Overstock reported a net loss of $4.2 million for the first quarter 2005, ending March 31, 2005. The auction marketplace it introduced in late 2004 cost $1.6 million in Q1-05, which the company expects to be reduced by $1 million in Q2.

Overstock's revenue grew 102% and gross profits grew 194% (both on a year-over-year basis), while gross margins grew to 15.0% from 10.3% in Q1 2004. However, the company lost $4.2 million and spent $28 million on CAPEX (capital expenditure).

In June, Overstock is moving to a much larger building being completed a few hundred yards away from the current location, adding about $1 million/quarter to its facilities costs, but the company expects it to satisfy its needs through the next 3 years at the current growth rate.

In addition, Overstock is spending heavily in IT. "Our current technology would max out at an annual rate of $1.5-$2 billion of revenue, so we are switching to systems that will support us to a $4-$8 billion level."

The press release issued by Overstock is unique and is narrated by Overstock CEO Patrick Byrne, who explains the thinking behind some of the decisions the company makes (http://digbig.com/4dfkp).

For instance, Byrne points to three areas of note: investment spending to support growth of the core business, such as IT (technology) and other G&A (general and administrative); spending on new initiatives, such as Auctions, Travel and Design your Own Jewelry; and what he calls "experiments, skunkworks and mudpies - things we tried that may or may not have generated the results we expected, such as $1 shipping, a large marketing spend and special purchases." Byrn continues, "In my mind, all three of these areas are fundamental to our continued growth. I list them and describe what remains to be done about them in the future."

Here's what Byrne had to say specifically about Overstock Auctions:

"Our Auctions continue what seems to me a robust start. We maintain 1% of the listings of eBay's domestic business. We find incredible goodwill and support in the serious auction community, which is guiding us regarding the features and programs it wants us to develop. Working with this "swarm" is one of the pleasures of my job: it is hard to imagine a group of tougher, hungrier, or fairer entrepreneurs than they. This may become a long war of attrition with eBay."

CEO Patrick Byrne also communicates directly on the Overstock Auction message boards. On Sunday, Byrne addressed some of the questions he's been receiving from Overstock Auction users (http://digbig.com/4dfnm).

http://www.overstock.com