Q2 2020 Overstock.com Inc Earnings Call
[music].
Thank you for standing by and welcome to the Q2, Twentytwenty Overstock Dot Com Inc. earnings Conference call. At this time, all participants are in a listen only mode.
After the speakers presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.
To ask a question during the session you will need to press star one on your telephone if you require further assistance. Please press star Zero I would now like the hand the conference over to your speaker today. This Alexis Callahan. Thank you. Please go ahead.
Thank you operator, good morning, and welcome to our second quarter 2020, <unk> earnings Conference call. Joining me today, our Jonathan Johnson CEO of Overstock, and President of Medici Ventures, and Adrian Lee CFO of Overstock.
Dave Nelson President of Overstock, retail and Saum Noursalehi CEO of T zero will be available for CNS.
Please note that we are conducting today's call remotely.
Let me remind you of the following discussion and our responses to questions reflect management's views as of today July Thirtyth 2020, and May include forward looking statements actual results may differ materially.
Additional information about factors that could potentially impact our financial results is included in our form 10-Q for Q1 2020 subsequent filings with the FCC and in our press release filed this morning.
Please review the forward looking statements disclosure on slide two of todays presentation.
During this call will discuss certain non-GAAP financial measures the slides accompanying reflect past anda filings with the FCC each posted on our Investor Relations website contain additional disclosures regarding these non-GAAP measures, including reconciliations of these measures to the most comparable GAAP measures.
Please note today's presentation is available for download on our Investor Relations website, and our summary slide contains instructions for asking questions during our keynote session.
And with that let me turn the call at least huge on them.
Israel accidents.
More than the old.
Earlier solely through this year or second quarter results.
Provide updates on their business.
All this agenda shown on slide rules.
Slide four please.
We continue to strengthen the older started.
On June 33 out of the six director Board, we observed over the current founder imagine Polgar of a private equity group in San Francisco better gross margins automation removal took companies.
25 years of experience and technology capital markets strategy, and Investor Relations, where it was a great personal overstock and a stronger ambition to our board, which now as far as an independent directors.
We will represent our shareholders world.
We continue to look to add another independent board member worn worth.
Ecommerce and retail expertise.
So figuring out about the soon.
Flood Park please.
Last month Overstock, when do you want to three vendors awarded a contract for a proof of concept pilot with the euros Federal government General services administration.
We will provide a commercial ecommerce platform on which participate in government agencies can make micro purchases purchase is less than $10000 for items or employees need things like office equipment and supplies Overstocks core offerings.
These government agencies, which make referee 6 billion in here. The Walmart group purchases will also have access through robust analytics dashboard and reporting system that provides granular inside the agency spending.
Including whether they are meeting certain quotas.
This award is a validation of the robustness of our supply chain longstanding partner relationships inside infrastructure.
And the strength of our underlying data and analytics capabilities.
Aside from any potential piano impact. This award has reputation or board and still overstock and could lead to additional b to b opportunities.
I do know there's no guarantee how much of the potential buyer federal government Margaret purchased a big Overstock will win.
Slide six please.
Unfortunately, this virus isn't over yet, but it's looking like there might be reference for some time, so I want to keep you apprised as its continuing impact on our organization.
The overstock retail business model is well suited for the current environment, which is arguably be covering the new normal.
That is no abundantly evident in our sales numbers, which increased more than 100% in the second quarter year over year.
Because of our focus on technology and automation embedded in our system.
Our model sales effectively and cost efficiently.
Even when sales doubled.
Customers, you're buying or our core products home furnishings, where the most relevant categories as we spend so much of our times in our homes and they're buying them easily from the safety of their homes.
Our 20 plus years of worn stared and partner supplier relationships and dropship model has allowed us to be nimble.
Importantly, overstocks value proposition is particularly attractive during uncertain financial times, we offer great products.
Great prices.
As an organization, we are still nearly 100% work from home.
That continues to go well.
Despite aggressive were in customer care to keep up with demand.
We're also taking advantage of talent in the market from businesses disrupted by the pandemic.
It's no secret there throughout the throughout this pandemic, we've also faced our own set of challenges.
Decreased sales strayed logistics, resulting in higher customer contact volumes.
Our inventory levels dipped where could doubling in sales.
And fulfillment lag.
Hi, Eric and launched automation initiatives to improve customer self service options in the beginning to recover in inventory.
Fulfillment.
Our employees we're nimble.
And adaptive and we are resilient as an organization.
Slide seven please.
A quick corporate update.
We regained our which he status during the second quarter with the increase in our market capitalization.
We filed a shelf registration statement to reflect that.
