Consolidated revenue of $453 million (-1% growth) and pre-tax loss of $49.9 million;CEO commits to a return to profitability for the retail business in 2019, commits Retail will generate a minimum positive $10 million operating cash flow for 2019
SALT LAKE CITY, March 18, 2019 (GLOBE NEWSWIRE) — Overstock.com, Inc. (NASDAQ:OSTK), a tech-driven online retailer and advancer of blockchain technology, today reported financial results for the quarter ended December 31, 2018.
My fellow shareholders,
Our blockchain projects are some of the most significant and cutting edge in the world, and we are just reaching the point where our products are being introduced to the public. In particular, tZERO brought live a security token trading platform. Our retail arm lost money last year because I gunned things in an attempt to create a conventional high-growth/money losing e-commerce business, but the losses were nauseating and we reverted back to the philosophy of profitability on which we built Overstock: as a result, in 2019 Retail will return to profitability, generating a positive operating cash flow ≥ $10M.
I encourage you to tune in to our 2018 earnings call for a more robust discussion on all facets of Overstock.
Your humble servant,
Patrick M. ByrneCEO and Founder
Key metrics (Q4 2018 vs. Q4 2017):
— Revenue: $452.5M vs. $456.3M (1% decrease); — Gross profit: $81.6M vs. $85.8M (5% decrease); — Gross margin: 18.0% vs. 18.8% (78 basis point decrease); — Sales and marketing expense: $47.5M vs. $54.5M (13% decrease); — Technology/G&A expense: $82.5M vs. $54.0M (53% increase); — Pre-tax loss: $49.9M vs. $24.9M ($25.0M increase); o Pre-tax loss – Retail: $27.7M ($10.1M increase) o Pre-tax loss – tZERO: $12.6M ($9.1M increase) o Pre-tax loss – Other: $9.6M ($5.8M increase) — Net loss*: $42.3M vs. $95.7M ($53.4M decrease); — Diluted net loss per share: $1.39/share vs. $3.72/share ($2.33/share decrease); — Adjusted EBITDA (non-GAAP financial measure): ($30.4M) vs. ($17.9M) ($12.5M decrease); o Adjusted EBITDA – Retail: ($19.1M) ($8.5M decrease) o Adjusted EBITDA – tZERO: ($7.8M) ($5.7M decrease) o Adjusted EBITDA – Other: ($3.5M) ($1.7M increase).
*Net loss refers to Net loss attributable to stockholders of Overstock.com, Inc.
We will hold a conference call and webcast to discuss our Q4 and full-year 2018 financial results on Monday, March 18, 2019, at 8:30 a.m. ET.
Webcast information
To access the live webcast and presentation slides, go to http://investors.overstock.com. To listen to the conference call via telephone, dial (877) 673-5346 and enter conference ID 3244508 when prompted. Participants outside the U.S. or Canada who do not have Internet access should dial +1 (724) 498-4326 then enter the conference ID provided above.
A replay of the conference call will be available at http://investors.overstock.com starting two hours after the live call has ended. An audio replay of the webcast will be available via telephone starting at 11:30 a.m. ET on Monday, March 18, 2019, through 11:30 a.m. ET on Monday, April 1, 2019. To listen to the recorded webcast by phone, dial (855) 859-2056 then enter the conference ID provided above. Outside the U.S. or Canada dial +1 (404) 537-3406 and enter the conference ID provided above.
Please email questions in advance of the call to ir@overstock.com.
Key financial and operating metrics:
Investors 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 was $452.5 million and $456.3 million for Q4 2018 and 2017, respectively, a 1% decrease. This decrease was primarily due to a 4% decrease in orders driven by a 13% reduction in sales and marketing expenses. We also had an increase in promotional activities, including coupons and site sales (which we recognize as a reduction of revenue), due to our driving a higher proportion of sales using such promotions. The decrease in orders was partially offset by a 3% increase in average order size (excluding promotional activities) primarily due to a continued sales mix shift into higher-priced products.
