Q4 & FY 2018 Earnings Call 2 Forward-Looking Statements
The information presented herein may contain forward-looking statements. Such forward-looking statements include all statements other than statements of historical fact, including forecasts of trends. You should not place undue reliance on any forward-looking statements, which speak only as of the date they were made. We undertake no obligation to update any forward-looking statements as a result of any new information, future developments or otherwise. Forward-looking statements are inherently difficult to predict. Accordingly, actual results could differ materially for a variety of reasons, including, but not limited to, the amount and timing of our capital expenditures, results of our ongoing review of strategic initiatives including the possible sale of our e-commerce business, initiatives to improve the performance of our retail business and the recent reduction in our workforce, adverse tax, regulatory or legal developments, competition, and any inability to achieve profitability, generate positive cash flow from operations, raise capital, or borrow funds on acceptable terms. Other risks and uncertainties include, among others, the inherent risks associated with the businesses that Medici Ventures and tZERO are pursuing, including whether tZERO’s joint venture with Box Digital Markets, LLC will be able to achieve its objectives, the regulatory, technical, operational and other obstacles tZERO faces in each of its initiatives, the effects of key business personnel moving from our retail business to our Medici Ventures, Inc. and tZERO businesses or otherwise leaving, our continually evolving business model, difficulties we may have with our infrastructure, our fulfillment partners or our payment processors, including cyber-attacks or data breaches affecting us or any of them, and difficulties we may have with our search engine optimization results. More information about factors that could potentially affect our financial results is included in our Form 10-K for the year ended December 31, 2018, which was filed with the Securities and Exchange Commission on March 18, 2019, and in our subsequent filings with the Securities and Exchange Commission. Additionally, certain statements included herein, including our statements regarding the estimated value of blockchain exchanges are based upon third-party sources over whom we exercise no control; to the extent any of these third-party statements are incorrect our statements regarding the corresponding estimated value may also be incorrect. The Form 10-K, and our subsequent filings with the Securities and Exchange Commission identify important factors that could cause our actual results to differ materially from those contained in or contemplated by our projections, estimates and other forward-looking statements. 3
Agenda
1. Medici Ventures – A Blockchain Technology Stack for Civilization A. tZERO: Building Our Lead B. Other Medici Portfolio Companies 2. Retail – The Ship’s New Course: $10 Million Positive Operating Cash Flow in 2019 3. Strategic Alternatives 4. Summary 5. Q&A 4
A Blockchain Technology Stack for Civilization 5
“Country” 6
Mouths (People) 7
Land 8
Spear 9
“Country” 10
Blockchain Technology Stack for Civilization 11
Blockchain Technology Stack for Civilization
People 12
Blockchain Technology Stack for Civilization
Capital (= Land Titling = Rule of Law)
People 13
Blockchain Technology Stack for Civilization Currency (Central Banking)
Capital (= Land Titling = Rule of Law)
People 14
Blockchain Capital Markets Technology Stack for Civilization Currency (Central Banking)
Capital (= Land Titling = Rule of Law)
People 15
Commerce (Supply Chain)
Blockchain Capital Markets Technology Stack for Civilization Currency (Central Banking)
Capital (= Land Titling = Rule of Law)
People 16
Voting
Commerce (Supply Chain)
Blockchain Capital Markets Technology Stack for Civilization Currency (Central Banking)
Capital (= Land Titling = Rule of Law)
People 17
Voting
Commerce (Supply Chain)
Capital Markets
Currency (Central Banking)
Capital (= Land Titling = Rule of Law)
People 18
Government as a Service™ (‘GaaS™’)
People Capital Money Capital Markets Commerce Voting
Banking & Capital Supply Identity Land Titling Voting Currency Markets Chain 19
Banking & Capital Supply Identity Land Titling Voting Currency Markets Chain 20
Banking & Capital Supply Identity Land Titling Voting Currency Markets Chain The Next Generation of Capital Markets 22 Advantages of Security Tokens
1. Customizable Securities 2. Reduced Friction Costs with “Reg-Aware” Tokens 3. Enhanced Liquidity 4. Democratized Access to Capital Formation 5. Instant Settlement (No Market Manipulation via Settlement Failure) 6. Perfect Transparency for Regulators 7. 24/7 Trading 23
100% of the stocks and bonds trading on Wall Street today could be tokenized, and in five years, 100% of the stocks and bonds on Wall Street will be tokenized.
