Q2 2021 Overstock.com Inc Earnings Call
[music].
Good day, and thank you for standing by and welcome to the Q2.2021, Overstock Dot Com earnings conference call at.
Time, all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session at that time. If you have a question you will need to press star 1 on your telephone if anyone should require assistance during the conference. Please press star zero leaves.
Please be advised that today's conference is being recorded I would now like the hand the conference over to your speaker today, Alexis Callahan head of IR. Please go ahead.
Thank you operator, good morning, and welcome to Overstock <unk> second quarter 2021 earnings Conference call.
Joining me.
Today are Jonathan Johnson, CEO, and Adrian Lee CFO, Dave Nielsen President of Overstock will also be available for Q&A. Please note that we are conducting today's call remotely.
Let me remind you that the following discussion and our responses to your questions reflect management's views as of today July.
2021 and May include forward looking statements actual results may differ materially from such statements.
Additional information about factors that could potentially impact our financial results is included in our form 10-Q for the first quarter 2021, and subsequent filings with the SEC and.
And in our press.
The 20 lifestyle of this morning.
Please review the forward looking statements of disclosure on slide 2 of today's presentation.
During this call, we'll discuss certain non-GAAP financial measures the slides accompanying this webcast and our filings with the SEC 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. The presentation is available for download on our Investor Relations website, and our summary slide contains the instructions for asking questions during our Q&A session and with.
That let me turn the call over to you Jonathan.
Thank you and luxury of standard more than 2.
Everyone.
And please you reported always yard deliver both growth and for all.
For the ability and the second quarter.
This is true achievement for the company.
We beat the year over year comp growing revenue for push Inc. For.
Against.
Lots of comparable period.
First full quarter lapping the start of the pandemic.
We did this by continuing to make the foundational operational improvements to our business.
Executing against the disciplined strategy and the <unk>.
Focusing intensely on the things that drive results.
During today's call will follow the agenda on slide 3.
Next slide please.
The only 2 years ago, and I check the home of the business was and focused.
Less disciplined and it was trying to do too many and often competing projects and.
And it was experiencing and identity crisis.
The road the ecommerce business wasn't very appropriately tend to do is we were spending a lot of time and energy on the blockchain and portfolio.
I recognize the we were a real moment for overstock, and we had an opportunity to snap back to shift the business per se.
Our strength and weaknesses.
That's the way the competitive landscape and how it had evolved the C.
Jim and I made several important strategic decisions.
Led us to where we are today.
First we decided to focus on our e-commerce business.
And we decided to lean into.
And the value of the home furnishings categories and decades of expertise there and.
Third we decided to outsource the management of the blockchain and assets to a capable and venture capital firm and.
They bring all parties to do what they do best.
So here we are.
Our design.
2 of them were intentionally operating and a large and growing furniture and home furnishings market.
That market has increasingly moved online and is supported by favorable long term macroeconomic trends the.
The pandemic accelerated the size neck, and I think permanent.
Line shift and buying home furnishings on line.
Many Kurt.
And forecasted economic trends bode well for the future long term growth and sustained strength of the overall category the great reshuffling of the American workforce persists.
Simple work.
Net which leaves people working at home is here to stay as a result people are moving houses are being bought and sold and a record pace aided in part by low mortgage rates healthy employment levels and a record of high savings rate.
And consumers have money to spend.
As we think about where that money will be Smith.
Some of the question whether trade off decisions need to be made whether the spend on experiences or whether the spend on goods.
And the health of the economy and the consumer Waller.
We believe sooner than later.
The answer is and and not and or consumers can do both.
It can go on vacation and what may be a post pandemic environment and making the BARDA outdoor patio set for their backyard and benign and as families and friends and began together again youre ready to.
Hosting the holidays by borrowing of new dining room and said yes.
Yes, there there may be of short term shift as many of the act on a pent up need to get out of their house and vacation.
We believe and.
Time will tell but the online home furnishings space the space where purpose for.
And we'll continue to grow long term and the macroeconomic trends looked like they support this too.
Slide 5 please.
Next the brief.
Corporate update.
For a couple of major accounting items, and the second quarter worth mentioning.
First we released a tax valuation of allowance of $47 million and the quarter.
This release was driven by recent actual performance and future expected financial profitability.
This is a big deal and indicative of the underlying strength.
For your business.
And the new level for which we are operating.
Second and.
In conjunction with the closing of our transaction with probably on the venture partners with deconsolidation of the Medici venture assets from our financial statements and recorded a net 228 million.
<unk> of our game when adjusting those assets the fair value the.
The gain is recording and discontinued operations.
