Q4 2023 Beyond Inc Earnings Call

Okay.

Operator: Thank you for standing by. 2024-2023 Beyond Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode.

Thank you for standing by and walk up to Q4, 2023 beyond Inc. Earnings Conference call. At this time, all participants are in a listen only mode.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question at this time, please press star 1-1 on your telephone. Please be advised that today's call is being recorded. I would now like to turn the conference over to Adrienne Lee, BEYOND's Chief Financial and Administrative Officer.

After the Speakers' presentation, there'll be a question and answer session.

A question at that time, Please press star one on your telephone please.

Please be advised today's call is being recorded.

I would now like to turn the conference over to Adrianne, Lee beyond Chief financial and administrative officer Adrian.

Adrienne Lee: Thank you, Operator. Good morning, and welcome to BEYOND's fourth quarter and full year 2023 earnings conference call. Joining me today on the call are Executive Chairman Marcus Limonis, CEO of Bed Bath & Beyond, Chandra Holt, and CEO of Overstock, Dave Nielsen. Today's discussion and our responses to your questions reflect management's view as of today, February 21, 2024, and may include forward-looking statements, including, without limitation, regarding our future goals, performance, profitability, and financial results. Additional results could differ materially from such statements.

Thank you operator, good morning, and welcome to beyond the fourth quarter and full year 2023 earnings Conference call. Joining me today on the call our executive Chairman market Simona CEO of bed Bath and beyond Chandra <unk> and CEO of Overstock, Dave Nielsen today's discussion and our responses to your questions reflect.

As of today February 21, 2024, and May include forward looking statements, including without limitation regarding our future goals performance profitability and financial results actual results could materially could differ materially from such statements.

Adrienne Lee: Additional information about risks, uncertainties, and other important 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 SBA. During this call, we'll discuss certain non-GAAP financial measures. Our filings with the SEC, including our fourth-quarter earnings release available on our investor relations website at investors.beyond.com, contain important additional disclosures regarding these non-GAAP measures, including reconciliations of these measures to the most comparable GAAP measures. Following management's prepared remarks, we will open the call for questions. With that, let me turn the call over to our Executive Chairman, Marcus Limonis. Well, good morning, and welcome to the first Beyond Earnings Call into 2024. I am really honored to be here, and I understand the gravity of this opportunity.

Additional information about risks uncertainties and other important 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 are filings with the SEC, including our fourth quarter earnings release available on our Investor Relations website at investors <unk> beyond dot com contain important additional disclosures regarding these non-GAAP measures, including reconciliations of these measures to the most comparable GAAP.

<unk> measures.

Following managements prepared remarks, we will open the call up for questions with that let me turn the call over to our executive Chairman markets alone. It well good morning, and welcome to the first beyond earnings call into 2024, I'm really honored to be here and I understand the gravity of this opportunity.

Over the last 75 days, we have made substantial progress laying the foundation for material growth, a differentiated business model and improve customer retention and then affinity focus with our customer.

Marcus Limonis: Over the last 75 days, we have made substantial progress laying the foundation for material growth, a differentiated business model, and improved customer retention and an affinity focus with our customers. Our goal is to take a simple commodity transaction and turn it into a trust transaction. We realize that it's going to take time, but we are going to lay the foundation for it. Positive transactions with frequency, with our Bed Bath & Beyond brands, will create trust. And trust will create our ability to sell the bigger ticket items from Overstock and more complex products and services from Beyond Plus. As many of you know, we've gone through both a management and company restructuring in the last 75 days. Yesterday, we announced management changes that provide clear direction for the two brands and position us with a leadership team that is now aligned with shareholders on incentives and driving value. Adrian, Chandra, and Dave are the three leaders whom I trust to lead the day-to-day operations with full P&L authority and responsibility. They bring expertise, vision, and the change management skills that this company needs to drive results and evolve this business. You'll be hearing from each of them today in both prepared remarks and the Q&A.

Our goal is to take a simple commodity transaction and turned it into a trust transaction.

We realize that is going to take time, but we're going to lay the foundation for it positive transactions with frequency with our bed Bath <unk> beyond brands will create trust and trust will create our ability to sell the bigger ticket items from overstock to more complex products and services from beyond plus.

As many of you know we've gone through both our management and company restructure in the last 75 days.

Yesterday, we announced management changes, which provides clear direction on the two brands and position us with a leadership team that is now aligned with shareholders on incentives and driving value.

<unk> Chandra Dave are the three leaders who might trusts to lead the day to day operations with full P&L authority and responsibility.

Bring expertise vision and the change management skills that this company needs to drive results and evolve this business you'll be hearing from each of them today in both the prepared remarks and the Q&A.

Marcus Limonis: One thing you can count on going forward is better communication, especially related to our vision, better results, and a clear path forward. That vision lands squarely on providing our customers with ideas, inspiration, and information in addition to the products and services they need to unlock the value of their household. That focus is centered around the four walls of their home, extending to the four corners of their property.

One thing you can count on going forward is better communication, especially related to our vision.

Our results and a clear path forward that.

That vision land squarely on providing our customers ideas inspiration that in <unk> and.

Information in addition to the products and services they need to unlock the value of their household.

That focus is centered around the four walls of their of their home extending to the four corners of their property.

Marcus Limonis: To begin this transformation, we feel like we have an unbelievable amount of low-hanging fruit at this company. As an example, we know the most valuable tangible asset we own is our database of consumers. We know that improving the quality of that database drives up conversion and brings variable costs down. Much to my delight, our database is massive, with over 150 million records.

To begin this transformation, we feel like we have an unbelievable amount of low hanging fruit at this company as an example, we know the most valuable tangible asset we own is our database of consumers.

We know that improving the quality of that database drives up conversion and brings variable costs down.

To my delight, our database is massive with over 150 million records, however to improve efficiency and profitability, we're going to invest and cleansing de duping. It by household and instituting a more efficient segmentation strategy.

Marcus Limonis: However, to improve efficiency and profitability, we're going to invest in cleansing, de-duping it by household, and instituting a more efficient segmentation strategy. We have brought in both external leading firms and subject matter experts to create our gold standard for that database now. The implementation of that database across a modern-day CRM will improve conversion and materially reduce inefficient marketing spend. I believe this simple strategy will reduce the company's marketing expense as a percentage of revenue by anywhere from 0.5% to 1% annually, better than last year, a number that we know we have to reduce materially over the next 24 months. The odd will have one purpose, to unlock the home's potential for both homeowners and renters, giving us a chance to expand the lifetime value of each customer we establish as a relationship.

We have brought in both external leading firms and subject matter experts to create our gold standard of that database now.

The implementation of that database across a modern day, CRM will improve conversion and materially reduce inefficient marketing spend.

Believe this simple strategy will reduce the company's marketing expense as a percentage of revenue by anywhere from a half a percent to 1% annually better than last year, a number that we know we have to reduce materially over the next 24 months.

Beyond we'll have one purpose to unlock the homes potential for both homeowners and renters, giving us the chance to expand the lifetime value of each customer we established as a relationship. We believe this will drive growth.

Marcus Limonis: We believe this will drive growth and profitability. Well, a utopian state would be to create the AAA of the home, a true affinity model, providing both products and services that grow lifetime value. Expanding and growing our core business is where our laser focus is. That starts with generating core revenue and delivering better margins. Our primary focus this year is to achieve $2 billion in sales, a material increase from 2023, and follow that up with achieving a run rate of $3 billion by the end of 2025, all while sequentially improving margins over that period back to the 20% margin plus level. Those two factors, coupled with material SG&A reductions, will result in a profitable run rate by year-end 2024.

And profitability.

Well utopian state would be to create the AAA of the whole true affinity model, providing both products and services that grow the lifetime value.

Expanding and growing our core business is where our laser focus is that starts with generating core revenue and delivering better margins.

Our primary focus this year is to achieve $2 billion in sales a material increase from 2023.

And followed that up with achieving a run rate of $3 billion by the end of 2025.

All while sequentially improving margins over that period back to the 20% margin plus level.

Those two factors coupled with material SG&A reductions will result in a profitable run rate by year end 2024.

Marcus Limonis: We believe the bridge and building blocks to achieve that are clear, and the team is going to walk you through that bridge shortly. Before I turn the call over to the team, I wanted to provide a short summary of our 16 company Medici portfolio, a non-core asset that many holders have requested an update on. As a reminder, in April of 2021, our company entered into a limited partnership agreement with Pellion Ventures in Draper, Utah, to manage the Medici portfolio. This partnership came with an annual management fee in addition to upside deal economics in exchange for them nurturing these companies and building value. While we are wildly excited by the prospects of a few of them, the overall performance has not been as good as we think it could be.

We believe the bridge and building blocks to achieve that are clear and the team is going to walk you through that bridge shortly.

Before I turn the call over to the team I wanted to provide a short summary on our 16 company Medici portfolio, a noncore asset that many holders have requested an update on.

As a reminder, in April of 2021, our company entered into a limited partnership agreement with <unk> ventures in Draper, Utah to manage the Medici portfolio.

This partnership came with an annual management fee. In addition to upsize the deal economics and exchange for them nurturing these companies and building value.

We are wildly excited by the prospects of a few of them. The overall performance has not been as good as we think it could be.

Marcus Limonis: We intend to increase our communication with these respective companies and work closely with Pellion to modify the relationship in a way that singularly unlocks value and holds parties accountable. We do believe there are a few companies that could surprise and delight all of us. We're firmly committed to delivering updates quarterly. I'll now turn the call over to Dave. Thank you, Marcus.

We intend to increase our communication with these respective companies and work closely closer with <unk> to modify the relationship in a way that singularly unlocks value and hold parties accountable. We do believe there are a few companies that could surprise and delight all of us were firmly.

<unk> committed to delivering updates quarterly.

I'll now turn the call over to Dave.

Thank you Marcus.

David J. Nielsen: 2024 is a pivotal year for the company as we lay the groundwork for our new strategic vision and work toward a return to profitability. We have a roadmap to launch new home-centric websites and value-added services over the course of the year to acquire new customers, improve our retention of them, and ultimately drive down the cost of customer acquisition. As a proof point for the above strategy, this dynamic was evident in Q4. Leading up to and during the holidays, we saw a higher number of repeat customers compared to the same period last year. This is important as we work to improve our marketing efficiency and build loyalty among the new customers acquired. Some may say our repeat rate increased because of the categories we leaned into, like bed, bath, kitchen, and dining, and that may be true.

2024 is a pivotal year for the company as we lay the groundwork for a new strategic vision and work toward a return to profitability.

We have a roadmap to launch new home centric websites and value add services over the course of the year to acquire new customers.

Prove our retention of them and ultimately drive down the cost of customer acquisition.

As a proof point to the above strategy. This dynamic was evident in Q4.

Leading up to and during the holidays, we saw a higher number of repeat customers compared to the same period last year.

This is important as we work to improve our marketing efficiency and build loyalty among the new acquired customers. Some may say, our repeat rate increase because of the categories, we leaned into like bed Bath kitchen and dining.

And that may be true.

David J. Nielsen: But we see this as a benefit to the home-centric portfolio of businesses and see Bed Bath & Beyond as a flywheel to power customer acquisition for the entire portfolio. On the third quarter earnings call, we told you that we would relaunch Overstock in September of 2024. Our team found a way to pull that launch date up significantly, working with my new best friend, Harley Finkelstein, president of Shopify.

But we see this as a benefit to the home centric portfolio of businesses and sea bed Bath and beyond as a flywheel to power customer acquisition for the entire portfolio.

On the third quarter earnings call. We told you that we would relaunch overstock in September of 2024.

Our team found a way to pull that launch date up significantly working with my new best friend, Harley Finkelstein President of Shopify, we are planning to relaunch overstock and roughly five weeks. This is significant because re launching it will mean, we can immediately begin to build accretive business.

David J. Nielsen: We are planning to relaunch Overstock in roughly five weeks. This is significant because relaunching it will mean we can immediately begin to build a creative business with the Overstock customer in furniture, area rugs, patio, and outdoor, among other categories. We're also planning to relaunch the jewelry business, which was once a hundred plus million dollar business annually, among other product lines that the Overstock customer was drawn to over the years. Pulling up the relaunch of Overstock has the potential to drive higher average unit retail prices, improve overall margins, and meet customers where they're shopping for the items we know they want, which is a far more efficient way to leverage each of our iconic brands and drive marketing spend efficiency.

With the overstock customer in furniture area rugs patio and outdoor among other categories. We're also planning to relaunch the jewelry business, which was once a 100 plus million dollars business annually. Among other product lines that the overstock customer was drawn to over the years.

Pulling up the re launch of Overstock has the potential to drive higher average unit retails improve overall margins and meet customers, where they're shopping for the items, we know they want.

Which is a far more efficient way to leverage each of our iconic brands and drive marketing spend efficiencies.

David J. Nielsen: Adrian will outline our targets as she walks you through our margin improvement plan for 2024 later on the call. As we look to the future, we believe we can maximize profitability with a larger e-commerce revenue stream underpinned by multiple brands, layering value-added services, and operating a more variable cost model. Well, we have a lot to improve.

Adrian will outline our targets as she walks you through our margin improvement plan for 2024 later on the call as.

As we look to the future. We believe we can maximize profitability with a larger ecommerce revenue stream underpinned with multiple brands layering value added services and operating a more variable cost model, while we have a lot to improve.

David J. Nielsen: There is also a lot of good work happening. We are thrilled with the fact that we exceeded our expectations and are sitting today at nearly 6 million active customers, a 20% improvement over last year. November through today, revenue growth has remained positive for the first time since 2021.

There is also a lot of good work happening.

We are thrilled with the fact that we exceeded our expectations and are sitting today at nearly 6 million active customers a 20% improvement over last year November through today revenue growth has remained positive the first time since 2021.

David J. Nielsen: We're encouraged to see our work to improve vendor relations begin to bear fruit. Vendor partners are recognizing our improved sales performance in the bed, bath, and beyond power categories of bedding, bath, kitchen appliances, cookware, and dining, just to name a few, and are working with our merchandising teams to increase breadth and depth of assortment to help us drive sales and improve margins. During Q4, our new partner additions grew by 74%, with more than 200 new partners added.

We're encouraged to see our work to improve vendor relations begin to bear fruit.

Vendor partners are recognizing our improved sales performance and the bed Bath <unk> beyond power categories of bedding, Bath and kitchen appliances, cookware and dining just to name a few and are working with our merchandising teams to increase breadth and depth of assortment to help us drive sales and improve margins.

During Q4, our new partner additions grew by 74% with more than 200, New partners added in fact, as we turned the page on 2023 more than 100 additional partners were under various stages of contracting.

David J. Nielsen: In fact, as we turned the page on 2023, more than 100 additional partners were under various stages of contract. As you can appreciate, there is an incredible amount of work being done by our team. They are excited and engaged.

As you can appreciate there is an incredible amount of work being done by our team they're excited and engaged our strategic vision is aimed at increasing our engagement with customers by staying connected with them beyond a single sales transaction.

David J. Nielsen: Our strategic vision is aimed at increasing our engagement with customers by staying connected with them beyond a single sales transaction. It is our mission to help customers unlock the potential of their home. We believe these actions will enable us to achieve our long-term aspirational goals, or what we internally refer to as our North Star, 10 million active customers, $250 average order value, and a two times annual order frequency. Before I wrap up, I want to give a warm welcome to Chandra. I'm thrilled we've added such a terrific leader and experienced retail professional to our team. With that, Chandra.

It is our mission to help customers unlock the potential of their home. We believe these actions will enable us to achieve our long term aspirational goals.