Robert Greifeld Former Chairman & CEO of NASDAQ 24 Valuation of Global Assets
Asset Global Market Cap
Equities $44 T a
Bonds (Government + Corporate + Household) $247 T b
Real Estate (Residential + Office + Retail + Hotels + Industrial + Agricultural + All Other) $217 T c
Total $508 T
References: a. NASDAQ News Article: (https://www.nasdaq.com/article/us-stock-market-is-biggest-most-expensive-in-world-but-us-economy-is-not-the-most-productive-cm942558) b. CNBS World Economy News: (https://www.cnbc.com/2018/07/11/global-debt-hits-a-new-record-at-247-trillion.html) c. Visual Capitalist: World’s Money and Markets: (http://money.visualcapitalist.com/worlds-money-markets-one-visualization-2017/) 25 Value of Exchanges ≈ .18% of Listed Entities’ Market Cap
Exchange Exchange’s Market Cap Total Listed Entities’ Market Cap Exchange Value ÷ Listed Value
ICE (NYSE parent) * NYSE $41.5 B * $28,528 B a 0.15% NASDAQ $13.2 B * $10,857 B b 0.12% TMX Group (Canada) $3.0 B * $2,095 B b 0.14% Euronext $3.7 B * $3,379 B c 0.11% Deutsche Börse $23.1 B * $1,738 B c 1.33% Tokyo SE $9.0 B * $5,679 B b 0.16% London SE $19 B * $3,767 B b 0.50% B3 (Brazil) $9.49 B d $938 B b 1.01% Bombay SE $ 0.59 B e $2,056 B b 0.03% National SE of India $6.55 B f $2,030 B b 0.32% Global Total $129.13 B ~ $73,000 B c 0.18%
References: a. NYSE Market Cap Data: (https://www.nyse.com/market-cap) b. Wikipedia: List of Stock Exchanges: (https://en.wikipedia.org/wiki/List_of_stock_exchanges) c. Visual Capitalist: World’s Stock Exchanges by Size: (http://money.visualcapitalist.com/all-of-the-worlds-stock-exchanges-by-size/) d. Bloomberg Quint Article: (https://www.bloombergquint.com/markets/how-to-value-the-bombay-stock-exchange#gs.KwyAHmEl) e. Quoted on NSE as of Jan 11, 2019: (https://www.nseindia.com/live_market/dynaContent/live_watch/get_quote/GetQuote.jsp?symbol=BSE&illiquid=0&smeFlag=0&itpFlag=0) f. VCCircle News Corp Article: (https://www.vccircle.com/national-stock-exchange-valued-at-6-5-bn-as-ifci-pares-stake/) * The market cap value for this publicly listed company was read from a quotation on a major public exchange on January 10, 2019. These third party public sources were used to compute the estimate on the following slide, and Overstock expressly disclaims any liability in the event such sources may contain inaccuracies. 26 Potential Value of Blockchain Exchanges
$508 Trillion ⨉ 0.18%
$914.4 Billion 27 tZERO’s Accomplishments
First SEC Registered Partner with Regulated ATS Filed Completed STO & Launched Trading of Digital Offering U.S. Stock Exchange with SEC Issued Security Token Security Tokens Completed (Pending SEC Approval) (2015) (2018) (2019) (2016) (Anticipate 2019) ✓ ✓ ✓ ✓ ✓
Coinbase ? ? ? ? ?
Circle ? ? ? ? ?
OpenFinance ? ? ? ? ?
Templum ? ? ? ? ?
