Overstock.com CEO Discusses Q3 2010 Results – Earnings Call Transcript
Overstock.com, Inc. (
)
Q3 2010 Earnings Call Transcript
November 3, 2010 3:00 pm ET
Executives
Jonathan Johnson – President
Steve Chesnut – SVP, Finance
Analysts
Stephen Gregory – Mandalay Research
John Petrides – Advisor Capital Management
Latisha Bechot Bekau [ph] – Aajna Partners [ph]
Nat Schindler – Bank of America-Merrill Lynch
Glenn Rollins [ph]
Presentation
Operator
Compare to:
Previous Statements by OSTK
»
Overstock.com, Inc. Q2 2010 Earnings Call Transcript
»
Overstock.com, Inc. Q4 2009 Earnings Call Transcript
»
Overstock.com Inc. Q3 2009 Earnings Conference Call
»
Overstock.com, Inc. Q2 2009 Earnings Call Transcript
Good afternoon. My name is Chenille, and I will be your conference operator today. At this time I would like to welcome everyone to the Overstock.com Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. Thank you.
I’d now like to turn the call over to Jonathan Johnson, President of Overstock.com.
Please, go ahead sir.
Jonathan Johnson
Thank you, Chenille. Good afternoon and welcome to our third quarter 2010 conference call. Joining me today is Steven Chesnut, Senior Vice President of Finance and Risk Management. Patrick Byrne, he is not with us today. He came in this morning and took ill and is unable to be on the call and he apologizes. So Steve and I will go forward without him.
Let me begin with some of the legal forward-looking statement language. The following discussion and our responses to your questions only reflect management’s views as of today, November 3, 2010, and will include forward-looking statements. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in the Q3 2010 Form 10-K we filed with the SEC last Friday on October 29, 2010.
You all had a few days to review our Form 10-Q. As you listen to the call, I encourage you to have the document in front of you, since our financial results and detailed commentary are included in it and it includes much of the discussion that will follow.
During the call, we will discuss certain non-GAAP financial measures. The slides accompanying this Web site and our filings with the SEC, each posted on our Investor Relation Web site contain additional disclosures regarding these non-GAAP measures. Including reconciliations of these measures to the more comparable GAAP measures.
With that, let me turn the call over to Steve to review some financial results before we go over the slides.
Steve Chesnut
Thank you, Jonathan. Let me give you a brief review of the financial results for the third quarter which ended on September 30th. During this discussion, unless otherwise stated, all comparisons in our call today will be against results from third quarter of 2009.
First, I’d like to highlight it revenue, which grew at 27% to $245 million in the quarter. We experienced growth in all major categories in both the direct and the fulfillment partner business. We believe that our focus on pricing and marketing initiatives was the key driver of revenue growth.
Overall, gross profit increased 11% to $41 million, while gross margin declined 240 basis points to 16.9%. While our revenue growth benefited from our overall lower prices, our gross margin is lower than last year largely as a result of pricing initiative that we’ve implemented.
Our net loss was $3.5 million for the quarter, which is $0.15 a share. Year-to-date, our net loss is $1.1 million or $0.05 a share, and this compares to $0.05 and $0.22 per share loss for the same period last year.
During the quarter, we also retired $16.1 million of our long-term debt. To do this, we used nearly $15 million from a sell leaseback transaction that was closed during the quarter with U.S. Bank. We now have $34.4 million of senior notes outstanding.
Like Jonathan said, I would encourage you to review our Q3 Form-Q for a detailed and thorough analysis of the results. So with that brief financial highlights, Jonathan let me turn the call back to you.
Jonathan Johnson
Thanks, Steve. What I’d like to do is walk through the slides that are posted on our Investor Relations Web site and we’ll start on slide three. As Steve mentioned, our revenue was $245.4 million and it was up 27% over last year.
Gross profit dollars were also up. We had 11% growth over last year there. Gross margins were just under 17%, and our contribution dollars grew slightly versus last quarter at $25.8 million and you can see our contribution margin was 10.5%, down from last year and frankly down from where we’d like to have it.
Our target as we’ve mentioned before remains to have in 10% to 12% range, but we did a bunch of the things in the third quarter that we think were useful to our business as we acquired customers and got ready for the fourth quarter.
Our net loss year-to-date is just over $1 million and I think that’s consistent with what we’ve said in the past. We view the first three quarters of the year as the time when we are trying to grow the business and run at breakeven, and moving a $1 million is close to breakeven as I think we can get without it having been zero.
If you turn to slide four, in the past we’ve talked about some important initiatives that we’ve been working on and this slide highlights to a few of those that rolled in Q3. First is we’ve upgraded our Club O royalty reward program and that happened in the third quarter, we think it’s a great offer.
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