Overstock.com's Q3 loss widened to US$7.8M from US$3.4M loss a year ago as revenue fell 2% to US$239.7M; company attributes revenue dip to decrease in promotions, rebranding of company to O.co

, October 27, 2011 () – Overstock.com, Inc. (NASDAQ: OSTK) today reported financial results for the quarter ended September 30, 2011.

Key Q3 2011 metrics (comparison to Q3 2010):

Revenue: $239.7M vs. $245.4M (2% decrease);
Gross margin: 16.0% vs. 16.9% (90 basis point decrease);
Gross profit: $38.4M vs. $41.4M (7% decrease);
Sales and marketing expense: $13.8M vs. $15.6M (12% decrease);
Contribution (non-GAAP measure): $24.6M vs. $25.8M (5% decrease);
G&A/Technology expense: $32.5M vs. $28.9M (12% increase);
Net loss: $(7.8)M vs. $(3.4)M ($4.4M increase); and
Diluted EPS: $(0.33)/share vs. $(0.15)/share ($0.18 loss per share increase).

The Company will hold a conference call and webcast to discuss its third quarter 2011 financial results on Thursday, October 27, 2011 at 11:30 a.m. Eastern Time.

Webcast information

To access the live webcast and presentation slides, please go to http://investors.overstock.com. To listen to the conference call via telephone, dial (866) 551-1816 and enter conference ID 21393510 when prompted. Participants outside the United States or Canada who do not have Internet access should dial +1 (706) 758-1198 and enter conference ID 21393510 when prompted.

Replay

A replay of the conference call will be available at http://investors.overstock.com starting 2 hours after the live call has ended. An audio replay of the webcast will be available via telephone starting at 12:30 p.m. Eastern Time on Thursday, October 27, 2011, through 11:59 p.m. Eastern Time on Thursday, November 3, 2011. To listen to the recorded webcast by phone, please dial (855) 859-2056 and enter conference ID 21393510 when prompted. Outside the U.S. or Canada please dial +1 (404) 537-3406 and enter conference ID 21393510 when prompted.

Please email questions to Kevin Moon at kmoon@overstock.com prior to the conference call.

Key financial and operating metrics discussion:

You should review our financial statements and publicly-filed reports in their entirety and not rely on any single financial measure.

Total net revenue -- Total net revenue for the third quarter of 2011 and 2010 was $239.7 million and $245.4 million, respectively, a 2% decrease. The primary reasons for shrinking revenue for the three months ended September 30, 2011 were visits to our website were up slightly, conversion rates were lower, resulting in fewer orders, and an 8% decrease in new customers compared to last year. We believe that the decline in revenue is partially the result of a decrease in site wide promotions and email and affiliate channel couponing we did to shift resources to promoting our Club O loyalty program. We also believe that our current efforts to rebrand ourselves from Overstock.com to O.co may have contributed to the decline in revenue.

Gross profit -- Gross profit for the third quarter of 2011 and 2010 was $38.4 million and $41.4 million, respectively, a 7% decrease. Gross profit represents 16.0% and 16.9% of total net revenue for those respective periods. Competitive pricing initiatives were the primary reason for lower gross profit. Higher freight and warehouse related costs as a percentage of revenue, offset in part by a favorable sales mix shift into higher margin categories such as Home & Garden also had an impact.

Contribution (a non-GAAP financial measure) and contribution margin (a non-GAAP financial measure) -- Contribution for the third quarter of 2011 and 2010 was $24.6 million (10.2% contribution margin) and $25.8 million (10.5% contribution margin), respectively, a 5% decrease in contribution (a 30 basis point decrease in contribution margin).

Contribution (a non-GAAP financial measure) (which we reconcile to "gross profit" in our statement of operations) consists of gross profit less sales and marketing expense and reflects an additional way of viewing our results. Contribution margin is contribution as a percentage of total net revenue. When viewed with our GAAP gross profit less sales and marketing expenses, we believe contribution and contribution margin provides management and users of the financial statements information about our ability to cover our fixed operating costs, such as technology and general and administrative expenses. Contribution and contribution margin are used in addition to and in conjunction with results presented in accordance with GAAP and should not be relied upon to the exclusion of GAAP financial measures. The material limitation associated with the use of contribution is that it is an incomplete measure of profitability as it does not include all operating expenses or non-operating income and expenses. Management compensates for these limitations when using this measure by looking at other GAAP measures, such as operating income (loss) and net income (loss).

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