SharesPost ? ? ? ? ? 28 tZERO Wins Patent for Integrating Crypto with Legacy Trading Tech 29 Security Token Ecosystem
3rd Party 3rd Party 3rd Party rd 3rd Party Issuance Brokerage 3 Party Brokerage Issuance Platform 2 Brokerage rd 1 3 Party Platform 3... 3… Issuance 2 Platform 1
Issuer Investor 1 1
Issuer Issuance Security Token Trading Investor 2 Platform ATS / Exchange Platform 2
Issuer Investor 3… 3… 30 Security Token Ecosystem
rd 3rd Party 3 Party 3rd Party rd rd 3 Party 3 Party Issuance Brokerage Brokerage 2 Brokerage rd Issuance Platform 3 Party Platform 3... 3… Issuance 2 Platform 1
Issuer Investor 1 1
✓ COMPLETE ✓ COMPLETE
Issuer Issuance Security Token Trading Investor 2 Platform ATS / Exchange Platform 2
Issuer Investor 3… 3… 31
rd rd 3 Party rd 3 Party 3 Party 3rd Party 3rd Party Issuance Brokerage Brokerage Brokerage Issuance Platform 2 3rd Party 3… Platform 3... Issuance 2 Platform 1
Issuer Investor What We Have Built So Far 1 1
✓ COMPLETE ✓ COMPLETE
Issuer Issuance Security Token Trading Investor 2 Platform ATS / Exchange Platform 2
Issuer Investor 3… 3… 32 Security Token Ecosystem IN PROGRESS
rd 3rd Party 3 Party 3rd Party rd rd 3 Party IN PROGRESS 3 Party Issuance Brokerage Brokerage 2 Brokerage rd Issuance Platform 3 Party Platform 3... 3… Issuance 2 Platform 1
Issuer 1
IN PROGRESS IN PROGRESS ✓ COMPLETE ✓ COMPLETE
Issuer Issuance Security Token Trading In-house Retail 2 Platform ATS / Exchange Platform Broker Dealer
Issuer 3… 33 Senior Management Team
Saum Noursalehi | CEO Steve Hopkins | President Amit Goyal | CTO § 25+ years of experience § 15+ years of experience § 20+ years of experience § MBA, University of Chicago § BS, University of Utah § BE, Punjab Technical University § BS, University of Utah
Alan Konevsky | CLO Joel Quall | CFO Ralph A. Daiuto, Jr. | COO § 20+ years of experience § 25+ years of experience § 30+ years of experience § JD, Harvard Law School § JD, Fordham University School of Law § BS, City University of New York § AB, Columbia University § BS, University at Albany
Patrick Byrne | Executive Chairman Elliot Grossman | CEO, Retail BD § 30+ years of experience § 14+ years of experience § PhD, Stanford University § BA, Kenyon College § MS, University of Cambridge § BS, Dartmouth College
Select Management Team Experience 34 Wins Since Q3 2018
1. Issued tZERO Tokens on Public Blockchain – October 12, 2018
2. Open-Sourced Token Protocol (“tØken”) – October 30, 2018
3. Acquired Bitsy (Sped Time to Market, S.H.) – December 31, 2018
4. Awarded Patent for Trading Digital Assets – January 1, 2019
5. Launched Investor Onboarding – January 10, 2019
6. Launched Trading Platform – January 25, 2019 35 Next Steps
1. Onboard Quality Issuers & Tokens – Underway
2. Expand Token Investor Base – Underway
3. Launch Crypto Trading – June 2019
4. Enhance & Scale DLRs – August 2019
5. Boston Security Token Exchange (BSTX) = BOX JV – 2019
6. International (SaaS at 50% Rev. Share) – Ongoing Discussions 36 Product Roadmap
tZERO Token Issuance
Issuance Issuance Platform to Support STO’s Platform
Secondary Trading of tZERO Token on ATS Security Token ATS / Exchange Additional Security Tokens Listed and Trading on ATS
Security Token Exchange BSTX (BOX JV)
tZERO Token Trading Platform
Trading Trade Traditional US Equities Platform Onboard Additional BD’s
Trade Crypto Through tZERO App
Q3 2018 Q4 2018 Q1 2019 Q2 2019 37
Banking & Capital Supply Identity Land Titling Voting Currency Markets Chain 38
• Promoting economic prosperity via land governance systems using blockchain and other technologies (mobile apps, social media, AI)
• Continuing projects: Zambia, Rwanda
• New projects:
• Wyoming: adding blockchain capabilities to existing Teton County system