Perspective, so prospectus supplement to reestablish our ATM under the new show.
I should note, we still have not use the ATM and 2020.
We distributed our digital doing and on May 19.
This is a preferred shares of stock the trades on the T zero alternative trading system under the symbol Oh STK Oh.
We closed yesterday and $41 in 50 cents per share.
He pays an annual cash dividends.
We announced earlier this month, the Delaware Supreme Court reversed and $8.6 million judgment against us in a gift card case.
I'm pleased to declare agreed with our arguments.
There's nothing of substance to report on the regulatory front.
We continue to cooperate forward and engage with regulators to address any questions. They may have.
Slide eight please.
I'll now turn it over to address to discuss our second quarter financial results.
Thank you Jonathan I look forward to discussing our second quarter results next slide.
Before we dive into the numbers I would like to reiterate how we manage the business and segment our financial results. As this chart illustrates we report our financial results across three segments.
Overstock retail a pure play ecommerce retailers.
T zero, which is focused on driving adoption of block chain technology and capital markets and met achieve ventures, which includes several block chain focused companies that are aligned with our foundational pillars.
Our consolidated results aggregate these three segments.
I will begin with a summary of overstock Dot com, which includes our consolidated results followed by a more in depth discussion of overstock retail second quarter performance.
Next slide.
On a consolidated basis, we delivered strong results last quarter, driven by a record revenue at overstock retail record trading volume on our T zero, Ats and disciplined spending and investing across our three segments.
In summary, we posted 109% revenue growth year over year positive adjusted EBITDA of $42 million.
I would earnings per share of 84 cents and ended the quarter with a healthy balance sheet that included a cash balance of over $300 million.
The organization, that's focused and continues to execute against its key initiatives. Importantly, these efforts are becoming increasingly evident in our financial performance.
Next slide.
This chart provides a summary of overstock retail exceptionally strong second quarter performance, our business supported a 200% increase and new customers and our profitability as measured by adjusted EBITDA improved by $51 million year over year.
Jonathan will discuss shortly a key takeaway here is the scalability of our peer play ecommerce model and efficiencies created through our partner Dropship program.
As we mentioned during our recent Investor day, our overarching goal is to create operating leverage by growing our topline at a faster pace than operating expenses on that note. We doubled the total revenue last quarter, which was accompanied by a 62% increase and total operating expenses and with this included sales and marketing efforts.
As these results demonstrate.
Profitably, gaining new customers and making progress towards achieving sustainable profitable growth long term.
Next slide.
Last quarter revenue from our retail business was a record $767 million or an increase of 109% compared to Q2 last year customers are increasingly finding us and purchased products in our core home furnishings category.
Compared to the second quarter of 2019, new customers, new customer growth increased over 200% and we have experienced strong customer purchase repeat behavior, which Jonathan will discuss later.
Well the difficult to predict trends right now we currently believe that some of this shift to online home furnishings purchasing will continue.
And should serve as a tailwind for our revenue growth outpacing the growth of the overall us online home furnishings market a long term goal of ours.
Next slide.
Retail gross profit increased to $178 million, a 100 million dollar increase compared to second quarter last year. Furthermore, gross margin improved by almost 350 basis points year over year.
While we're pleased with the improvement it is important to note that results were driven by operational efficiencies as well as several onetime items unique to the second quarter of 2020 are onetime items included.
Lower cost from being understaffed and the customer care organization as we adjusted to increase sales volumes a benefit from fulfillment related charges as part of our service level agreements to protect our customers experience.
And lower discounting activity as we said strategically balanced marketing efforts against product availability and stockouts.
Going forward, we do not expect gross margin to be similarly impacted by these onetime items, just discussed and I would expect performance to be more inline with our first quarter 2020 results.
Next slide.
This chart illustrates our overstock retail operating expenses in absolute dollars and as a percent of revenue of note operating expenses include sales and marketing general and and administrative and tech expenses.
As a percent of revenue excluding special items that benefited the quarter operating expenses improved almost 500 basis points as we leverage as we were able to leverage our Jenny and technology expenses.
Illustrating the strong operating leverage inherent in our business. We can go the topline without adding significant Jamie expense into the business.
Next slide.
I am pleased to report our operating leverage carried through to the bottom line as you can see overstock retail posted $53 million and adjusted EBITDA during the quarter and an increase of $51 million year over year. Following three sequential quarters of adjusted EBITDA loss adjusted EBITDA margin was a record 6.9%.
An improvement of 650 basis points year over year.
As I discussed on the gross margin chart, our record revenue coupled with onetime items unique to the second quarter means investors and analysts should not expect adjusted EBITDA margin to be quite as high as it wasn't the second quarter. Our long term goal remains to consistently deliver and adjusted EBITDA margin in the mid single digits.