For going forward quarterly quarterly activity of the Medici Ventures fund will be recorded as part of continuing operations.
We're pleased to have that transaction closed.
And they have Kelly on managing and directing those businesses.
I'm also extremely proud and overstock was named to parity Dot Org and best companies for women to advance list for 2021.
This is a real honor.
The company and the list of shining examples of businesses.
Walk the walk and are helping to create equal representation in the workplace.
Over the past year Overstock is increase the diversity of our management team and board of.
I'll now hand, it over to 1 of those great new female executives and Adrianne Lee will review our solid.
The second quarter financial results.
Thank you Jonathan Slide 6 please.
As already mentioned, we are pleased to have closed the transaction with Italian venture partners and the second quarter, allowing us to deconsolidation of the Medici ventures businesses from our financial statements and record of gain net of tax.
And as we recognized and initial upwards fair value adjustment on the Medici assets and our direct minority interest and T. Zero. Please note my comments today will reflect the results from continuing operations only and I.
I will begin with a high level summary of our second quarter results, followed by a review of key customer metrics and performance.
Next slide please.
We had yet another strong quarter delivering year over year revenue growth, while continuing profitability adjusted EBITDA was $44 million and the second quarter of year over year decrease of $4.5 million as a result of 1 time benefits recognized in 2020 and and improvement of 40.
And the Kevin million dollars compared to the second quarter of 2019.
We reported diluted diluted earnings per share of $1.72, excluding the impact of the tax valuation allowance release diluted earnings per share was <unk> 73, and the quarter, a decrease of 38 versus 2020 and and improvement of.
47, and 10 per share compared to the second quarter of 2019, the year over year decline and diluted earnings per share reflects a 16 per <unk>.
<unk> benefit from a non recurring legal accrual release in 2020, and a 12 cent impact from increased shares outstanding due to our successful follow on offering last August.
The dollar of our digital of dividend.
Consistent with recent performance our balance sheet remains strong we ended the second quarter with $536 million and cash our cash balance reflects the funding of our capital commitment to the Medici Ventures fund and benefited from standard and voice timing and accounts payable.
I will speak to the other.
The financial metrics in greater detail and the following slides next slide please.
We posted revenue of $795 million and the second quarter and increase of 4% year over year and 116% compared to the same period and 2019. This was driven by a 33% increase and average order value.
And and and improvement in order frequency average order value increased year over year as we continue to lean into home and was sequentially driven by sales mix within home categories.
As we continue to lean into homes, we expect our business to be less seasonal than it has been historically, but we do expect variability by quarter, driven by sales and mix within home.
As I.
I've mentioned on previous calls future trends remain difficult to predict but we believe that the furniture and home furnishings market will continue to grow and that the shift to online purchasing is a trend that will persist our goal remains to take market share and the expanding U S online home furnishings market.
The next slide.
Gross profit came in at.
$175 million and the second quarter, a decrease of $3 million versus the prior year and an increase of $102 million compared to the second quarter of 2019.
<unk> margin was 22% for the second quarter, which is right within our targeted range. This represents a decrease of 119 basis points compared to a year ago.
And an increase of 228 basis points year over too.
The year over year margin decline was expected and driven by a few notable nonrecurring items from the second quarter of 2020, if you recall gross margin and the second quarter of 2020 benefited from lower customer care expense as we adjusted to increase sales volumes fulfillment related.
To protect the customer experience and lower discounting activity as we balanced marketing efforts against product availability and stock outs.
Next slide please.
This chart illustrates the G&A and tech expense over the past 9 quarters, and both absolute dollars and as a percentage of revenue adjusting for onetime G&A expense.
Expense benefit in 'twenty, and 'twenty G&A and tech expense declined by $4 million and remained flat sequentially, even as we continued to deliver for top line growth.
As a percentage of revenue G&A and tech expense was 6.7% for the second quarter and created nearly 80 basis points of leverage compared to the second quarter of 2000.
And in 'twenty compared to 2019, G&A and tech expense increased by only 3% while revenue increased by 116% and improved 738 basis points as a percent of revenue.
We have implemented robust expense controls and continue to be measured and are spending our business model enables us to scale efficiently.
Without adding significant cost into the business.
Next slide please.
We delivered adjusted EBITDA of $44 million and the second quarter, which is down slightly versus a year ago, but up significantly versus the 2 year comparable period, adjusted EBIT and margin was 5.6% a decrease of 79 basis.
And this points compared to 2020, primarily driven by onetime benefits to gross margin realized a year ago and an increase of 625 basis points versus 2019. This is right in line with our margin targets driven by our focus on market share growth and disciplined expense management next slide.