Gross profit – Gross profit was $81.6 million and $85.8 million for Q4 2018 and 2017, respectively, a 5% decrease, representing 18.0% and 18.8% gross margin for those respective periods. The decrease in gross margin was primarily due to increased promotional activities, partially offset by a continued shift in sales mix into higher margin products.
Sales and marketing expenses – Sales and marketing expenses totaled $47.5 million and $54.5 million for Q4 2018 and 2017, respectively, a 13% decrease, representing 10.5% and 11.9% of total net revenue for those respective periods. This decrease in sales and marketing expenses was primarily due to decreased spending in the sponsored search, display ads on social media, and television marketing channels.
Technology expenses – Technology expenses totaled $34.6 million and $29.9 million for Q4 2018 and 2017, respectively, a 16% increase, representing 7.6% and 6.6% of total revenue for those respective periods. The increase was primarily due to a $2.5 million increase in technology licenses and a $2.0 million increase in staff-related costs.
General and administrative (“G&A”) expenses – G&A expenses totaled $47.9 million and $24.1 million for Q4 2018 and 2017, respectively, a 99% increase, representing 10.6% and 5.3% of total revenue for those respective periods. The increase was primarily due to a $6.0 million increase in impairments on indefinite-lived intangible assets, a $5.1 million increase in staff-related costs, a $3.6 million increase in losses on the disposal of various businesses and assets, a $3.5 million increase in consulting and outside services expenses, and a $2.0 million increase in legal expenses.
Other expense, net – Other expense, net totaled $2.0 million and $1.6 million for Q4 2018 and 2017, respectively. The increase is primarily due to a $2.0 million increase in losses on equity holdings and other assets, and a $0.8 million decrease in Club O and gift card breakage which we began recognizing as a component of revenue in 2018 following the adoption of ASC 606, partially offset by a $2.2 million decrease in debt retirement charges.
Provision (benefit) for income taxes – Provision (benefit) for income taxes totaled ($1.9) million and $71.9 million for Q4 2018 and 2017, respectively. The decrease is due to changes related to the Tax Cuts and Jobs Act and recording a full valuation on our deferred tax assets in Q4 2017.
Net cash used in operating activities – Net cash used in operating activities was $138.9 million and $35.2 million for the twelve months ended December 31, 2018 and 2017, respectively. The $103.7 million increase is primarily due to increased consolidated net loss.
Free cash flow (a non-GAAP financial measure) – Free cash flow totaled ($167.6) million and ($58.8) million for the twelve months ended December 31, 2018 and 2017, respectively. The $108.8 million decrease was due to a $103.7 million decrease in operating cash flow and a $5.1 million increase in capital expenditures.
Cash – We had cash and cash equivalents of $141.5 million and $203.2 million at December 31, 2018 and December 31, 2017, respectively. The decrease is primarily due to operating losses, cash used for acquisitions and other investments, and the repayment of our building loan, partially offset by proceeds received from our tZERO security token offering, the exercise of a stock warrant in Q1 2018, and proceeds from an at-the-market offering during Q3 2018.
About Overstock.comOverstock.com, Inc Common Shares (NASDAQ:OSTK) / Series A Preferred (Medici Ventures’ tZERO platform: OSTKP) / Series B Preferred (OTCQX:OSTBP) is an online retailer and technology company based in Salt Lake City, Utah. It’s leading e-commerce website sells a broad range of new products at low prices, including furniture, décor, rugs, bedding, home improvement, jewelry, and more. The online shopping site, which is visited by nearly 40 million customers a month, also features a marketplace providing customers access to millions of products from third-party sellers. Overstock was the first major retailer to accept cryptocurrency in 2014, and in the same year founded Medici Ventures, its wholly-owned subsidiary developing and accelerating blockchain technologies to democratize capital, eliminate middlemen, and re-humanize commerce. Overstock regularly posts information about the company and other related matters on the Newsroom and Investor Relations pages on its website, Overstock.com.