• Mexico: collecting and developing digital land records platform for Tulum area homeowners
• Pursuing projects in the Caribbean, East & West Africa, Eastern Europe, Central & South Asia 39
Eastern Caribbean Dollar Issued by Eastern Caribbean Central Bank
Anguilla Antigua and Barbuda Dominica Christine Lagarde Grenada Managing Director and Montserrat Chair of the International Monetary Fund Saint Kitts and Nevis “A system regulated by central banks could Saint Lucia become the basis for a rapid expansion of Timothy Antoine Saint Vincent and the Grenadines financial services to developing world Governor of the ECCB countries and the poorest people in western societies without the risks associated with privately managed digital currencies.” 40 “Billionaire Koch brother's crusade against counterfeit wine” – 60 Minutes, October 22, 2017 41
Download App
Explore wines See wine features Pay with credit card or with crypto See your orders on your cellar 42 43
§ RVN is one of the fastest growing open source networks of projects that did not fundraise, had no ICO or pre-mine § It is one of the top 20 mineable coins § Over 18,000 tokenized assets have been issued § The community has thousands of members § The network works for securities tokens § Because Medici Ventures has been active in donating dev time, we know how to build on this § We support open source § Several portfolio companies and others are building on it 44
Banking & Capital Supply Identity Land Titling Voting Currency Markets Chain 45
Retail 46 Our Historical Record of Profitability
OSTK Retail Pre-Tax Income
$40
Millions $30
$20
$10
$-
$(10)
$(20)
$(30) 2009 2010 2011 2012 2013 2014 2015 2016
Source: Overstock and Wayfair 10-Ks 47 Our Historical Record of Profitability
OSTK Retail Pre-Tax Income Wayfair vs. OSTK Retail Pre-Tax Income $100
$40 Millions $-
Millions $30
$(100)
$20
$(200) $10
$(300) $-
$(400) $(10)
$(20) $(500)
$(30) $(600) 2009 2010 2011 2012 2013 2014 2015 2016 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
OSTK W
Source: Overstock and Wayfair 10-Ks 48 Keywords in Top 3 – 2017 SEO Deterioration
8000
7000
6000
5000
4000
3000
2000
1000
0 3/1/17 4/1/17 5/1/17 6/1/17 7/1/17 8/1/17 9/1/17 10/1/17 11/1/17 12/1/17 1/1/18 2/1/18 3/1/18
Keywords
Source: seoClarity (March 5, 2019) 49 Competitive Visit Growth – Q1 2018
70% Overstock vs. Wayfair YoY Weekly Visit Growth 60%
50%
40%
30%
20%
10%
0%
-10%
-20% 12/30/2017 01/06/2018 01/13/2018 01/20/2018 01/27/2018 02/03/2018 02/10/2018 02/17/2018 02/24/2018 03/03/2018 03/10/2018 03/17/2018 03/24/2018 03/31/2018
2018 Wayfair YoY Growth % 2018 Overstock YoY Growth %
Source: Hitwise, a division of Connexity. 2018 US YoY weekly visit growth. 50 Wayfair Selected Financial Data
$1,200 Millions
$1,000
$800
$600
$400
$200
$0 2012 2013 2014 2015 2016 2017 2018
Selling, Operations, Technology, G&A (Fixed Costs) Gross Profit less Customer Service, Merchant Fees, and Advertising (What There is to Pay the Fixed Costs)
Source: Wayfair 10-Ks 51 Quarterly Retail Contribution
$40
$35 $37 Millions $33 $30 $31 $30
$25
$20
$18 $15
$10
$5
$0 ($3)
($5)
($10) Q4 '17 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 (est)
Retail Contribution is a non-GAAP financial measure. See Reconciliation in Appendix 52 Quarterly Retail Adjusted EBITDA
$0
($5) Millions ($10) ($10) ($11)
($15) ($19) ($20) ($21)
($25) ($25)
($30)
($35)
($40)
($45) ($47)
($50) Q4 '17 Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 (est)
Retail Adjusted EBITDA is a non-GAAP financial measure. See Reconciliation in Appendix 53
When you're trying to get SEO …fixed … You start showing up first in the top 100 Google results, and then you work on getting those terms to percolate up into the top 10, and then up into the top 3.
