Delaware | 000-49799 | 87-0634302 | ||
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incorporation or organization) | Identification Number) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: | |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
OVERSTOCK.COM, INC. | ||
By: | /s/ PATRICK M. BYRNE | |
Patrick M. Byrne | ||
Chief Executive Officer | ||
Date: | November 8, 2018 |
1. | How we have put over $175 million of your capital to work nurturing to life a keiretsu of blockchain enterprises, including tZERO, which we believe is leading the pack globally in possibly the most lucrative of all blockchain applications (i.e., security tokens). I think the public may not understand our master plan in Medici, how the pieces all fit together, as well as how blockchain firms in this network are making similarly dramatic progress in their respective fields. |
2. | As promised in our last conference call, we have pivoted our ecommerce business from the “accelerate at any cost and ignore the losses” standard Internet model back to our rational economic agent model, and in the process halved quarter-to-quarter loss (from $57 million to $29 million pre-tax loss before some special legal expenses). In the slide deck to which we will speak during our conference call, we will disclose data regarding the shifts in our marketing efficiency that have occurred and are accelerating. Because of these improvements, I expect similar results in our fourth quarter. |
3. | We are adequately capitalized (especially given the significant contraction in retail losses) in a way that does not strangle our ambitions in blockchain. In tZERO in particular, we know we have a massive opportunity and have staffed up appropriately, but in this conference call you will learn of other efforts we are staffing up on the expectation that they represent similarly sized opportunities. |
4. | Strategic issues: In our last conference call, we announced we were working on a partnership with GSR capital and our ambitions to scale tZERO globally with GSR. We share a common strategic outlook, and GSR is proving to be a great help in the development of business in Asia. We also disclosed that GSR had signed an agreement to buy $30 million in tZERO security tokens from Overstock and would acquire stakes in tZERO and Overstock common stock, subject to due diligence and negotiating definitive agreements. GSR has completed its legal due diligence, and we are actively working with GSR to finalize definitive agreements. Beyond th |
• | Revenue: $440.6M vs. $424.0M (4% increase); |
• | Gross profit: $86.7M vs. $83.7M (4% increase); |
• | Gross margin: 19.7% vs. 19.7% (flat); |
• | Sales and marketing expense: $55.3M vs. $45.2M (23% increase); |
• | G&A/Technology expense: $79.2M vs. $50.4M (57% increase); |
• | Pre-tax loss: ($49.4M) vs. ($6.5M) ($42.9M increase); |
◦ | Pre-tax loss - Overstock retail (non-GAAP financial measure): ($40.0M) |
◦ | Pre-tax loss - Medici (non-GAAP financial measure): ($9.4M) |
• | Net loss*: ($47.9M) vs. ($0.8M) ($47.1M increase); |
• | Diluted net loss per share: ($1.55)/share vs. ($0.03)/share ($1.52/share increase); |
Nine months ended September 30, | Twelve months ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net cash used in operating activities | $ | (120,300 | ) | $ | (62,448 | ) | $ | (93,073 | ) | $ | (7,445 | ) | ||||