O, Overstock.com, O.com, Club O, Main Street Revolution, and Worldstock are registered trademarks of Overstock.com, Inc. O.biz and Space Shift are also trademarks of Overstock.com, Inc. Other service marks, trademarks and trade names which may be referred to herein are the property of their respective owners.
Average order size is measured at the time of order, before promotional discounts and shipping revenue.
This press release and the March 18, 2019 conference call and webcast to discuss our financial results may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements include all statements other than statements of historical fact, including forecasts of trends. Additionally, certain statements included herein, including our statements regarding commitments are forward-looking statements that do not offer any guarantees, personal or otherwise. You should not place undue reliance on any forward-looking statements, which speak only as of the date they were made. We undertake no obligation to update any forward-looking statements as a result of any new information, future developments or otherwise. Forward-looking statements are inherently difficult to predict. Accordingly, actual results could differ materially for a variety of reasons, including, but not limited to, the amount and timing of our capital expenditures, the significant increases in our marketing expenditures in the first half of 2018 and the subsequent reduction of those expenditures, the results of our ongoing review of strategic initiatives including the possible sale of our e-commerce business, initiatives to improve the performance of our retail business and the recent reduction in our workforce, adverse tax, regulatory or legal developments, competition, and any inability to achieve profitability, generate positive cash flow from operations, raise capital, or borrow funds on acceptable terms. Other risks and uncertainties include, among others, the inherent risks associated with the businesses that Medici Ventures, Inc. (“Medici Ventures”) and tZERO Group, Inc. (“tZERO”) are pursuing, including whether tZERO’s joint venture with Box Digital Markets, LLC will be able to achieve its objectives, the regulatory, technical, operational and other obstacles tZERO faces in each of its initiatives, the effects of key business personnel moving from our retail business to our Medici Ventures and tZERO businesses or otherwise leaving, our continually evolving business model, difficulties we may have with our infrastructure, our fulfillment partners or our payment processors, including cyber-attacks or data breaches affecting us or any of them, and difficulties we may have with our search engine optimization results. More information about factors that could potentially affect our financial results is included in our Form 10-K for the year ended December 31, 2018, which was filed with the Securities and Exchange Commission on March 18, 2019, and in our subsequent filings with the Securities and Exchange Commission. The Form 10-K and our subsequent filings with the Securities and Exchange Commission identify important factors that could cause our actual results to differ materially from those contained in or contemplated by our projections, estimates and other forward-looking statements.
Overstock.com, Inc. Consolidated Balance Sheets (in thousands, unaudited) December 31, December 31, 2018 2017 ———— ———— Assets Current assets: Cash and cash equivalents $ 141,512 $ 203,215 Restricted cash 1,302 455 Accounts receivable, net 35,930 30,080 Inventories, net 14,108 13,703 Prepaids and other current assets 22,415 17,744 ———- – ———- – Total current assets 215,267 265,197 Fixed assets, net 134,687 129,343 Deferred tax assets, net 109 — Intangible assets, net 13,370 7,337 Goodwill 22,895 14,698 Equity investments 60,427 13,024 Other long-term assets, net 14,464 4,216 ———- – ———- – Total assets $ 461,219 $ 433,815 — ——- – — ——- – Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 102,574 $ 85,406 Accrued liabilities 87,858 82,611 Deferred revenue 50,578 46,468 Other current liabilities, net 476 178 ———- – ———- – Total current liabilities 