Patrick Byrne Q3 2018 Earnings Conference Call 54 Keywords in Top 10 12000
10000
8000
6000
4000
2000
0 3/1/17 4/1/17 5/1/17 6/1/17 7/1/17 8/1/17 9/1/17 10/1/17 11/1/17 12/1/17 1/1/18 2/1/18 3/1/18 4/1/18 5/1/18 6/1/18 7/1/18 8/1/18 9/1/18 10/1/18 11/1/18 12/1/18 1/1/19 2/1/19 3/1/19
Keywords
Source: seoClarity (March 5, 2019) 55 Keywords in Top 3 8000
7000
6000
5000
4000
3000
2000
1000
0 3/1/17 4/1/17 5/1/17 6/1/17 7/1/17 8/1/17 9/1/17 10/1/17 11/1/17 12/1/17 1/1/18 2/1/18 3/1/18 4/1/18 5/1/18 6/1/18 7/1/18 8/1/18 9/1/18 10/1/18 11/1/18 12/1/18 1/1/19 2/1/19 3/1/19
Keywords
Source: seoClarity (March 5, 2019) 56 Six Consecutive Months of Strong SEO Improvement
Positive Growth Negative Growth
80% 74%
60%
40%
21% 21% 20% 15% 10% 5% 5% 6%
0% -2% -1% -6% -4% -4% -8% -8% -11% -20% -15% -14% -19% -22% -24% -31% -40% -41%
-60% Ma y2017 Ma y2018 July 2017 July 2018 April 2017 April 2018 April June 2017 June 2018 Ma rch2018 August 2017 August 2018 August October2017 January2018 October2018 January2019 February 2018 February 2019 February December 2017 December 2018 December November 2017 November 2018 November September2017 September2018
Source: SEMrush (March 5, 2019) 57 Paid Club O Memberships +36% YoY
0 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 2016 2017 2018 2019 58 Recent ‘Wins’
1. Top 3 Keywords – up 66% since 10/1/2018
7th Consecutive 2. Web Marketing Association: Best Retail Mobile App (12/2018) WMA Award
3. eTail Best in Class Awards: Best Mobile App (2/2019)
4. Mobile Star Awards: Best Retail Shopping App – SUPERSTAR (3/2019)
5. Loyalty360 Customer Awards: Best in Class Award for Customer Experience Strategy (10/2018)
6. ABBI Awards: Best Multi-Screen Campaign, Overstock + Ocean Media (11/2018) 59 Q4 2018 Financial Results: Retail
Revenue Gross Profit Gross Margin $446.7 Million $80.0 Million 17.9% 1% decrease vs. Q4 2017 5% decrease vs. Q4 2017 vs. 18.7% in Q4 2017
Contribution1 Contribution Margin1 Adjusted EBITDA1 $32.9 Million 7.4% ($19.1) Million 6% increase vs. Q4 2017 vs. 6.9% in Q4 2017 vs. ($10.6) million in Q4 2017
1 Retail Contribution, Contribution Margin, and Adjusted EBITDA are non-GAAP financial measures. See Reconciliations in Appendix 60 2019 Planned Improvement in Retail
Planned Improvement in Retail Adjusted EBITDA $115M 61 2019 Planned Improvement in Retail
Planned Improvement in Retail Adjusted EBITDA $115M
Planned Improvement Planned Improvement in Retail in Retail Contribution Tech and G&A Expenses (excluding depreciation, amortization, and stock comp) $82M $33M 62 Annual Retail Contribution
$250 Millions Millions
$200 $196 Upside $184 $180 $172 $172 Base $150 $159 $160
$100
$78
$50
$- 2014 2015 2016 2017 2018 2019 Plan
Retail Contribution is a non-GAAP financial measure. See Reconciliations in Appendix 63 Corporate Headcount (Non-Medici Ventures)
1,600
1,400 1,351 1,346 1,327 1,321 1,321 1,310 1,305 1,246 1,215 1,200 1,163 1,165 1,175 1,172 1,172
1,069
1,000
800
600
400
200
0 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 Ma y-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 64 Management Structure
“Inc.”