Next slide.
And that summarizes our second quarter financial results, Jonathan I will now turn the call back to you.
Thank you Adrian we're thrilled with his results represent disciplined focus.
A lot of hard work.
People throughout the company.
Slide 17 please.
Let me walk you through how we achieved these results starting with overstock retail.
Florida is getting please.
Overstock is a top player and the growing home furnishings online market a market that is now more relevant.
Ever.
Online penetration was steadily.
We steadily increasing prior to the pandemic for recent pandemic related shifts in consumer behavior has accelerated the growth.
We estimate that the online penetration was 36% at the end of Q2.
Slide 19 please.
We are playing to our distinct position of strength in the market position that is relevant beauty market condition, but especially during challenging economic times.
Our brand vision of Green homes for all differentiates on the home goods expertise and smart value.
Our customers come to us to find high quality home goods for a great value, we're not nor do we strive to be an everyday low price leader such as the generals you see at the bottom of this chart.
Nor do we strive to be inspirational.
We believe our position uniquely meets the needs as many customers in the market.
Customers, we focus on every very.
Slide 20 please.
During Q2 as many customers discovered overstock for the first time.
Our new customers tripled year over year, and our 28 day repeat rate increased 16% year over year.
New customers are finding us in products payload and they are having a good experience.
This gives us confidence that these new customers assisting with us and we'll continue to make future purchases. We are obsessive refocused on retaining these new customers.
Slide 21 please.
We are building strong foundation in our core competencies.
First we know our customers, what they want and how to reach them.
49 million average monthly visits are not happenstance, they're driven by personalized emails to help them find the products, they're looking for our loyalty program, we're through with three returns and the price match guarantee.
And our offering of customer service to meet their logistical needs without phone calls.
Second.
We've been building in integrated innovative technology, and all hard retail for 20 years.
I know scalable core infrastructure that has allowed us to handle large increase in traffic and new customer this quarter.
Our improved decile keyword rankings are bringing more customers and our efforts and machine learning and computer vision are helping customers quick refined products, they're looking for.
Third we have a highly scalable business model.
Dropship model with thousands of partners and fulfillment centers augmented by our own in house distribution network allows for efficient delivery and flexible inventory management.
Our abundance of assortment over 8 million products allowed us to suddenly double our sales.
We are now standing up a beat a beside quickly for our recently awarded Geo state contract.
Slide 22 please.
No two are focused retail strategy.
Broadly Overstocks mission is to create dream homes from making beautiful comfortable well appointed homes accessible for helping customers easily and confidently or just what they want to us.
We've consolidated his vision and focus into a single page that everyone had overstock retail live spot.
In order to achieve sustainable profitable growth, we most focused on serving our customers hires needs.
And we know our customers are savvy shoppers and reluctant refreshers.
Additionally, we've aligned our brand pillars through our customers' needs our responsibilities smart value.
And easy delivery of support.
Brand pillars provides long term guardrails focus for innovation that were.
So we're going we're already working on their friends that improve experiences our customers law.
Slide 23 please.
We've done a great deal of customer research and our findings are driven our focus.
Two customer segments, particularly fit our strength.
Savvy shoppers and reluctant refreshers together, they represent 40% of the home furnishings market or roughly $120 billion.
This is a key point of differentiation for us.
Throughout the U.S strategic marketing ship market segments.
It was a function of opportunity size industry space and existing customer alignment to what our brand naturally dose so well.
Well other pure play at home goods retailers focus more on inspiration. We've we've been there the white space for the two customer segments, who already have a higher propensity to shop with us.
These customers are deal driven once we feel great about their purchases and want to low hassle shopping experience.
Well that's overstock.
We continue to leverage analytics and machine learning to ensure we provide the shopping experience these customers our customers desire.
In the recent work from home period, most of our new customers were savvy shoppers and relocation Refreshers, which gives us added confidence to these new customers are here to stay.
Slide 24 please.
You can see here, how our 2020 initiatives aligned with our three brand pillars. These initiatives have not changed during the pandemic.
We remain focused on them through completion.
The loan exception is the launch of free shipping on everything.
This promotion has allowed us to serve our customers better during the pandemic.
I will drive specifically at each of the points here, but the next slides will show the progress from efforts.
Progress aligned with our three brand pillars slide 25. Please.
Okay.
Mobile has long accounted for more than half of our visitors, but laggan conversion.
As a result of our specific efforts to enhance our mobile experience for the first time mobile now represents a greater percentage of sales than desktop.