Expenditures for fixed assets, including internal-use software and website development | (20,677 | ) | (20,873 | ) | (23,390 | ) | (33,772 | ) | ||||||||
Free cash flow | $ | (140,977 | ) | $ | (83,321 | ) | $ | (116,463 | ) | $ | (41,217 | ) |
September 30, 2018 | December 31, 2017 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 182,042 | $ | 203,215 | |||
Restricted cash | 1,395 | 455 | |||||
Accounts receivable, net | 30,552 | 30,080 | |||||
Inventories, net | 17,308 | 13,703 | |||||
Prepaids and other current assets | 23,863 | 17,744 | |||||
Total current assets | 255,160 | 265,197 | |||||
Fixed assets, net | 133,425 | 129,343 | |||||
Deferred tax assets, net | 135 | — | |||||
Intangible assets, net | 25,140 | 7,337 | |||||
Goodwill | 22,058 | 14,698 | |||||
Equity investments | 57,436 | 13,024 | |||||
Other long-term assets, net | 8,113 | 4,216 | |||||
Total assets | $ | 501,467 | $ | 433,815 | |||
Liabilities and Stockholders' Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 93,277 | $ | 85,406 | |||
Accrued liabilities | 100,753 | 82,611 | |||||
Deferred revenue | 39,917 | 46,468 | |||||
Other current liabilities, net | 472 | 178 | |||||
Total current liabilities | 234,419 | 214,663 | |||||
Long-term debt, net | 3,069 | — | |||||
Long-term debt, net - related party | — | 39,909 | |||||
Other long-term liabilities | 5,934 | 7,120 | |||||
Total liabilities | 243,422 | 261,692 | |||||
Stockholders' equity: | |||||||
Preferred stock, $0.0001 par value authorized shares - 5,000 | |||||||
Series A, issued and outstanding - 127 and 127 | — | — | |||||
Series B, issued and outstanding - 555 and 555 | — | — | |||||
Common stock, $0.0001 par value | |||||||
Authorized shares -100,000 | |||||||
Issued shares - 35,138 and 30,632 | |||||||
Outstanding shares - 31,941 and 27,497 | 3 | 3 | |||||
Additional paid-in capital | 651,482 | 494,732 | |||||
Accumulated deficit | (413,395 | ) | (254,692 | ) | |||
Accumulated other comprehensive loss | (587 | ) | (599 | ) | |||
Treasury stock: | |||||||
Shares at cost - 3,197 and 3,135 | (66,709 | ) | (63,816 | ) | |||
Equity attributable to stockholders of Overstock.com, Inc. | 170,794 | 175,628 | |||||
Equity attributable to noncontrolling interests | 87,251 | (3,505 | ) | ||||
Total equity | 258,045 | 172,123 | |||||
Total liabilities and stockholders' equity | $ | 501,467 | $ | 433,815 |
Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Revenue, net | |||||||||||||||
Direct | $ | 15,424 | $ | 19,645 | $ | 46,409 | $ | 64,572 | |||||||
Partner and other | 425,156 | 404,362 | 1,322,635 | 1,223,894 | |||||||||||
Total net revenue | 440,580 | 424,007 | 1,369,044 | 1,288,466 | |||||||||||
Cost of goods sold | |||||||||||||||
Direct | 16,205 | 19,577 | 45,649 | 61,687 | |||||||||||
Partner and other | 337,659 | 320,755 | 1,051,067 | 972,026 | |||||||||||
Total cost of goods sold | 353,864 | 340,332 | 1,096,716 | 1,033,713 | |||||||||||
Gross profit | 86,716 | 83,675 | 272,328 | 254,753 | |||||||||||
Operating expenses: | |||||||||||||||
Sales and marketing | 55,312 | 45,153 | 226,942 | 126,068 | |||||||||||
Technology | 33,880 | 28,746 | 97,597 | 85,982 | |||||||||||
General and administrative | 45,356 | 21,651 | 116,551 | 66,622 | |||||||||||
Total operating expenses | 134,548 | 95,550 | 441,090 | 278,672 | |||||||||||
