Overstock.com, Inc.

Good day, and thank you for standing by. Welcome to the Overstock.com Incorporated second quarter 2022 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker today, Lavesh Hemnani, Head of Investor Relations. Please go ahead, sir.

Thank you, operator. Good morning and welcome to Overstock's second quarter 2022 earnings conference call. I am Lavish Mnani, head of investor relations. Joining me on the call today are Jonathan Johnson, CEO, and Adrian Lee, CFO. Additionally, Dave Nielsen, president of Overstock, will be available for Q&A. Please note that we're conducting today's call remotely. Next slide, please. Let me remind you, the following discussion and our responses to your questions reflect management's views as of today, July 28, 2022, and may include forward-looking statements. Actual results could differ more easily from such statements. Additional information about factors that could potentially impact our financial results is included in our Form 10-K for the year ended December 31, 2021, and in our subsequent filings with the SEC. A slide presentation accompanying today's webcast has been posted to our investor relations website and is available to download. Please review the important forward-looking statements disclosure on slide two 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 contain important additional disclosures regarding these non-GAAP measures, including reconciliations of these measures to the most comparable GAAP measures, Finally, to participate during our Q&A session, please use the registration link available under the event section of our investor relations website. Next slide, please. During today's call, we will follow the agenda on slide three. And with that, let me turn the call over to our first speaker for today, Jonathan Johnson.

Thank you, LaVesh, and good morning, everyone. Let me start by saying how proud I am of the entire Overstock team. for achieving our ninth consecutive quarter of profitability and doing so in a particularly difficult environment. Our second quarter performance reflected the headwinds related to weak consumer sentiment due in large part to macroeconomic and geopolitical volatility. This weakness started to become more pronounced in late Q1 and continues through today. While we cannot control the macro environment and the impact that high gas prices, increasing interest rates, record inflation, and uncertainty surrounding geopolitical events has on consumer sentiment and competitors' behavior, we can control and have controlled many elements of our business. In fact, our asset life business model is highly advantageous during times like these. We don't have expensive logistics operation with high fixed cost base or significant owned inventory on our balance sheet. We can and do continue to offer smart value to our customers as their wallets are stretched. Nine straight quarters of profitability with very top line performance is a testament to this team's ability to run a profitable enterprise for our shareholders. While I am not pleased that our top line revenue is down 34% versus the historic high of last year, I am pleased that we were able to stay within the structure of our financial recipe card to deliver adjusted EBITDA margin of 3.9% near the lower end of our stated targets. We increased share repurchases during the quarter, showing further commitment to shareholders. Overstock remains in a favorable cash position with a strong balance sheet, well equipped to navigate through ongoing macro instability. Next slide. Since I became CEO in late 2019, we have operated our business under vastly different macro conditions. During 2020, the world plunged into a pandemic and e-commerce penetration surged over 40% compared to the 33% range today. In the first half of 2021, consumers were largely restricted to their homes and had excess money to spend on discretionary items. In 2022, consumer sentiment around home-related purchases was moderated with rising interest rates and inflation tracking at 40-year highs. Spend on services is not yet fully normalized, which will likely continue to exert pressure on goods-related spending. Considering these facts and our record second quarter performances in each of the last two years, I believe it's important to reflect on our recent performance as compared to our performance in the pre-2020 timeframe. Over this period, we gained market share. and did so profitably. The chart on this slide illustrates well the benefits we have realized from the focused operational improvements we have implemented. Compared to 2019, we've grown 44%, which has outpaced the market. In fact, if you were to look at our growth just for our home-related business, we have grown 60% versus Q2 2019. That is significant. Our active customer base, although smaller than the pandemic highs, is still tracking ahead of pre-pandemic levels, and our broader product assortment and improved mobile app experience are being recognized by our customers. Based on third-party data we review, our change in retention rate versus last year was comparable to other peers in the categories. We are not alone in navigating through this difficult retail environment. A major difference for Overstock, in my opinion, is that our team is committed to delivering profitability. Since I became CEO, this has been our commitment to shareholders. I believe this financial discipline is even more important during these unprecedented times. I'm encouraged by the progress made by the team and the focus on achieving our long-term strategic vision. This includes increasing the breadth and depth of product assortment to improve our brand association with home, growing mobile app adoption, and growing our Canadian revenue share. Our unique smart value brand pillar and the market quadrant where we compete with ample white space positions us favorably to capture demand when consumers are looking to spend in our category. Next slide. Now for a brief update on recent corporate events. During the second quarter, we repurchased approximately $35 million of equity. Year to date, we have repurchased approximately $60 million of equity. We continue to be opportunistic in evaluating future future repurchase opportunities. In May, our shareholders approved the conversion of both our Series A1 and Series B preferred stock into common stock. We completed this conversion in June. We now have a simpler equity capital structure. We completed our transition to 100% furniture and home furnishings retailer by exiting the last of our non-home categories in late June. As we have shared in the past, this was a strategic choice. Over the long term, we expect to benefit from an increased association of the overstock brand with home. While this has resulted in some short-term pain, our data continues to support that a home customer spends more, has a higher average order value, and repeats more frequently than other customers. Adrienne will now review our second quarter financial results in more detail. Adrienne?