These mobile visits were up 149% in mobile sales were up 148% year over year in Q2.
Mobile resonates with our customer so we will continue to improve our mobile experience our mobile experience.
26 please.
This chart reinforces our primary focus on home furnishings.
And that new and existing customers understand and like our primary focus our Q2 sales mix of home furnishings was 92.5%.
After maybe 8.6 last year and 86.7 last quarter.
Our customers know us for our core competencies in home furnishings.
Slide 27 please.
Okay.
Organic search traffic has recovered and is now at an all time high.
As we previously talked about we had a tough time with FCO a couple of years ago.
To 29 June we really started honing.
Homing in on the most relevant home related keywords and keyword rankings, who showed a steady increase so all the absolute volume of our top three keywords is not as an all time high all the focus technology and content, we put in place allowed us to take advantage of the influx of increase.
Online shoppers, resulting in the favorable increase we now see in Q2.
Slide 28 please.
Two key elements of our brand pillars relate to shipping and promotions.
Free shipping is a top purchase driver.
We launched free shipping on all orders in response to covert 19.
It's nice to see our current customer rating of shipping charges is now 11% favorable compared to competition.
Sadly shoppers recognize overstocks proposed promotional competitive.
We're now 6% favorable compared to home furnishing retailer averages.
These differentiators of smart value resonate with our customers.
It's nice to see where have significantly move the needle on each side.
Slide 29 please.
During the work from home period, we've experienced multiple challenges and fulfillment capabilities.
Ours is not a unique story.
Well, our click to delivery increased we've put our customers first and made sure we set realistic expectations on delivery time.
Yes, our percentage of orders delivered on time.
Or early remain consistent with our customers expectations.
Slide 30 please.
Due to our increased our increase in sales we've received a high volume of customer contacts the highest in our history.
Good news is that customer service contacts as a percentage of orders continue to decline and is 37% lower than last year, even better a lot of contacts are now through self service you can see we had a four x. increase in the percentage of self service contacts year over year.
Sure. This means customers can solve their own problems, which avoids the cost of the customer service content.
Our customer satisfaction, which dipped during the height of our sales increased continues to increase as we tweak can make improvements.
Our technology roots, who shown as we innovate through automation.
Slide 31 please.
All those to say, we're well positioned for continued growth.
Our revenue growth is outpacing the industry driven by our technology customer focus on our business model.
Normalized gross margins have improved.
Our expense rate is growing slower than revenue driving operational leverage that Adrian talked about.
This flows through to produce long term adjusted EBITDA margins in the mid single digits.
We are generating positive free cash flow.
We are driving sustainable profitable growth for overstock retail by enabling our vision of dream holds for all.
Slide 32 please.
Okay.
I'll now turn to our Medici ventures business.
This slide shows Medici ventures areas of focus and where each of our watching companies fits into our vision.
I'll start with.
Zero.
Slide 33 please.
From a successful distribution ago acute care owe to record EPS volume encrypted traffic count growth.
It has been an exciting quarter for key zero.
Gordon way I believe two euros recent achievements well service catalyst for future growth and adoption of the platform.
Slide 34 please.
Okay.
With the recent increase or T zeros, Ats volume, which I will highlight more detail on the next slide two zero now accounts for roughly 95% of all security token volume.
And he zero P. and always Teekay Arrow currently account for over 80% of the total value of security tokens trading today.
This data is encouraging as it demonstrates our market leading position in has encouraged the team to broaden the types of.
Private companies in assets at targets.
Good.
And do this more in a moment.
As noted on this slide two zero was named best block chain solution as the year.
Hi, FCF news of Fintech focused media outlook.
If someone is thinking about issuing a security jochen they need to consider using T zero.
35 please.
Following the successful distribution of always Kao T zero delivered record Ats volume last quarter.
May and June where our two strongest month.
Launching the platform last year with 423390, 1000 tokens traded in those months.
It was also worth mentioning the June was the first full month with or CTO trading, which represented 32% of june's trading volume.
Year to date volume on the T zero Ats is up 77% and more importantly continues to grow.
During July one in July 24th.
Over 625000 tokens have traded on the platform far exceeding our previous records.
Because PCR generates revenue from trading commissions higher volume these higher revenue.
Slide 36 please.
In addition to record HTS volume, our crypto App experienced record user growth in Q2, adding over 2600 users with over 1000, new accounts in May alone.
As you May recall T zero intends to migrate to users to its retail broker dealer to zero markets upon approval, which will allow these users to create our digital securities.
Slide 37 please.
There's been a busy an exciting few months for Q zero, most recently easier assigned to Tokenization and trading agreement with the luxury shit reach property.
