---------

    Total operating expenses       44,517     33,135    120,308    115,992
                                ---------  ---------  ---------  ---------

Operating loss                    (23,152)    (4,874)   (52,881)   (36,113)

Interest income                       459      1,291      2,989      3,359
Interest expense                   (1,096)    (1,029)    (3,638)    (3,085)
Other income, net                      (6)       (92)        (7)       (92)
                                ---------  ---------  ---------  ---------

Loss from continuing operations   (23,795)    (4,704)   (53,537)   (35,931)
Discontinued operations:
  Loss from discontinued
   operations                        (708)         -     (2,615)    (3,924)
                                ---------  ---------  ---------  ---------

Net loss                          (24,503)    (4,704)   (56,152)   (39,855)
Deemed dividend related to
 redeemable common stock              (33)         -        (99)         -
                                ---------  ---------  ---------  ---------

Net income (loss) attributable
 to common shares               $ (24,536) $  (4,704) $ (56,251) $ (39,855)
                                =========  =========  =========  =========

Net loss per common share -
 basic and diluted:
  Loss from continuing
   operations                   $   (1.16) $   (0.20) $   (2.67) $   (1.52)
  Loss from discontinued
   operations                   $   (0.03) $       -  $   (0.13) $   (0.16)
  Net loss per common share -
   basic and diluted            $   (1.19) $   (0.20) $   (2.80) $   (1.68)
Weighted average common shares
 outstanding - basic and
 diluted                           20,600     23,726     20,052     23,671

Other data:
Shopping bookings (in 000s)     $ 170,590  $ 177,226  $ 543,582  $ 513,270
Auction gross merchandise
 volume (in 000s)               $   6,751  $   2,628  $  21,690  $  11,076
Average customer acquisition
 cost (shopping)                $   31.49  $   18.17  $   24.62  $   20.76




                            Overstock.com, Inc.
                  Consolidated Balance Sheets (unaudited)
                              (in thousands)


                                              December 31,   September 30,
                                                  2006           2007
                                              -------------  -------------
                    Assets
Current assets:
  Cash and cash equivalents                   $     126,965  $      74,145
  Marketable securities                                   -         16,842
                                              -------------  -------------

    Cash, cash equivalents and marketable
     securities                                     126,965         90,987
  Accounts receivable, net                           11,638          7,607
  Notes receivable                                    6,702          1,506
  Inventories, net                                   20,274         22,400
  Prepaid inventory                                   2,241          5,003
  Prepaid expenses                                    7,473         10,257
  Current assets of held for sale subsidiary          4,718              -
                                              -------------  -------------

    Total current assets                            180,011        137,760
Property and equipment, net                          56,198         33,450
Goodwill                                              2,784          2,784
Other long-term assets, net                             578            197
Note receivable                                           -          4,045
Long-term assets of held for sale subsidiary         16,594              -
                                              -------------  -------------

    Total assets                              $     256,165  $     178,236
                                              =============  =============

     Liabilities and Stockholders' Equity
Current liabilities:
  Accounts payable                            $      66,039  $      38,504
  Accrued liabilities                                40,142         26,499
  Capital lease obligations, current                  5,074          3,801
  Current liabilities of held for sale
   subsidiary                                         3,684              -
                                              -------------  -------------

    Total current liabilities                       114,939         68,804
  Capital lease obligations, non-current              3,983              -
  Other long-term liabilities                             -          3,113
  Convertible senior notes                           75,279         75,537
                                              -------------  -------------

    Total liabilities                               194,201        147,454
                                              -------------  -------------

Stockholders' equity:
  Common stock                                            2              2
  Additional paid-in capital                        325,771        332,899
  Accumulated deficit                              (198,694)      (238,549)
  Treasury stock                                    (64,983)       (63,435)
  Accumulated other comprehensive loss                 (132)          (135)
                                              -------------  -------------

       Total stockholders' equity                    61,964         30,782
                                              -------------  -------------

    Total liabilities and stockholders'
     equity                                   $     256,165  $     178,236
                                              =============  =============




