Ladies and gentlemen, thank you for standing by and welcome. At this time, all participants are in a listen-only mode. Following the presentation, there will be a question-and-answer session. Please be advised that today's conference call may be recorded. I would now like to hand the call, press call over to Allison Fletcher, Vice President of Legal and Acting General Counsel at Beyond, Inc. Please go ahead.

Thank you, operator. Good morning and welcome to Beyond, Inc.'s fourth quarter and full year 2024 earnings conference call. Joining me on the call today are Executive Chairman, Marcus Lemonis; Chief Financial and Administrative Officer, Adrianne Lee; and President, Dave Nielsen. Today's discussion and our responses to your questions reflect management's views as of today, February 25th, 2025, and may include forward-looking statements, including without limitation to statements regarding our future business strategies, goals, financial performance, outlook for the remainder of the quarter or any other period, anticipated growth, stock price, profitability, macroeconomic conditions, the value of our brands and investment, relationships with third parties and agreements we are entering into with them, margin improvement, expense reduction, market efficiencies, conversion, customer experience, changes to brands and websites, product offerings, blockchain efforts and strategies, tokenization efforts and strategies, and the timing of any of the foregoing. Actual results could differ materially from such statements. 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, 2023, in our Form 10-Q for the quarter ended September 30, 2024, and in our subsequent filings with the SEC. During this call, we'll discuss certain non-GAAP financial measures. Our filings with the SEC, including our fourth quarter and full year earnings release, which are 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. A slide presentation with supporting data is available for download on our investor relations website. Please review the important forward-looking statements disclosure on Slide 2 of our presentation. With that, let me turn the call over to you, Marcus.

Thanks, Allison. It always amazes me how these safe harbors get longer and longer over time. I give a lot of credit to the lawyers. They have added a lot of words. As I mentioned, as Allison mentioned, I'm joined today by Adrianne Lee and Dave Nielsen. And what we really want to do on this call is we're going to go through our prepared remarks pretty briefly and we want to leave a lot of time for Q&A. As part of that context for Q&A, we have really divided the presentation into two distinct areas. The first area is our primary core business, the thing that actually drives revenue and what we're fighting to get to profitability on. The second part of our call, we'll lean into blockchain tokenization and a couple of initiatives or ideas that we have out there that we're going to discuss. So when we get into the Q&A section, feel free to break out your questions in those specific areas if you have them. All right? So, look, we have made a lot of progress in the last 12 months. And it has not been an easy 12 months, both for the stock price and for, quite frankly, the results. We really have acknowledged that the work that has been done since 12 months ago has really been fruitful. And we feel that we're probably sitting in the best possible spot that we could be. I'm confident to tell you that I believe that the worst is absolutely 100% behind us. Now, I'm required to qualify things like that assumes market conditions don't eradicate, but for the most part, if the world stays the way it is today, we are headed in a very, very positive direction. For those of you that want to…

Thank you, Marcus. I'll take a few minutes to walk us through our fourth quarter financial results. Revenue declined 21% year-over-year in the fourth quarter as we continue to make trade-off decisions to right-size our margin profile. For the year ending December 2024, we posted $1.4 billion of revenue, which was an 11% decline versus full year 2023. As a reminder, we expected revenue to decline year-over-year as we continue on our path to profitability and as we swiftly make progress on restoring margin guardrails. We do remain laser focused on the four key areas of conversion, gross margin, sales and marketing efficiency, and expense management that we laid out at our October 24th investor event and which Dave will speak to in greater detail. I will start out with gross margin where we exceeded our target. Gross margin landed at 23% for the quarter, a 380 basis point improvement compared to the same period last year. Sequentially, we delivered an accelerated 180 basis point improvement in gross margin as we continued to optimize pricing, improve freight costs, and rationalize assortment. You may recall, we targeted a 50 basis point improvement from the third quarter of 2024, and we overdelivered by 130 basis points. We took a significant step forward to return to our historic operating levels. We posted improvements each quarter of 2024 as we continue to work the six-part plan I outlined at the beginning of last year, renegotiating freight, improving vendor relations, growing the margin-accretive Overstock brand and integration add-ons, embarking on licensing activity and eliminating inefficient discounting. The fourth quarter was a strong execution proof point. G&A and tech expense of $48 million decreased by $6 million year-over-year as a result of our commitment to reduce fixed costs by an annualized amount of $65 million. I…

