Overstock.com 2010 Annual Report Download - page 65

Table of Contents
Seasonality
Based upon our historical experience, revenue typically increases during the fourth quarter because of the holiday retail season. The actual quarterly
results for each quarter could differ materially depending upon consumer preferences, availability of product and competition, among other risks and
uncertainties. Accordingly, there can be no assurances that seasonal variations will not materially affect our results of operations in the future. The following
table reflects our total net revenues for each of the quarters in 2010 and 2009 (in thousands):
First
Quarter Second Quarter Third Quarter Fourth Quarter
2010 $ 264,330 $ 231,253 $ 245,420 $ 348,870
2009 185,729 174,898 193,783 322,359
Comparison of Years Ended December 31, 2009 and 2008
Executive Commentary
This executive commentary is intended to provide investors with a view of our business through the eyes of our management. As an executive
commentary, it necessarily focuses on selected aspects of our business. This executive commentary is intended as a supplement to, but not a substitute for, the
more detailed discussion of our business included elsewhere herein, Investors are cautioned to read our entire "Management's Discussion and Analysis of
Financial Condition and Results of Operations", as well as our interim and audited financial statements, and the discussion of our business and risk factors
and other information included elsewhere or incorporated in this report. This executive commentary includes forward-looking statements, and investors are
cautioned to read the "Special Note Regarding Forward-Looking Statements" at the beginning of Item 2, "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Revenue grew 27% in the fourth quarter of 2009 and 6% for the full year of 2009, compared to the same periods of 2008, in spite of the weakness in the
overall US economy. Our business model continued to mature. Through expanding the number of partners we work with, and the number of categories and
products we offer on our Website, the fulfillment partner business generated over 80% of our revenue. Our direct business, which accounted for over 40% of
total revenues in 2005, has contributed a consistently smaller percentage of total revenues over the last five years as our emphasis has shifted to the fulfillment
partner business. In 2009, the direct business generated 17% of total revenue.
We have marketing and pricing initiatives that are attracting shoppers to our Website. While pricing initiatives create pressure on gross profit, we have
been able to offset part of this pressure on gross profit through strong revenue growth and supply chain efficiencies. Marketing expense as a percent of
revenue was the lowest it has been in our history. We believe that we have used relatively effective advertising campaigns and maintained a disciplined
approach to marketing expenditures. As a result of increased gross profit and controlled spending on advertising, we saw a 26% growth in 2009 contribution
(which is gross profit less marketing expense), while our operating expenses increased by only 2%. This operating leverage helped result in our first profitable
year. Net income for the year was $7.7 million, or $0.33 per share on a diluted basis.
These operational results improved our liquidity position this year as well. Net cash provided by operating activities was $46.1 million, we returned to
positive book value, and our working capital increased by $9.5 million from year end last year despite our use of nearly $11.8 million for capital expenditures
and the retirement of long-term debt.
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