Revenues missed the estimates
On November 8, Overstock (OSTK) reported its third-quarter results. The company’s net revenues of $440.6 million fell slightly short of analysts’ estimate of $440.7 million. The adjusted EPS of -$1.55 was significantly wider than analysts’ projection of an adjusted EPS of -$0.80. However, on a YoY (year-over-year) basis, the revenues increased 4%. The company’s stock price rose 1.8% in the after-market hours.
The revenues are driven by the acceleration in marketing investments. However, Overstock continues to face challenges due to changes in the natural search algorithm. Also, higher promotional activity weighed on the top line.
Overstock is working to become a blockchain-oriented company. The company is looking to sell its retail unit to fund blockchain endeavors. Overstock has been improving its retail operations to make it attractive to buyers. The company stated that it would comment on the strategic alternatives at an appropriate time in the future.
The company is upbeat about the investments it secured from GSR. GSR Capital agreed to invest ~$375 million in Overstock and tZERO. GSR Capital will buy tZERO security tokens worth $30 million.
The gross profit was $86.7 million—a rise of 4% on a YoY basis. The gross margin was unchanged at 19.7%. Overstock witnessed increased promotional activity, which had a negative impact on the gross margin. However, the favorable product mix helped nullify the impact of the higher promotional activity.
Rising expenses caused the operating loss to expand to $47.8 million—compared to the operating loss of $11.9 million reported in the same quarter last year. Higher marketing costs resulted in a 23% YoY increase in total sales and marketing expenditures to $55.3 million. Technology and general and administrative costs increased 18% and 109%, respectively, in the third quarter. On a reported basis, the EPS was -$1.55—much wider compared to the adjusted EPS of -$0.03 reported YoY.
For the nine months ending in September, Overstock reported a free cash outflow of $120.3 million—compared to its free cash outflow of $62.4 million reported in the same period last year.