Now I will turn to.
Of our operating metrics that we use to manage and assess our business performance and which we began disclosing last quarter.
This slide shows active customers and order frequency as expected our active customer base declined sequentially to $9.2 million at the end of the second quarter driven by the significant influx of new customers during the peak of the <unk>.
Instructions, which caused a high point and online penetration however, our active customer count increased 31% or by $2.2 million customers compared to the second quarter of 2020 and by $3.4 million customers versus 2019.
Orders per active customer was 169 times.
And the second quarter, which improved sequentially and on a year over year basis, we anticipate order for frequency will increase over time and be influenced by our customer retention efforts on our larger home customer base and as we increase our brand Association with home.
Next slide.
The slides.
Shows orders delivered and average order value orders delivered was $15.5 million for the trailing 12 months period. This is an increase of 36% compared to the prior year or for 1 million orders and an increase of 52% or $5.3 million orders compared to 2019 the.
The sequential decline is attributable.
Double to our decline and active customers during the period and is as expected we more than offset this decline by an increase in average order value and order frequency.
<unk> improved 33% year over year to $213 and 16% sequentially driven by our continued mix into homes and sales shift within home categories.
And while the absolute number of orders decrease the value of each order improved there is a strong correlation between higher value orders and customer retention and so as we continue to lean into homes, we anticipate a positive impact on customer repeat purchase behavior.
It's important to note that there may be some near term noise and our operational metrics.
Please exit non home categories, and as online penetration stabilizes, but overtime, we expect consistent improvement.
In summary, we are pleased with our second quarter performance and our ability to continue to deliver solid financial results with that back to you Jonathan.
My children.
Our.
As we and quarter results were solid.
The comp during the quarter with a high bar.
We're measured and our spending and generated operating leverage we delivered $44 million of adjusted EBITDA and a margin of 5.6%.
We again delivered profitable growth and within our target.
Margin guardrails.
It should be clear that the he is the result of purposeful meaningful foundational changes slide.
Slide 14 please.
Our consistent and solid performance and as the result of operational changes and organizational discipline and focus.
The team has embraced the changes and the strategy we've implemented it now in our D. R.
Lots of <unk>.
I will now discuss our ecommerce business, including our strategy operations and growth drivers and where do you will see how we are choosing the news.
For near term results Slide 16 please.
As we mentioned last quarter overstock, and our top for brand and the larger growing U S online furniture and home furnishings market moving up from number of the number of large fall of last year, our long term goal.
Move up.
As we continue to take market share.
This market is currently estimated at 325 billion and <unk>.
GDP as a proxy as it has been historically, many anticipated industry growth to continue and the single digits, perhaps a bit higher this year.
The main shift and this market. However is not whether consumers will continue to buy furniture and decor for their homes, but instead, where they will buy those things online or in store.
It appears that the true secular shift and consumer behavior is underway and sticking accelerated by the pandemic.
Pandemic and Adas.
The biotechnology.
While everyone, we'll learn and society enters and comes through this post pandemic transition period, and there will be some short term shuffling of consumer spending we believe most of the industry growth will be and online and as consumers.
Increasingly opt for the selection value and convenience of buying online.
Overstock is focused on capturing as much of this market share growth as possible.
Particularly now because the shift is underway.
Slide 17 and place.
2 years ago.
And the Overstock was it a real inflection point I mentioned and making 3 key decisions. The first of all of us to focus on our e-commerce business with a single of the level of of tension, we haven't done and years.
The survey was to assess aware of the market and competitive landscape set of all and the purposefully determine where we wanted to play.
It was taught it was time to stop trying to be all things to all people and you get really clear on our strength.
We have strategically carved out of niche within the market with specific targeted customers, we feel naturally play to our strength and and the market quadrate that serves significant customer demand.
The slide maps, the competitive landscape and our relative position.
We are exclusively focused on furniture and home furnishings, and we are focused on providing quality goods and.
Great prices.
I would also note of third the matching that is a bit more difficult to graphically depict which of the specific customers retarget and.
The spirit of the claim to our strength, we target customers, who are already seeking the value proposition of we provide the.
His customers seek smart value and the low hassle experience.
We believe these customers represent roughly 40 per cent of the market or $130 billion and have the naturally higher propensity to shop with us.
And noticed 1 other player of our quadrant.
And I play or does not offer the same quality for the price, it's focused on a different customer and theirs.
Not taking and is not focused on being of pure play online retailer.
We like where overstock his position.
And we are focused on taking the market share and the ample white space within the market.
I will now talk to each of our 3 brand of colors, each of which help and.