Awesome.
This assets should be trading soon it will be TCOS first third party choke token.
That's an exciting milestone.
We also had two new broker dealers go live on the Ats last quarter, one of which is a publicly traded company.
Glass.
Driven by recent increase in equity volumes to zeros broker dealer subsidiary speed drought has generated a record revenue.
Year to date through June easier generated $23 million in revenue.
Exceeding revenue for all of 29 team.
I hope this trend continues to grow to zero grows the digital security side of the business.
Slide 38 please.
I will again reiterate the T zero roadmap.
Our team here recently heard some key milestones its overarching priorities remain the same.
These include adding more assets increasing liquidity on the Ats.
In improving the investor experience across its ecosystem.
One area all have more color on the asset side.
Easier or initially targeted companies looking to raise capital and then trade over platform.
It is shifting its focus toward companies, particularly those with deep cap tables that are interested direct trading on the P. zero ATM.
Since trading is not contingents contingent on a successful capital raise this category issuers, we're able to trade more quickly.
Zero has already begun reaching out to several private companies in the early feedback is encouraging so stay tuned.
I'm pleased with two zeros recent progress and encouraged by its prospects.
Slide 39 please.
Matter a few of our other.
As she venture companies with notable news in progress.
Slide 40 please.
Votes spaced in Boston has a mobile voting up uses built insecurity of smartphone technology and renewed ability of the block chain to enable safe and secure mobile voted.
We recently became the first remote voting platform verified its complying with federal voting security guidelines. This is a big deal.
Well. It's also recently conducted elections for the Arizona in South Dakota stay conventions, bringing the total of successful election conducted to nearly 70.
Protest the perfect solution to our updated current systems, particularly in the coated 19 area.
Everyone on both sides of the Io should be clamoring perverts.
Chuck out its new website, which launched yesterday.
Slide 41 please.
Settlements based in Belgium is one of our utility players crossing several verticals.
It provides licensed enterprise grade district.
Distributed middleware.
The company was recently recognized by Everest group as a top start up in low code platforms.
Settlement scalable loco solution makes block chain use case development and immigration highly accessible to organizations and developers, which accelerates that much needed digital home overall of outdated centralized systems. We currently rely on.
Slide 42 please.
All briefly recap before we move to cure today.
Slide 43 please.
We have made a lot of progress, thus far and twentytwenty across all our businesses.
We are executing against the focused and disciplined strategy.
Those efforts are beginning to show in our financial results.
We've reacted quickly to adapt to the challenging market conditions and costs and consumer demands.
Our business model and our employees of the demonstrated remarkable resilience.
We resolve many of the challenges posed by the quick moved to a nation working from home.
We are stronger than ever.
We are positioned well to continue our growth trajectory.
And I'm excited to see just how far we can go.
With that.
Let's take some questions and Elecsys, let's start with live questions.
Operator.
On the line.
And in order to ask an audio questions complete press Star then the number one I get telephone keypad.
First question comes from the line of Thomas Forte with Davidson.
Great. Thank you for taking my questions first off Jonathan Adrian days Lexus some congratulations on amazing performance.
One question and one follow up.
So you touched on this a little but I wanted to put it in sports terms to see if I can drive the price.
Home.
I can you talk about your ability to achieve mid teens sales growth post pandemic whenever that is so using a sports comparison logos basketball is it a lay up because it a slam dunk, there's a free through the three pointer.
Good.
Nice to hear the sports analogy and Tom Thank you for the kind words.
Dan I'll ask you to address that.
Mid June sales growth post pandemic, recognizing that puts pandemic may be something that never actually comps.
Okay.
Yes, Thanks, Tom Great question.
Right now.
We are in turbulent times.
And.
To predict something right now to give any kind of a forecast would would be parents on our part that said, we maintain our strategy. We maintain our goal of outpacing the home furnishings industry market growth and continuing to improve.
On our operating strategy.
Excellent questions do I want to do you want to add anything to that.
I'll now.
Okay on chart.
Right. Thank you. So second question for T Zero I wanted to talk about Tcrs efforts to add tokens to its Ats and can you remind us some the current status of your efforts to create a joint venture with box.
There are Jonathan do you want me to jump in.
Yeah, John Thats your question Tom Okay.
So on new assets do you guys heard Aspen digital will be the third the first third party token that trades on our platform.
Cove It did slow down.
The trading up new asset.
With the market volatility, but we've now seen issuers reengage.
We do have several others in the pipeline there kind of from of wide spectrum of industries.
With a bulk of them being and real estate so.
Following Aspen, we hope to have some additional assets lives.