What we internally refer to as our North Star 10 million active customers $250 average order value and a two times annual order frequency.

Before I wrap up I want to give a warm welcome to Chandra.

Thrilled we've added such a terrific leader and experienced retail professionals to our team with that Sandra.

Chandra Holt: Thanks, Dave. I joined the company because I'm passionate about Bed Bath & Beyond and I'm driven to reestablish its category dominance. It's my goal for Bed Bath & Beyond to be a leader in unified commerce. We aim to create a customer experience that is more seamless than today's traditional omni-channel. We also plan to introduce tailored experiences for purchasing that are adjacent to our core Bed Bath & Beyond offerings, such as Baby and Beyond, Kids and Beyond, College Living, and Wombsetter.com. Baby and Beyond is expected to be our first specialty store, And we are excited about the upside, because we know many FedRats can be uncomfortable. Spruce Lane Craft Shop, the Buetting, Filming, Catering, Lamsada is another exciting initiative. At its peak, Wamsutta was a top bedding and textile brand in the U.S.

Thanks, Dave.

Joining the company because I'm passionate about bed Bath and beyond and then driven to reestablish category dominance.

Thanks, Michael for bed Bath, <unk> beyond to be a leader in unified Commerce.

We aim to create a customer experience that is more seamless from today's traditional omnichannel retailers.

We also plan to introduce tailored experiences for purchase occasions that are adjacent to our core bed Bath <unk> beyond offerings, such as baby <unk> kids are beyond colleagues and one set of dot com.

Amy and beyond is expected to be our first specialized experience and we are excited about the upside because we know many that doesn't beyond customers cross.

Cross shop, the BBB category.

I'm sorry that is another exciting initiative at its peak was a top abetting and textile brand in the U S.

Adrienne Lee: In the coming weeks, I plan to partner with suppliers and designers to set the new vision for Lone Star. I look forward to modernizing the marketing and creative processes through a partnership with a powerful and influential female leader who will serve as the creative director and will be announced at a later date. Across all brands, we seek to build and curate an assortment to improve quality and provide unprecedented value for our customers. We have significant opportunities ahead of us with our robust portfolio brands, and I look forward to leading the charge in positioning the business for growth and interacting with our investment customers. I will now turn the call over to Chandra. Thank you, Chandra. I'm going to start by reviewing some key financial results to provide context for how we're thinking about our path forward. Revenue declined 5% year-over-year in the fourth quarter and grew 3% sequentially.

In the coming weeks I plan to partner with suppliers and designers because that's a new vision for one product.

I look forward to modernizing the marketing and creative processes through a partnership with a powerful and influential E Mail leader.

Is the creative director and will be announced at a later date.

Across all brands, we seek to build I'm curious assault.

Assortment to improve quality and provide unprecedented value for our customers.

We have significant opportunities ahead of us with a robust portfolio of brands and I look forward to leading the charge and positioning the business for growth.

And interacting with our investment community.

I'll now turn the call over to Adrian.

Thank you Kendra I'm going to start by reviewing some key financial results to provide context into how we're thinking about our path forward.

Revenue declined 5% year on year in the fourth quarter and grew 3% sequentially improvement in our revenue trend was led by a 9% growth in active customers driving 35% growth in orders.

Adrienne Lee: The improvement in our revenue trend was led by 9% growth in active customers, driving 35% growth in... Average order value declined 30% year-over-year due to mixed feelings about the lower AUR category. November and December revenue combined was up year over year, and we have seen that trend continue. There is measured progress being made, and we are focused on carrying the momentum through this year as Chendra leads our team in curating a better assortment for our Bed Bath & Beyond brands, and Dave leads the relaunch of our once billion-dollar plus Overstock. Gross margin landed at 15.6% for the quarter, a 650 basis point decrease versus the same period last quarter.

Average order value declined 30% year over year due to sales mix skewing to lower AUR categories.

November and December revenue combined was up year over year, and we have seen that trend continue there is measured progress being made and we are focused on carrying the momentum through this year as gender leads our team in Curating, a better assortment for our bed Bath <unk> beyond brands and Dave leads the relaunch of our $1 billion plus overstock.

Site.

Gross margin landed at 15, 6% for the quarter, a 650 basis point decrease versus the same period last year. We believe this result is somewhat transient and was primarily driven by reigniting our customers attracting.

Adrienne Lee: We believe this result is somewhat transient and was primarily driven by reigniting old customers, attracting new customers, and educating and enticing them on a wider source. Increased discounting dropped about 400 basis points, Welcome Rewards Redemption drove about 160 basis points, and increased shipping costs drove about 170 basis points of pressure. We are taking the following actions that are within our control to improve our growth margin profile, renegotiating. Improving Vendor Relations for More Favorable Products. Relaunching overstock.com, which we believe will drive higher AOVs. Providing integration add-ons like product warranties and shipping and reintroducing Ramsuda and other owned brands to complement the Superior Name Brands we have assembled and eliminating inefficient distribution. The G&A tech expense increase of $7 million was primarily driven by us booking approximately $6 million of discrete one-time item costs primarily associated with expense reduction actions announced in December. All in, adjusted EBITDA was a loss of $49 million.

Attracting new customers and educating and enticing them on a wider assortment.

Increased discounting drove about 400 basis points welcome rewards redemptions drove about 160 basis points and increased shipping costs drove about 170 basis points of pressure.

We are taking the following actions that are within our control to improve improve our gross margin profile.

Renegotiating freight rates.

Improving vendor relations from our favorable product costs.

Launching overstock Dot com, which we believe will drive higher AMD provides.

Providing integration add ons like product warranties and shipping insurance.

Reintroducing them sooner and other owned brands to complement the superior named brands, we have assembled.

And eliminating inefficient discounting.

The G&A, the G&A and tech expense increase of $7 million.

Was primarily driven by us booking approximately $6 million of discrete onetime item costs, primarily associated with expense reduction actions announced in December.

All in adjusted EBITDA was a loss of $49 million.

Adrienne Lee: On a margin basis, this was a negative 12.7%, an almost 1500 basis point decline year over year, with approximately 50% of the decline driven by growth margin pressure. In addition to our focus on improving gross margins, we continue to look for opportunities to reduce expenses throughout the P&L. We have identified a total of $45 million of annualized costs, which is expected to be fully annualized in the first half of 2020. This includes the $25 million cost reductions committed to in December and $20 million of incremental spending.

On a margin basis. This was a negative 12, 7% and almost 500 basis point decline year over year with approximately 50% of the decline driven by gross margin pressure.

In addition to in addition to our focus on improving gross margins. We continue to look for opportunities to reduce expenses throughout the P&L. We have identified a total of $45 million of annualized cost savings, which is expected to be fully annualized in the first half of 2025.

This includes the $25 million cost reductions committed to in December and $20 million of incremental savings we.

We expect to reinvest these dollars to continue to drive growth.

I want to highlight that we have revised our executive teams equity compensation to align it with stock price appreciation and revenue growth. This is meaningful as it incentivize the team to push to our $2 billion revenue goal make progress towards getting back to a 20% plus gross margin and continue to identify cost savings.

Adrienne Lee: We expect to reinvest these dollars to continue to drive growth. Additionally, I want to highlight that we have revised our executive team's equity compensation to align it with stock price appreciation and revenue growth. This is meaningful as it incentivizes the team to push to our $2 billion revenue goal, make progress towards getting back to a 20% plus growth margin, and continue to identify costs. Our reported GAAP EPS loss of $3.55 for the fourth quarter was primarily impacted by establishing a valuation allowance against our net deferred tax assets due to our recent operating losses and expected near-term pressure on profitability related to growing our customer files. Excluding the impact of equity securities, our building write-down, and the valuation allowance, we reported an adjusted diluted loss per share of $1.25.

Our reported GAAP EPS loss of $3 55 for the fourth quarter was primarily impacted by establishing evaluation allowance against our net deferred tax assets due to our recent operating losses and expected near term pressure on profitability related to growing our customer file.

Excluding the impact of equity Securities are building write down and the valuation allowance that we reported adjusted diluted loss per share of $1 22.

Our balance sheet remains strong on a net basis, we ended the year with a cash balance of $268 million.

On our third quarter earnings call, we shared that we expected to spend $175 million on the purchase of bed Bath <unk> beyond brand and subsequent customer acquisition strategies we.

Adrienne Lee: Our balance sheet remains strong. On a net basis, we ended the year with a cash balance of $268 million. On our third quarter earnings call, we shared that we expected to spend $175 million on the purchase of Bed Bath & Beyond and subsequent customer acquisition strategy. We have spent about $100 million through the fourth quarter, and I expect that we will invest less, in large part due to the key learnings Dave mentioned from the fourth quarter. Kendra and Dave are focused on growing our anchor brands and launching new products and services. These products are under various stages of launch. Our margin and cost-saving actions are well underway. So as far as expectations are concerned, we expect revenue to be positive year over year in Q1, with the goal of $2 billion for 2022. We expect gross margins to be in the 16% to 17% range in Q1, with a goal for the full year closer to 2021.

We have spent about $100 million through the fourth quarter and I expect that we will invest less in large part due to the key learnings Dave mentioned from the fourth quarter.

Tender and Dave are focused on growing our anchor brands and launching new products and services. These products are under various stages of launch our margin and cost saving actions are well underway. So as far as expectations. We expect revenue to be positive year over year in Q1 with the goal of $2 billion for 2024.

We expect gross margins to be in the 16% to 17% range in Q1 with a goal for the full year closer to 20%. We expect the second half of the year to be profitable.

There is work to be done, but I'm confident in our path forward and now I will turn the call back to Markus.

Thanks, Adrian before we get into the Q&A I want to reiterate that we hope you hear loud and clear from US what we know the expectations are from you and what our standards are of ourselves I'd like to now turn the call over to the Q&A.

Thank you again, ladies and gentlemen, my question. Please press star one on your telephone.

Marcus Limonis: We expect the second half of the year to be profitable. There is work to be done, but I'm confident in our path forward. And now, we'll turn the call back to Marcus.

To ask a question please press star 111.

One moment for our first question.

Our first question comes from the line of Rick Patel of Raymond James Your line is open.

Marcus Limonis: Thanks, Adrienne. Before we get into the Q&A, I want to reiterate that we hope you hear loud and clear from us what we know the expectations are from you and what our standards are for ourselves. I'd like to now turn the call over to the Q&A. Thank you. Again, ladies and gentlemen, if you'd like to ask a question, please press star 1-1 on your telephone. Again, to ask a question, please press star 1. One moment for our first.

Thank you and good morning, everyone and congrats to Chandra, Dave and Adrian on the new and expanded roles.

I just had a question on <unk>.

The low hanging fruit that you touched on so you talked about database.

Opportunities around the database and segmentation can you dig a little further on how to gain efficiency here and when should we really start to see this initiatives gain traction is it something that happens in 2024 or is it more of an out year event.

So this is Marcus Thank you for the question for me when I look at a valuable asset light the database understanding the construct of it and the cleanliness of it is probably first and foremost and when we made the bed Bath and beyond acquisition, we picked up a very large database, but understanding what a large database looks like it is.

Rick Patel: Our first question comes from the line of Rick Patel of Raymond James. Your line is open. Thank you. Good morning, everyone, and congratulations to Chandra, Dave, and Adrian on the new and expanded roles. I just had a question about just the low-hanging fruit that you touched on.

To understand the quality of that database and the segmentation of it so putting people in the right categories at the right time offering them the right products improves efficiency today in my opinion, we are basically just spraying the database with every single offer that we have and we need to do a better job.

Marcus Limonis: So you talked about the database and opportunities around the database and segmentation. Can you dig a little further on how to gain efficiency here and when should we really start to see this initiative gain traction? Is it something that happens in 2024 or is it more of an out-year event? So this is Marcus. Thank you for the question.

Understanding who that customer is what their historical purchases are creating some predictive logic around what their next purchases could be understanding their address and their home better to understand size of property square footage of home number of rooms in the half.

Marcus Limonis: For me, when I look at a valuable asset like a database, understanding the construct of it and the cleanliness of it is probably first and foremost. And when we made the Bed Bath & Beyond acquisition, we picked up a very large database. But understanding what a large database looks like is important to understand the quality of that database and its segmentation.

And what the things are that are going to speak directly to them too often customers forget to curate a message or an offer specifically to individual consumer and when they do that they end up exhausting the database, creating fatigue and having people either not come back.

And do business or opt out of the relationship because they don't feel like it's customized to that when you do these things you should expect to yield more from that customer over a 12 month period as Dave mentioned, our goal is to increase the frequency of visits to two and to expand the.

Marcus Limonis: So putting people in the right categories at the right time and offering them the right products improves efficiency. Today, in my opinion, we are basically just spamming the database with every single offer that we have. And we need to do a better job of understanding who that customer is, what their historical purchases are, creating some predictive logic around what their next purchases could be, understanding their address and their home better to understand the size of the property, the square footage of the home, the number of rooms in the house, and what the things are that are going to speak directly to them. Too often, we forget to curate a message or an offer specifically to an individual consumer. And when they do that, they end up exhausting the database, creating fatigue, and having people either not come back and do business or opt out of the relationship because they don't feel like it's customized to them.

Offering.

To them by looking to generate a higher op.

The process has already started we've engaged with the leading database provider in axiom. It is our expectation within 30 days, we will have done the <unk> of those households, and then it will be implemented into our CRM. This is a now task not a tomorrow task and the <unk>.

Primary reason for doing it in addition to growing revenues, we need to take cost out of this company. This company cannot spend north of 13% as a percentage of revenue driving revenue every 1% is meaningful to the bottom line and we take that seriously and <unk>.

Fact at $2 billion, 1% represents $20 million, we know that when we look at a 200 plus million dollars marketing budget. There has to be inefficiency in it and it's not about just trimming that expense its about taking that savings and reinvesting it in growth that is why we believe.

Marcus Limonis: When you do these things, you should expect to yield more from that customer over a 12-month period. As Dave mentioned, our goal is to increase the frequency of visits to two and to expand the offering to them by looking to generate a higher AOV. The process has already started.

<unk> that by the end of 'twenty five we could be at a $3 billion run rate as we launch these other brands. So it's announcing.

And Marcus can you talk about your assumptions for macro in the home products market as we think about the $2 billion goal for this year are you assuming things get better from here or does it remain very challenging just curious how we should think about the market relative to the self help levers that you can pull.

Marcus Limonis: We've engaged with the leading database provider, Axion. It is our expectation that within 30 days, we'll have done the de-duping of those households, and then it'll be implemented into our CRM. This is a task now, not a task tomorrow. And the primary reason for doing it, in addition to growing revenue, is that we need to take costs out of this company. This company cannot spend north of 13% as a percentage of revenue driving revenue. Every 1% is meaningful to the bottom line, and we take that seriously. In fact, at $2 billion, 1% represents $20 million.

We expect the market to stay challenging and quite frankly have some headwinds, but what I think people are underestimating is the power that the bed Bath <unk> beyond historical customer operated with and what we learned in this entire process to be really candid is that shutting overstocked down was up.

Fatal mistake, because while we were able to win the buy box on selling large big items with high <unk> at bed Bath <unk> beyond we had to do that by buying the business Overstock Dot com has built a legacy on selling those types of products and when you try to convince people that.

Marcus Limonis: We know that when we look at a 200-plus-million-dollar marketing budget, there has to be inefficiency in it. And it's not about just trimming that expense. It's about taking that savings and reinvesting it in growth. That is why we believe that by the end of 25, we could be at a $3 billion run rate as we launch these other brands. So it's a now.