Operating loss | (47,832 | ) | (11,875 | ) | (168,762 | ) | (23,919 | ) | |||||||
Interest income | 383 | 189 | 1,547 | 450 | |||||||||||
Interest expense | (101 | ) | (713 | ) | (1,370 | ) | (2,139 | ) | |||||||
Other income (expense), net | (1,848 | ) | 5,882 | (1,489 | ) | 2,751 | |||||||||
Loss before income taxes | (49,398 | ) | (6,517 | ) | (170,074 | ) | (22,857 | ) | |||||||
Benefit from income taxes | (141 | ) | (5,412 | ) | (445 | ) | (7,727 | ) | |||||||
Consolidated net loss | $ | (49,257 | ) | $ | (1,105 | ) | $ | (169,629 | ) | $ | (15,130 | ) | |||
Less: Net loss attributable to noncontrolling interests | (1,334 | ) | (319 | ) | (5,886 | ) | (942 | ) | |||||||
Net loss attributable to stockholders of Overstock.com, Inc. | $ | (47,923 | ) | $ | (786 | ) | $ | (163,743 | ) | $ | (14,188 | ) | |||
Net loss per common share—basic: | |||||||||||||||
Net loss attributable to common shares—basic | $ | (1.55 | ) | $ | (0.03 | ) | $ | (5.47 | ) | $ | (0.55 | ) | |||
Weighted average common shares outstanding—basic | 30,279 | 25,003 | 29,256 | 25,024 | |||||||||||
Net loss per common share—diluted: | |||||||||||||||
Net loss attributable to common shares—diluted | $ | (1.55 | ) | $ | (0.03 | ) | $ | (5.47 | ) | $ | (0.55 | ) | |||
Weighted average common shares outstanding—diluted | 30,279 | 25,003 | 29,256 | 25,024 |
Nine months ended September 30, | Twelve months ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Cash flows from operating activities: | |||||||||||||||
Consolidated net loss | $ | (169,629 | ) | $ | (15,130 | ) | $ | (266,421 | ) | $ | (12,369 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||||||
Depreciation of fixed assets | 19,437 | 21,895 | 26,390 | 29,468 | |||||||||||
Amortization of intangible assets | 3,596 | 2,839 | 4,756 | 3,614 | |||||||||||
Stock-based compensation to employees and directors | 11,654 | 3,009 | 12,722 | 3,795 | |||||||||||
Deferred income taxes, net | (383 | ) | (8,682 | ) | 73,498 | (7,651 | ) | ||||||||
Gain on investment in precious metals | — | (1,907 | ) | (64 | ) | (2,108 | ) | ||||||||
Impairment of cryptocurrencies | 9,641 | — | 9,641 | — | |||||||||||
Gain on sale of cryptocurrencies | (8,412 | ) | (845 | ) | (9,562 | ) | (845 | ) | |||||||
Impairment of equity securities | 511 | 4,500 | 1,498 | 4,500 | |||||||||||
Early extinguishment costs of long term debts | 283 | — | 2,747 | — | |||||||||||
Other | 741 | 420 | 1,197 | 569 | |||||||||||
Changes in operating assets and liabilities, net of acquisitions: | |||||||||||||||
Accounts receivable, net | (73 | ) | 3,814 | (5,825 | ) | (3,283 | ) | ||||||||
Inventories, net | (1,833 | ) | 5,375 | (1,974 | ) | 2,155 | |||||||||
Prepaids and other current assets | (4,806 | ) | (5,950 | ) | (1,655 | ) | (680 | ) | |||||||
Other long-term assets, net | (4,120 | ) | (121 | ) | (6,306 | ) | (551 | ) | |||||||
Accounts payable | 7,143 | (35,794 | ) | 21,942 | (14,370 | ) | |||||||||
Accrued liabilities | 18,044 | (35,831 | ) | 41,564 | (10,217 | ) | |||||||||
Deferred revenue | (1,511 | ) | (275 | ) | 3,452 | 248 | |||||||||
Other long-term liabilities | (583 | ) | 235 | (673 | ) | 280 | |||||||||
Net cash used in operating activities | (120,300 | ) | (62,448 | ) | (93,073 | ) | (7,445 | ) | |||||||
Cash flows from investing activities: | |||||||||||||||
