Beyond(US:BYON)2021-11-03 16:00PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) This section presents Overstock.com, Inc.'s unaudited consolidated financial statements, highlighting the deconsolidation of Medici Ventures and tZERO as discontinued operations Consolidated Balance Sheets The balance sheet as of September 30, 2021, reflects total assets growing to $1.06 billion, driven by increased equity securities, while liabilities decreased and stockholders' equity significantly grew Consolidated Balance Sheet Summary (in thousands) | Financial Metric | Sep 30, 2021 (in thousands) | Dec 31, 2020 (in thousands) | | :--- | :--- | :--- | | Total Current Assets | $564,672 | $582,740 | | Total Assets | $1,064,917 | $830,214 | | Total Current Liabilities | $302,478 | $327,581 | | Total Liabilities | $355,803 | $393,888 | | Total Stockholders' Equity | $709,114 | $436,326 | Consolidated Statements of Income Q3 2021 net revenue slightly decreased to $689.4 million, while nine-month net revenue grew to $2.14 billion, with income from continuing operations nearly doubling to $138.8 million Consolidated Statements of Income Summary (in thousands) | Metric (in thousands) | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Net Revenue | $689,390 | $717,695 | $2,143,787 | $1,824,249 | | Gross Profit | $156,708 | $168,713 | $485,058 | $420,831 | | Operating Income | $28,849 | $38,862 | $91,952 | $74,354 | | Income from Continuing Operations | $30,426 | $37,904 | $138,849 | $71,977 | | Consolidated Net Income | $30,426 | $21,226 | $356,095 | $36,042 | Consolidated Statements of Cash Flows Net cash from continuing operating activities decreased to $100.1 million, while investing activities used $52.1 million, and financing activities shifted to a $10.0 million outflow Consolidated Statements of Cash Flows Summary (in thousands) | Cash Flow Activity (in thousands) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash provided by continuing operating activities | $100,084 | $221,824 | | Net cash used in continuing investing activities | ($52,061) | ($12,169) | | Net cash provided by (used in) continuing financing activities | ($10,042) | $234,103 | Notes to Unaudited Consolidated Financial Statements Notes detail accounting policies, the deconsolidation of Medici Ventures and tZERO resulting in a $243.5 million gain, the shift to a single Retail segment, and other financial disclosures - On April 23, 2021, the company deconsolidated its Medici Ventures and tZERO businesses, which are now reported as discontinued operations. This strategic shift resulted in a $243.5 million gain upon deconsolidation4768 - Following the deconsolidation, the company has one reportable segment: Retail. The former tZERO and Medici Ventures segments are now classified under discontinued operations128 - On August 17, 2021, the Board of Directors approved a stock repurchase program for up to $100.0 million of common stock through December 31, 2023. No shares were repurchased under this program as of September 30, 2021107 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q3 2021 performance, noting a 3.9% revenue decrease to $689.4 million due to lower orders, partially offset by higher average order value, while maintaining strong liquidity Overview and Strategies Overstock's strategy focuses on three brand pillars: Product Findability, Smart Value, and Easy Delivery and Support, with initiatives to enhance search, expand market share, and improve data infrastructure - The company's long-term focus is on three brand pillars: "Product Findability," "Smart Value," and "Easy Delivery and Support"133 - Current initiatives include: - Improving customer search and navigation - Expanding the Canadian customer base - Growing the government market share - Enhancing the enterprise data platform and embracing public cloud infrastructure133134135 Results of Operations Q3 2021 net revenue decreased 3.9% due to fewer orders, partially offset by higher average order value, while gross margin declined and sales & marketing expenses increased Results of Operations Summary | Metric | Q3 2021 | Q3 2020 | Change | | :--- | :--- | :--- | :--- | | Net Revenue | $689.4M | $717.7M | (3.9)% | | Gross Profit | $156.7M | $168.7M | (7.1)% | | Gross Margin | 22.7% | 23.5% | (80 bps) | - The Q3 2021 revenue decrease was primarily due to a 22% decrease in customer orders, partially offset by a 24% increase in average order value146 - Sales and marketing expenses as a percentage of revenue increased to 11.0% in Q3 2021 from 9.9% in Q3 2020, mainly due to increased spending on paid listing advertisements and keywords158 - General and administrative expenses decreased by $7.6 million (26.5%) in Q3 2021 compared to Q3 2020, driven by reductions in staff-related expenses, consulting fees, and facilities costs165 Liquidity and Capital Resources The company maintains strong liquidity with $512.2 million in cash, despite a decrease in cash from continuing operations to $100.1 million, and has $71.7 million in contractual obligations - As of September 30, 2021, the company had cash and cash equivalents of $512.2 million174 Cash Flow Summary (in thousands) | Cash Flow Summary (in thousands) | Nine Months Ended Sep 30, 2021 | | :--- | :--- | | Operating Activities | $100,084 | | Investing Activities | ($52,061) | | Financing Activities | ($10,042) | Contractual Obligations (in thousands) | Contractual Obligations (in thousands) | Total | Less than 1 year | | :--- | :--- | :--- | | Operating leases | $15,819 | $5,977 | | Loan agreements | $55,910 | $5,264 | | Total | $71,729 | $11,241 | Quantitative and Qualitative Disclosures About Market Risk The company faces market risks primarily from its $330.2 million in equity securities, particularly private company investments, while interest rate and foreign currency risks are considered minimal - Interest rate risk is minimal due to the short-term nature of cash equivalents and a fixed blended annual interest rate of 4.45% on its loan agreements192193 - The company holds $330.2 million in equity securities in public and private companies, which are subject to market price volatility and valuation complexity195 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2021, with no material changes to internal controls over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period199 - No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2021201 PART II. OTHER INFORMATION Legal Proceedings Legal proceedings include an ongoing SEC investigation related to tZERO and a securities class action lawsuit, which was dismissed in the company's favor but is now under appeal - The company is cooperating with an ongoing SEC investigation related to tZERO, a 2019 preferred stock dividend, and other matters91 - A securities class action lawsuit was dismissed in the company's favor on September 20, 2021, but the plaintiffs filed a Notice of Appeal on October 18, 202194 Risk Factors Key risks include challenges in the changing job market, technology and security risks from remote work, potential losses from equity interests in startup businesses, and the risk of not realizing deferred tax assets - The company faces risks from the changing job market, including labor shortages and increased competition for talent, which could affect its ability to attract and retain key personnel206207 - The company may be required to recognize losses on its direct and indirect noncontrolling interests in startup companies, particularly those within the Medici Ventures Fund, over which it has no control212213 - There is a risk that the company may not realize its deferred tax assets, for which it recently reversed a significant valuation allowance, if future taxable income is lower than projected214216 Other Required Disclosures The company reported no unregistered sales of equity securities, issuer repurchases, or defaults upon senior securities, with mine safety disclosures being inapplicable - The company reported no unregistered sales of equity securities, issuer purchases of equity securities, or defaults upon senior securities for the period217218220