Our new brand Thats going to do the same thing you lose them turning overstock dot com back on will not only allow bed bath <unk> beyond to expand its existing assortment and honed in on its historical legacy success, but it allows overstock to do the same and bringing in and establishing <unk>.

Separate Ceos for the Overstock brand and its family of products and we will talk about that in a minute and bed bath and beyond and its family of products. We have an acute focus by each of them to manage their P&L to establish their own invest.

Marcus Limonis: And Marcus, can you talk about your assumptions for macro and the home product market as we think about the $2 billion goal for this year? Are you assuming things get better from here, or does it remain very challenging? Just curious how we should think about the market relative to the self-help levers that you can pull. We expect the market to stay challenging and, quite frankly, have some headwinds. But what I think people are underestimating is the power that the Bed, Bath & Beyond historical customer operated with. And what we learned in this entire process, to be really candid, is that shutting Overstock down was a fatal mistake. Because while we were able to win the buy box on selling large, big items with high AOVs at Bed, Bath & Beyond, we had to do that by buying the business.

To establish their own vendors and to chart their own course to growth the only mandate that exist in their collaboration is that I don't ever want to see the same product on both sites, they're tasked with establishing new vendors, new ideas and new pathways to find customers all while ensuring that they are adding to the <unk>.

Overall company database, which allows us to monetize that customer through these other products and services and the recently launched beyond Dot com.

Thanks, very much and all the best.

Okay.

Thank you one moment please.

Our next question comes from the line of Curtis Nagle of Bank of America. Your line is open.

Okay, great. Thanks, Thanks, very much for taking the question.

I guess my first one.

Marcus Limonis: Overstock.com has built a legacy on selling those types of products, and when you try to convince people that a new brand is going to do the same thing, you lose them. Turning Overstock.com back on will not only allow Bed Bath & Beyond to expand its existing assortment and hone in on its historical legacy success, but it allows Overstock to do the same. In bringing in and establishing separate CEOs for the Overstock brand and its family of products, and we'll talk about that in a minute, and Bed Bath & Beyond and its family of products, we have an acute focus on each of them to manage their P&L, to establish their own vendors, and to chart their own course to growth.

Just love to dig into the.

250.

Target.

Just kind of curious what is assumed in terms of contribution from normalizing.

And promotions how much of that is contributions from new products like baby categories, I guess cross selling cross brands.

And then I guess services contribution.

The follow up question on that just a second.

Yes.

Unpack that a little bit because I heard a question around the <unk> and then does that right and then I wanted to separate out what we think the contribution of those other businesses are to the total topline did I hear that right.

Just a contribution to the total ALJ.

All of those things factor in.

Yes, I just wanted to know where that would be great. Yes, yes, yes.

<unk> is really a function of mix and when you look at the overstock customer the frequency that that customer visits the website is lower primarily because they are larger ticket items large furniture, assortments outdoor above ground spas big outdoor patio furniture and larger items.

Marcus Limonis: The only mandate that exists in their collaboration is that I don't ever want to see the same product on both sites. They're tasked with establishing new vendors, new ideas, and new pathways to find customers, all while ensuring that they're adding to the overall company database, which allows us to monetize that customer through these other products and services on the recently launched Beyond.com. Thanks very much and all the best.

That overstock Dot com had historically really really excels in when you look at driving overall revenue unique the frequency of visits that bed Bath <unk> beyond brings to the table with common items from bed Bath kitchen, and dining along with other things that Chandra is expected to grow.

Over time, what we really have learned is that if we can state myopically focused on the premise that our job is to deliver products and services to everything inside of the four walls of the home and the four corners of the property. We then really understand which brand is going to actually execute that.

Curtis Nagel: Thank you. Our next question comes from the line of Curtis Nagel of Bank of America. Your line is open. Great. Thanks very much for taking the question. Yeah, I guess the first one.

A different part of each strategy clearly on the outside of the house Overstock is going to lead that process with things like trampolines above ground spas outdoor patio furniture outdoor kitchens and things like that when you come inside it's clear that overstock is going to be better at delivering.

Marcus Limonis: I'd love to dig into the $250 AV target. I'm kind of curious what, I guess, is assumed in terms of contribution from normalizing pricing and promotions, how much of that is contribution from new products like baby or new categories, I guess, cross selling, and cross brands. And then, I guess, services contribution, which I'll have a follow-up question on. So I'm going to unpack that a little bit, because I heard a question about the AOV, and then I'm, is that right? And then I want to separate out what we think the contribution of those other businesses is to the total top line. Did I hear that right?

<unk> large ticket items around furniture now does it mean that bed Bath <unk> beyond can't sell furniture, but if you look at the historical brand attributes the consumer didn't intrinsically think of them that way and I believe what happened in the fall of 2023 is that when the company made the decision to shut down an overstock if.

Believe that it could transition that large ticket high <unk> consumer to bed Bath, <unk> beyond and quite frankly, it didn't happen and.

Anybody that had a brain would've known it wasn't going to happen. When you look at bed Bath <unk> beyond and you look at those historical categories that had high margin and high <unk>.

Marcus Limonis: Just contributions of total AOV. Yeah. How do all those... Yeah. I just want to show the most lovely ones.

Frequency it was obvious to us that we needed to lean into those things. So when you look at growing customer count well clearly bed Bath <unk> beyond does that when you look at increasing frequency clearly bed bath and beyond does that but when you are looking to drive <unk>.

Marcus Limonis: Yeah, so AOV is really a function of mix, and when you look at the Overstock customer, the frequency that that customer visits the website is lower, primarily because there are larger ticket items, large furniture assortments, outdoor above ground spas, big outdoor patio furniture, and larger items that Overstock.com had historically really, really excelled in. When you look at driving overall revenue, you need the frequency of visits that Bed Bath & Beyond brings to the table, with common items from bed, bath, kitchen, and dining, along with other things that Chendra is expected to grow over time. What we really have learned is that if we can stay myopically focused on the premise that our job is to deliver products and services to everything inside of the four walls of the home and the four corners of the property, we then really understand which brand is going to actually execute each different part of each strategy.

You need the trust and relate ability that bed Bath <unk> beyond created to then have overstock be able to convert that consumer in our database.

We know that driving overall revenue and getting to this $2 billion number are essentially Lego building blocks the core bed Bath <unk> beyond business has to deliver and you heard about adding new vendors and adding new relationships and eliminating distributors picking up margin by having first cost.

But we also know that that particular consumer has life events, having a baby getting married going to college buying their first home whatever that may be and Chandra is a world class expert and has proven over several decades that she knows.

Marcus Limonis: Clearly, on the outside of the house, Overstock is going to lead that process with things like trampolines, above-ground spas, outdoor patio furniture, outdoor kitchens, and things like that. But when you come inside, it's clear that Overstock is going to be better at delivering large ticket items like furniture. Now, that doesn't mean that Bed Bath & Beyond can't sell furniture, but if you look at the historical brand attributes, the consumer didn't intrinsically think of them that way. And I believe what happened in the fall of 2023 is that when the company made the decision to shut down Overstock, it believed that it could transition that large-ticket, high-aOV consumer to Bed Bath & Beyond. And quite frankly, it didn't happen. And anybody that had a brain would have known it wasn't going to happen.

How to execute that quite frankly better than all of US that are currently here. That's why we added her to the team, but when we look at driving to $2 billion. We believe that overstock is going to fill that gap up you heard Adrian mentioned overstock was a $1 $5 billion brand before.

Bath and beyond even showed up now it is true that there are some categories that both businesses played it.

Overstock sold some betting off price setting, but it sold some betting and it's sold some household items, but for the most part for the most part that revenue was driven by other categories. I believe that splitting these rolls, giving them full P&L responsibility, giving them the resources and the tools they need to grow.

<unk> their companies and improving vendor relationships will drive the gap that everybody seems to be so convinced that we can't achieve we're telling you today and you can look at our pay plans and look at our stock incentive plans, we signed up for a program. We believe we can achieve.

Marcus Limonis: When you look at Bed Bath & Beyond, and you look at those historical categories that had high margins and high frequency, it was obvious to us that we needed to lean into those things. So when you look at growing the customer count, well, clearly, Bed Bath & Beyond does that. When you look at increasing the frequency, clearly, Bed Bath & Beyond does that.

As opposed to what the historical model was where management was just taking bonuses and taking Rs use regardless of what the outcome was we've all signed up for a program that we firmly believe we can deliver in spite of the headwinds it is our intention to aggressively.

<unk> market share and if you look at the P&L for the full 2024 year, we plan on returning to profitability by the end of the year on a run rate basis. We know the first two quarters are still going to be we're still going to be operating at a moderate loss the first quarter, we <unk>.

Marcus Limonis: But when you're looking to drive AOV, you need the trust and relatability that Bed Bath & Beyond created to then have Overstock be able to convert that consumer in our database. We know that driving overall revenue and getting to this $2 billion number are essentially Lego building blocks. The core Bed Bath & Beyond business has to deliver. And you heard about adding new vendors and adding new relationships and eliminating distributors and picking up margin by having first cost dollars. But we also know that that particular consumer has life events, like having a baby, getting married, going to college, buying their first home, whatever that may be. And Chandra is a world-class expert and has proven over several decades that she knows how to do that, quite frankly, better than all of us that are currently here. That's why we added her to the team.

Specter as we continue to build the database as we get ready to launch overstock as we reengage with customers on a continued basis, we're confident that that's going to happen keep in mind last fall. This company told you that it was going to take 170 up to 175 million.

To reignite the brand, Dave and Adrian and myself prior to charter coming committed that there was no way no way, we're going to spend $175 million. We believe that we will materially improve that statistic, but we know that launching overstock was the simple.

Marcus Limonis: But when we look at driving to $2 billion, we believe that Overstock is going to fill that gap. You heard Adrian mention that Overstock was a $1.5 billion brand before Bed, Bath & Beyond even showed up. Now, it is true that there are some categories that both businesses played in. Overstock sold some betting, off-price betting, but it sold some books, and it sold some household items.

Silver bullet that quite frankly was obvious to us, but not obvious to others.

Thank you Mark that was really comprehensive.

Just a bit.

Follow up on the.

Services angle. So you talked a lot about trust right.

Driving.

You bet.

They require more turnover just figure out playing in.

Marcus Limonis: But for the most part, for the most part, that revenue was driven by other categories. I believe that splitting these roles, giving them full P&L responsibility, giving them the resources and the tools they need to grow their companies, and improving vendor relationships will close the gap that everybody seems to be so convinced that we can't achieve. We're telling you today, and you can look at our pay plans and look at our stock incentive plans; we signed up for a program we believe we can achieve. As opposed to what the historical model was, where management was just taking bonuses and taking RSUs, regardless of what the outcome was, we've all signed up for a program that we firmly believe we can deliver.

Where do you see I look at your site you got a couple of new businesses.

Mortgages, you got home services.

Business that is coming soon.

In terms of volume of plan to eventually get into $3 billion run rate I would assume these things are kind of longer dated or just how do you see those things integrating in.

I guess when do you think they'll start contributing.

So the revenue.

Look I have.

Yes, I have been a public company CEO now for eight years and I have learned a lot of hard lessons in one of those lessons is setting expectations properly around what could be achieved and while we have an immense amount of enthusiasm about what we know we have transformed this company.

Into we don't want investors and the people that we work for to be confused with any lack of focus on us delivering core revenue with improved margins with reduced SG&A, but let me be really clear about one thing I did not join this company to be a peddler of products.

Marcus Limonis: In spite of the headwinds, it is our intention to aggressively grab market share. And if you look at the P&L for the full 2024 year, we plan on returning to profitability by the end of the year on a run rate basis. We know the first two quarters are still going to be, we're still going to be operating at a moderate loss.

On the Internet I joined this company because I am 100% confident that I will turn this business into the AAA of the home business I've done it in other businesses and I truly understand that once you understand the fact set of who the customer is that lives inside of the four corners of that property home owner or home run.

Marcus Limonis: In the first quarter, we expect that as we continue to build the database, as we get ready to launch Overstock, and as we re-engage with customers on a continued basis, we're confident that that's going to happen. Keep in mind, last fall, this company told you that it was going to take up to $175 million to reignite the brand. Dave and Adrian and myself, prior to Chandra coming, committed that there was no way, no way we were going to spend $175 million. We believe that we will materially improve that statistic, but we know that launching Overstock was the simple silver bullet that, quite frankly, was obvious to us but not obvious to others. Thank you, Mark. That was really comprehensive.

<unk>, we need to build trust with them and as you build trust with them over time by delivering World Class service innovative solutions in all the nice nice words that everybody wants to use you will be able to penetrate their wallet by selling them products and services that they need.

Not flashy products that we want them to have that they need we know they need product warranties things break we know we need to provide services to improve the installation and delivery of those products to reduce reduce returns, which ultimately improves margin and improves the customer experience, we know that our.

Homeowners have assets their most important asset their home, we know they need to from time to time unlock value in that home and whether that's buying a new one refinancing one that they have cashed.

Curtis Nagel: And just a bit of thought on the services angle. So you talked a lot about trust, and in driving, in a purchase of that. I think they're requiring just more internal or just, you know, things are not playing in.

Cashing out I'll do a cash out refis or just accessing some value that's been established in the appreciation of their home. So they can pull that money out and reinvest it in their home.

Marcus Limonis: Where do you see, you know, I look at your site, you've got a couple new businesses, mortgage is you've got, you know, home services business that, you know, it's coming soon. In terms of, you know, plan to eventually get into, you know, $3 billion run rate, I would assume these things are kind of longer dated or just, you know, how do you see those things integrating? And I guess, when do you think they'll start contributing, you know, to the revenue? Look, I have been a public company CEO now for eight years, and I have learned a lot of hard lessons.

The idea of offering a $20000 HELOC program is purely made to give that consumer the ability to grab cash from the appreciated asset and reinvest it but let's be clear, we expect that consumer to actually reinvest a portion of that in buying the products.

That they need to to decorate to fulfill the balance of that renovation or expansion.

I know confidently that as we merge the rewards program as we improve the credit card program and we launch these other finer products, including home improvement loans that we will build that brand over time.

Marcus Limonis: And one of those lessons is setting expectations properly around what can be achieved. And while we have an immense amount of enthusiasm about what we know we have transformed this company into, we don't want investors and the people that we work for to be confused by any lack of focus on us delivering core revenue with improved margins and reduced SG&A. But let me be really clear about one thing.

I have not we have not established any of those revenue metrics or profit contribution expectations in any standard that we have outlined for you today as it relates to achieving profitability by the end of next year or the year. After our job is to surprise.

Marcus Limonis: I did not join this company to be a peddler of products on the internet. I joined this company because I am 100% confident that I will turn this business into the AAA of the home business. I've done it in other businesses.

Delight with our penetration on those and we will give you an update on the complexity and the size of that when we believe it has established a level of materiality.

Marcus Limonis: And I truly understand that once you understand the facts of who the customer is that lives inside of the four corners of that property, the homeowner or home renter, we need to build trust with them. And as you build trust with them over time by delivering world-class service, innovative solutions, and all the nice, nice words that everybody wants to use, you will be able to penetrate their wallets by selling them products and services that they need. Not flashy products that we want them to have, but ones that they need. We know they need product warranties; things break. We know we need to provide services to improve the installation and delivery of those products to reduce returns, which ultimately improves margin and improves the customer experience.

Alright, thanks very much.

Sure.

Thank you one moment please.

Our next question comes from the line of Seth Sigman of Barclays. Your line is open.

Hey, good morning, everyone and congrats to all on the new roles.

My main question is around the pricing strategy, the pricing philosophy more from a competitive perspective.

Yes, the term the team used to use in the past with smart value.

