If Patrick Byrne is good at anything, it’s hyping Overstock.com (NASDAQ:OSTK) when the company is not deserving of the hype. To hear him tell it in real time, everything is rosy and the company is doing stellar and investors will surely be impressed. (It’s only a couple of years later that he admits to “screwing up” the company.)
The fourth quarter earnings release showed quarterly revenue up 2% to $300 million, and annual revenue down 2% to $768.8 million. Neither of these are particularly impressive.
And they are even less impressive when you look at them in conjunction with an interview Patrick Bryne gave CNBC on December 7, 2007. According to the company’s press release about the interview:
“We are having a pretty nice Christmas,” he said during the interview where he mentioned that the company’s gross bookings had increased thus far during Q4 by approximately 10% over last year’s Q4 due to an increase in the order size of the average transaction.
Okay, let me get this straight. A few weeks before the end of the year, Byrne is hyping the fourth quarter results, using a non-GAAP measure (gross bookings) that he says is 10% higher than the fourth quarter the prior year. Yet Overstock.com ends up doing only 2% more revenue than the prior year.
When the question about the results was raised during Overstock.com’s fourth quarter conference call, Patrick simply said:
Basically December came in — things did not — the Christmas season was not as sharp a spike as we had hoped as we were even — things were looking great right up through Thanksgiving actually. And then as the weeks rolled on to the Christmas season, it was just a bit of a letdown. So what did we end up doing? $3 million for the quarter in EBIT?
So it was looking good up through Thanksgiving, and when you gave your interview two weeks later, it wasn’t so good anymore? Because if you’re saying now that things were was good through Thanksgiving, methinks that means that the days after Thanksgiving weren’t so hot. Yet on December 7 you said they were hot!
Maybe with another company, I’d be willing to say “a few days here, a few days there…” yeah, they were just off on some estimates. But not with Patrick Byrne and not with Overstock.com. It’s never quite that simple.
Plus, you have the fact that Patrick used a non-GAAP measure during that interview… What’s the big deal with that? Well the accounting rules (GAAP) are there to bring some uniformity to the financial accounting process. Users of financial statements can more readily compare companies and understand the meaning of the financial statements when GAAP rules are followed.
With non-GAAP measures… not so much. Because these measures don’t fall under any “official” rules, they can mean different things at different companies. Using such measures makes it hard for an outsider to know what is really going on at a company.
Surprise, surprise. Patrick Byrne likes to use these measures for some wacky reason.