241,486 214,663 Long-term debt, net 3,069 — Long-term debt, net – related party — 39,909 Other long-term liabilities 5,958 7,120 ———- – ———- – Total liabilities 250,513 261,692 ———- – ———- – Commitments and contingencies 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 – 355 and 555 — — Common stock, $0.0001 par value Authorized shares -100,000 Issued shares – 35,346 and 30,632 Outstanding shares – 32,146 and 27,497 3 3 Additional paid-in capital 657,981 494,732 Accumulated deficit (458,897 ) (254,692 ) Accumulated other comprehensive loss (584 ) (599 ) Treasury stock: Shares at cost – 3,200 and 3,135 (66,757 ) (63,816 ) ———- – ———- – Equity attributable to stockholders of Overstock.com, Inc. 131,746 175,628 Equity attributable to noncontrolling interests 78,960 (3,505 ) ———- – ———- – Total stockholders’ equity 210,706 172,123 ———- – ———- – Total liabilities and stockholders’ equity $ 461,219 $ 433,815 — ——- – — ——- –
Overstock.com, Inc. Consolidated Statements of Operations (in thousands, except per share data) (unaudited) Three months ended December 31, 2018 2017 ———– ———– Revenue, net Retail $ 446,733 $ 451,996 Other 5,815 4,294 ——— – ——— – Total net revenue 452,548 456,290 ——— – ——— – Cost of goods sold Retail 366,712 367,561 Other 4,256 2,931 ——— – ——— – Total cost of goods sold 370,968 370,492 ——— – ——— – Gross profit 81,580 85,798 ——— – Operating expenses: Sales and marketing 47,537 54,521 Technology 34,557 29,896 General and administrative 47,930 24,096 Total operating expenses 130,024 108,513 Operating loss (48,444 ) (22,715 ) Interest income 661 209 Interest expense (98 ) (798 ) Other loss, net (1,999 ) (1,573 ) ——— – ——— – Loss before income taxes (49,880 ) (24,877 ) Provision (benefit) for income taxes (1,939 ) 71,915 Consolidated net loss $ (47,941 ) $ (96,792 ) Less: Net loss attributable to noncontrolling interests (5,614 ) (1,102 ) ——— – Net loss attributable to stockholders of Overstock.com, Inc. $ (42,327 ) $ (95,690 ) – ——- – – ——- – Net loss per common share—basic: Net loss attributable to common shares—basic $ (1.39 ) $ (3.72 ) Weighted average common shares outstanding—basic 32,112 25,103 Net loss per common share—diluted: Net loss attributable to common shares—diluted $ (1.39 ) $ (3.72 ) Weighted average common shares outstanding—diluted 32,112 25,103
Overstock.com, Inc. Consolidated Statements of Operations (in thousands, except per share data) (unaudited) Year ended December 31, 2018 2017 ————- ————- Revenue, net Retail $ 1,800,187 $ 1,728,104 Other 21,405 16,652 ———– – ———– – Total net revenue 1,821,592 1,744,756 ———– – ———– – Cost of goods sold Retail 1,452,195 1,392,558 Other 15,489 11,647 ———– – ———– – Total cost of goods sold 1,467,684 1,404,205 ———– – ———– – Gross profit 353,908 340,551 ———– – ———– – Operating expenses: Sales and marketing 274,479 180,589 Technology 132,154 115,878 General and administrative 164,481 90,718 Total operating expenses 571,114 387,185 ———– – ———– – Operating loss (217,206 ) (46,634 ) Interest income 2,208 659 Interest expense (1,468 ) (2,937 ) Other income (loss), net (3,488 ) 1,178 ———– – ———– – Loss before income taxes (219,954 ) (47,734 ) ———– – ———– – Provision (benefit) for income taxes (2,384 ) 64,188 ———– – ———– – Consolidated net loss $ (217,570 ) $ (111,922 ) Less: Net loss attributable to noncontrolling interests (11,500 ) (2,044 ) ———– – ———– – Net income (loss) attributable to stockholders of Overstock.com, Inc. $ (206,070 ) $ (109,878 ) – ——— – – ——— – Net loss per common share—basic: Net loss attributable to common shares—basic $ (6.83 ) $ (4.28 ) Weighted average common shares outstanding—basic 29,976 25,044 Net loss per common share—diluted: Net loss attributable to common shares—diluted $ (6.83 ) $ (4.28 ) Weighted average common shares outstanding—diluted 29,976 25,044