How do you all feel about that today, how that was executed what does it actually mean and as you think about overstock in bed Bath, how should they be positioned in the marketplace from a price perspective, and ultimately what's the type of work Youre doing right now to ensure that right value proposition. Thank you.

Marcus Limonis: We know that our homeowners have assets. Their most important asset is their home. We know they need to, from time to time, unlock value in that home. And whether that's buying a new one, refinancing one that they have, cashing out, or doing a cash out refinance, or just accessing some value that's been established in the appreciation of their home so they can pull that money out and reinvest it in their home.

Thanks.

I'm going to speak to the overstock side of the equation and then I'll hand, it over to Chandra, but I can tell you from overstock that when you think about overstock I don't want you to think about overstock circa 2022.

Marcus Limonis: Our idea of offering a $20,000 key lock program is purely to give that consumer the ability to grab cash from the appreciated asset and reinvest it. But let's be clear; we expect that consumer to actually reinvest a portion of that in buying the products that they need to decorate, to fulfill the balance of that renovation or expansion. I know confidently that as we merge the rewards program, as we improve the credit card program, and we launch these other finer products, including home improvement loans, that we will build that brand over time. But I have not, and we have not, established any of those revenue metrics or profit contribution expectations in any standard that we have outlined for you today as it relates to achieving profitability by the end of next year or the year after. Our job is to surprise and delight with our penetration of those, and we will give you an update on the complexity and the size of that when we believe it's established a level of materiality. All right. Thanks very much.

I want you to think of Overstock circa 2016, 2017, 2009, you get it back into that ore where smart value.

Was our opportunity.

So think about us as surplus goods don't think about us necessarily as liquidation think about us as factory direct overruns surplus as Marcus mentioned products that you will not find on bed Bath <unk> beyond we will have different assortments on both product categories.

We will have more than just home furnishings on the overstock website. There is a need for this in the market. There is a need for this among.

Among our suppliers, especially after what we've just gone through but there's always been that need nobody ever orders the perfect amount of sofas or nobody ever orders the perfect amount of health and beauty products. There is always an overrun here or there and an opportunity to price. It competitively so for us something that I think is really important with <unk>.

Overstock for you to for everybody to remember.

The overstock customer.

As a higher average household income customer. This is a customer who has made a lot of money they have a high.

Our high income and they make money by saving money and they love that shopping experience. They love the treasure Hunt they loved that thrill of the hunt they.

They will spend when they see quality at a value and thats, primarily what that brand has been built on over the years. When you think of well how can overstock drive these high average order sizes that bed Bath <unk> beyond <unk>.

Seth Sigman: Thank you. Our next question comes from the line of Seth. Barclays, Yolanda... Hey, good morning, everyone. And congrats on all the new roles. My main question is around the pricing strategy, the pricing philosophy, more from a competitive perspective. I guess the term the team used to use in the past was smart value. How do you all feel about that today? How was it executed?

It wasn't just in furniture that was capable we've sold $100000 diamond rings on overstock in the past several of them. There are customers looking for that deal and Thats. The way we want you to think about overstock.

Seth Sigman: What does that actually mean? And as you think about Overstock and Bed Bath, how should they be positioned in the marketplace from a price perspective? And ultimately, what's the type of work you're doing right now to ensure that right value proposition? Thank you.

Sandra yes.

Yes, but that can be on pricing is pretty straightforward. So we try to be competitive with <unk>.

Editors in our space in the market and then our customers love coupons and discounts and so we use those levers to drive the business where appropriate.

David J. Nielsen: You know, I'm going to speak to the overstock side of the equation and then I'll hand it over to Chandra, but I can tell you from experience that when you think about overstock, I don't want you to think about overstock circa 2022. I want you to think of overstock circa 2016, 2017, 2009, get it back into that era where smart value was our opportunity. Think about us as surplus goods. Don't think about us necessarily as liquidation. Think about us as factory direct, overruns, and surplus. As Marcus mentioned, products that you will not find at Bed Bath & Beyond.

Okay. Thank you for that and then I'm just curious with the recent inflection that you've seen in the business can you talk about some of the themes types of customers maybe the categories that you are seeing the improvement what is working right now.

Yes for us the.

Again, the lion's share of what's going on what's happening right now is bed bath and beyond.

And with bed Bath <unk> beyond its happening in the core power categories.

Bedding Bath kitchen and dining.

<unk> cookware you name. It. These are all really really important categories for us, we'll see spikes in furniture, and and area rugs and home improvement just like this recent labor day, our President's day, However, I will tell you.

David J. Nielsen: We will have different assortments in both product categories. We will have more than just home furnishings on the Overstock website. There is a need for this in the market. There is a need for this among our suppliers, especially after what we've just gone through. But there's always been that need.

It isn't at the same average order size as what you would get with Overstock, we have.

Overstocked running as a sub domain right now.

Click on Overstock, you can see.

The assortment that's there right now it's just as a placeholder because we had some.

David J. Nielsen: Nobody ever orders the perfect amount of sofas, or nobody ever orders the perfect amount of health and beauty products. There's always an overrun here or there and an opportunity to price that competitively. So for us, something that I think is really important with Overstock for everybody to remember. The Overstock customer is a higher average household income customer. This is a customer who has made a lot of money. They have a high income, and they make money by saving money, and they love that shopping experience. They love the treasure hunt.

60000 customers a day clicking on overstock.

Key in on their keyboards and on their cell phones overstock, we wanted to give them a place. So we didn't let them go cold until we got this launch started.

The average order size is 50, plus dollars higher there than what youll see on bed Bath and beyond and it's just that same pricing strategy. There is an opportunity for us with the product categories on overstock to drive a higher margin.

And a higher ELV, but bed bath and beyond Mark spoke to at the frequency we love It we love, how often theyre coming back and we love the frequency in which they are buying I'll tell you one thing that we definitely learned as Dave and I over the last couple of months hit the road.

David J. Nielsen: They love that thrill of the hunt, and they will spend when they see quality at a value. And that's primarily what that brand has been built on over the years. When you think of, well, how can Overstock drive these high average order sizes that Bed Bath & Beyond can't do? It wasn't just in furniture that Overstock was capable of doing.

Bed Bath <unk> beyond historical relationship with certain vendors in excess of three four $500 million a year and when we studied.

Intently, what mistakes, we believe bed Bath <unk> beyond made in their final days. It was really abandoning the solid brand recognition that large brands like Newell and cuisinart and a number of other brands have established in the marketplace and when you went to bed Bath <unk> beyond <unk>.

David J. Nielsen: We've sold $100,000 diamond rings on Overstock in the past, several of them. There are customers looking for that deal, and that's the way we want you to think about Overstock. Kendra

Chandra Holt: Yeah, Bed Bath & Beyond's pricing is pretty straightforward. So we try to be competitive with the main competitors in our space in the market. And then our customers love coupons and discounts. And so we use those levers to drive the business where it is. Okay, thank you for that. And then I'm just curious, with the recent inflection that you've seen in the business, can you talk about some of the themes, you know, types of customers, maybe the categories that you're seeing, the improvement, what is working right now? Yeah, for us, again, the lion's share of what's going on, what's happening right now is Bed Bath and Beyond. And with Bed Bath and Beyond, it's happening in the core categories of bedding, bath, kitchen, and dining. Tabletop cookware, you name it.

Specs to see those name brands from Dyson vacuums to Wamus set of sheets and for some reason the company thought it was a good idea to part ways with those world class globally dominated brands that consumers came to expect and understand the balance in any business like that is to have a perfect.

Between well recognizable brands that gives the customer the understanding that you are incredible retailer and weaving in owned brands that give you. The margin expansion you need to hit the levels of profitability, but thats, a very fine balance and when I started looking to hire a CEO.

David J. Nielsen: These are all really, really important categories for us. We'll see spikes in furniture and area rugs and home improvement, just like this recent Labor Day or President's Day. However, I will tell you, It isn't at the same average order size as what you would get with Overstock. We have Overstock running as a subdomain right now. If you click on Overstock, you can see the assortment that's there.

So for this business I said to the board we need to find somebody that doesn't think like this we need to find somebody that has actually done it and so when we went out and were blessed define someone at tenders caliber to be the CEO of buyback. If you look back at her previous relationships in a previous post she had not.

David J. Nielsen: Right now, it's just a placeholder because we had some 60,000 customers a day clicking on Overstock. They were keying in on their keyboards and on their cell phones. We wanted to give them a place so we didn't let them go cold until we got this launch started.

Only executed, but every channel checks that I did prior to bringing her on was not just with the people that she worked with it was the vendors that she had relationships with that for me was the gating principle of understanding does Chandra or does this candidate understand the importance of putting those.

David J. Nielsen: The average order size is 50 plus dollars higher there than what you'll see on Bed, Bath & Beyond, and it's just that same pricing strategy. There is an opportunity for us with the product categories on Overstock to drive a higher margin and a higher AOV, but Bed, Bath & Beyond, Marcus spoke to it, the frequency, we love it. We love how often they're coming back, and we love the frequency in which they buy. I'll tell you one thing that we definitely learned as Dave and I hit the road over the last couple months: that Bed Bath & Beyond had a historical relationship with certain vendors in excess of three, four, $500 million a year. And when we studied intently what mistakes we believe Bed Bath & Beyond made in its final days, it was really abandoning the solid brand recognition that large brands like Newell and Cuisinart and a number of other brands had established in the marketplace.

World Class brands up on a pedestal and then understanding through her experience of creating private labels that all of those companies have underpinned that how to support it.

As a foundational piece just to prop up the overall margin that really is the simple thing. Many people have said to me is bed bath and beyond going to have stores again, I will tell you as clear as I can I have no idea as I sit here today I have a feeling because gender has mentioned it two or three times.

That being in the retail business is an omnichannel experience I'd like you to expand on that a little bit.

Yeah, right now within both e-commerce, and brick and mortar there is white space.

Marcus Limonis: And when you went to Bed Bath & Beyond, you expected to see those name brands, from Dyson Vacuums to Wama Seta Sheets. And for some reason, the company thought it was a good idea to part ways with those world-class, globally dominant brands that consumers came to expect and understand. The balance in any business like that is to have a perfect balance between well-recognizable brands that give the customer the understanding that you are a credible retailer and weaving in old brands that give you the margin expansion you need to hit levels of profitability. But that's a very fine balance. And when I started looking to hire a CEO for this business, I said to the board, we need to find somebody that doesn't think like this. We need to find somebody that has actually done it.

Or a category killer to come in.

Add back.

Kitchen dining the category that bed Bath <unk> beyond had probably been dominant.

And when.

When we look at how our customers want to shop, we think theres an opportunity to serve them in multiple ways. So right now we're serving them from an ecommerce standpoint, but.

If we look at from brick and mortar presence right now I think everything's on the table, Yes, let me be.

Clear about sort of timeframes around that this company is sitting with a relatively meaningful amount of cash and no debt other than the building that we're currently in the process of selling every dollar that we have in the bank, we think about as our last dollar and there will be no <unk>.

Cereal Capex investments made of any kind until we have reestablished our level of profitability that is sustained I want to really be clear and if there is an opportunity to license the brand to somebody internationally like we already have today in Mexico, we will explore those in fact.

Marcus Limonis: And so when we went out and were blessed to find someone at Chandra's Caliber to be the CEO of Bed Bath, if you look back at her previous relationships and her previous posts, she had not only executed, but every channel check that I did prior to bringing her on was not just with the people that she worked with. It was the vendors that she had relationships with. That, for me, was the gating principle of understanding. Does Chandra or this candidate understand the importance of putting those world-class brands up on a pedestal and then understanding, through her experience of creating private labels at all those companies, how to underpin that, how to support it as a foundational piece just to prop up the overall margin? That really is a simple thing.

Dave is heading over to Dubai here next week.

From an inbound call of somebody that wants to open up bed Bath and beyond stores in the UAE. We are open to all of those things, but I would expect that we will explore partnerships shop in shop opportunities and things that are capex light and brand centric around how we want to delta.

But I don't want anybody to leave this call thinking that we're going to start opening stores Tomorrow next week or even next year that is not on the runway. We just don't want people to think that we are limiting the growth potential of this business. We are open to lots of ideas, including acquisitions of other companies where maybe.

Chandra Holt: And many people have said to me, is Bed Bath & Beyond going to have stores again? I will tell you as clearly as I can, I have no idea as I sit here today. I have a feeling, because Chandra has mentioned it two or three times, that being in the retail business is an omni-channel experience. I'd like you to expand on that. Yeah, right now, you know, within both e-commerce and brick and mortar, there's white space for a category killer to come in. In bed, bath, kitchen, and dining, the categories of bed, bath, and beyond have always been dominant. And, you know, when we look at how our customers want to shop, we think there's an opportunity to serve them in multiple ways. So right now, we're serving them from an e-commerce standpoint. But, you know, should we look at some brick and mortar presence? Right now, I think everything's on the table.

Baskin integrate or more a variety of other things.

Thank you all and best of luck.

Thank you.

Please.

Our next question comes from the line of Steven Forbes with Guggenheim. Your line is open.

Good morning, everyone markets I realize you mentioned working on improving the customer segmentation data.

But given the ramp in <unk> orders and obviously be the revenue goals for the year any update on the mix of orders between the customer groups that we can help contextualize.

And any sort of early learnings around repeat behavior differences among those groups.

Marcus Limonis: Let me be clear about the sort of timeframes around that. This company is sitting with a relatively meaningful amount of cash and no debt other than the building that we're currently in the process of selling. Every dollar that we have in the bank, we think about as our last dollar. And there will be no material CapEx investments made of any kind until we have re-established a level of profitability that is sustainable. I want to really be clear.

Worth highlighting.

On the on the third quarter earnings call.

Stephen we talked about the legacy overstock customers, which were customers who had purchased on overstock and also purchased on bed Bath <unk> beyond.

The legacy bed Bath <unk> beyond customers and then Pam Nu.

For the fourth quarter relatively similar performance among all three groups.

Marcus Limonis: And if there is an opportunity to license the brand internationally, like we already have today in Mexico, we will explore those opportunities. In fact, Dave is heading over to Dubai next week from an inbound call from somebody that wants to open up Bed Bath & Beyond stores in the UAE. We're open to all those things.

Faq.

Maybe a little bit more improvement and a willingness on the Tam new customer segment.

To lean into some of the higher price point categories in furniture and area rugs, but for the most part the overstock customer stayed about where they were from a repeat.

Marcus Limonis: But I would expect that we will explore partnerships, shop-and-shop opportunities, and things that are CapEx-like and brand-centric around how we want to build it. But I don't want anybody to leave this call thinking that we're going to start opening stores tomorrow, next week, or even next year. That is not on the runway.

<unk>.

The bed Bath <unk> beyond customer as I mentioned, we had a higher repeat.

Frequency among those customers in the fourth quarter and that had a lot to do with I believe what markets was just touching on and what Chandra is here to do and that is reestablish these powerhouse world class brands on bed Bath <unk> beyond with.

Operator: We just don't want people to think that we are limiting the growth potential of this business. We are open to lots of ideas, including acquisitions of other companies where maybe Bed Bath & Beyond can be integrated, or a variety of other things. Thank you all and best of luck. One moment. Our next question comes from Alana. Lugenherm, Yolanda. Good morning, everyone.

Even taking it to the next level, having unique collaborations with some of these major brands, where we have something unique on our website that brings people to to bed Bath <unk> beyond <unk> and <unk>.

Getting back in those businesses it took us a little bit of time in the in the third quarter to get those up and running with those world class brands by the fourth quarter, that's where we've seen some of the momentum and it's carried on into the first quarter as I mentioned in those key categories.