Retail Medici 65 Management Structure
Shared Services: • Finance & Accounting • Legal “Inc.” • People Care (HR) • Administration
Retail Medici 66 “Retail on a Standalone Basis”
“Inc.”
2/3 1/3
Retail Medici 67 Returning to Sustained Profitability
18
16
14
12
10
8
6
4
2
0 Q4 '18 Monthly Average Q1 '19 Outlooked Monthly Current Monthly Run Rate Q2 Q3 Q4 '19 Planned Monthly Average Full Year ’18 Q4 ’18 Q1 ‘19 Outlooked Monthly Average MonthlyAverage Average Monthly Average
Retail Contribution Retail Tech and G&A Expenses*
* Retail Tech and G&A Expenses excluding depreciation, amortization, stock compensation, and 1/3 (Medici allocation) of Inc. costs. 68 Returning to Sustained Profitability
18
16
14
12
Current Monthly 10 Run Rate
8
6
4
2
0 Q4 '18 Monthly Average Q1 '19 Outlooked Monthly Current Monthly Run Rate Q2 Q3 Q4 '19 Planned Monthly Average Full Year ’18 Q4 ’18 Q1 ‘19 Outlooked Monthly Average MonthlyAverage Average Monthly Average
Retail Contribution Retail Tech and G&A Expenses*
* Retail Tech and G&A Expenses excluding depreciation, amortization, stock compensation, and 1/3 (Medici allocation) of Inc. costs. 69 Returning to Sustained Profitability
18
16
14
12
Current Monthly 10 Run Rate
8
6
4
2
0 Q4 '18 Monthly Average Q1 '19 Outlooked Monthly Current Monthly Run Rate Q2 Q3 Q4 '19 Planned Monthly Average Full Year ’18 Q4 ’18 Q1 ‘19 Outlooked Q4 ‘19 Planned Monthly Average MonthlyAverage Average Monthly Average Monthly Average
Retail Contribution Retail Tech and G&A Expenses*
* Retail Tech and G&A Expenses excluding depreciation, amortization, stock compensation, and 1/3 (Medici allocation) of Inc. costs. 70
Strategic Alternatives 71 Strategy to Maximize Shareholder Value
Overstock will continue to run the Retail business as though we are going to hold it forever, while continuing in this process.