Overstock.com, Inc. Consolidated Statements of Cash Flows (in thousands, unaudited) Year ended December 31, 2018 2017 ———— ———— Cash flows from operating activities: Consolidated net loss $ (217,570 ) $ (111,922 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation of fixed assets 26,411 28,848 Amortization of intangible assets 5,286 3,999 Stock-based compensation to employees and directors 14,356 4,077 Deferred income taxes, net (2,386 ) 65,199 Gain on investment in precious metals — (1,971 ) Gain on sale of cryptocurrencies (8,370 ) (1,995 ) Loss on equity investments, net 2,828 5,995 Loss on disposal of business and other asset abandonments 3,565 — Impairment on indefinite-lived intangible assets 6,000 — Impairment of cryptocurrencies 10,463 — Early extinguishment costs of long-term debts 283 2,464 Other 711 368 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable, net (5,558 ) (1,938 ) Inventories, net 628 5,234 Prepaids and other current assets (3,622 ) (2,799 ) Other long-term assets, net (2,870 ) (2,307 ) Accounts payable 16,499 (20,995 ) Accrued liabilities 5,661 (12,311 ) Deferred revenue 9,150 4,688 Other long-term liabilities (399 ) 145 ———- – ———- – Net cash used in operating activities (138,934 ) (35,221 ) ———- – ———- – Cash flows from investing activities: Proceeds from sale of precious metals — 11,917 Purchase of intangible assets (9,597 ) (423 ) Investment in equity securities (48,731 ) (5,188 ) Disbursement of note receivable (3,059 ) (750 ) Deposit on purchase of a business (8,000 ) — Acquisitions of businesses, net of cash acquired (12,912 ) — Expenditures for fixed assets, including internal-use software and website (28,680 ) (23,586 ) development Other 56 70 ———- – ———- – Net cash used in investing activities (110,923 ) (17,960 ) ———- – ———- – Cash flows from financing activities: Payments on capital lease obligations (496 ) (83 ) Payments on finance obligations — (15,316 ) Payments on interest swap — (1,535 ) Payments on long-term debt (40,000 ) (45,766 ) Proceeds from long-term debt — 40,000 Payments of preferred dividends (77 ) (109 ) Proceeds from issuance and exercise of stock warrants 50,588 106,462 Proceeds from exercise of stock options — 664 Proceeds from security token offering, net of offering costs and withdrawals 82,354 905 Proceeds from sale of common stock, net of offering costs 94,554 — Paid in capital for noncontrolling interest 6,700 — Purchase of treasury stock — (10,000 ) Payments of taxes withheld upon vesting of restricted stock (4,622 ) (1,229 ) Payment of debt issuance costs — (670 ) ———- – ———- – Net cash provided by financing activities 189,001 73,323 ———- – ———- – Net increase (decrease) in cash and cash equivalents (60,856 ) 20,142 Cash, cash equivalents and restricted cash, beginning of year 203,670 183,528 ———- – ———- – Cash, cash equivalents and restricted cash, end of year $ 142,814 $ 203,670 – ——– – – ——– –
Segment Financial Information
Segment information has been prepared in accordance with ASC Topic 280 Segment Reporting. We determined our segments based on how we manage our business. We use pre-tax net income (loss) as the measure to determine our reportable segments. In the fourth quarter of 2018, we completed our review of our segment reporting and we no longer consider the split of retail direct and retail partner as a distinct and relevant measure of our business. Accordingly, Direct and Partner are no longer considered separate reportable segments but are included under Retail in our Business Segment disclosures. Our Medici business includes one reportable segment, tZERO. The remainder of our Medici business is not significant as compared to our Retail and tZERO segments. Our Other segment consists of Medici Ventures’ remaining operations.
Our Retail segment primarily consists of amounts earned through e-commerce sales through our Website and the associated costs incurred for our Retail business and also includes the costs of our administrative functions such as finance, human resources, and legal, excluding intercompany transactions eliminated in consolidation.
Our tZERO segment primarily consists of amounts earned through securities transactions through our broker-dealers and costs incurred to execute our tZERO business initiatives, excluding intercompany transactions eliminated in consolidation.
Our Other segment consists of Medici Ventures’ remaining operations, excluding tZERO and intercompany transactions eliminated in consolidation.