<unk> customer was coming through the website.

Alana: Marcus, I realize you mentioned working on improving the customer segmentation data. But given the ramp in 4Q orders, and obviously the revenue goals for the year, any update on the mix of orders between the customer groups that we can help contextualize? And any sort of early learnings around repeat behavior differences among those groups that are worth highlighting?

When asking who moved.

They literally typed in the word overstock and they came to the site and it was gone entirely gone its like Youre being invited to a party and then finding out that you had the wrong address and I think the challenge with that is is that we lost short term credibility.

That website when that sub domain got popped up really as a reaction to what I think Dave and I believe was just a mistake we were seeing business on a daily basis 200, $225000 with no marketing know anything trying to get people to buy something from a business that is intuitive.

David J. Nielsen: On the third quarter earnings call, Steven, we talked about the legacy Overstock customers, which were customers who had purchased on Overstock and also purchased on Bed Bath & Beyond, the legacy Bed Bath & Beyond customers, and then Tam New for the fourth quarter, relatively similar performance among all three groups. In fact, maybe a little bit more improvement and a willingness by the TAM new customer segment to lean into some of the higher price point categories in furniture and area rugs, but for the most part, the Overstock customer stayed about right where they were from a repeat function. The Bed Bath & Beyond customer, as I mentioned, we had a higher repeat frequency among those customers in the fourth quarter.

Really not correct is cost prohibitive and we don't have an infinite amount of our shareholders' cash to spend on that which is why we've pivoted. So hard in so quickly because we need to hit that $2 billion revenue and we know overstock as the path forward.

Yes.

Thank you for that and then just a quick follow up more of a clarification Mark as I believe I believe you stated that the goal is to sort of improve the marketing expense ratio by 50 to 100 basis points per year. I guess first can you just confirm that that's what you mean and then what sort of a base line is it the fourth quarter run rate or the full year of 2023.

David J. Nielsen: And that has a lot to do with, I believe, what Marcus was just touching on and what Chendra is here to do, and that is re-establish these powerhouse, world-class brands on Bed Bath & Beyond. And even taking it to the next level, having unique collaborations with some of these major brands, where we have something unique on our website that brings people to Bed Bath & Beyond. And getting back into those businesses, it took us a little bit of time in the third quarter to get those up and running with those world-class brands. But by the fourth quarter, that's where we saw some of the momentum, and it carried on into the first quarter, as I mentioned in those key categories. Look, the Overstock customer was coming to the website and asking who had moved. I mean, they literally typed in the word Overstock, and they got to the site, and it was gone, entirely gone. It's like being invited to a party and then finding out that you have the wrong address.

<unk> that we should think about that improvement over the next 12 to 24 months yes.

Yes.

Started looking at the financial statements for 2023, 14% was the marketing spend as a percentage of revenue and I have a goal of getting us down to 11 over time that that 3% is material. When you were talking about a $2 $3 billion business. This company can.

Not afford a 14%.

Marketing expense as a percentage of revenue nor should it be leaning exclusively on its vendors to mitigate that expense the vendors have a finite amount of money and we need that money to show up with better first cost dollars. So we have true margins that are better and supporting the customer experience when things don't go.

Alana: And I think the challenge with that is that we lost short-term credibility when that website, when that subdomain got popped up, really as a reaction to what I think Dave and I believe was just a mistake. We were seeing a business on a daily basis, $200,000, $225,000 with no marketing, no anything. Trying to get people to buy something from a business that is intuitively not correct is cost prohibitive. And we don't have an infinite amount of our shareholders' cash to spend on that, which is why we've pivoted so hard and so quickly, because we need to hit that $2 billion revenue, and we know Overstock is the path forward. Thank you for that.

That's a form of marketing and I think too often people are focused on let's just drive more and more and more you also need to retain what you've built so when we look at the overall marketing spend and our goal to drop it by a half a percent two 1%. This year that would mean that we would be looking at a 13%.

13, 5% number.

As part of that improving the efficiency of that database to drive that below 13, getting retention of our customers should drive that to 12 or below and then getting more efficient with our database and being smarter about our relationships with our customers is the pathway to 11 for those people that believe it or not.

Possible. There is no reason that you couldnt cut $30 $40 million of marketing expense out of this budget. The question is which 30 or 40 do you cut.

That usually is where the devil is in the details. We believe we have the secret sauce to figure that out.

Marcus Limonis: And just a quick follow-up, more of a clarification, Marcus. I believe you stated that the goal is to sort of improve the marketing expense ratio by 50 to 100 basis points per year. I guess, first, can you just confirm that that's what you meant? And then what's the baseline?

Thank you.

Thank you one moment please.

Our next question comes from the line of Jonathan Madison risky.

Of Jefferies. Your line is open.

Great. Good morning, everyone and thanks for taking my questions and welcome to the team Chandra.

First question is on the 2024 sales goal.

Maybe if you could just break that down a little bit to $2 billion.

Marcus Limonis: Is it the fourth quarter run rate or the full year 2023 that we should think about that improvement over the next 12 to 24 months? Yeah, when I started looking at the financial statements for 2023, 14% was marketing spend as a percentage of revenue, and I have a goal of getting us down to 11.

Marcus I think you described overstock dot com as the silver bullet. So just curious how much the overstock dot com contributing.

To 2024 after the <unk> launch.

Yes, Thanks, Jonathan I read your note last evening that came out shortly after we released our earnings and I suppose I can understand why you asked or why your question our ability to get to $2 billion. At this moment in time overstock and bed Bath <unk> beyond are not separate reporting segments, we expect that in the.

Marcus Limonis: That 3% is material when you're talking about a two, three billion dollar business. This company cannot afford a 14% marketing expense as a percentage of revenue, nor should it be leaning exclusively on its vendors to mitigate that expense. The vendors have a finite amount of money, and we need that money to show up with better first cost dollars, so we have true margins that are better and support the customer experience when things don't go right. That's a form of marketing. And I think too often people are focused on, let's just drive more and more and more. But you also need to retain what you've built.

2025 calendar year because of the materiality of what we believe overstock will become that we will report them separately, but if you look at the financials for 2023 from a revenue standpoint.

Approximately at $1 6 billion.

And bed Bath and beyond business did not layer into that number until.

Early the late summer early fall August of 2023, what happened in that moment is went out with bed Bath <unk> beyond.

When the website literally went from red to Blue literally just changed the name of it.

Marcus Limonis: So when we look at the overall marketing spend and our goal to drop it by a half a percent to 1% this year, that would mean that we would be looking at a 13 to 13.5% number as part of that. Improving the efficiency of that database to drive that below 13, getting retention of our customers to drive that to 12 or below, and then getting more efficient with our database and being smarter about our relationships with our customers is the pathway to 11. For those people that believe it's not possible, there's no reason that you couldn't cut 30, 40 million dollars of marketing expenses out of this budget. The question is, which 30 or 40 do you cut?

Not only confuse people, but I think you sent away overstock customers. So the way that I've asked the team to think about it is if you take the bed Bath and beyond core segment business from August one through December 31, or quite frankly, even through today and you annualize that and then <unk>.

Took the historical overstock business that was January through July 31, and you annualize that and then took out some of that crossover categories. That's what gives us confidence that $2 billion is a clear path. Let me also add to that that we know that.

Adding baby and beyond and a few other ancillary things also contribute to that.

Marcus Limonis: And that usually is where the devil is in the details. We believe we have the secret sauce to figure that out. Thank you. Thank you. One moment.

But we are not able to tell you because of SEC reporting how that 2 billion is going to be broken out. The reason I said that overstock is the silver bullet is theres a gap to fill.

Jonathan: Our next question comes from the line of Jonathan, of Jeffries, Yolanda's Oak. Great. Good morning, everyone, and thanks for taking my questions, and welcome to the team, Chandra, on the 2024 sales goal. Maybe if you could just break that down a little bit, the $2 billion. Mark, or you can subscribe to Overstock.com as the silver bullet. I'm curious how much you see Overstock.com contributing. I, for after the 1Q launch.

And thats about as good as I can be there is a gap to fill but we did use science and historical information to lay this track down it wasn't just some wild finger in the air Swag.

Yes.

Very helpful color and just a quick follow up question.

Marcus I think you made some comments about kind of working closely more closely with <unk> on going forward.

Marcus Limonis: Thanks. Yeah, thanks, Jonathan. I read your note last evening that came out shortly after we released our earnings, and I suppose I could understand why you asked or why you questioned our ability to get to $2 billion. At this moment in time, Overstock and Bed Bath & Beyond are not separate reporting segments. We expect that in the 2025 calendar year, because of the materiality of what we believe Overstock will become, we will report them separately. But if you look at the financials for 2023, from a revenue standpoint, we were approximately at $1.6 billion. And Bed Bath & Beyond's business did not layer into that number until the late summer, early fall, August of 2023.

Just some color on the cash flow statement I think you guys had a $10 million of proceeds.

From blockchain asset sales or crypto currency proceed.

More detail there and what's the path ahead for 'twenty four.

Im going to have Adrian handle the cash portion of how she wants to manage unlocking the value of her assets and she'll go through whether it's the building or bitcoin things of that nature, but let me address capelli unrelated to chip.

Very seriously every dollar that leaves this company and when I look at our P&L on a monthly basis and I see a line item of our management fee I think that very seriously and in 2021. This company for some reason decided that it couldnt manage a portfolio that wasn't even a noncore asset so it <unk>.

Marcus Limonis: What happened at that moment was when Bed Bath & Beyond, when the website literally went from red to blue, you literally just changed the name of it. You not only confused people, but I think you sent away Overstock customers. So the way that I've asked the team to think about it is if you take the Bed Bath & Beyond core segment business from August 1st through December 31st, or quite frankly, even through today, and you annualize that, and then you took the historical Overstock business that was January through July 31st, and you annualize that, and then you took out some of the crossover categories, that's what gives us confidence that $2 billion is But we are not able to tell you, because of SEC reporting, how that $2 billion is going to be broken out. The reason I said that Overstock is the silver bullet is that there's a gap to fill. And that's about as good as I can be.

<unk> to sign up a partnership with a local corporate ventures fund to help manage those 16 portfolio companies I've had the pleasure of speaking to a number of the leaders of those portfolio companies and quite frankly I have been pleased when I have one on one dialogue with them about what they are.

Doing what ideas they have and more importantly, what sorts of results. They are driving but I had to make that phone call and what I will not stand for is anybody getting in the way of our shareholders' understanding what's happening with money that has left their bank account and been invested in some other asset and when I pay somebody.

A fee to manage that business I expect results and communication and so we're going to work with <unk> on improving those two things over time and if those two things arent going to improve at a level that meets all of our standards. Then we're going to just assess what options, we have and redoing.

Marcus Limonis: There's a gap to fill, but we did use science and historical information to lay this track down. It wasn't just some wild finger-in-the-air swag.

Marcus Limonis: Yeah, that's very helpful, Collar. And just a quick follow-up question. Marcus, I think you made some comments about kind of working closely, more closely with Pellion, you know, going forward and, Just some color on the cash flow statement, I think you guys had $10 million in proceeds from Blockchain Asset Sales or Cryptocurrency Proceeds. Just more detail there and what's the path ahead for 24. Yeah, I'm going to have Adrienne handle the cash portion of how she wants to manage unlocking the value of her assets. And she'll go through, whether it's the building or Bitcoin, things of that nature. But let me address the Pellion relationship.

But it is in no way an indictment on the businesses that are inside of that portfolio. In fact, we don't control them. They are proprietors, we don't have a controlling stake where we could tell anybody what to do and whether you agree or disagree with the investment that had been made over the previous five years.

It's water under the bridge our job is to understand the value of that investment and figure out how to monetize that investment.

One goal maximize the value of that investment turned it into cash and then weaponize that cash to grow this company by either investing in its core business or acquiring another bolt on business that fits naturally inside of what our core business is.

Adrian Yes happy to Jonathan Thanks for the question on cash let me just frame that up a bit obviously, we're always looking at our balance sheet and looking at.

Marcus Limonis: I take very seriously every dollar that leaves this company. And when I look at the P&L on a monthly basis and I see a line item of a management fee, I take that very seriously. And in 2021, this company, for some reason, decided that it couldn't manage a portfolio that wasn't even a non-core asset.

Nonperforming assets and if theres, an opportunity to monetize in a meaningful way.

So the item you are seeing here in the fourth quarter was our decision to sell some of our bitcoin amounts actually all of our clients that we did have a holdings. If you recall there was a point in our company history, where we accepted crypto currency payment and.

Marcus Limonis: So it elected to sign up a partnership with a local corporate ventures fund to help manage those 16 portfolio companies. I've had the pleasure of speaking to a number of the leaders of those portfolio companies and, quite frankly, have been pleased when I have one-on-one dialogue with them about what they're doing, what ideas they have, and more importantly, what sorts of results they're driving. But I had to make that phone call.

And we have decided to sell those currencies, mostly in addition, Markus mentioned that we do have our corporate headquarters here in Salt Lake City pending are up for sale and we're looking to monetize that asset as well and we've received one offer so far that offer as much as Dave and I would like to move on it doesn't meet Adrian.

Standards, just yet and we're waiting on a few other offers that we expect to come in but it is our goal to have transacted on this building one way or the other by the middle of the year. The carry cost on this building is about $8 million and Thats.

Marcus Limonis: And what I will not stand for is anybody getting in the way of our shareholders understanding what's happening with money that has left their bank account and been invested in some other asset. And when I pay somebody a fee to manage that business, I expect results and communication. And so we're going to work with Pellion on improving those two things over time. And if those two things aren't going to improve at a level that meets all of our standards, then we're going to just assess what options we have for redoing them. But it is in no way an indictment of the businesses that are inside of that portfolio. In fact, we don't control them.

Seven point.

$6 million more than we're willing to invest in just parking desks and computers that money needs to be reinvested in technology, the database expanding brands et cetera et cetera.

Very helpful Best of luck.

Thank you.

And that at that time for question today, I would like to turn the call back over to Mark is la <unk> for any closing remarks.

Adrienne Lee: They are proprietors. We don't have a controlling stake where we could tell anybody what to do. And whether you agree or disagree with the investment that was made over the previous five years, it's water under the bridge. Our job is to understand the value of that investment and figure out how to monetize that investment. I have one goal, maximize the value of that investment, turn it into cash, and then weaponize that cash to grow this company by either investing in its core business or acquiring another bolt-on business that fits naturally inside of what our core business is. Adrian?

Thank you so much I couldnt be more excited about the team that has been assembled here to manage the day to day operations for those of you that know me I drive a very very hard charging mentality around serving at the pleasure of our employees and our shareholders. One thing that was not meant.

On today's call is that we will use a different tactic overtime to influence the outcome of our results, we will use influencers and content and information and ideas to bring the customers closer to us the days of buying singularly linear TV or just buying.

Adrienne Lee: Yes, happy to. Jonathan, thanks for the question on cash. Let me just frame that up a bit. Obviously, we're always looking at our balance sheet and looking at, you know, particularly non-performing assets, and if there's an opportunity to monetize them in a meaningful way. So the item you're seeing here in the fourth quarter was our decision to sell some of our Bitcoin, actually all of our Bitcoin. So we did have a holdings. If you recall, there was a point in our company history where we accepted cryptocurrency as payment. And we have decided to sell those currencies. In addition, Marcus mentioned that we do have our corporate headquarters here in Salt Lake City pending or up for sale, and we're looking to monetize that asset as well. And we've received one offer so far. That offer, as much as Dave and I would like to move on, doesn't meet Adrian's standards just yet.