1. Remain committed to hybridizing with national brick-and-mortar/web property 2. Process is ongoing 3. Seeking the right structure and valuation 4. Retail Recovery improves valuation 72 Revised tZERO MoU with Makara and GSR*
• Signed on February 28 • Co-leading Investment of up to $100M • Expect to Close in April
* Advisors have been retained to pursue alternatives in parallel 73
Summary 74 Summary
A B C D E
Medici Retail • Government as a Service • $115M YoY Improvement in Adjusted EBITDA • tZERO Leading Pursuit of Potential $900B Opportunity • Other Medici Companies: Blockchain Products in Production, Increase Adoption 75 Summary
A B C D E
Medici Retail • Government as a Service • $115M YoY Improvement in Adjusted EBITDA • tZERO Leading Pursuit of Potential $900B Opportunity • Other Medici Companies: Blockchain Products in Production, Increase Adoption
Submit questions to [email protected] 76
Appendix 77 Q4 2018 Financial Results: OSTK Total
Revenue Gross Profit Adjusted EBITDA1 $452.5 Million $81.6 Million ($30.4) Million 1% decrease vs. Q4 2017 5% decrease vs. Q4 2017 vs. ($17.9) million in Q4 2017
Sales & Marketing Expense Contribution1 Ending Cash $47.5 Million $34.0 Million $141.5 Million 13% decrease vs. Q4 2017 6% increase vs. Q4 2017 vs. $182.0 million at September 30, 2018
1 Adjusted EBITDA and Contribution are non-GAAP financial measures. See Reconciliations in Appendix 78 Adjusted EBITDA Reconciliation
Year ended Three months ended Dec-2018 Dec-2017 Dec-2018 Sep-2018 Jun-2018 Mar-2018 Dec-2017 Adjusted EBITDA Retail $ (112,489) $ 11,155 $ (19,116) $ (21,190) $ (46,901) $ (25,282) $ (10,608) tZERO (24,805) (7,252) (7,816) (3,864) (9,649) (3,476) (2,077) Other (15,953) (15,813) (3,453) (4,882) (5,108) (2,510) (5,173) Adjusted EBITDA (153,247) (11,910) (30,385) (29,936) (61,658) (31,268) (17,858) Less: Special items (see table below) 23,402 - 9,565 10,783 (6,816) 9,870 - Less: Depreciation and amortization 31,697 32,847 8,664 7,999 7,535 7,499 8,113 Less: Stock-based compensation 14,356 4,077 2,702 2,246 2,973 6,435 1,068 Less: Interest and other income (expense), net (2,748) (1,100) (1,436) (1,566) 593 (339) (2,162) Less: Provision (benefit) for income taxes (2,384) 64,188 (1,939) (141) (27) (277) 71,915 Net loss $ (217,570) $ (111,922) $ (47,941) $ (49,257) $ (65,916) $ (54,456) $ (96,792) Special items: Impairments on intangible assets $ 6,000 $ - $ 6,000 $ - $ - $ - $ - Loss on disposal of business 3,565 - 3,565 - - - - Cryptocurrency impairments and gains on sale, net 443 - - (6,816) 7,259 Severance 1,600 - - - - 1,600 - Special legal expenses* 11,794 - - 10,783 - 1,011 - Total Special Items $ 23,402 $ - $ 9,565 $ 10,783 $ (6,816) $ 9,870 $ -
*Special legal expenses include charges associated with our Delaware gift card escheatment matter and legal fees associated with pursuing our strategic alternatives. Adjusted EBITDA is a non-GAAP financial measure used in addition to and in conjunction with results presented in accordance with GAAP and should not be relied upon to the exclusion of GAAP financial measures. You should review our financial statements and publicly-filed reports in their entirety and not rely on any single financial measure. 79 Annual Contribution Reconciliation
Year ended, December 31 2018 2017 2016 Retail tZERO & Other Total Retail tZERO & Other Total Retail tZERO & Other Total Retail Contribution Total net revenue $ 1,800,187 $ 21,405 $ 1,821,592 $ 1,728,104 $ 16,652 $ 1,744,756 $ 1,784,782 $ 15,181 $ 1,799,963 Cost of goods sold 1,452,195 15,489 1,467,684 1,392,558 11,647 1,404,205 1,458,411 10,203 1,468,614 Gross profit 347,992 5,916 353,908 335,546 5,005 340,551 326,371 4,978 331,349 Less: Sales and marketing expense 269,987 4,492 274,479 179,549 1,040 180,589 147,368 528 147,896 Plus: Club O Rewards and gift card breakage (included in Other expense, net)* - - - 2,742 - 2,742 16,808 - 16,808 Contribution $ 78,005 $ 1,424 $ 79,429 $ 158,739 $ 3,965 $ 162,704 $ 195,811 $ 4,450 $ 200,261 Contribution margin 4.3% 6.7% 4.4% 9.2% 23.8% 9.3% 11.0% 29.3% 11.1%
