Overstock.com, Inc.

Good day and thank you for standing by. Welcome to the first quarter of 2023 Overstock.com Incorporated 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 will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our speaker today, Lavesh Hemnani. Please go ahead.

Thank you, operator. Good morning and welcome to Overstock's first quarter 2023 earnings conference call. I'm Lavesh Hemnani, head of investor relations. Joining me on the call today are CEO Jonathan Johnson and CFO Adrian Lee. President Dave Nielsen will be available for Q&A. A slide presentation accompanying today's webcast has been posted to our investor relations website and is available to download. Next slide, please. Please review the important forward-looking statements disclosure on slide two of today's presentation. The following discussion and our responses to your questions reflect management's views as of today, April 27, 2023, and may include forward-looking statements. Actual results could differ materially 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, 2022, and in our subsequent filings with the SEC. 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 the conciliations of these measures to the most comparable GAAP measures. Following management's prepared remarks, we will open the call for questions. To ask a question, please use the registration link available under the event section of our investor relations website. Next slide, please. During today's call, we follow the agenda on slide three. With that, let me turn the call over to our CEO, Jonathan Johnson.

Thank you, Mahesh. Good morning, everyone. This morning, we reported our first quarter 2023 financial results with revenue in line with the expectations we shared with you in February. For the quarter, revenue declined 29% year-over-year. On a home-only basis, revenue declined about 27% year-over-year, an improvement in trend. We are encouraged by these results, particularly how we were able to improve results later in the quarter and look forward to the key spring-summer selling season. I am pleased with the focus of the Overstock team as it has delivered another quarter of positive adjusted EBITDA, our 12th consecutive quarter of positive adjusted EBITDA. That's three full years of consistent positive performance. This is a testament to our asset light business model and the team's disciplined operational approach. Adrian will discuss these results in more detail later. Next slide. We shared this slide last quarter. It highlights how we continue to expect 2023 to be a tale of two halves. This is a year of inventory rationalization for the industry, something that is taking longer than most expected. It is also a year of rebuilding for Overstock as we get back on track to retaking market share profitably. We remain confident in our ability to execute against our plan to turn around top line performance. As a result, we reiterate our current expectations for a better second half compared to the first half of 2023 in terms of both top and bottom line performance. we continue to make meaningful strides in expanding the depth and breadth of our home product assortment. More on this later. I will note, while recent volatility in the financial market certainly adds another wrinkle of macro concern, neither Overstock nor any of the Medici Ventures portfolio companies were directly adversely impacted by the recent regional banking crisis. Overstock's healthy balance sheet places us in a strong position to navigate the various uncertain macro and industry conditions that exist. As we look out to the remainder of this year, it is not clear whether we will face additional headwinds from growing negative consumer sentiment or cutbacks in spending in our category from title liquidity or credit availability. However, this uncertainty is not impacting our team's focus on improving our business performance. We continue to make progress on our strategic growth drivers and maintain our focus on efficiency. Next slide. On this slide, we provide additional information on our home-only active customer base, which we report on a trailing 12-month basis. As a reminder, we fully exited non-home merchandising categories at the end of June 2022. While our strategic focus on home has caused some pain in the short term, we continue to believe it was and is the right decision for our future. On the left, we show our home-only active customer base over the last four years. This base peaked at about 8 million customers at the end of 2020 during the height of the pandemic. A shift in consumer sentiment and consumer spending preferences over the last two years has resulted in a decline in our active customer base. Importantly, even with this decline, We continue to track above pre-pandemic levels with about 4.8 million home only active customers at the end of Q1. We have been able to attract new customers and retain many existing customers by executing on strategy to increase our presence in the large and fragmented furniture and home furnishings market. These efforts have been challenged by industry-wide limited consumer engagement and a demand within the home category. Even so, we are optimistic about the future. We