<unk> are over consumers don't react to things like that and you could expect a whole host of influencers to not just be.

Involved in our business, but the motivated financially by the results a really new idea around influencers being tied to the variability of performance. We are on the cusp of announcing a few of them and believe that not only are we going to be adding them to our pool, but I am confidence in Dave and <unk> are going to be.

Adding additional resources to their army as well thanks for joining us on the call and we look forward to seeing you on the next one take care.

Thank you ladies and gentlemen, this does conclude today's conference. Thank you all participating you may now disconnect have a great day.

Yes.

Marcus Limonis: And we're waiting on a few other offers that we expect to come in, but it is our goal to have transacted on this building one way or the other by the middle of the year. The carrying cost on this building is about $8 million.

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Adrienne Lee: And that's $7.6 million more than we're willing to invest in just parking desks and computers. That money needs to be reinvested in technology, the database, expanding brands, et cetera, et cetera. Very helpful.

Jonathan: Best of luck. Thank you. And that is our time for the question of the day. I'd like to turn the call back. Thank you so much.

Yes.

Okay.

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Marcus Limonis: I couldn't be more excited about the team that has been assembled here to manage the day-to-day operations. For those of you that know me, I drive a very, very hard charging mentality around serving at the pleasure of our employees and our shareholders. One thing that was not mentioned on today's call is that we will use a different tactic over time to influence the outcome of our results. We will use influencers, content, information, and ideas to bring customers closer to us. The days of buying linear TV or just buying ads are over. Consumers don't react to things like that.

<unk>.

Okay.

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Marcus Limonis: And you could expect a whole host of influencers to not just be involved in our business but be motivated financially by the results. A really new idea around influencers being tied to the variability of performance. We are on the cusp of announcing a few of them, and believe that not only are we going to be adding them to our pool, but I'm confident that Dave and Chandra are going to be adding additional resources to their army as well. Thanks for joining us on the call, and we look forward to seeing you on the next one. Take care.

Yeah.

Yes.

Yeah.

Yes.

Operator: Thank you. Ladies and gentlemen, this does conclude today's conference. Thank you all.

Operator: Have a great day, www.overstock.com www.overstock.com www.overstock.com www.overstock.com www.overstock.com www.overstock.com www.overstock.com www.overstock.com www.overstock.com www.overstock.com www.overstock.com www.overstock.com www.overstock.com www.overstock.com www.overstock.com www.overstock 2024-2023 Beyond Inc. Earnings Conference Call At this time, all participants are in a listen-only mode.

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Adrienne Lee: After the speaker's presentation, there will be a question and answer session. To ask a question at this time, please press star 11 on your telephone. Please be advised that today's call is being recorded. I would now like to turn the conference over to Adrienne Lee, BEYOND's Chief Financial and Administrative Officer.

Yes.

Adrienne Lee: Thank you, Operator. Good morning, and welcome to BEYOND's fourth quarter and full year 2023 earnings conference call. Joining me today on the call are Executive Chairman Marcus Limonis, CEO of Bed Bath & Beyond, Chandra Holt, and CEO of Overstock, Dave Nielsen. Today's discussion and our responses to your questions reflect management's view as of today, February 21, 2024, and may include forward-looking statements, including, without limitation, regarding our future goals, performance, profitability, and financial results. Additional results could differ materially from such statements.

Okay.

Sure.

Okay.

Thank you for standing by and welcome to Q4 2023 Beyond Inc. Earnings Conference call. At this time, all participants are in a listen only mode.

Adrienne Lee: Additional information about risks, uncertainties, and other important 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 SBA. During this call, we'll discuss certain non-GAAP financial measures. Our filings with the SEC, including our fourth-quarter earnings release available on our investor relations website at investors.beyond.com, contain important additional disclosures regarding these non-GAAP measures, including reconciliations of these measures to the most comparable GAAP measures. Following management's prepared remarks, we will open the call to questions. With that, let me turn the call over to our Executive Chairman, Marcus Limonis. Well, good morning, and welcome to the first Beyond Earnings Call into 2024. I am really honored to be here, and I understand the gravity of this opportunity.

After the Speakers' presentation there'll be a question and answer session to ask a question at that time. Please press star one on your telephone.

Please be advised today's call is being recorded.

I would now like to turn the conference over to Adrianne, Lee beyond Chief financial and administrative officer Adrian.

Thank you operator, good morning, and welcome to <unk> fourth quarter and full year 2023 earnings Conference call. Joining me today on the call our executive Chairman Mark <unk> CEO of bed Bath <unk> beyond Chandra halt and CEO of Overstock, Dave Nielsen today's discussion and our responses to your questions reflect.

As of today February 21, 2024, and May include forward looking statements, including without limitation regarding our future goals performance profitability and financial results actual results could materially differ materially from such statements.

Marcus Limonis: Over the last 75 days, we have made substantial progress laying the foundation for material growth, a differentiated business model, and improved customer retention and an affinity focus with our customers. Our goal is to take a simple commodity transaction and turn it into a trust transaction. We realize that it's going to take time, but we are going to lay the foundation for it. Positive transactions with frequency with our Bed Bath & Beyond brands will create trust. And trust will create our ability to sell the bigger ticket items from Overstock and more complex products and services from Beyond Plus. As many of you know, we've gone through both a management and company restructuring in the last 75 days. Yesterday, we announced management changes that provide clear direction for the two brands and position us with a leadership team that is now aligned with shareholders on incentives and driving value. Adrian, Chandra, and Dave are the three leaders whom I trust to lead the day-to-day operations with full P&L authority and responsibility. They bring expertise, vision, and the change management skills that this company needs to drive results and evolve this business. You'll be hearing from each of them today in both prepared remarks and the Q&A.

Additional information about risks uncertainties and other important 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 are filings with the SEC, including our fourth quarter earnings release available on our Investor Relations website at investors <unk> beyond dot com contain important additional disclosures regarding these non-GAAP measures.

Reconciliations of these measures to the most comparable GAAP measures.

Following managements prepared remarks, we will open the call up for questions with that let me turn the call over to our executive Chairman market's ammonia will good morning, and welcome to the first beyond earnings call into 2024, I am really honored to be here and I understand the gravity of this opportunity.

Over the last 75 days, we have made substantial progress laying the foundation for material growth, a differentiated business model and improve customer retention and then affinity focus with our customer.

Our goal is to take a simple commodity transaction and turned it into a trust transaction.

We realized thats going to take time, but we're going to lay the foundation for it positive transactions with frequency with our bed Bath <unk> beyond brands will create trust and trust will create our ability to sell the bigger ticket items from overstock to more complex products and services from beyond plus.

Marcus Limonis: One thing you can count on going forward is better communication, especially related to our vision, better results, and a clear path forward. That vision lands squarely on providing our customers with ideas, inspiration, and information in addition to the products and services they need to unlock the value of their household. That focus is centered around the four walls of their home, extending to the four corners of their property.

As many of you know we've gone through both our management and company restructure of the last 75 days.

Marcus Limonis: To begin this transformation, we feel like we have an unbelievable amount of low-hanging fruit at this company. As an example, we know the most valuable tangible asset we own is our database of consumers. We know that improving the quality of that database drives up conversion and brings variable costs down. Much to my delight, our database is massive, with over 150 million records.

Yesterday, we announced management changes, which provide clear direction on the two brands and position us with a leadership team that is now aligned with shareholders on incentives and driving value.

<unk> Chandra Dave are the three leaders who might trusts to lead the day to day operations with full P&L authority and responsibility they bring expertise vision and the change management skills that this company needs to drive results and evolve this business you'll be hearing from.

Marcus Limonis: However, to improve efficiency and profitability, we're going to invest in cleansing, de-duping it by household, and instituting a more efficient segmentation strategy. We have brought in both external leading firms and subject matter experts to create our gold standard for that database now. The implementation of that database across a modern-day CRM will improve conversion and materially reduce inefficient marketing spend. I believe this simple strategy will reduce the company's marketing expense as a percentage of revenue by anywhere from a half a percent to one percent annually, better than last year, a number that we know we have to reduce materially over the next 24 months. The odd will have one purpose to unlock the home's potential for both homeowners and renters, giving us a chance to expand the lifetime value of each customer we establish as a relationship. We believe this will drive growth and profitability. Well, a utopian state would be to create the AAA of the home, a true affinity model, providing both products and services that grow lifetime value.

Each of them today in both the prepared remarks and the Q&A.

One thing you can count on going forward is better communication, especially related to our vision.

<unk> results and the clear path forward that vision land squarely on providing our customers ideas inspiration and information in addition to the products and services they need to unlock the value of their household.

That focus is centered around the four walls of their of their home extending to the four corners of their property.

To begin this transformation, we feel like we have an unbelievable amount of low hanging fruit at this company as an example, we know the most valuable tangible asset we own is our database of consumers, we know that improving the quality of that database drives up conversion and brings variable costs.

Down much.

Much to my delight, our database is massive with over 150 million records, however to improve efficiency and profitability, we're going to invest and cleansing de duping. It by household and instituting a more efficient segmentation strategy.

Marcus Limonis: Expanding and growing our core business is where our laser focus is. That starts with generating core revenue and delivering better margins. Our primary focus this year is to achieve $2 billion in sales, a material increase from 2023, and follow that up with achieving a run rate of $3 billion by the end of 2025, all while sequentially improving margins over that period back to the 20% margin plus level. Those two factors, coupled with material SG&A reductions, will result in a profitable run rate by year-end 2024.

We have brought in both external leading firms and subject matter experts to create our gold standard of that database now the.

The implementation of that database across a modern day, CRM will improve conversion and materially reduce inefficient marketing spend.

I believe this simple strategy will reduce the company's marketing expense as a percentage of revenue by anywhere from a 5% to 1% annually better than last year, a number that we know we have to reduce materially over the next 24 months.

Marcus Limonis: We believe the bridge and building blocks to achieve that are clear, and the team is going to walk you through that bridge shortly. Before I turn the call over to the team, I wanted to provide a short summary of our 16-company Medici portfolio, a non-core asset that many holders have requested an update on. As a reminder, in April 2021, our company entered into a limited partnership agreement with Pellion Ventures in Draper, Utah, to manage the Medici portfolio. This partnership came with an annual management fee in addition to upside deal economics in exchange for them nurturing these companies and building value. While we are wildly excited by the prospects of a few of them, the overall performance has not been as good as we think it could be.

Beyond we'll have one purpose to unlock the homes potential for both homeowners and renters, giving us the chance to expand the lifetime value of each customer we established as a relationship. We believe this will drive growth.

And profitability.

Well utopian state would be to create the AAA of the whole true affinity model, providing both products and services that grow the lifetime value.

Expanding and growing our core business is where our laser focus is that starts with generating core revenue and delivering better margins.

Our primary focus this year is to achieve $2 billion in sales a material increase from 2023, and followed that up with achieving a run rate of $3 billion by the end of 2025.

Marcus Limonis: We intend to increase our communication with these respective companies and work closely with Pellion to modify the relationship in a way that singularly unlocks value and holds parties accountable. We do believe there are a few companies that could surprise and delight all of us. We're firmly committed to delivering updates quarterly. I'll now turn the call over to Dave. Thank you, Marcus.

All while sequentially improving margins over that period back to the 20% margin plus level.

Those two factors coupled with material SG&A reductions will result in a profitable run rate by year end 2024.

David J. Nielsen: 2024 is a pivotal year for the company as we lay the groundwork for our new strategic vision and work toward a return to profitability. We have a roadmap to launch new home-centric websites and value-added services over the course of the year to acquire new customers, improve our retention of them, and ultimately drive down the cost of customer acquisition. As a proof point for the above strategy, this dynamic was evident in Q4. Leading up to and during the holidays, we saw a higher number of repeat customers compared to the same period last year. This is important as we work to improve our marketing efficiency and build loyalty among the new customers acquired. Some may say our repeat rate increased because of the categories we leaned into, like bed, bath, kitchen, and dining, and that may be true.

We believe the bridge and building blocks to achieve that are clear and the team is going to walk you through that bridge shortly.

Before I turn the call over to the team I wanted to provide a short summary on our 16 company Medici portfolio, a noncore asset that many holders have requested an update on <unk>. As a reminder, in April 2021, our company entered into a limited partnership agreement with <unk> ventures in Draper, Utah.

To manage the Medici portfolio. This.

This partnership came with an annual management fee. In addition to upsize the deal economics and exchange for them their touring these companies and building value.

While we are wildly excited by the prospects of a few of them. The overall performance has not been as good as we think it could be.

We intend to increase our communication with these respective companies and work closely closer with <unk> to modify the relationship in a way that singularly unlocks value and hold parties accountable. We do believe there are a few companies that could surprise and delight all of us were firm.

David J. Nielsen: But we see this as a benefit to the home-centric portfolio of businesses and see Bed Bath & Beyond as a flywheel to power customer acquisition for the entire portfolio. On the third quarter earnings call, we told you that we would relaunch Overstock in September of 2024. Our team found a way to pull that launch date up significantly, working with my new best friend, Harley Finkelstein, president of Shopify.

<unk> committed to delivering updates quarterly I'll now turn the call over to Dave.

Thank you Markus.

2024 is a pivotal year for the company as we lay the groundwork for a new strategic vision and work toward a return to profitability.

David J. Nielsen: We are planning to relaunch Overstock in roughly five weeks. This is significant because relaunching it will mean we can immediately begin to build a creative business with the Overstock customer in furniture, area rugs, patio, and outdoor, among other categories. We're also planning to relaunch the jewelry business, which was once a hundred plus million dollar business annually, among other product lines that the Overstock customer was drawn to over the years. Pulling up the relaunch of Overstock has the potential to drive higher average unit retail prices, improve overall margins, and meet customers where they're shopping for the items we know they want, which is a far more efficient way to leverage each of our iconic brands and drive marketing spend efficiency.

We have a roadmap to launch new home centric websites and value add services over the course of the year to acquire new customers.

Prove our retention of them and ultimately drive down the cost of customer acquisition.

As a proof point to the above strategy. This dynamic was evident in Q4.

Leading up to and during the holidays, we saw a higher number of repeat customers compared to the same period last year.

This is important as we work to improve our marketing efficiency and build loyalty among the new acquired customers. Some may say, our repeat rate increase because of the categories, we leaned into like bed Bath kitchen and dining.

And that may be true.

But we see this as a benefit to the home centric portfolio of businesses and sea bed Bath <unk> beyond the <unk>.

David J. Nielsen: Adrian will outline our targets as she walks you through our margin improvement plan for 2024 later on the call. As we look to the future, we believe we can maximize profitability with a larger e-commerce revenue stream underpinned by multiple brands, layering value-added services, and operating a more variable cost model. Well, we have a lot to improve.

Flywheel to power customer acquisition for the entire portfolio.

On the third quarter earnings call. We told you that we would relaunch overstock in September of 2024.

Our team found a way to pull that launch date up significantly working with my new best friend, Harley Finkelstein President of Shopify, we are planning to relaunch overstock and roughly five weeks. This is significant because re launching it will mean, we can immediately begin to build accretive business.

David J. Nielsen: There is also a lot of good work happening. We are thrilled with the fact that we exceeded our expectations and are sitting today at nearly 6 million active customers, a 20% improvement over last year. November through today, revenue growth has remained positive for the first time since 2021.

With the overstock customer in furniture area rugs patio and outdoor among other categories. We're also planning to relaunch the jewelry business, which was once a 100 plus million dollars business annually. Among other product lines that the overstock customer was drawn to over the years.