Thanks, Adrianne. On October 24th at our investor session in New York, we committed to four key priorities for restoring our core business, marketing efficiency, sales growth through improved conversion, margin enhancement and expense management. Today, we are pleased to share our fourth quarter progress. While there is still work to do, we see a path to our goal of profitability. Let's be clear, our immediate focus isn't top line growth. It's about rebuilding a strong, profitable foundation. Once that is in place, we'll shift our focus to unlocking long-term sustainable growth. Now let's dive into the data. The materials in front of you on the chart we reviewed at the October investor event, with Q4 and December's performance added to show how we're tracking. I'll add some color from January results to highlight ongoing areas of focus as we march towards profitability. December was our best performing month of Q4 in terms of marketing efficiency, as you can see on Slide 12 of the prepared materials posted to the Investor Relations page on our website. We hit our target of 12% sales and marketing as a percent of revenue, driven by reallocating spend to high-performing channels, focusing on our power categories and refining audience targeting. January came in slightly higher but well below the 2024 run rate of 17%. And while there will be ebbs and flows along the way, I'm encouraged to see the trend moving in the right direction toward our goal of 12%. Next, on Slide 12, you can see December conversion trending upward. This was fueled by SKU rationalization and vendor streamlining, ensuring customers find our most productive assortment. As we've said, Bed Bath & Beyond was never meant to be a marketplace. We're curating a sharper, more efficient product mix. Since April of 2024,…

Thanks, Dave. We'll actually turn the call back over to the operator to open up our Q&A section.

[Operator Instructions] We have our first question, this comes from the line of Jonathan Matuszewski from Jefferies.

Okay. Good morning. Thanks for taking my questions. The first one was on just top line. Obviously, you had some good progress recently in terms of bringing sales and marketing expense down. Just curious like the monthly cadence of revenue throughout the quarter and kind of how revenue trended from a cadence perspective as you brought down ad spend? That's my first question. Thanks.

Well, I think we have to be careful. We don't provide revenue. We don't disclose revenue by month. But I will tell you that we're focused on pretty -- very simply doing profitable transactions. So as we mentioned earlier, when you look at the revenue in the month of October compared to November and December, they started to decline. And the reason is when they started to decline is because we started eliminating vendors and SKUs that we were losing money on. And so when you go through a very explosive loss in October, a double-digit loss in October, and you get down to a mid-single-digit loss in December, you have to understand that driving margin and eliminating negative SKUs is going to have that effect. As I mentioned earlier, Jonathan, we are going to continue to contract things to get profitable. And I don't know how expansive that's going to be. We obviously want to continue to drive revenue and meet new customers at the front door. But as we continue to eliminate SKUs and eliminate vendors, it does have a contraction on our revenue. I would expect that revenue will continue to be a little tighter here in the first couple of quarters but that EBITDA and net income should have an explosive growth on the bottom line. As we raise margins, as we lower our marketing expense, I would expect to see nice year-over-year improvement. First quarter of last year, we lost a boat load of money. That is not our expectation and the January and February results do that. We will sell less in the first quarter than we did last year. I don't think that's lost on anybody.

That's very helpful. Thanks for the color there. And then just on gross margin, I think you outlined some of the building blocks as we go forward, maybe towards that initial North Star of maybe 25%, 27%. Maybe just give us some perspective in terms of what inning you're in, in terms of moving SKUs from Bed Bath back to Overstock. How much kind of work is left there, maybe kind of what inning we're in, in terms of -- it sounds like you've made some progress, ongoing progress in terms of SKU rationalization. But just trying to understand kind of the biggest buckets in terms of kind of gross margin expansion ahead. Thanks so much.

Yeah. So I'll start with the proclamation as much as I can avoid that word, that we'll continue to have sequential margin improvement through the balance of this year. A big contributor to that is the growth that we're seeing coming out of Overstock. And if you look at that assortment today and you look at that management team that's there specifically on Overstock, which by the way, we brought people back that were part of Overstock years ago that understand that brand. We're going to see some nice revenue growth and contribution margin and gross margins there are just -- they're just better. I think secondarily, we're starting to use our balance sheet and our relationships primarily through vendor consolidation to get our first cost in line with where they need to be across our entire enterprise. I don't want to predict what inning we're in because I think that, ultimately, there's never going to be an end to the game. The goal going forward is to always improve margin. And while we're setting a short-term goal of 27%, I'm never going to be happy until we're north of 30%, and north of 30% requires a certain mix and assortment and vendor relationship and omnichannel mix that allows all that to happen. It shouldn't be lost on anybody that our investment into Kirkland's was done to be able to activate the Bed Bath & Beyond omnichannel business. And the Bed Bath & Beyond omnichannel business is a fire starter for incrementally better first cost because the vendors are seeing multiple places that they can sell their product and additional revenue opportunities. So we are early in the game, but the game really doesn't end. If I could wave a magic wand and hope and pray I'd like to get to 27% at some point at the end of this year, I think that's a little bullish but we're going to try like the Dickens to get there, north of 25% is our absolute have to get there. And so when you start to do the walk of how is the company going to get profitable, you could tweak your gross margins in your model, you can tweak down your SG&A probably another $4 million, $5 million over the next 12 months in your model and then you can expect in the back half, once we establish a margin base, that we'll start to slowly spend more money growing revenue again. We do not want to contract revenue throughout the 2025 year. But if we can get to profitability in 2025, that is the primary goal. Any other color or questions on that? Operator?