Hopefully this quarter and next.
As far as be FCX, they're having ongoing dialogue with the regulators.
And.
And there are actually about to make an amendment to their rule book, So so they're making progress moving along and we hope to get an approval.
Sometime later this year early next year.
Great. Thanks for taking my questions I'll get back into queue in time permitting asking more thanks. Thanks Tom.
Your next question comes from Mark Hi, net cohort dance with Altira out their line excuse me.
Well I need is day would come and Jonathan you deserve a lot of credit because you took an absolute should show and you have made it.
Something quite special.
But I'm not.
All high fives yet.
What is the plan.
To tighten the spread between the overstock preferred the O.S.T.K. show and the O.S.T.K.
Oh, it's T.K.L. should theoretically be worth.
More than the common because it's worth the common plus dividend.
And what.
And when should we hear about the O.S.T. kao dividend and or distribution.
Mark Thanks for the kind words.
I want to comment that.
The entire team at Overstock of T zero at the at the company has made this happen.
It's true to say kind words about maybe there's certainly been a key metrics.
On.
On tightening the spread between overstock comment overstock preferred that's really something the market.
It's going to want to figure out what will we do to help to market.
We're working very hard to get more more broker dealers.
Subscribed to the T zero Ats, we think that will improve.
Quantity.
We're working to clients business incentives.
To get the overstock preferred shares trade more for exclusively.
On the T zero platform I think those things.
Should tighten spread but ultimately we're going to be focused on running the businesses.
And let the market the terminal.
Howard values common versus preferred or vice versa.
I'll have a question for someone might we see a dividend on the tokens with T zero doing much better.
[music].
We're exploring some options with the dividend with the T zero P. token.
I don't have that date for dividends to announce right now, but there are some options were looking.
To to.
Potentially apply to those tokens, which will make a much more valuable to the investors that participated in that race.
And I'm wondering if they werent, mark Mark why things and hampers saw declaring a.
[laughter] distributing a dividend on the T zero PV token his or her Delaware law company must be profitable or wall easier is doing much better.
It's still not to bottom line breakeven and so on a Delaware our character and that's why we're Thomas mentioned looking for ways to make it more variable are important and we've got to thinking caps on that.
And finally has there been any thought given.
To hiring a full time, chief investment officer, or Chief investment officer and team to run met achieve rationalize magnitude because you had your hands full run in.
Oh speed ship overstock.
And if T zero.
And other MACI assets get a little more assigned to it than this thing really homes.
So great question.
Probably not a team at this point don't we are looking for will soon be posting a.
[music].
Our job description for someone that can help the companies in the notes you family get that launching products to market.
The can monitor the companies in the notes you can't wait to determine.
Which one additional belge ventures capital and help the companies in the notes you ventures family.
Raise capital from third parties, particularly from well known VC.
Understood on some of the board to the company or better Geoventures family.
I am stretched in the Overstock Board is recognized that they've asked us to.
We've asked me to focus on.
Getting someone or some people are to fill those roles. So we're working on it.
Well done well done gang and well done Jonathan bringing in people around you to help you out the super job.
Thank you.
Your next question comes from brands fellow with P.A.H. research.
Thanks for taking my questions I want to add my congratulations on execution.
First question I had really related to the GSK announcement I understand that I guess, you're going to launch this portal sometime in the next few weeks I Wonder if you could dimensionalize the revenue opportunity, obviously $6 billion is a big number, but we don't really have any sense as to.
What amount of spending occurs and then product categories that you have a very strong presence in currently.
And I know and I'm guessing that you are having extensive conversations with new vendors to the overstock ecosystem as result of this announcement.
Can you somehow frame the GSK opportunity with a little more granularity.
Let me start then alternative today than it Adriana that make you become a tier one tier plays a big win for us.
It is an unknown when and how it affects the PML.
We don't know exactly what these five government agencies.
Which we don't grow to more government agencies, who purchased from us.
We do know that they really liked our platform like the product offering.
And there like you know whether its thank god.
That's a hard question to answer.
But I'll turn to David Adrian because it's not like we haven't done some modeling is hard to answer.
Dave.
Yeah. Thanks, Jonathan Good question, Brad you know as we look at this thing to keep in mind is about 6 billion dollar Tam.
As in the product categories, where we currently play where we currently operate.
But let me underscore emphasized on highlight.
True of concept pilot programs.
Well, we'll launch this in August.
[music].
We're.
We are in conversations with new vendors with new suppliers.
Many in the commercial good side of things many of our current partners.
Already operate where have.
Dealings with the GSK either present for in the past and they know how to work in this environment. They know the product categories as well.