Year ended, December 31 2015 2014 Retail tZERO & Other Total Retail tZERO & Other Total Retail Contribution Total net revenue $ 1,655,908 $ 1,930 $ 1,657,838 $ 1,497,103 $ - $ 1,497,103 Cost of goods sold 1,353,184 - 1,353,184 1,218,044 - 1,218,044 Gross profit 302,724 1,930 304,654 279,059 - 279,059 Less: Sales and marketing expense 124,218 250 124,468 109,461 - 109,461 Plus: Club O Rewards and gift card breakage (included in Other expense, net) 5,911 - 5,911 2,439 - 2,439 Contribution $ 184,417 $ 1,680 $ 186,097 $ 172,037 $ - $ 172,037 Contribution margin 11.1% 87.0% 11.2% 11.5% 11.5%
*Effective January 1, 2018, we made a change in accounting principle to present Club O Rewards and gift card breakage in Partner and other revenue instead of Other expense, net on our consolidated statements of operations. This change impacts the presentation of Total net revenue, Gross profit and Other expense, net, but does not impact the calculation of contribution. Contribution and contribution margin are non-GAAP financial measures used in addition to and in conjunction with results presented in accordance with GAAP and should not be relied upon to the exclusion of GAAP financial measures. You should review our financial statements and publicly-filed reports in their entirety and not rely on any single financial measure. 80 Quarterly Contribution Reconciliation
Three months ended Dec-18 Sep-18 Jun-18 Retail tZERO & Other Total Retail tZERO & Other Total Retail tZERO & Other Total Retail Contribution Total net revenue $ 446,733 $ 5,815 $ 452,548 $ 435,775 $ 4,805 $ 440,580 $ 477,683 $ 5,450 $ 483,133 Cost of goods sold 366,712 4,256 370,968 350,651 3,213 353,864 387,252 4,138 391,390 Gross profit 80,021 1,559 81,580 85,124 1,592 86,716 90,431 1,312 91,743 Less: Sales and marketing expense 47,142 395 47,537 55,182 130 55,312 93,747 669 94,416 Plus: Club O Rewards and gift card breakage (included in Other expense, net)* ------Contribution $ 32,879 $ 1,164 $ 34,043 $ 29,942 $ 1,462 $ 31,404 $ (3,316) $ 643 $ (2,673) Contribution margin 7.4% 20.0% 7.5% 6.9% 30.4% 7.1% (0.7%) 11.8% (0.6%)
Three months ended Mar-18 Dec-17 Retail tZERO & Other Total Retail tZERO & Other Total Retail Contribution Total net revenue $ 439,996 $ 5,335 $ 445,331 $ 451,996 $ 4,294 $ 456,290 Cost of goods sold 347,580 3,882 351,462 367,561 2,931 370,492 Gross profit 92,416 1,453 93,869 84,435 1,363 85,798 Less: Sales and marketing expense 73,917 3,297 77,214 54,237 284 54,521 Plus: Club O Rewards and gift card breakage (included in Other expense, net)* - - - 818 - 818 Contribution $ 18,499 $ (1,844) $ 16,655 $ 31,016 $ 1,079 $ 32,095 Contribution margin 4.2% (34.6%) 3.7% 6.9% 25.1% 7.0%
*Effective January 1, 2018, we made a change in accounting principle to present Club O Rewards and gift card breakage in Partner and other revenue instead of Other expense, net on our consolidated statements of operations. This change impacts the presentation of Total net revenue, Gross profit and Other expense, net, but does not impact the calculation of contribution. Contribution and contribution margin are non-GAAP financial measures used in addition to and in conjunction with results presented in accordance with GAAP and should not be relied upon to the exclusion of GAAP financial measures. You should review our financial statements and publicly-filed reports in their entirety and not rely on any single financial measure.