I believe Mr. Matuszewski is on mute, but thank you. Our next question comes from Thomas Forte from Maxim Group. Your line is open.

Thank you.

Hi, Tom.

Great. Thanks. Great. So, Marcus, I listened to your Medici Ventures related call on X last week, I thought it was very interesting. Can you talk about your current efforts to generate shareholder value from Medici Ventures' portfolio including how to potentially offer the Buy Buy Baby token with tZERO advancing that effort. And then you hinted in your prepared remarks, but can you let us know when investors can expect an update on GrainChain, which sounds like it's been doing incredibly well and that you consider it to be potentially a very promising supply chain company. Do we have to wait for 1Q '25 earnings for an update? There was a time when you had dedicated investor calls on the Medici Ventures portfolio outside of your quarterly earnings call.

Yeah, there was a time where the company did have that separate call. Unfortunately, a few years ago, previous management created the transaction with Pelion, and our ability to communicate is really now distilled down to our ability to get information directly from those companies. We get a report when requested from Pelion, but right now, Adrianne, Dave and my focus is we have to figure out how to unlock the value there. And we think the only way to unlock the value is to provide use cases and to bring those brands to the forefront. Let me back up for just a minute on the motivation behind the blockchain/technology as it relates to any possible tokenization of any of the IP that we have today. A tokenization is in the most simple form, is for a big company like issuing stock. And for a small company, it's an easier way of doing that. Our motivation to do whether it's Buy Buy Baby or Bed Bath & Beyond in concept, our motivation to do that really had multiple prongs associated with them. The first and foremost is to start to rebuild the community of followers that ultimately drive the business. And if you look at other organizations like Costco that are out there that have a club membership for the right to enter, I look at tokenization as the highest level of loyalty program that one could have. And when you start to think about it like a loyalty program, you start to think about what are the attributes that a loyalty program should have. It should have additional benefits at the highest level. It should have access to information at a preview level and it should come with something that I can count on. That doesn't mean that the…

Thank you, Marcus.

Next question?

Thank you. Our next question comes from the line of Steven Forbes from Guggenheim. Your line’s open.

Good morning. This is Julio Marquez on for Steve Forbes. How does the average contribution margin compare between Bed Bath & Beyond and Overstock today versus back in the 2024 Analyst Day? Are we in a place where both are acceptable? And then any way you can help us better understand the base level productivity needed to achieve free cash flow neutrality and then any initial comments on where you see the greatest productivity opportunities today, whether it's categorical level or like at a branded level? Thank you.

So, Julio, I'm going to break that into two distinct questions. I'm going to have Dave take the first one, breaking down the improvement in contribution margin and how he sees them interplaying between the multiple banners. And then I'm going to turn it over to Adrianne to address where does she think revenue needs to be to get to breakeven, which is I think what your question was.

Thanks, Marcus. So, Marcus mentioned on the call that Overstock was rebounding and had solid economics. What we're seeing is exactly what the model for Overstock was working exactly as planned. And it is coming along and we continue to grow and develop that brand. It does have a slightly better contribution margin than our Bed Bath & Beyond contribution margin. As we've talked about on the call today, we continue to curate. We continue to remove unprofitable vendors and SKUs, and we continue to fine-tune that assortment, we will continue to grow that contribution margin, but Overstock, from its initial phases and growing, more naturally fits that model and the SKU assortment that we have for it, and we continue to grow it. We brought back the management team, a part of the management team that was there previously, and they have been masterful at moving us forward to our goal of ultimately the contribution margin we know we can be profitable with. Adrianne?

Thanks, Dave, and I appreciate the question. I would say if you think about kind of our scripted remarks today and what we've shared at our investor event, all of the pieces we have shared, whether it's the conversion targets, the gross margin targets, tech and G&A, those are the places we need to get to in order to be profitable, which will ultimately generate free cash flow. So, I think if you look at some of our operating metrics pre the Bed Bath & Beyond integration when we were generating free cash flow and operating profitably, it's really recalibrating those four key metrics we've been talking about to those historic levels.