The fine overstock value proposition for.
18 please.
Our first brand color is product find the bill of it.
As we continue to further lead into home, it's critical that our customers know us and for home furnishings offerings and can quickly and easily find the home products. They are looking for.
Remember that and easy hassle free experience is paramount to our target customers.
I'll mention 2 updates regarding this brand pillar for.
First sales and home related goods and the second quarter reached 94% up for 91 per cent at the end of 2020, and the highest and are operating history.
We continue to phase out of non home products and of measured way the guys, we do and increasing the depth and breadth of assortment within our home furnishings product categories. Our goal is for 100 per cent of sales revenue to the home related by this time next year.
We believe our focus on home attracts loyal customers, who will spend more with us and buy more frequently.
Second we're making good progress on our product find the ability and they should of which involves overhauling of onsite search functionality and navigation can make finding home products easier for.
Faster and more intuitive.
We made great strides and the second corner by furthering our understanding of of our customers search and can.
And then providing customers with more relevant and accurate search results and based on that and <unk>.
Continuing progress of this initiative should result, and higher conversion and higher customer satisfaction.
It's important that were seen as and online furniture and all the furniture you destination.
And while we are finding are and then we make finding our home products easy and for.
Fast.
519 please.
Our second brand pillar of smart value.
This means offer and great products of great prices or said differently, the highest quality products for the price.
Our promotional model is critical to attracting and retaining our customer targets. The love the finding of deal and they want to feel like they're winning.
Our goal remains to wait on price posts promotion not can be and every day low price later.
Last year, we made good progress and clarifying of promotional messaging and refining our pricing model and.
Want to make sure our products are consistently competitively priced.
That builds trust and our brand and helps customer loyalty.
And we've talked about before there are really 2 components of pricing for.
Finding comparable products to price match against.
And then adjusting of price can ensure aware of appropriately competitive.
The more comparable products, we find the better.
The increase the number and the second quarter.
The also made good progress over the past few quarters and increasing the percentage of those comparable products and which we are price competitively.
Oh of work to do well, we're progressing nicely.
I would say this is of work that has never truly done and we will always be working to price match more of our products and adjusting of pricing to remain appropriately competitive.
I should also mentioned are free shipping policy of component of smart value and the benefit that really matters to our customers and.
In fact, it's the top purchase driver of among our targeted customers and 1 of the reasons. We married please shipping on everything of permanent customer benefit last year.
It should be no surprise, then the relative to competition, we continue to compare favorably on our customer's rating of shipping charges.
The opportunity for us going forward is to increase awareness of the significant customer benefits.
Slide 20 please.
Our third brand pillar is easy delivery and support.
And this includes the logistics and delivery, which is getting the.
The right product assortment, and then optimizing its journey to the customer.
We utilize a partner based dropship model.
We have more than 3000 partners with over 5000 and fulfillment centers nationwide.
The deep partner base allows for high inventory of novels, and broad product assortment without utilizing our own capital.
And enables us to be nimble, 1 of fishing with and satellite business model.
Over the past year, and a half, we've and gasping and partner relations and a more meaningful way and we ever had.
Acting like a real partner collaborating and working together to optimize not only our business, but also there's.
We think this is having a positive impact on our ability of source, new product and get higher product allocation at a time when inventory is particularly scarce.
From our customer experience standpoint, we know of it both delivery speed and on time accuracy of matter.
For large parcel products and particular delivery estimation accuracy matters more and we improved our estimation capabilities over the past year.
And I also improved our communications with partners carriers and customers.
And received the allowed us to better navigate supply chain disruption and other unexpected issues.
We have an opportunity to improve on speed with the goal to get small parcel deliveries to customers within 2 business days.
And sure we really like our operating model.
The capital of light and enables us the scale effectively and efficiently.
Slide 21 please.
Easy delivery and support also includes customer support Saturday.
Satisfied customers generally become loyal customers are mission, there for us to deliver predictable efficient and effective customer service that results and and E Z of hassle free customer experience.
That means preventing issues before they arise and resolving them quickly when they do.
We aim to resolve most cases on first contact.
We've made significant progress over the past year and issue prevention, which resulted in of 27% decrease and <unk>.
Customer contact volume and the second quarter compared to the same period 2 years ago and.
[noise] improvement was largely driven by better communications with customers around product cracking and <unk>.
Sure of delivery updates and increase the self service options for.
And for the past year, we've added new automation and self service functionality to the site, which enables customers to do things like request the replacement part.
Or start and return without the need to talk to an agent.
In addition to reducing costs and also results and higher customer satisfaction, which often correlates to hire customer retention.
