Overstock CEO Patrick Byrne told Reuters that bitcoin-based sales would be responsible for $0.04 in earnings per share (EPS) this year.
Bitcoin-based sales have now exceeded $2 million since their January launch. The reported run rate is $15,000 a day, “or $300,000 per month.” Clarification is needed, however, on the relationship between these figures: if sales are $15k per day, this should be $450k per month. It is a stretch to assume that only business days (roughly 20 per month) are counted. One would expect e-commerce activity to remain just as high on weekends. The figure of $300k actually fits better with the $2m year-to-date, assuming 7 months of activity, leaving the $15k/day in need of further examination.
It is also worth noting that $6-8 million total is expected for this year, mostly from new customers. This would require a hockey stick-like jump in sales for the year’s remainder: $4-6 million are required in the remaining 5 months, which is 2-3x the amount achieved during the first 7 months.
Said Byrne to Business Insider:
“What I get at conferences is, ‘I switched my purchases to you online as a show of support.’ That’s what I get in the Bitcoin community. It’s become part of the Bitcoin ethic to go and buy something on Overstock.com.”
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This point is significant. One could have argued that the $0.04 would have come either way. Customers just happened to choose the Bitcoin option, and therefore, Bitcoin isn’t adding to the bottom line. The comment indicates that Bitcoin is in fact increasing their performance and gain of market share.
Also reported was that bitcoin-based sales generated only 0.25% of total revenues. Byrne also said that “the world expects us to make 75-80 cents per share this year”. A figure of $0.04 EPS represents about 5% of earnings.
The question becomes, why such a disparity in the Bitcoin % contribution between revenue and earnings? It is likely that Byrne’s intention was 75-80 cents for the quarter, translating to $3.00-3.20 for the year and in line with last year’s numbers. Even so, this would mean Bitcoin’s earnings contribution is in excess of 1%. Even when working with the upper end of hockey stick model noted earlier, $8 million in Bitcoin sales would be roughly 0.5% of the annual total. This gets you closer to the earnings contribution of 1% but is still significantly off.
One other possibility: The Reuters article also mentioned that a run rate of $1 million in Bitcoin sales per month is expected by year’s end (consistent with the hockey stick model). If this is annualized over the following 12 months, this gets you to 0.8% contribution (assuming $1.5 billion in total revenue)- not perfect but closer. The $0.04 (1%) Bitcoin earnings contribution may then be referring to those 12 months, which was not the indication in the article. Reuters has been contacted to clarify the above points.
Bitcoin-based purchases were usually larger. 90% of Overstock shoppers are male, who are buying items like furniture and bedding more typically purchased by women.