The following table summarizes information about reportable segments and includes a reconciliation to consolidated net income (loss) (in thousands):
Three months ended, December 31 Retail tZERO Other Total ———– ———– ———- ———– 2018 Total net revenue $ 446,733 $ 4,963 $ 852 $ 452,548 Cost of goods sold 366,712 3,404 852 370,968 ——— – ——— – ——– – ——— – Gross profit 80,021 1,559 — 81,580 Operating expenses 106,573 13,885 9,566 130,024 Interest and other expense, net (1,130 ) (280 ) (26 ) (1,436 ) ——— – Pre-tax loss $ (27,682 ) $ (12,606 ) $ (9,592 ) (49,880 ) – ——- – – ——- – – —— – ——— – Benefit for income taxes (1,939 ) ——— – Net loss $ (47,941 ) – ——- – 2017 Total net revenue $ 451,996 $ 4,159 $ 135 $ 456,290 Cost of goods sold 367,561 2,931 — 370,492 ——— – ——— – ——– – ——— – Gross profit 84,435 1,228 135 85,798 Operating expenses 101,193 4,701 2,619 108,513 Interest and other expense, net (810 ) — (1,352 ) (2,162 ) Pre-tax loss $ (17,568 ) $ (3,473 ) $ (3,836 ) (24,877 ) – ——- – – ——- – – —— – ——— – Provision for income taxes 71,915 Net loss $ (96,792 ) – ——- –
Year ended, December 31 Retail tZERO Other Total ————- ———– ———– ————- 2018 Total net revenue $ 1,800,187 $ 19,043 $ 2,362 $ 1,821,592 Cost of goods sold 1,452,195 13,127 2,362 1,467,684 ———– – ——— – ——— – ———– – Gross profit 347,992 5,916 — 353,908 Operating expenses 506,113 47,006 17,995 571,114 Interest and other income (expense), net (476 ) 233 (2,505 ) (2,748 ) Pre-tax loss $ (158,597 ) $ (40,857 ) $ (20,500 ) (219,954 ) – ——— – – ——- – – ——- – ———– – Benefit for income taxes (2,384 ) Net loss $ (217,570 ) – ——— – 2017 Total net revenue $ 1,728,104 $ 16,493 $ 159 $ 1,744,756 Cost of goods sold 1,392,558 11,647 — 1,404,205 ———– – ——— – ——— – ———– – Gross profit 335,546 4,846 159 340,551 Operating expenses 365,648 17,101 4,436 387,185 Interest and other income (expense), net 4,680 — (5,780 ) (1,100 ) Pre-tax loss $ (25,422 ) $ (12,255 ) $ (10,057 ) (47,734 ) – ——— – – ——- – – ——- – ———– – Provision for income taxes 64,188 ———– – Net loss $ (111,922 ) – ——— –
Non-GAAP Financial Measure Reconciliations
Free Cash Flow
Free cash flow (a non-GAAP financial measure) reflects an additional way of viewing our cash flows and liquidity that, when viewed with our GAAP results, provides a more complete understanding of factors and trends affecting our cash flows and liquidity. Free cash flow, which we reconcile below to “Net cash provided by (used in) operating activities,” the nearest GAAP financial measure, is net cash provided by (used in) operating activities reduced by “Expenditures for fixed assets, including internal-use software and website development.” We believe that net cash provided by (used in) operating activities is an important measure, since it includes both the cash impact of the continuing operations of the business and changes in the balance sheet that impact cash. We believe free cash flow is a useful measure to evaluate our business since purchases of fixed assets are a necessary component of ongoing operations and free cash flow measures the amount of cash we have available for mandatory debt service and financing obligations, changes in our capital structure, and future investments after purchases of fixed assets. Free cash flow measures have limitations as they omit certain components of the overall consolidated statement of cash flows and do not represent the residual cash flow available for discretionary expenditures. Free cash flow should not be considered a substitute for net income or cash flow data prepared in accordance with GAAP and may not be comparable to similarly titled measures used by other companies. Therefore, we believe it is important to view free cash flow as a complement to our entire consolidated statements of cash flows as reconciled below (in thousands):