Customers really like being able to help themselves self service as a percentage of total customer service cases increased and the second quarter of sequentially and year over year and is up for and a half times versus the same period and 2 years ago.
We're focused on enhancing our customer service functionality, and I and <unk> and on and increasing customer utilization of this on for it.
Those are all 3 of Ram colors, which together and form our differentiate and value proposition and guide our strategy.
Slide 22 of place.
We intend to live by our mantra of sustainable profitable market share growth.
Listed on the slide or some of it's certainly not all of the key drivers can we believe for fuel continued growth.
For improving product line, the ability for faster easier customer experience.
We're increasing the breadth and depth of our home goods historical.
We're expanding internationally first and to Canada shipping and do our Canadian customers from Canada instead of from the U S.
Our new Canadian customer experienced fighters now lies and over time, we expect that our Canadian business will be roughly 10% of the size of our domestic business.
We expect to take what we learn from the Canadian expansion and use it as a template for future international expansion efforts.
You have a great mobile and it remains and right now.
We're working to improve pop.
We're focused on of optimizing our marketing channels and increasing direct Crawford.
We are high per focused on improving customer retention and.
Improving the customer experience helps with that.
We're establishing our government business and.
And that continues to ramp slowly, but we are adding new products daily and proof.
Moving the site and making business development after the total state and local level.
We could government is a meaningful long term opportunity.
And do we think there is a big opportunity to increase Overstock brand Association with Huh.
Nearly as these home customers of twice as likely to purchase from us.
And short we feel well positioned.
But many of the neighbors to Paul to continue to grow and to achieve a long term plan.
July of 23 please.
As I've mentioned many times before we believe we are in the middle of the secular shift and consumer behavior as people are increasingly buying furniture and home furnishings online.
We have intentionally set or near the medium term growth and margin targets accordingly.
Formed by our desire to take market share while consistently delivering profitability.
And when we feel the industry's reached of natural maturation point, we may consider revising our targets and establishing a longer term Margaret for a framework.
For targets <unk> with the goal of of choosing these consistently quarter and and quarter out.
Top line outpacing the market driven by our technology, our customer focus and our business model.
Gross margins and the 22% range, which may fluctuate slightly from quarter to quarter.
Disciplined spending, particularly and G&A and tech expense to continue to drive operating lever and.
And adjusted EBITDA margins and the mid single digits.
Overstock, and now operating and a new level.
The structural changes and improvements we've made and will continue to make will prove all and consistent matrix and performance for 24. Please.
Next I'll briefly discuss significant updates on the matter to venture spot for.
25.
There've been a few updates worth noting it to some of the matter of cheese and you'll find businesses that sorry for earnings call all of which were publicly disclosed.
Zero has been busy executing high priority items and.
The sign several partnership agreements and is working through due diligence to get additional new assets training on the a T S, including partnering what was the zoo to bring and <unk> to market.
2 zero is encouraged by the SEC rule, the heightened O T C eligibility requirements for private companies.
Zero also launched its new crypt off at the end of June which enables significantly higher training on it and.
The trading of additional cryptocurrencies and it's the inside of them.
Previously announced 2 zero camp of 2 zero and capital races and process.
And it has each of the last 2 quarters, 2 zero will host and Investor update call next month I encourage you to tune in for key heroes update.
And and effort to keep your fries of significant progress made by the minutes, you've answered fund companies and plan to continue to provide some of the updates and our quarterly earnings call. The line to what has been disclosed publicly.
Slide 26, please and the.
And I'll briefly recap the quarter and provide some additional color for.
For we move to Q&A.
Slide 27 and please.
In summary, overstock and Levered, another corner of both growth and profitability.
And go forward outlook is bright enough.
That we've released the tax valuation of allowance this quarter.
We also deconsolidate the manage the adventure businesses and recorded of game on their adjustment to share value. It's.
It's great to have that tracks transaction closed and telling on managing the portfolio, which frees us off to focus on our E Commerce business.
Oh wait for word.
We will continue to execute against our focus strategy to deliver sustainable profitable market share growth.
We are now operating and and an entirely new level.
And do not give guidance and we can.
Typically do not like to comment on our expectations and any given court. However.
However, because we know and may be helpful. As we laughed the pandemic quarters, and we will provide additional color today.
Do not of <unk> do not expect us to continue this practice.
The third quarter and started slightly slower.
According to day G. M. S is down single digits year over year.
We've seen what we think is of short term shipped and behavior as consumers of stopped cocooning at least and if only for the summer and he.
Relieve some pent up demand and areas like travel and the entertainment.
This is not entirely unexpected.