I want to add something that really ties to cash because I get questions often around what our cash balance is. And that is an excellent question when a company is burning money because you want to know what the runway looks like. But as we get closer to profitability, it's important for people to understand that cash goes through the balance sheet in multiple ways. It can go into inventory. It can go into a variety of other things. And so as we get into second, third, fourth quarter, I really want to start to focus on what's the working capital of the business. For example, as Kirkland's starts to open up Bed Bath and Buy Buy Baby and even potentially Overstock stores, we may choose to partner with them even further to accelerate that growth. But they have a pretty rigid balance sheet that doesn't provide for a ton of runway for a ton of growth in the short term. And so we want to make sure that every single dollar that's in our kitty and every single dollar that gets spent is with the highest and best use at all times. And you have our commitment that any money that we raise, any money that we spend, any money that we invest will always be done to create the maximum return on investment. That is why we are so feverishly working to eliminate any burn as fast as we can because every dollar that gets burned is a dollar that we don't get the opportunity to invest with double and triple-digit returns. So that's how -- that's why you're sensing the vigor in our voice around getting to zero as every dollar that's leaving is not going where I want it to go. Next question.

And just as a quick follow-up. I think you briefly touched on earlier, but any additional color you can give on the contribution due to the positive gross margin surprise during the quarter. I think you mentioned like better under support or is it a function of like an internal efficiency capture?

No, the upside in the margin profile for Q4 was simply the team doing what they're supposed to do, which is to work with their vendors to execute the proper first cost to consolidate vendors, to eliminate unprofitable SKUs to eliminate unprofitable vendors and to not waste money on marketing. The expectations that I have for the team over the next several quarters is going to increase and the pressure is going to continue to mount to get us to that 27% margin and ultimately a much better contribution margin. They did a hell of a job and what I'm seeing in January and February is continuing to sequentially contribute to the improvement.

Awesome. Thank you for the color. Really appreciate it.

Yes, sir.

Thank you. Our next question comes from the line of Peter Keith from Piper Sandler. Your line is open.

Hi. This is Alexia Morgan on for Peter Keith. Thanks for taking our question. So first, you've talked about the importance of conversion rates and gross margin, your path to profitability. And we have visibility on gross margin. You touched a little bit on conversion rates in the presentation. But could you give any more color on conversion rates and how those performed throughout Q4 and possibly quarter-to-date in conjunction with marketing spend? And then for the second question, we've been hearing from channel checks and other companies about the slowdown in demand in January and February, understanding that you're simultaneously going through some SKU and vendor rationalization. We're just curious if you've been seeing any sort of change in underlying consumer demand quarter-to-date?

We -- right now, in this moment, we are singularly focused on driving margin, lowering SG&A, improving conversion, and we're operating in our own vacuum right now to get to zero. While everybody else, including what people perceive as our competitors, which they're not, continue to burn money, we are in the business of getting to zero and making money. And so I can't speak to what's happening in the overall industry. What I can speak to is that our revenue will continue to tighten as is part of our strategy to get to profitability. And so I want to be clear about that. We don't report our contribution margin specifically, but I can tell you that our contribution margin is improving nicely. For those that understand contribution margin, it isn't simply just the gross profit on the transaction. It's all of the frictionals that are inside it and our efficiencies inside it and the site experience inside it and the discounting that's required and the shipping expense that's required and all of the other things that go into it. When you're trying to improve contribution margin, it is truly a process efficiency gain. Just putting it up on the website and selling it isn't all of it. We have made many, many unfortunate headcount changes bringing in better talent and better staff, and we will continue to do that until we get the results where the contribution margin is where it historically was for Overstock. I believe we are many, many points away but we are more positive than this company has been in 18 months and seeing sequential improvement every day.

Got it. Thank you.

Thank you. Our next question comes from the line of Rick Patel from Raymond James. Your line is open.

Thank you. Good morning, everyone. I had a question on marketing. You touched on the opportunity for better efficiency. I was hoping you can expand upon the work that remains to be done and how we should be thinking about marketing from a modeling perspective as you work towards sequential margin improvement? And I also had a second question on the near-term outlook for gross margins. I think you touched on near-term figures being 25% and then also 27%. I know the goal is to obviously maximize what you can do, but just from a modeling perspective, what the reasonable assumption would be. Thank you.