David J. Nielsen: We're encouraged to see our work to improve vendor relations begin to bear fruit. Vendor partners are recognizing our improved sales performance in the bed, bath, and beyond power categories of bedding, bath, kitchen appliances, cookware, and dining, just to name a few, and are working with our merchandising teams to increase breadth and depth of assortment to help us drive sales and improve margins. During Q4, our new partner additions grew by 74% with more than 200 new partners added. In fact, as we turned the page on 2023, more than 100 additional partners were under various stages of contract. As you can appreciate, there is an incredible amount of work being done by our team. They are excited and engaged.

Pulling up the re launch of Overstock has the potential to drive higher average unit retails improve overall margins and meet customers, where they're shopping for the items, we know they want.

Which is a far more efficient way to leverage each of our iconic brands and drive marketing spend efficiencies.

Adrian will outline our targets as she walks you through our margin improvement plan for 2024 later on the call as.

As we look to the future. We believe we can maximize profitability with a larger ecommerce revenue stream underpinned with multiple brands layering value added services and operating a more variable cost model, while we have a lot to improve.

There is also a lot of good work happening.

We are thrilled with the fact that we exceeded our expectations and are sitting today at nearly 6 million active customers of <unk>.

20% improvement over last year November through today revenue growth has remained positive the first time since 2021.

We're encouraged to see our work to improve vendor relations begin to bear fruit.

Vendor partners are recognizing our improved sales performance and the bed Bath <unk> beyond power categories of bedding, Bath and kitchen appliances, cookware and dining just to name a few and are working with our merchandising teams to increase breadth and depth of assortment to help us drive sales and improve margins.

David J. Nielsen: Our strategic vision is aimed at increasing our engagement with customers by staying connected with them beyond a single sales transaction. It is our mission to help customers unlock the potential of their home. We believe these actions will enable us to achieve our long-term aspirational goals, or what we internally refer to as our North Star: 10 million active customers, $250 average order value, and twice the annual order frequency. Before I wrap up, I want to give a warm welcome to Chandra. I'm thrilled we've added such a terrific leader and experienced retail professional to our team. With that, Chandra.

During Q4, our new partner additions grew by 74% with more than 200, New partners added in fact, as we turned the page on 2023 more than 100 additional partners were under various stages of contracting.

As you can appreciate there is an incredible amount of work being done by our team they're excited and engaged our strategic vision is aimed at increasing our engagement with customers by staying connected with them beyond a single sales transaction.

Chandra Holt: Thanks, Dave. I joined the company because I'm passionate about Bed Bath & Beyond and am driven to reestablish its category dominance. It's my goal for Bed Bath & Beyond to be a leader in unified commerce. We aim to create a customer experience that is more seamless than today's traditional omni-channel. We also plan to introduce tailored experiences for purchasing that are adjacent to our core Bed, Bath & Beyond offerings, such as Baby & Beyond, Kids & Beyond, College Living, and Wombsetter.com. Baby & Beyond is expected to be our first specialty store, and we are excited about the upside because we know many Baby & Bath customers. Bricklink craft shop, and the B&C Academy.

It is our mission to help customers unlock the potential of their home. We believe these actions will enable us to achieve our long term aspirational goals.

What we internally refer to as our North Star 10 million active customers $250 average order value and a two times annual order frequency.

Before I wrap up I want to give a warm welcome to Chandra.

I'm thrilled we've added such a terrific leader and experienced retail professionals to our team with that Sandra.

Thanks, Dave.

Joined the company, because I'm passionate about bed Bath and beyond and then driven to reestablish a category dominance.

It's Michael for bed Bath, <unk> beyond to be a leader in unified Commerce.

We aim to create a customer experience that is more seamless from today's traditional omnichannel retailers.

Chandra Holt: Lamsada is another exciting initiative. At its peak, Wamsutta was a top bedding and textile brand in the U.S. In the coming weeks, I plan to partner with suppliers and designers to set the new vision for Lone Sutter. I look forward to modernizing the marketing and creative processes through a partnership with a powerful and influential female leader who will serve as the creative director and will be announced at a later date. Across all brands, we seek to build and curate an assortment to improve quality and provide unprecedented value for our customers. We have significant opportunities ahead of us with our robust portfolio brands, and I look forward to leading the charge in positioning the business for growth and interacting with our investment community. I will now turn the call over to Chandra. Thank you.

We also plan to introduce tailored experiences for purchase occasion that are adjacent to our core bed Bath <unk> beyond offerings, such as baby <unk> Kids are beyond college, and one set of Dot com.

<unk> is expected to be our first specialized experience and we are excited about the upside because we know many that doesn't beyond customers cross.

Cross shop, the BBB category.

I'm sorry that is another exciting initiative at its peak once that was a top betting and textile brand in the U S.

In the coming weeks I plan to partner with suppliers and designers because that's a new vision for months.

I look forward to modernizing the marketing and creative processes through a partnership with a powerful and influential E mail here.

Is the creative director and will be announced at a later date.

Across all brands.

Bill I'm curious assortment to improve quality and provide unprecedented value for our customers.

We have significant opportunities ahead of us with a robust portfolio of brands and I look forward to leading the charge and positioning the business.

Adrienne Lee: I'm going to start by reviewing some key financial results to provide context for how we're thinking about our path forward. Revenue declined 5% year-over-year in the fourth quarter and grew 3% sequentially. Improvement in our revenue trend was led by 9% growth in active customers driving 35% growth in Average order value declined 30% year-over-year due to mixed feelings about lower AUR category. November and December revenue combined was up year over year, and we have seen that trend continue. There is measured progress being made, and we are focused on carrying the momentum through this year as Chendra leads our team in curating a better assortment for our Bed Bath & Beyond brands, and Dave leads the relaunch of our once billion-dollar plus Overstock. Gross margin landed at 15.6% for the quarter, a 650 basis point decrease versus the same period last quarter.

Interacting with our investment community.

I will now turn the call over to Adrian.

You cannot I'm going to start by reviewing some key financial results to provide context into how we're thinking about our path forward revenue declined 5% year over year in the fourth quarter and grew 3% sequentially improvement in our revenue trend was led by a 9% growth in active customers driving 35% growth in orders.

Average order value declined 30% year over year due to sales mix skewing to lower AUR categories.

November and December revenue combined was up year over year, and we have seen that trend continue there is measured progress being made and we are focused on carrying the momentum through this year as tender leads our team in Curating, a better assortment for our bed Bath <unk> beyond brands and Dave leads the relaunch of our $1 billion plus overstock.

Eight.

Gross margin landed at 15, 6% for the quarter, a 650 basis point decrease versus the same period last year. We believe this result is somewhat transient and was primarily driven by reigniting our customers.

Adrienne Lee: We believe this result is somewhat transient and was primarily driven by reigniting old customers and attracting new customers and educating and enticing them on a wider source. Increased discounting dropped about 400 basis points, Welcome Rewards Redemption drove about 160 basis points, and Increased Shipping Cost drove about 170 basis points of pressure.

<unk>, new customers and educating and enticing them on a wider assortment.

Increased discounting drove about 400 basis points welcome rewards redemptions drove about 160 basis points and increased shipping costs drove about 170 basis points of pressure.

Adrienne Lee: We are taking the following actions that are within our control to improve our gross margin program, renegotiating, and improving Vendor Relations for More Favorable Products and Relaunchingoverstock.com, which we believe will drive higher AOVs. Providing integration add-ons like product warranties and shipping and reintroducing Ramsuda and other owned brands to complement the Superior Name Brands we have assembled and eliminating inefficient distribution. The G&A tech expense increase of $7 million was primarily driven by us booking approximately $6 million of discrete one-time item costs primarily associated with expense reduction actions announced in December. All in, adjusted EBITDA was a loss of $49 million.

We are taking the following actions that are within our control to improve improve our gross margin profile.

Renegotiating freight rates.

Improving vendor relations from our favorable product costs.

<unk> Overstock Dot com, which we believe will drive higher <unk>.

Providing integration add ons like product warranties and shipping insurance.

Reintroducing them sooner and other owned brands to complement the superior named brands, we have assembled and eliminating inefficient discounting.

The G&A the G&A and tech expense increase of $7 million was primarily driven by us booking approximately $6 million of discrete onetime item costs, primarily associated with expense reduction actions announced in December.

All in adjusted EBITDA was a loss of $49 million.

Adrienne Lee: On a margin basis, this was a negative 12.7%, an almost 1500 basis point decline year over year, with approximately 50% of the decline driven by growth margin pressure. In addition to our focus on improving gross margins, we continue to look for opportunities to reduce expenses throughout the P&L. We have identified a total of $45 million of annualized costs, which is expected to be fully annualized in the first half of 2020. This includes the $25 million cost reductions committed to in December and $20 million of incremental spending.

On a margin basis. This was a negative 12, 7%.

<unk> thousand 500 basis point decline year over year with approximately 50% of the decline driven by gross margin pressure.

In addition to in addition to our focus on improving gross margins. We continue to look for opportunities to reduce expenses throughout the P&L. We have identified a total of $45 million of annualized cost savings, which is expected to be fully annualized in the first half of 2025.

This includes the $25 million cost reductions committed to in December and $20 million of incremental savings.

Adrienne Lee: We expect to reinvest these dollars to continue to drive growth. Additionally, I want to highlight that we have revised our executive team's equity compensation to align it with stock price appreciation and revenue growth. This is meaningful as it incentivizes the team to push to our $2 billion revenue goal, make progress towards getting back to a 20% plus growth margin, and continue to identify costs. Our reported GAAP EPS loss of $3.55 for the fourth quarter was primarily impacted by establishing a valuation allowance against our net deferred tax assets due to our recent operating losses and expected near-term pressure on profitability related to growing our customer file. Excluding the impact of equity securities, our building write-down, and the valuation allowance, we reported an adjusted diluted loss per share of $1.25.

We expect to reinvest these dollars to continue to drive growth.

I want to highlight that we have revised our executive teams equity compensation to align it with stock price appreciation and revenue growth. This is meaningful as it incentivize the team to push to our $2 billion revenue goal make progress towards getting back to a 20% plus gross margin and continue to identify cost savings.

Our reported GAAP EPS loss of $3 55 for the fourth quarter was primarily impacted by establishing evaluation allowance against our net deferred tax assets due to our recent operating losses and expected near term pressure on profitability related to growing our customer file.

The impact of equity Securities are building write down and the valuation allowance that we reported adjusted diluted loss per share of $1 22.

Adrienne Lee: Our balance sheet remains strong. On a net basis, we ended the year with a cash balance of $268 million. On our third quarter earnings call, we shared that we expected to spend $175 million on the purchase of Bed Bath & Beyond and subsequent customer acquisition strategy. We have spent about $100 million through the fourth quarter, and I expect that we will invest less, in large part due to the key learnings Dave mentioned from the fourth quarter. Kendra and Dave are focused on growing our anchor brands and launching new products and services. These products are under various stages of launch. Our margin and cost-saving actions are well underway. So as far as expectations are concerned, we expect revenue to be positive year over year in Q1, with the goal of $2 billion for 2020-21. We expect gross margins to be in the 16% to 17% range in Q1, with a goal for the full year closer to 2020.

Our balance sheet remains strong on a net basis, we ended the year with a cash balance of $268 million.

On our third quarter earnings call, we shared that we expected to spend $175 million on the purchase of bed Bath <unk> beyond brand and subsequent customer acquisition strategies.

We have spent about $100 million through the fourth quarter and I expect that we will invest less in large part due to the key learnings Dave mentioned from the fourth quarter.

Tender and Dave are focused on growing our anchor brands and launching new products and services. These products are under various stages of launch our margin and cost saving actions are well underway. So as far as expectations. We expect revenue to be positive year over year in Q1 with the goal of $2 million for 2024.

We expect gross margins to be in the 16% to 17% range in Q1 with a goal for the full year closer to 20%. We expect the second half of the year to be profitable.

Marcus Limonis: We expect the second half of the year to be profitable. There is work to be done, but I'm confident in our path forward. Now, we'll turn the call back to Marcus.

There is work to be done, but I am confident in our path forward and now I will turn the call back to market.

Marcus Limonis: Thanks, Adrienne. Before we get into the Q&A, I want to reiterate that we hope you hear loud and clear from us what we know the expectations are from you and what our standards are for ourselves. I'd like to now turn the call over to the Q&A. Thank you. Again, ladies and gentlemen, if you'd like to ask a question, please press star 1-1 on your telephone. Again, to ask a question, please press star 1. One moment for our first.

Thanks, Adrian before we get into the Q&A I want to reiterate that we hope you hear loud and clear from US what we know the expectations are from you and what our standards are of ourselves I'd like to now turn the call over to the Q&A.

Thank you again, ladies and gentlemen, my question. Please press star one on your telephone.

Again to ask a question. Please press star 111.

One moment for your first question.

Rick Patel: Our first question comes from the line of Rick Patel of Raymond James. Your line is open. Thank you. Good morning, everyone, and congratulations to Chandra, Dave, and Adrian on the new and expanded roles. I just had a question about just a low-hanging fruit that you touched on.

Our first question comes from the line of Rick Patel of Raymond James Your line is open.

Thank you and good morning, everyone and congrats to Chandra, Dave and Adrian on the new and expanded roles.

I just had a question on <unk>.

The low hanging fruit that you touched on so you talked about database.

Marcus Limonis: So you talked about the database and opportunities around the database and segmentation. Can you dig a little further on how to gain efficiency here and when should we really start to see this initiative gain traction? Is it something that happens in 2024 or is it more of an out-year event? So this is Marcus. Thank you for the question.

Opportunities around the database and segmentation can you dig a little further on how to gain efficiency here and when should we really start to see this initiatives gain traction is it something that happens in 2024 or is it more of an out year event.

So this is Marcus Thank you for the question for me when I look at a valuable asset light the database understanding the construct of it and the cleanliness of it is probably first and foremost and when we made the bed Bath and beyond acquisition, we picked up a very large database, but understanding what a large database looks like it is.

Marcus Limonis: For me, when I look at a valuable asset like a database, understanding the construct of it and the cleanliness of it is probably first and foremost. And when we made the Bed Bath & Beyond acquisition, we picked up a very large database. But understanding what a large database looks like is important to understand the quality of that database and its segmentation.

To understand the quality of that database and the segmentation of it so putting people in the right categories at the right time offering them the right products improves efficiency today in my opinion, we are basically just spraying the database with every single offer that we have and we need to do a better job.

Marcus Limonis: So putting people in the right categories at the right time and offering them the right products improves efficiency. Today, in my opinion, we are basically just spamming the database with every single offer that we have. And we need to do a better job of understanding who that customer is, what their historical purchases are, creating some predictive logic around what their next purchases could be, understanding their address and their home better to understand the size of the property, the square footage of the home, the number of rooms in the house, and what the things are that are going to speak directly to them. Too often, we forget to curate a message or an offer specifically to an individual consumer. And when they do that, they end up exhausting the database, creating fatigue, and having people either not come back and do business or opt out of the relationship because they don't feel like it's customized to them.

Understanding who that customer is what their historical purchases are creating some predictive logic around what their next purchases could be understanding their address and their home better to understand size of property square footage of home number of rooms in the half.

And what the things are that are going to speak directly to them too often customers forget to curate a message or an offer specifically to individual consumer and when they do that they end up exhausting the database, creating fatigue and having people either not come back.

And do business or opt out of the relationship because they don't feel like it's customized to that when you do these things you should expect to yield more from that customer over a 12 month period as Dave mentioned, our goal is to increase the frequency of visits to two and to expand the.

Marcus Limonis: When you do these things, you should expect to yield more from that customer over a 12-month period. As Dave mentioned, our goal is to increase the frequency of visits to two and to expand the offering to them by looking to generate a higher AOV. The process has already started.