And we've seen some of our campaign and your significantly and and my opinion and if.
Fish and like increasing their online AD spend and an effort to make up for losing market share.
Time will tell on both these.
In the meantime, the overstock team is focused on driving third quarter sales for the.
Third quarter that has the Labour day of home furnishings of that.
Followed by our customer service.
All of our customer of day of that still to come.
Hi remains bullish on the health of the large and growing online and home furnishings space.
Face were purposefully and and that is supported by favorable longterm macroeconomic trends.
We anticipate delivering consistent profitability under our margin framework and continuing to take market share, including and the remainder of 2021.
And as I suspect, you'll see as our competitors and out there Q2 results and the coming weeks, the overstock took real market share and Q too and.
And I'm confident we can continue to do this quarter after quarter.
We love our space and we are confident and our future trajectory.
Now, let's take some questions.
At the reminder to ask the question you would need to kind of star 1 on your telephone to withdraw your question press the pound or half tea. Please standby and why we compiled of Q&A roster.
Yeah first question cause the kind of line at the panic for K B a Davidson your line is open.
Great first off congrats and a quarter second 2 quick questions on and reach out and the 1 on T zero for.
The retail and can you give a little more color and and what drove your a O V and the second quarter and.
And then can you talk about order trends versus sales trend on the assumption you're not recognizing of revenue for the actual product of ships.
And if you're so inclined can you talk about the order transfers of of sales try and quarter to date.
Thank you.
Thanks, Tom Green day of your voice.
L. B and Q2. This is what you would expect to see happening as we wait in the hall home furnishings have an average of higher average order volume and non home furnishing products and and when you think about last.
Q too and 2020, and we were selling a whole lot of.
Products get weren't home and things like schools of elastic sprint string as people were making their own face masks and things like that so.
And the all my feet and you can expect to see L V Alright and.
Increase day would you add and you think of that and do you want to comment on orders virtue of sales chumps.
[noise] sure.
Hi, Tom you know the.
The increased a O V is for.
Thoughtful and intentional as we continue the transition into home and lean into some of those product categories. As you know we don't share between the product categories, how they're performing individually, but we are seeing good signs of that transition the customer of our customer is becoming more and more comfort.
The what flying home.
And and and interesting metric and exciting metric for us is as that a O V increases as customers by larger items, they're more inclined to repeat more frequently is what you're saying.
In terms of the orders.
Oh go ahead Jonathan.
Keep you on the exercise the part of the toughness of being rowboat.
[noise] and that is so true and in terms of our our.
Order count obviously as we continue to shift out of those non phone categories and then for home category and he will see the transition and the number of orders, but and offsetting increase and a L. D.
Jonathan it's back to Ya.
Yep, and Tom and I don't think we're gonna comment any more of a quarter of the day trends was February sat and that's the.
Colors at the call of our provider.
Great. Thank you Jonathan So quick follow up and a T zero at a high level of can you talk about the positive impact I assume you've seen on trading volume from the increasing the crypto tap from 500, a week for 25000 a day.
Tom type of I can't.
The tally on the all closed we are less involved and the day to day of 2 zero or any of the portfolio of companies that is the question I think is better off of the 2 zero management team.
And when they hold their quarterly called next month.
Great I look forward to ask and and then thanks math and great.
Your next question comes from the line of Anna and of treat that with Needham and company. Your line is open.
And great. Thank you so much the morning, guys and kind of grass and great for adults and.
On top of the of the top from here.
We had a couple of pets [laughter] of course, but a couple of questions 1 of them. The near term if I may and 1 on the more medium term. So understanding that's what it is the date shopping and if you will maybe talk about how you feel overstock of physician for back to school seasons of tea.
And they're asking what's out there calling for a pretty big back to for Steven for the industry, maybe specific category opportunities that were missed last year with the pandemic. That's 1 and secondly, an S K U and the.
The S T and growth and the business has been pretty impressive and and this is that with all of the challenges where the supply chain across the industry, obviously, you'd like to take and share maybe help us and Pat how should we think about the F. T. You browse next year and just trying to think through the sale of acceleration for 22.
As the supply chain opens up.
Let me take for us kind of thousands of your past and both of those questions for a little more color today.
The first.
Quarter to day, and what possibilities, we have and the and the rest of the corner.
Certainly.
The.
The summer is generally starts a little slower and I think we've seen that impacted this year as people are just vacation starved travel start the win kids go back to school parents go back to work.
We think there'll be kind of returned to what feels more normal and the shopping space, we have 2 big events coming up and the.