Purchases of intangible assets | (9,583 | ) | — | (10,006 | ) | — | |||||||||
Proceeds from sale of precious metals | — | 11,603 | 314 | 13,213 | |||||||||||
Investment in precious metals | — | — | — | (1,633 | ) | ||||||||||
Disbursement of note receivable | (2,700 | ) | (750 | ) | (2,700 | ) | (1,368 | ) | |||||||
Investment in equity securities | (43,670 | ) | (4,188 | ) | (44,670 | ) | (4,938 | ) | |||||||
Acquisitions of businesses, net of cash acquired | (12,912 | ) | — | (12,912 | ) | 28 | |||||||||
Expenditures for fixed assets, including internal-use software and website development | (20,677 | ) | (20,873 | ) | (23,390 | ) | (33,772 | ) | |||||||
Other | 34 | (160 | ) | 264 | (179 | ) | |||||||||
Net cash used in investing activities | (89,508 | ) | (14,368 | ) | (93,100 | ) | (28,649 | ) | |||||||
Cash flows from financing activities: | |||||||||||||||
Payments on capital lease obligations | (372 | ) | — | (455 | ) | — | |||||||||
Payments on interest swap | — | — | (1,535 | ) | — | ||||||||||
Proceeds from finance obligations | — | — | — | 5,324 | |||||||||||
Payments on finance obligations | — | (2,436 | ) | (12,880 | ) | (2,988 | ) | ||||||||
Proceeds from long-term debt | — | — | 40,000 | 4,826 | |||||||||||
Payments on long-term debt | (40,000 | ) | (750 | ) | (85,016 | ) | (750 | ) | |||||||
Payments of preferred dividends | — | — | (109 | ) | — | ||||||||||
Proceeds from exercise of stock options | — | 654 | 10 | 1,473 | |||||||||||
Proceeds from rights offering, net of offering costs | — | — | — | 7,591 | |||||||||||
Proceeds from issuance and exercise of stock warrants | 50,587 | — | 157,046 | — | |||||||||||
Proceeds from security token offering, net of offering costs | 82,610 | 3 | 83,515 | 3 | |||||||||||
Proceeds from sale of common stock, net of offering costs | 94,624 | — | 94,624 | — | |||||||||||
Purchase of treasury stock | — | (10,000 | ) | — | (10,000 | ) | |||||||||
Paid in capital for noncontrolling interest | 6,700 | — | 6,700 | — | |||||||||||
Payments of taxes withheld upon vesting of restricted stock | (4,574 | ) | (1,104 | ) | (4,699 | ) | (1,207 | ) | |||||||
Payment of debt issuance costs | — | (251 | ) | (419 | ) | (251 | ) | ||||||||
Net cash provided by (used in) financing activities | 189,575 | (13,884 | ) | 276,782 | 4,021 | ||||||||||
Net increase (decrease) in cash, cash equivalents and restricted cash | (20,233 | ) | (90,700 | ) | 90,609 | (32,073 | ) | ||||||||
Cash, cash equivalents and restricted cash, beginning of period | 203,670 | 183,528 | 92,828 | 124,901 | |||||||||||
Cash, cash equivalents and restricted cash, end of period | $ | 183,437 | $ | 92,828 | $ | 183,437 | $ | 92,828 |
Nine months ended September 30, | Twelve months ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Supplemental disclosures of cash flow information: | |||||||||||||||
Cash paid during the period: | |||||||||||||||
Interest paid, net of amounts capitalized | $ | 1,232 | $ | 1,980 | $ | 2,192 | $ | 2,574 | |||||||
Income taxes paid, net of refunds | 59 | 492 | 54 | 624 | |||||||||||
Non-cash investing and financing activities: | |||||||||||||||
Fixed assets, including internal-use software and website development, costs financed through accounts payable and accrued liabilities | $ | 731 | $ | 618 | $ | 731 | $ | 618 | |||||||