                            Overstock.com, Inc.
              Consolidated Statements of Cash Flows (unaudited)
                              (in thousands)


                                 Three months ended     Nine months ended
                                    September 30,         September 30,
                                --------------------  --------------------
                                  2006       2007       2006       2007
                                ---------  ---------  ---------  ---------

Cash flows from operating
 activities of continuing
 operations:
  Net loss                      $ (24,502) $  (4,704) $ (56,151) $ (39,855)
  Adjustments to reconcile net
   loss to cash provided by
   (used in) operating
   activities of continuing
   operations:
    Loss from discontinued
     operations                       708          -      2,615      3,924
    Depreciation and
     amortization                   7,776      7,080     20,802     22,825
    Realized gain from
     marketable securities              -          -     (2,085)         -
    Realized loss on
     disposition of property
     and equipment                      -          -        599          1
    Stock-based compensation        1,042      1,176      3,088      3,386
    Stock-based compensation to
     consultants for services          (3)       140         31        280
    Stock-based compensation
     relating to performance
     share plan                         -        350          -        350
    Treasury stock issued to
     employees as compensation         67        213        679        928
    Amortization of debt
     discount and deferred
     financing fees                   139         86        417        258
    Gain from retirement of
     convertible senior notes           -          -          -          -
    Restructuring                       -          -          -     12,283
    Notes receivable accretion          -       (136)         -       (136)
    Changes in operating assets
     and liabilities, net of
     effect of acquisition and
     discontinued operations:
      Accounts receivable, net      1,541        335      2,880      3,731
      Inventories, net              6,040     (6,975)    24,487     (2,126)
      Prepaid inventory              (781)    (2,879)     5,605     (2,762)
      Prepaid expenses                455     (1,522)      (716)    (2,784)
      Other long-term assets         (123)       100       (105)       366
      Accounts payable             11,745      4,960    (53,479)   (27,632)
      Accrued liabilities          (3,340)      (856)   (26,909)   (18,970)
      Other long-term
       liabilities                      -       (114)         -       (114)
                                ---------  ---------  ---------  ---------

        Net cash provided by
         (used in) operating
         activities                   764     (2,746)   (78,242)   (46,047)
                                ---------  ---------  ---------  ---------

Cash flows from investing
 activities of continuing
 operations:
  Change in restricted cash             -          -        253          -
  Purchases of marketable
   securities                           -     (7,783)         -    (29,164)
  Sales of marketable
   securities                           -      8,924     56,756     12,324
  Expenditures for property and
   equipment                       (7,769)      (316)   (19,675)    (2,232)
  Proceeds from the sale of
   property and equipment               1          -          1          -
  Proceeds from the sale of
   discontinued operations, net
   of cash transferred                  -          -          -      9,892
  Paydown of note receivable            -        502          -      5,196
  Decrease in cash resulting
   from de-consolidation of
   variable entity                      -          -          -          -
  Expenditures for other
   long-term assets                     -          -       (100)         -
                                ---------  ---------  ---------  ---------

        Net cash provided by
         (used in) investing
         activities                (7,768)     1,327     37,235     (3,984)
                                ---------  ---------  ---------  ---------

Cash flows from financing
 activities of continuing
 operations:
  Payments on capital lease
   obligations                       (124)        (5)    (2,878)    (5,256)
  Borrowings on line of credit      5,245          -     78,503      1,169
  Payments on line of credit       (5,245)         -    (78,503)    (1,169)
  Payments to retire
   convertible senior notes             -          -          -          -
  Proceeds from the issuance of
   common stock                         -          -     25,000          -
  Exercise of stock options           806        551      2,267      2,472
                                ---------  ---------  ---------  ---------

        Net cash provided by
         (used in) financing
         activities                   682        546     24,389     (2,784)
                                ---------  ---------  ---------  ---------

  Effect of exchange rate
   changes on cash                     40        (26)        11         (5)
  Cash provided by (used in)
   operating activities of
   discontinued operations             42          -        112       (204)
  Cash used in investing
   activities of discontinued
   operations                         (39)         -       (343)       (53)
                                ---------  ---------  ---------  ---------