Third core Labor day is a significant furniture purchasing holiday historically, and our customer days, which fall of that later and September a big deal. So we think of some of that will be back to school that day of comment more on that and the <unk> as far as <unk>.
We are focused on building home inventory and we'll have some serious shrinkage as we move out of non home and we think that can be more than offset by getting into the new categories.
Right.
There are some categories of all of our market leaders somewhere where mark of competitors and somewhere and we're just not there yet and we are focused on remaining layers, becoming leaders and getting into categories low or not so I think there's a lot of potential <unk> growth and still there day for 1 more color.
And would you get to that.
On the on the back the schools question I would add that are you know back to school back the dorm room. There's the you know some pent up demand there in terms of and it's been a couple of years of lot of the universities for clothes last year and is.
Is the college age students are headed back the dorm rooms and.
Yeah, we have a strong betting category and are poised and ready to take advantage of that and back to school advertising and promotions.
On the on the ski account real just add to the jonathan's comments.
You know, we we continue to add and lead into the product category and have a very data driven approach on that it's not just Willy nilly additions, but with 3000 partners. We of partners all over the globe that are working the source and develop products for us to fit those areas, where we see opportunity from from search.
Words, and click through rates of search words, so it's a very date of driven approach and confident and hour attacking that.
Okay. That's that's super helpful. I appreciate that and I just found out if I may add another 1 just under the vendor check out of checks have been very constructive and overstock and I know a lot of things of being done very differently with a few overstock can you maybe Jonathan I speak to some of the.
Examples of of.
Of the how you like the view vendor relationship now very for several years ago.
Yeah, well I mean, 1 of his word <unk>, we have from focused on being and and.
And online home furnishings retailer Sweet talk to our partners frequently and we've got teams the talk to him every day, but even at the senior management level the frequency of discussions and say what can we do for that and what can they do for us with specific as the says different partners.
This is this is it's turned into a real partnership we help them with.
Product design, and where they where they can go next we give them lots of analytics to see where the market is going and and what they can do to to be in front of the the market.
We pay on time, and we pay more quickly than any of our competitors and I think that's important and you have a thing and I think it's treating.
Treating them like a partner is we force no 1 into our fulfillment centers and encourage them, but we try and do it and the way it makes sense for that if it makes economic sense for them to be and 1 of our 3 for Goldman centers, that's where they come they appreciate not having the arm twisted.
The force to be somewhere they shouldn't get so.
Candidly none of that is rocket science most of the standard.
The business practice blocking and tackling the that's what we do and we do it every day.
Well thanks for my Dad for taking a question of the send the best of luck for the third quarter.
Thanks.
Your net question comes from the line of <unk> Iranian with French Securities.
And good morning, guys. Thanks for taking the question of to take 1 for Jonathan once the Adrian Jonathan on.
And when I go back to your comments about competitors and the AD market.
Yeah.
Clearly add prices have gone up materially and I just wanted to see if we can expand on that a little bit. So are you, saying that you're you're not stepping and as aggressively on the advertising decided that some of the competitors are you kind of waiting for the markets and otherwise a little bit more they just talk about your your AD strategy here.
And then for it and I I, I guess I I want to understand the comment around let's seasonality given the fact that you're 2 Q kind of sequential growth was if I'm looking backwards and I know things of change, but by far as strong as as it's ever been so what what drove that and how does that fit into the kind of.
It's around the bus seasonality thanks.
I'll start turned Adrienne and and make a good day visiting wants to add the either or both of them are I think he's got all the time.
And pricing day off.
And I think there's a couple of things to think about here, 1 Q2, 2020 and prices went down.
And so the year over year comparable is skewed.
Online advertising of cheap and 2020 and.
More normal and 2021, and then I think there's people tried to keep up with last year's growth and got.
And out of Whack got expenses, Yeah. We spent a line we spend more than we had probably Tom with Lord.
And what we did not chase it all the way to the top.
And some of our competitors got 1 I think.
And the the irritation.
I'd spend areas, we didn't follow up but we did spend and I think that's the part of what helped US we were very nimble and that's part of what helped us comp the comp and grow top line.
4%. So we're gonna be competitor, we're gonna make sure that we're doing the best we can under our roof record sustainable profitable market share growth.
But we're not gonna be irrational and are spending.
Hey, there and why don't you talk about please and out of it and will that day.
They're on top.
Certainly yeah, I think my comments and just generally around as we lean into home and continue to lean and at home. We expect to just the last season or less volatility quarter and quarter out that's more around you know kind of being less gift the bowler left and those kind of niche areas, where people aren't by and home furnishing and all you.