believe our ongoing marketing campaign, growth in usage of the mobile app, enhanced loyalty efforts, and increased product assortment that is growing faster than our internal plan and better website experience should help us gain and retain more customers. The chart on the right shows the sequential change in our trailing 12-month home-only active customer base. In the first quarter, we lost about 281,000 home-only customers on a net basis over the last 12 months. While it certainly did not feel good to talk about a declining customer base, I am encouraged that our losses have been moderated. We think we have the right strategies to put us back on a customer growth path sometime in the second half of the year. While we have seen a decline in the absolute number of active customers, we continue to see higher levels of spending for a home-only customer compared to a non-home customer. We see this as a stamp of approval on our purposeful exit of non-home categories. Next slide. I'll now provide a quick update on the Medici Ventures Fund. Pelleyham Venture Partners, the general partner in our Medici Ventures Fund, will be hosting the second annual Medici Ventures Day on May 31st. Registration details are available on our investor relations website. The event will feature interviews with the leaders of T-Zero, Rainchain, Settlement, and Peernova. All these companies received additional capital investment from Overstock and or the Medici Ventures Fund within the last 18 months. Even in a challenge venture capital environment, these companies were able to access new capital and strengthen their teams. The event should provide helpful information on the markets in which these companies operate and their business models. As we do each quarter, I'll provide some fund updates. First, some of our shareholders have asked that we provide clarity regarding the disclosure related to Medici land governance. in the financial statement exhibits in our 2022 Form 10-K, which we filed in February. MLG had a financing round at the end of 2022, raising capital from a third-party investor. Neither Overstack nor the Medigee Ventures Fund participated in this down round. This resulted in a reduction of the value of the funds holding to about 2% of MLG. The impact of this is reflected in our Q1 2023 financials, but there was no impact to reported adjusted EBITDA or adjusted EPS. Second, Finclusive, a blockchain-based compliance as a service provider, recently announced a partnership with CrossFiver Bank. At a time of increased volatility in the financial markets, this partnership emphasizes the importance of the work being done by Finclusive to promote safe and compliant access to financial services. Third, BIT added two advisors, Monty Glick and Sean Carecross, to its leadership team as the company seeks to expand its digital currency management system offering to other markets. In my opinion, these advisory appointments and the 2022 edition of the CBDC team from Criteo positioned BIT to capitalize on the research and rollout of digital currencies. Fourth, as we shared last quarter, in January, Overstock invested $10 million in grain chain via a promissory note. The Medici Ventures Fund also participated in this funding round. Grain chain provides a software suite to farmer cooperatives that enables farmers to get paid 60% of the value of the commodity upon harvest and the balance upon successful delivery to the end consumer. And customer, rather, the silo or the grain elevator. The follow-on investment in grain chain will enable Overstock and its shareholders to participate in the future success of the company. Next slide. Now, for a brief update on our recent corporate events. In March, the Board of Directors of Overstock appointed Joanna Berkey as a new independent board member. Joanna currently serves as the Chief Information Security Officer at HP. She brings more than 25 years of experience in cybersecurity, information technology, data privacy, and digital strategy. Her wealth of experience and unique cybersecurity skill set complement the skills and strength of the current Overstock board members. With the addition of Joanna, the Overstock board now has eight members, seven of whom are independent. At the end of March, we filed proxy materials related to our annual meeting of shareholders. A copy of these materials is available on our investor relations websites. This year, we will be holding the meeting virtually on May 18 and invite all our shareholders to participate. Last week, we launched the next phase of our marketing campaign to improve our brand association with home. This next step builds on the Get Comfy commercials we launched last fall, where we communicated Overstock's transition to 100% home product online retail. The new Your Home, Your Treasure commercial specifically focuses on Overstock's brand pillar of smart value, meaning quality on-trend products for less. Our smart value brand pillar is a differentiator in the marketplace. This new phase of our marketing campaign highlights the joys of finding your perfect home furnishings or piece of furniture at the best price online. Now, I'll ask Adrienne to review our first quarter 2023 financial results. Adrienne?