And like I said is where onboarding new commercial partners. In this area you know, we feel confident that will happen.
Solid assortment.
To provide as Jonathan mentioned, the Gs they really liked our platform our website our tech is strong.
And we'll provide more updates along the way as as we learn more with this program, but let me just emphasize to the Tam of $6 billion.
That is not just random everything they purchase that's just in the categories that we specialize on.
Okay and in terms of how you're approaching the launch.
How much spending is involved.
In this quarter.
And how are you going to I guess promote engagement from government employees.
Yeah, Dave.
From a a big Jonathan from a from a spending standpoint, our tech is strong.
When you think about what the GRC working for on the platform, it's assembling pieces and components of products that we've been pioneering for the last 20 years, just assembling all of that together.
We've added some additional dev teams and some additional work, but it's it's it's not.
Nonmaterial really.
In terms of what we can offer and the product categories. Most of the time and energy was spent in developing a platform that allows us to government to their specific invoicing and analytics and the things that they need to manage their program in this micro purchase arena.
So not significant expenses right out of the gate.
Insignificant really.
Okay in terms of how you're going to from an engagement within the governance infrastructure.
Yes, it already engagement able talking out yeah go ahead.
Thanks Jay.
When you think about engagement. It you have to think about it a little bit differently than b to b to C sites, we're not allowed to promote directly.
And mark to market directly to these users.
There are specific users when you log you log in its a private website and.
They have access that is only for government agencies and these specific folks. So we'll continue to work closely with that yesterday, we have opportunities to survey, they're users and learn more and communicate with them, but there is no direct marketing.
Yeah, the government's been very clear on that Brad I think where are we ultimately win on this.
Is by providing these procurement officers the data they need to see that they're meeting quotas for buying from different types of businesses.
There are costs are going down.
If if they are having good experience purchasing and getting the kind of robust data, which we give them.
I think that's what makes it grow.
And just one last question on the GSK and we'll get back in to Q.
You mentioned that you're having a lot of conversations and new vendors similar or better commercially oriented.
I would guess and I just wanted to hear your thoughts on this that conversations with new vendors as a result at the G.S.A. I would assume also include potential.
Listing of product on your traditional consumer facing portal.
Yes.
A lot of these are it's it's opened up with an interesting segment for US we've talked to several.
Commercial suppliers, who actually have.
Some more large scale contracts with the U.S. government, who have never been in the shipping business.
Fulfillment for online services, so as they have reached out to us and we have reached out to some of them and the more we've been in conversations and more synergies, we see with them actually being able to list some of those commercial goods on our.
On our B to C website. So together is there is opportunity there as well.
All right I'll turn into our thinking.
Thanks, Brad.
Your next question comes from a line of Genesis be sector with M. <unk> asset management.
Guys, It's Joe Besecker, how you doing.
Oh.
From our president Phil Aaron's very well.
Well.
The question side, a lot of questions I have were.
We're asked but I have a couple of quick was kind of really kind of wrap it isn't first one is.
The work that we do here at Emerald.
They Jones, maybe on this call is the analysts supposes, we've been following credit card data and and.
The data that we see go in July so far has been exceptional as well can you can you comment on that and then so you could just give a quick if you can on that any kind of color on the bigwigs, our our our numbers are showing no signs of slowing whatsoever.
Well, let me let me take out one you know we aren't in the practice of Sherri intra quarter information right. We did so last quarter because early pandemic guidance from the RPC.
You can see we had a strong second quarter and I won't comment other than July July.
<unk> than to say that sales remain strong okay, and then a question for some.
So let me put a letter out yesterday and I just want you to give us some thinking.
As to.
How you came about reducing your salary and working for equity compensation.
That could be looked at several different ways.
But from my perspective, our perspective, that's a good thing can you give us a little bit of a a little bit of color on that.
Yeah. So what I mentioned in my letter is our board as well as myself and some other management took.
Equity for salary.
And the board is just exclusively taking equity I reduce my pay by 60%. It was completely optional. Its you know we're not dying for capital.
You guys know overstock is doing quite well plus we have our own capital.
So as not for that reason.
Part of it was because of coded and just being responsible with the times. The other part of it is we're preparing for a capital raise.
And.
And I think just showing reductions in burn is probably a smart thing to do.
In addition, we're adding some really strong capital markets talent.
Well I mentioned in my letter someone at managing director, we got from KKR named Michael GABAA Sir.
He is now supplemented in helping the team.
And we really need more or those kind of leaders in our firm to complement my skill set which is primarily product development in technology.
And so those are the reasons I didn't I also.
I think the team myself included really believing this mission and.