<unk> I would say within that though we do expect some variability and by quarter, depending on what categories of home people are purchasing so there's heights, where people are purchasing and increased patio their sites, where people are purchasing maybe a bit more of of the giftable type home products. So generally we're expecting to see the last seasonality then we have.
Brickley, because we're leaning in the home furnishings, the quarter and corner out there might be of a slight sales mixed with and home.
Safe day and.
Any of the yoga and those answers.
No both.
Both very accurate spot.
Spot on.
Thanks for the all great. Thank.
Thank you I appreciate the the answers.
Your next question Cats friend of mine of Peter Keith What Piper Sandler Your line is open.
[noise]. Thanks for good morning, guys Nice Q2 results here circling back on the large a O V increase I think the shift to home makes a lot of sense, but you didn't mentioned price inflation, we know that there's large price increases flowing through the channel give and elevated freight costs and of like.
So I guess the core of my question is what are you seeing there and if you want to quantify it and is that is the the price increases from your suppliers, causing any of gross margin pressure and the near term as you try to remain price competitive.
Yeah. The peer great question, everyone knows the raw material costs and drop the labor costs drop the shipping costs are off and so there is a lot of price pressure some of the costs.
We ask our partners to bear.
Some of the of course.
And some way pass along the the customer, but we're always doing it.
Within the constraints of having a very competitive price for our savvy shopper and reluctant refresher it needs to be the easy experience for them and when we take the piece of it again and it has to fit our.
Has to fit our margin or margin rubric and has to sit and our financial recipe card and for some product we wind up taking upside if that's if that's necessary so pressures, they're thus far and particularly with our large distributed partner network of.
Gordon and 3000 partners, we've been able to play and the space without having too much price.
Price and question.
Okay. That's helpful.
And secondly, and I guess I hate to ask of short term question. It seems like your stock is reverse this morning with the discussion around Q3 and.
Would it be.
You could quantify a little more detail of what negative single digit means and then I guess is the the view of without without guiding that and.
And maybe the quarter of could get better as we progress just based on perhaps easier compares and and some of the major selling events that you've called out.
Yeah for your thank you.
Call Me again is what we're gonna give you know we're only 1 third of the way through the corner.
And that first third is the height of vacation time for.
Most Americans for a hyper focused on market share growth and.
And and that means no matter what the market is doing whether it's expanding stagnating or even can tracking we're going to get better and how the market performs.
And we're gonna keep doing that so do I think we can have a better second 2 thirds of the corner than the first 2 pairs of.
Of course, I do and that's what we drive for every day.
Well I promised that it's hard to promise of what the future holds until I won't but.
I'm very confident and we will outperform our competitors and the market. That's what we're about sustainable profitable market share and grow.
Okay very good if I could ask 1 last question too you've talked about your 3 distribution centers, you're not forcing suppliers and to them could you quantify where you are today in terms of of the percentage of sales are flowing through your own D. C's and then secondarily you talked about trying to move small parcel too.
And guaranteed 2 day shipping, which seems like it could be kind of expensive you have to take up that that flow through to D. C network and in order to achieve that goal.
Let me start and of getting any of your correct. The gave wants to add please do.
The amount of 2 or 3.
Fulfillment centers and still relatively small.
It's single digit piece of our revenue and we pick that'll.
That will grow over time, but it needs to grow organically because it makes economic sense for us and for that.
And we've got a plan to do that as far as getting a small portion of the 2 day that is 2 day of delivery that as of gold.
We're not gonna do it at the risk of hurting sales on 2 day the delivery. So if the cost more than it is competitive we won't go there on those products part of it is just it is getting our partners.
And have their product located whether it's in their fulfillment centers or are fulfilled and centers closer to the customer and convincing them. The that makes sense for them and for US favorite would you out of the game.
Nothing too that the.
Accurate for them.
[noise] okay. Thanks, so much for all of the feedback guys. Good luck.
Thanks for later.
Oh, and now like to turn the call back over the kitchen, and chats and for clothing remarks.
Thank you for.
Thank you for participating and today's call. Once you should take away from the second quarter report for.
And we made and continue to make foundational operational improvements to the business.
And the result of a lot of hard work and focused strategy.
No I'm, calling for work to do.
Much of the blocking and tackling variety and we will continue to execute and deliver.
Second and when all the market is large and growing and supported by favorable longterm macroeconomic trends and it should enable sustained growth for years to come and we.
We feel well positioned.
To continue to outperform and take market share.
We appreciate your interest and all of a <unk> ownership and overstock and.
How much time, we'll keep working hard to consistently deliver on a long term plan. Thanks, so much.
This concludes today's conference call. Thank you for participating you may now disconnect.
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