Offering.

To them by looking to generate a higher op.

The process has already started we've engaged with the leading database provider in axiom. It is our expectation within 30 days, we will have done the <unk> of those households, and then it will be implemented into our CRM. This is a now task not a tomorrow task and the <unk>.

Marcus Limonis: We've engaged with the leading database provider, Axion. It is our expectation that within 30 days, we'll have done the de-duping of those households, and then it'll be implemented into our CRM. This is a task now, not a task tomorrow, and the primary reason for doing it, in addition to growing revenue, is that we need to take costs out of this company. This company cannot spend north of 13% as a percentage of revenue driving revenue. Every 1% is meaningful to the bottom line, and we take that seriously. In fact, at $2 billion, 1% represents $20 million.

Primary reason for doing it in addition to growing revenues, we need to take cost out of this company. This company cannot spend north of 13% as a percentage of revenue driving revenue every 1% is meaningful to the bottom line and we take that seriously and <unk>.

Fact at $2 billion, 1% represents $20 million, we know that when we look at a 200 plus million dollars marketing budget. There has to be inefficiency in it and it's not about just trimming that expense its about taking that savings and reinvesting it in growth that is why we believe.

Marcus Limonis: We know that when we look at a 200-plus-million-dollar marketing budget, there has to be inefficiency in it. And it's not about just trimming that expense. It's about taking that savings and reinvesting it in growth. That is why we believe that by the end of 25, we could be at a $3 billion run rate as we launch these other brands. So it's a now.

<unk> that by the end of 'twenty five we could be at a $3 billion run rate as we launch these other brands. So its analysis.

Marcus Limonis: And Marcus, can you talk about your assumptions for macro and the home product market as we think about the $2 billion goal for this year? Are you assuming things get better from here, or does it remain very challenging? Just curious how we should think about the market relative to the self-help levers that you can pull. We expect the market to stay challenging and, quite frankly, have some headwinds. But what I think people are underestimating is the power that the bed, bath, and beyond historical customer operated with. And what we learned in this entire process, to be really candid, is that shutting down Overstock was a fatal mistake. Because while we were able to win the buy box on selling large, big items with high AOVs at bed, bath, and beyond, we had to do that by buying the business.

And Marcus can you talk about your assumptions for macro in the home products market as we think about the $2 billion goal for this year are you assuming things get better from here or does it remain very challenging just curious how we should think about the market relative to the self help levers that you can pull.

We expect the market to stay challenging and quite frankly have some headwinds, but what I think people are underestimating is the power that the bed Bath <unk> beyond historical customer operated with and what we learned in this entire process to be really candid is that shutting overstocked down was up.

Fatal mistake, because while we were able to win the buy box on selling large big items with high <unk> at bed Bath <unk> beyond we had to do that by buying the business Overstock Dot com has built a legacy on selling those types of products and when you try to convince people that.

Marcus Limonis: Overstock.com has built a legacy on selling those types of products, and when you try to convince people that a new brand is going to do the same thing, you lose them. Turning Overstock.com back on will not only allow Bed Bath & Beyond to expand its existing assortment and hone in on its historical legacy success, but it allows Overstock to do the same. In bringing in and establishing separate CEOs for the Overstock brand and its family of products, and we'll talk about that in a minute, and Bed Bath & Beyond and its family of products, we have an acute focus on each of them to manage their P&L, to establish their own vendors, and to chart their own course to growth.

Our new brand is going to do the same thing you lose them turning overstock dot com back on will not only allow bed bath <unk> beyond to expand its existing assortment and honed in on its historical legacy success, but it allows overstock to do the same and bringing in and establishing.

Separate Ceos for the Overstock brand and its family of products and we'll talk about that in a minute and bed bath and beyond and its family of products. We have an acute focus by each of them to manage their P&L to establish their own invest.

To establish their own vendors and to chart their own course to growth the only mandate that exist in their collaboration is that I don't ever want to see the same product on both sites, they're tasked with establishing new vendors, new ideas and new pathways to find customers all while ensuring that they are adding to the <unk>.

Marcus Limonis: The only mandate that exists in their collaboration is that I don't ever want to see the same product on both sites. They're tasked with establishing new vendors, new ideas, and new pathways to find customers, all while ensuring that they're adding to the overall company database, which allows us to monetize that customer through these other products and services on the recently launched Beyond.com. Thanks very much and all the best.

Overall company database, which allows us to monetize that customer through these other products and services and the recently launched beyond Dot com.

Thanks, very much and all the best.

Okay.

Curtis Nagel: Thank you. Our next question comes from the line of Curtis Nagel of Bank of America. Your line is open. Great. Thanks very much for taking the question. Yeah, I guess the first one.

Thank you one moment please.

Our next question comes from the line of Curtis Nagle of Bank of America. Your line is open.

Great. Thanks, very much for taking the question.

I guess my first one.

Marcus Limonis: I'd love to dig into the $250 AV target. I'm just kind of curious what, I guess, is assumed in terms of contribution from normalizing pricing and promotions, how much of that is contribution from new products like Baby or new categories, I guess, cross-selling, and cross-brands? And then, I guess, services contribution, which I'll have a follow-up question on. So I'm going to unpack that a little bit, because I heard a question about the AOV, and then I was, is that right? And then I want to separate out what we think the contribution of those other businesses is to the total top line. Did I hear that right? Just a contribution to the total AOV. Yeah How do all those... Yeah, I just want to say it was a lovely day.

Just love to dig into.

The 250.

Sure.

<unk>.

Kind of curious what I guess is assumed in terms of contribution from normalizing pricing and promotions.

Much of that is contributions from new products like baby categories, I guess cross selling cross brands.

And then I guess services contribution, which I'll have a follow up question on that just a second.

Yes.

Unpack that a little bit because I heard a question around the <unk> and then does that right and then I wanted to separate out what we think the contribution of those other businesses are to the total top line did I hear that right.

Just a contribution to the total ALJ, how do all those things factor in.

Yes, I just wanted to layout that'd be great too.

Marcus Limonis: Yeah, so AOV is really a function of mix, and when you look at the Overstock customer, the frequency that that customer visits the website is lower, primarily because there are larger ticket items, large furniture assortments, outdoor above ground spas, big outdoor patio furniture, and larger items that Overstock.com had historically really, really excelled in. When you look at driving overall revenue, you need the frequency of visits that Bed Bath & Beyond brings to the table, with common items from bed, bath, kitchen, and dining, along with other things that Chendra is expected to grow over time. What we really have learned is that if we can stay myopically focused on the premise that our job is to deliver products and services to everything inside of the four walls of the home and the four corners of the property, we then really understand which brand is going to actually execute each different part of each strategy.

Yes.

<unk> is really a function of mix and when you look at the overstock customer the frequency that that customer visits. The website is lower primarily because there are larger ticket items large furniture, assortments outdoor above ground spas big outdoor patio furniture and larger items.

That overstock Dot com had historically really really excels in when you look at driving overall revenue unique the frequency of visits that bed Bath <unk> beyond brings to the table with common items from bed Bath kitchen, and dining along with other things that Chandra is expected to grow over.

<unk>, what we really have learned is that if we can stay myopically focused on the premise that our job is to deliver products and services to everything inside of the four walls of the home and the four corners of the property. We then really understand which brand is going to actually execute that.

A different part of each strategy clearly on the outside of the house Overstock is going to lead that process with things like trampolines above ground spas outdoor patio furniture outdoor kitchens and things like that when you come inside it's clear that overstock is going to be better at delivering.

Marcus Limonis: Clearly, on the outside of the house, Overstock is going to lead that process with things like trampolines, above-ground spas, outdoor patio furniture, outdoor kitchens, and things like that. But when you come inside, it's clear that Overstock is going to be better at delivering large ticket items like furniture. Now, that doesn't mean that Bed Bath & Beyond can't sell furniture, but if you look at the historical brand attributes, the consumer didn't intrinsically think of them that way. And I believe what happened in the fall of 2023 is that when the company made the decision to shut down Overstock, it believed that it could transition that large-ticket, high-aOV consumer to Bed Bath & Beyond. And quite frankly, it didn't happen. And anybody that had a brain would have known it wasn't going to happen.

<unk> large ticket items around furniture, now that doesn't mean that bed bath <unk> beyond can't sell furniture, but if you look at the historical brand attributes the consumer didn't intrinsically think of them that way and I believe what happened in the fall of 2023 is that when the company made the decision to shut down on overstock if.

Believe that it could transition that large ticket high <unk> consumer to bed Bath, <unk> beyond and quite frankly, it didn't happen and anybody that had a brain would've known it wasn't going to happen. When you look at bed Bath <unk> beyond and you look at those historical categories that had high Mark.

Marcus Limonis: When you look at Bed Bath & Beyond and you look at those historical categories that had high margins and high frequency, it was obvious to us that we needed to lean into those things. So when you look at growing the customer count, well, clearly, Bed Bath & Beyond does that. When you look at increasing the frequency, clearly, Bed Bath & Beyond does that.

Hi.

Frequency it was obvious to us that we needed to lean into those things. So when you look at growing customer count, while clearly bed Bath <unk> beyond does that when you look at increasing frequency clearly bed bath and beyond does that but when you are looking to drive.

Marcus Limonis: But when you're looking to drive AOV, you need the trust and relatability that Bed Bath & Beyond created to then have Overstock be able to convert that consumer in our database. We know that driving overall revenue and getting to this $2 billion number are essentially Lego building blocks. The core Bed Bath & Beyond business has to deliver. And you heard about adding new vendors and adding new relationships and eliminating distributors and picking up margin by having first cost dollars. But we also know that that particular consumer has life events, like having a baby, getting married, going to college, buying their first home, whatever that may be. And Chandra is a world-class expert and has proven over several decades that she knows how to do that, quite frankly, better than all of us that are currently here. That's why we added her to the team.

You need the trust and relate ability that bed Bath and beyond created to then have overstock be able to convert that consumer in our database.

We know that driving overall revenue and getting to this $2 billion number are essentially Lego building blocks the core bed Bath <unk> beyond business has to deliver and you heard about adding new vendors and adding new relationships and eliminating distributors picking up margin by having first cost.

But we also know that that particular consumer has life events, having a baby getting married going to college buying their first home whatever that may be and Chandra is a world class expert and has proven over several decades that she knows.

How to execute that quite frankly better than all of US that are currently here. That's why we added her to the team, but when we look at driving to $2 billion. We believe that overstock is going to fill that gap up you heard Adrian mentioned overstock was a $1 $5 billion brand before bed.

Marcus Limonis: But when we look at driving to $2 billion, we believe that Overstock is going to fill that gap. You heard Adrian mention that Overstock was a $1.5 billion brand before Bed, Bath & Beyond even showed up. Now, it is true that there are some categories that both businesses played in. Overstock sold some betting, off-price betting, but it sold some books, and it sold some household items.

Bathroom beyond even showed up now it is true that there are some categories that both businesses played it.

Overstock salt embedding off price setting, but it sold some betting and it's sold some household items, but for the most part for the most part that revenue was driven by other categories. I believe that splitting these rolls, giving them full P&L responsibility, giving them the resources of the tools they need to grow.

Marcus Limonis: But for the most part, for the most part, that revenue was driven by other categories. I believe that splitting these roles, giving them full P&L responsibility, giving them the resources and the tools they need to grow their companies, and improving vendor relationships will close the gap that everybody seems to be so convinced that we can't achieve. We're telling you today, and you can look at our pay plans and look at our stock incentive plans; we signed up for a program we believe we can achieve. As opposed to what the historical model was, where management was just taking bonuses and taking RSUs, regardless of what the outcome was, we've all signed up for a program that we firmly believe we can deliver.

<unk> their companies and improving vendor relationships will drive the gap that everybody seems to be so convinced that we can't achieve we're telling you today and you can look at our pay plans and look at our stock incentive plans, we signed up for a program. We believe we can achieve as.

As to what the historical model was where management was just taking bonuses and taking Rs use regardless of what the outcome was we've all signed up for a program that we firmly believe we can deliver it.

Marcus Limonis: In spite of the headwinds, it is our intention to aggressively grab market share. And if you look at the P&L for the full 2024 year, we plan on returning to profitability by the end of the year on a run rate basis. We know the first two quarters are still going to be, we're still going to be operating at a moderate loss.

In spite of the headwinds it is our intention to aggressively grab market share and if you look at the P&L for the full 2024 year, we plan on returning to profitability by the end of the year on a run rate basis. We know the first two quarters are still going to be.

We're still going to be operating at a moderate loss. The first quarter. We expect as we continue to build the database as we get ready to launch overstock as we reengage with customers on a continued basis, we're confident that that's going to happen keep in mind last fall. This company told you that.

Marcus Limonis: In the first quarter, we expect that as we continue to build the database, as we get ready to launch Overstock, and as we re-engage with customers on a continued basis, we're confident that that's going to happen. Keep in mind, last fall, this company told you that it was going to take up to $175 million to reignite the brand. Dave and Adrian and myself, prior to Chandra coming, committed that there was no way, no way we were going to spend $175 million. We believe that we will materially improve that statistic, but we know that launching Overstock was the simple silver bullet that, quite frankly, was obvious to us but not obvious to others. Thank you, Mark. That was really comprehensive.

It was going to take 170 up to $175 million.

To reignite the brand.

Dave and Adrian and myself prior to charter coming committed that there was no way no way, we were going to spend $175 million. We believe that we will materially improve that statistic, but we know that launching overstock was the simple silver bullet that.

Quite frankly was obvious to us, but not obvious to others.

Thank you Mark that was really comprehensive.

Just a bit.

Curtis Nagel: Just a bit of thought on the services angle. So you talked a lot about trust, and in driving, in a purchase of that. I think they're requiring just more internal or just, you know, things are not playing in.

Follow up on the.

Services angle, so you've talked a lot about trust right.

Driving.

<unk>.

They require more turnover just figure out playing in.

Marcus Limonis: Where do you see, you know, I look at your site, you've got a couple new businesses, mortgage is you've got, you know, home services business that you know, it's coming soon. In terms of, you know, plan to eventually get into, you know, $3 billion run rate, I would assume these things are kind of longer dated, or just, you know, how do you see those things integrating? And I guess, when do you think they'll start contributing, you know, to the revenue? Look, I have been a public company CEO now for eight years, and I have learned a lot of hard lessons. And one of those lessons is setting expectations properly around what can be achieved. And while we have an immense amount of enthusiasm about what we know we have transformed this company into, we don't want investors and the people that we work for to be confused by any lack of focus on us delivering core revenue with improved margins and reduced SG&A. But let me be really clear about one thing. I did not join this company to be a peddler of products on the internet. I joined this company because I am 100% confident that I will turn this business into the AAA of home businesses. I've done it before.

Where do you see I look at your site you got a couple of new businesses.

Mortgages, you got home services.

Business that is coming soon.

In terms of volume of plan to eventually get into $3 billion run rate I would assume these things are kind of longer dated or just how do you see those things integrating and I.

I guess when do you think they'll start contributing.

So the revenue.

Look I have yes.

I have been a public company CEO now for eight years and I have learned a lot of hard lessons in one of those lessons is setting expectations properly around what could be achieved and while we have an immense amount of enthusiasm about what we know we have transformed this company into.

We don't want investors and the people that we work for to be confused with any lack of focus on us delivering core revenue with improved margins with reduced SG&A, but let me be really clear about one thing I did not join this company to be a peddler of products on the <unk>.

Internet I joined this company because I am 100% confident that I will turn this business into the AAA of the home business.