  Net increase (decrease) in
   cash and cash equivalents       (6,279)      (899)   (16,838)   (53,077)
  Change in cash and cash
   equivalents from
   discontinued operations             (3)         -        231        257
  Cash and cash equivalents,
   beginning of period             45,550     75,044     55,875    126,965
                                ---------  ---------  ---------  ---------

  Cash and cash equivalents,
   end of period                $  39,268  $  74,145  $  39,268  $  74,145
                                =========  =========  =========  =========


                                Twelve months ended
                                    September 30,
                                --------------------
                                  2006       2007
                                ---------  ---------

Cash flows from operating
 activities of continuing
 operations:
  Net loss                      $ (62,434) $ (85,470)
  Adjustments to reconcile net
   loss to cash provided by
   (used in) operating
   activities of continuing
   operations:
    Loss from discontinued
     operations                     3,830      8,191
    Depreciation and
     amortization                  25,447     34,350
    Realized gain from
     marketable securities         (1,095)         -
    Realized loss on
     disposition of property
     and equipment                  2,056          1
    Stock-based compensation        3,095      4,418
    Stock-based compensation to
     consultants for services         (20)       272
    Stock-based compensation
     relating to performance
     share plan                         -        350
    Treasury stock issued to
     employees as compensation        720      1,036
    Amortization of debt
     discount and deferred
     financing fees                   435        258
    Gain from retirement of
     convertible senior notes      (1,988)         -
    Restructuring                       -     17,957
    Notes receivable accretion          -       (136)
    Changes in operating assets
     and liabilities, net of
     effect of acquisition and
     discontinued operations:
      Accounts receivable, net       (461)    (1,201)
      Inventories, net             29,352     40,396
      Prepaid inventory             8,578       (979)
      Prepaid expenses                 22     (1,064)
      Other long-term assets       (1,821)       967
      Accounts payable               (358)    (9,353)
      Accrued liabilities         (25,838)    (3,978)
      Other long-term
       liabilities                      -       (114)
                                ---------  ---------

        Net cash provided by
         (used in) operating
         activities               (20,480)     5,901
                                ---------  ---------

Cash flows from investing
 activities of continuing
 operations:
  Change in restricted cash           633          -
  Purchases of marketable
   securities                      (2,000)   (29,164)
  Sales of marketable
   securities                      76,280     12,324
  Expenditures for property and
   equipment                      (27,851)    (5,998)
  Proceeds from the sale of
   property and equipment               1          -
  Proceeds from the sale of
   discontinued operations, net
   of cash transferred                  -      9,892
  Paydown of note receivable            -      5,196
  Decrease in cash resulting
   from de-consolidation of
   variable entity                      -       (102)
  Expenditures for other
   long-term assets                  (100)         -
                                ---------  ---------

        Net cash provided by
         (used in) investing
         activities                46,963     (7,852)
                                ---------  ---------

Cash flows from financing
 activities of continuing
 operations:
  Payments on capital lease
   obligations                     (6,730)    (5,335)
  Borrowings on line of credit     86,003      9,347
  Payments on line of credit      (90,371)    (9,347)
  Payments to retire
   convertible senior notes        (7,735)         -
  Proceeds from the issuance of
   common stock                    25,000     39,406
  Exercise of stock options         2,701      2,739
                                ---------  ---------

        Net cash provided by
         (used in) financing
         activities                 8,868     36,810
                                ---------  ---------

  Effect of exchange rate
   changes on cash                    (14)        18
  Cash provided by (used in)
   operating activities of
   discontinued operations             67      1,265
  Cash used in investing
   activities of discontinued
   operations                        (441)      (276)
                                ---------  ---------

  Net increase (decrease) in
   cash and cash equivalents       34,963     35,866
  Change in cash and cash
   equivalents from
   discontinued operations            374       (989)
  Cash and cash equivalents,
   beginning of period              3,931     39,268
                                ---------  ---------

  Cash and cash equivalents,
   end of period                  $39,268    $74,145
                                =========  =========

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