Year ended December 31, 2018 2017 ———— ———– Net cash provided by (used in) operating activities $ (138,934 ) $ (35,221 ) Expenditures for fixed assets, including internal-use software and website (28,680 ) (23,586 ) development ———- – ——— – Free cash flow $ (167,614 ) $ (58,807 ) – ——– – – ——- –
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure that is calculated as net income (loss) before depreciation and amortization, stock-based compensation, interest and other income and (expense), provision (benefit) for income taxes, and special items. We have included Adjusted EBITDA in this earnings release because it reflects an additional way of viewing the operating performance at both the consolidated and segment level that is used internally in analyzing our financial results and we believe it is useful to investors, as a supplement to GAAP measures, in evaluating our ongoing operational performance. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA facilitates operating performance comparisons on a period-to-period basis. Exclusion of items in the non-GAAP presentation should not be construed as an inference that these items are unusual, infrequent or non-recurring. We have provided a reconciliation below of our segment and consolidated Adjusted EBITDA to net income (loss), the most directly comparable GAAP financial measure.
Adjusted EBITDA is 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. You should review our financial statements and publicly-filed reports in their entirety and not rely on any single financial measure. Adjusted EBITDA has limitations such as:
— Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; — Adjusted EBITDA does not reflect stock-based compensation and related taxes; — Adjusted EBITDA does not reflect adjustments related to the carrying values of our equity interests in unconsolidated entities; — Adjusted EBITDA does not reflect interest expenses associated with our borrowings; — Adjusted EBITDA does not reflect income tax payments that may represent a reduction in cash available to us; — Adjusted EBITDA does not reflect changes in our working capital; and — Other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.
The following table reflects the reconciliation of Adjusted EBITDA to net income (loss) for each of the periods indicated (in thousands):
Three months ended December 31, 2018 2017 ———– ———– Adjusted EBITDA Retail $ (19,116 ) $ (10,608 ) tZERO (7,816 ) (2,077 ) Other (3,453 ) (5,173 ) ——— – ——— – Adjusted EBITDA (30,385 ) (17,858 ) Less: Special items (see table below) 9,565 — Less: Depreciation and amortization 8,664 8,113 Less: Stock-based compensation 2,702 1,068 Less: Interest and other income (expense), net (1,436 ) (2,162 ) Less: Provision (benefit) for income taxes (1,939 ) 71,915 ——— – Net loss $ (47,941 ) $ (96,792 ) – ——- – – ——- – Special items: Impairments on intangible assets $ 6,000 $ — Losses on the disposal of various businesses and assets 3,565 — $ 9,565 $ — – ——- – – ——- –
Year ended December 31, 2018 2017 ———— ———— Adjusted EBITDA Retail $ (112,489 ) $ 11,155 tZERO (24,805 ) (7,252 ) Other (15,953 ) (15,813 ) ———- – ———- – Adjusted EBITDA (153,247 ) (11,910 ) Less: Special items (see table below) 23,402 — Less: Depreciation and amortization 31,697 32,847 Less: Stock-based compensation 14,356 4,077 Less: Interest and other income (expense), net (2,748 ) (1,100 ) Less: Provision (benefit) for income taxes (2,384 ) 64,188 ———- – ———- – Net loss $ (217,570 ) $ (111,922 ) – ——– – – ——– – Special items: Impairments on intangible assets $ 6,000 $ — Losses on the disposal of various businesses 3,565 — Cryptocurrency impairments and gains on sale, net 443 — Severance 1,600 — Special legal expenses (1) 11,794 — ———- – ———- – $ 23,402 $ — – ——– – – ——– –
___________________________________________ (1) Special legal expenses include charges associated with our Delaware gift card escheatment matter and legal fees associated with pursuing our strategic alternatives.
Public Relations:pr@overstock.com
Investor Relations:ir@overstock.com