Great. I'll have Adrianne complete my -- after I go to talk about what her expectations are for margin, Dave will add some color as well. On the marketing side, it's really important for people to understand all the parts and pieces that go in to ultimately creating that marketing efficiency. And site experience is at the forefront of that. And we still believe that our site experience isn't anywhere close to where it needs to be. The search functionality, while materially better than it was, doesn't even come close to meeting the standards that we have as a management team, and we're going to continue to accelerate those standards. Having the right vendors with the right product at the right price at the right time is also part of that strategy. When you get -- when it gets down to it, the way the customer comes to our site, either through e-mail or through a PLA ad or some other organic methodology is truly important from a performance standpoint. We are not operating at anywhere near the optimal level on the e-mail execution side. And we are making significant human capital changes as we speak right now with some new additions coming on to our team here in the next 10 days that are going to bring Overstock/Bed Bath & Beyond's e-mail execution back to a level of standard that the company historically operated on. What's important to understand in e-mail execution is the cleansing and the clarity around that e-mail file. We have just begun to work closer with Agentforce and Salesforce in cleansing that file. But we continue to be disappointed that certain categories and certain buckets and subsets of that e-mail database just isn't performing at all. Some of that was part of the Bed Bath acquisition, and it could have been either eliminated or discontinued or those e-mails are no longer viable. So we're going through in cleansing and segmenting in a better way. Every single time that we do that, we see slightly better performance. But if I was on a football field, the goal line is like 60 or 70 yards away. Adrianne, on the margin side?

Sure. And I think, Rick, if you were talking about our sales and marketing as a percent of revenue, what I'd say is and Dave mentioned this in his prepared remarks, December at 12% was certainly something that was lower than what we expect to see as we calibrate. So what I would say is kind of first, second, third quarter will all be better than the fourth quarter in total. But in between kind of December and the fourth quarter. Fourth quarter will be probably a little bit higher because of the higher promotional activity generally in the fourth quarter. And for the full year, I don't expect we'll be at our long-term target yet, but we'll be making great strides towards that.

Dave, if you'll address Rick's other question around gross margin around product. He was also asking we're at 23% today, what's our path. We obviously want to be conservative. But for modeling purposes, if you can set some expectations around how you see improvement there, that would be great.

Yeah. We are -- we -- as we've mentioned, the target is to get to 25%. That is not the end target. But the target is to get to 25%. And as we see that progressing sequentially over the quarters, we have a clear path that we're executing against to work with our partner base, to cull down some of the partners that are just not driving the profitability that we need, making stronger relationships with those partners that are key legacy partners in power categories to us, giving them access to more locations on the website in exchange for better costs associated with that as they get more volume flow through for them. So this is a game of -- we've got so much demand. We're continually working as Marcus mentioned, through all of those functions on the marketing side, but we're also utilizing our core vendors, our legacy vendors to get back to that historical gross margin that we know we can achieve and beyond.

I'm going to be a little more direct. We're going to partner with vendors that understand that growth is important to both companies. And we're going to partner with vendors that understand that being profitable is a mutual goal, not a singular goal. And while we have vendors out there that have abused the marketplace and taking advantage of us over the last 12 to 15 months, those vendors have been eliminated. And those vendors who understand how to be good partners are going to get the lion's share of our business, especially when we press go and we start opening stores and we start spending money again, driving e-commerce business. Those vendors that are most loyal are going to participate in that upside. And let me be clear, there is going to be an upside. It takes us a while to learn things. But once we learn them and once we get everything built exactly the way we want it, where we are doing profitable things, that our SG&A is in line, we will be the kind of company that everybody expects us to be, which is a growth company. That's who I am and that's what I believe in, but I will not compromise our cash or anything else in an effort to have growth. Revenue growth needs to be profitable revenue growth. All these pieces that we've done in the last six to eight months are building blocks to getting there. We are very, very close. And we appreciate the patience that you guys are giving us to get there and understanding the value that is being unlocked as we sit here.

Thanks for all the color.

I don't know if that's the last question, I think it is?

Yes, sir. And seeing as there are no more questions in the queue, that concludes our question-and-answer session. I will turn the call back over to Marcus Lemonis for closing remarks.

Great. Thank you very much. Just to make sure that we don't leave with any lack of clarity. Our goal is to make money. And our goal is to grow our margins. improve our efficiencies, improve our marketing conversion, improve our site experience and integrate our blockchain and other assets into our business. To take all of the investments that we've made in the Kirkland's, Buy Buy Baby examples and to start to have them bear fruit, we understand the mandate. We expect to deliver this quarter in hitting the metrics that we are promising you much like we did last quarter. Thank you so much for your support.

Ladies and gentlemen, that concludes today's conference call. Thank you all for joining. You may now disconnect.