Equipment acquired under capital lease obligations | — | — | 1,421 | 362 | |||||||||||
Capitalized interest cost | — | — | — | (12 | ) | ||||||||||
Change in fair value of cash flow hedge | — | (180 | ) | (1,558 | ) | (2,619 | ) | ||||||||
Note receivable converted to equity investment | 200 | 869 | 699 | 869 | |||||||||||
Acquisition of assets through stock issuance | 4,430 | — | 4,430 | — |
Three months ended September 30, | |||||||||||||||||||
Direct | Partner | Retail Total | Other | Total | |||||||||||||||
2018 | |||||||||||||||||||
Revenue, net | $ | 15,424 | $ | 420,351 | $ | 435,775 | $ | 4,805 | $ | 440,580 | |||||||||
Cost of goods sold | 16,205 | 334,446 | 350,651 | 3,213 | 353,864 | ||||||||||||||
Gross profit | $ | (781 | ) | $ | 85,905 | $ | 85,124 | $ | 1,592 | $ | 86,716 | ||||||||
Operating expenses | 124,571 | 9,977 | 134,548 | ||||||||||||||||
Interest and other expense, net | (515 | ) | (1,051 | ) | (1,566 | ) | |||||||||||||
Pre-tax loss | (39,962 | ) | (9,436 | ) | (49,398 | ) | |||||||||||||
Provision for (benefit from) income taxes | (155 | ) | 14 | (141 | ) | ||||||||||||||
Net loss | $ | (39,807 | ) | $ | (9,450 | ) | $ | (49,257 | ) | ||||||||||
2017 | |||||||||||||||||||
Revenue, net | $ | 19,645 | $ | 400,419 | $ | 420,064 | $ | 3,943 | $ | 424,007 | |||||||||
Cost of goods sold | 19,577 | 318,121 | 337,698 | 2,634 | 340,332 | ||||||||||||||
Gross profit | $ | 68 | $ | 82,298 | $ | 82,366 | $ | 1,309 | $ | 83,675 | |||||||||
Operating expenses | 90,592 | 4,958 | 95,550 | ||||||||||||||||
Interest and other income (expense), net | 5,375 | (17 | ) | 5,358 | |||||||||||||||
Pre-tax loss | (2,851 | ) | (3,666 | ) | (6,517 | ) | |||||||||||||
Benefit from income taxes | (3,993 | ) | (1,419 | ) | (5,412 | ) | |||||||||||||
Net income (loss) | $ | 1,142 | $ | (2,247 | ) | $ | (1,105 | ) |
Nine months ended September 30, | |||||||||||||||||||
Direct | Partner | Retail Total | Other | Total | |||||||||||||||
2018 | |||||||||||||||||||
Revenue, net | $ | 46,409 | $ | 1,307,045 | $ | 1,353,454 | $ | 15,590 | $ | 1,369,044 | |||||||||
Cost of goods sold | 45,649 | 1,039,834 | 1,085,483 | 11,233 | 1,096,716 | ||||||||||||||
Gross profit | $ | 760 | $ | 267,211 | $ | 267,971 | $ | 4,357 | $ | 272,328 | |||||||||
Operating expenses | 399,540 | 41,550 | 441,090 | ||||||||||||||||
Interest and other income (expense), net | 654 | (1,966 | ) | (1,312 | ) | ||||||||||||||
Pre-tax loss | (130,915 | ) | (39,159 | ) | (170,074 | ) | |||||||||||||
Benefit from income taxes | (283 | ) | (162 | ) | (445 | ) | |||||||||||||
Net loss | $ | (130,632 | ) | $ | (38,997 | ) | $ | (169,629 | ) | ||||||||||
2017 | |||||||||||||||||||
Revenue, net | $ | 64,572 | $ | 1,211,536 | $ | 1,276,108 | $ | 12,358 | $ | 1,288,466 | |||||||||
Cost of goods sold | 61,687 | 963,310 | 1,024,997 | 8,716 | 1,033,713 | ||||||||||||||
Gross profit | $ | 2,885 | $ | 248,226 | $ | 251,111 | $ | 3,642 | $ | 254,753 | |||||||||
Operating expenses | 264,455 | 14,217 | 278,672 | ||||||||||||||||
Interest and other income (expense), net | 5,490 | (4,428 | ) | 1,062 | |||||||||||||||
Pre-tax loss | (7,854 | ) | (15,003 | ) | (22,857 | ) | |||||||||||||
Benefit from income taxes | (3,280 | ) | (4,447 | ) | (7,727 | ) | |||||||||||||
Net loss | $ | (4,574 | ) | $ | (10,556 | ) | $ | (15,130 | ) |
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