Said getting some equity incentive for salary I'll I'll take that trade.
Gotcha those those with the reasons and then yes. So July view job guys is a big positive there's a big high I think it's a positive but in talking to some of the people in the street yesterday.
I think they were confused and I just wanted to get some clarity on the Oh, absolutely completely voluntary yes, and I think that shows the difference between the current.
Thinking in the past thinking and.
Your alongside the shareholders and I congratulate you for that I did want to drill down on first of all.
My body more code is who.
I can't say enough good things about when he asked his question that we were talking about the dividends you answered it more on the T zero as opposed to the overstocked preferred.
The thinking of a dividend on the overstock preferred.
I I may be kids shoes does that have that does that have anything to do with t. zeros profits or does it have to do with overstocks profits themselves.
Joe French us in a clarifying question I answer that.
The tier four easier okay overstocked right.
Ken.
Pay a dividend has every year paid dividends on the series.
Preferred shares I, you know board is not.
American discussed that but you know we paid it every year I don't know why we wouldn't bad but they're watching them right. There is a difference and when you answered the question at least the way I heard it.
We're speaking more to the T zero.
Tokens as opposed to the overstocked the preferred that's that's correct and I've been a good clarification. Thank you Joe so given.
This situation here when you meet.
I have not owned the preferred before because I was a shareholder because I got some of these tokens.
I think that.
I would suspect is that that would be on the as you said on the current agenda.
Correct.
Okay. Thank you guys great job.
Thanks, Jon and Kate.
Your next question comes from common sport. Thanks.
Great. Thanks for taking my follow up on her to margin question, one Jonathan talked about the government contract.
Answering opening the door from weren't B to B.
I would envision that he has the potential crickets, we have a higher long term margin of your fixing or good your for your namesake retail and then second can you talk about our near term and long term gross margin goals for her basic.
Tell business.
So Oh answer first you know turning to Andrew to provide some comment I think it's too early.
Your commentary on what margins might look for where a nascent.
B to B business.
We just haven't looked out or not.
Not in our current.
Focus will be.
As it grows but I just can't answer that question behavior in over two sectors.
Great. Thanks, any I tomcat to echo what Jonathan as we trends in marriage, and we see more I think Dave also said thats on the need to be Ngs based side, we'll certainly provide color on as we know more but it's too early as far as the gross margin.
Thoughts I think within my prepared remarks, I talked about the unique items.
Consider for to Q, hopefully those were on clear and sell kind of kinda.
I have the team think back to that Q1 performance on other place, where we expect to be going forward.
Thank you Tom.
Thank you very much.
Your next question comes from the line of William What's true.
From William came with it and company.
So what I'm sure your line is okay.
I had a question on the secure mobile voting.
I think you basically think it can be used can I just curious as Sarah.
Anyway halfway follow that is there a roadmap that you guys have.
True, it's going to be adopt it could it be adopted by states.
I mean, I think it could be huge also.
Can you elaborate on any of that at the too early.
Oh I want. Thank you yeah. Good we made it can be used to frankly I don't understand why it's not being used during covered by every county clerk or.
State Secretary of state, where there's over voting.
That said, you know government or slow to adopt new things.
The roadmap to date for.
Boats has been first use it for what are called you will cause of voters uniforms and overseas voters people that are voting absentee vendor expand it to people who have to add special voting compliance under the American with Disabilities Act.
That's how it's being used to 70 different states and jurisdictions initially I, it's gotten broader use by parties at their conventions.
Over the last 120 days is they haven't been able to meet and they've been able to.
Though remotely using mobile phones.
Yeah The road map.
It is is to continue to work with any having I would say William is there's not a single purchaser you don't go to the state and say, yes, devoting Guy bar years. There. It's every county clerk has the ability to do things. So you know in Iowa, That's 99 counties in Utah, It's too.
29, Kennedy, it's a long sales process. The votes is aggressive on that front. It meets with you know the National State County organizations County, clerks, and and that kind of things are looking at the votes website ideally TV dot com I think is used.
Well to see what they're doing.
Government.
Hard to do governors to change quickly.
We think this is a Mrs is.
Great product in a great time for this great product.
[laughter] and at this time down I know audio question are there any closing remarks.
Thank you Paul we appreciate your moderating it's for US I want to thank everyone participating in today's call I want to thank our team at Overstock accuse you had made she ventures. They have really worked hard over the last 220 days of work from home and a pandemic world.
I appreciate our shareholders' interest in Overstock, Intel we talk again stay safe stay healthy and we'll stay productive.
And thank you ladies and gentlemen. This concludes today's conference call. Thank you for your participation you may now disconnect.
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