Beyond, Inc.

Good morning. My name is Aaron and I'll be our conference operator for today. At this time, I would like to welcome everyone to the Q1 2025 Beyond Incorporated Earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. And at that point, if you would like to ask a question, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question at any time, simply press star followed by the number one again. With that, I'm pleased to turn the call over to Melissa Smith, General Counsel and Corporate Secretary. Melissa, you may now begin.

Thank you, operator. Good morning and welcome to Beyond, Inc.' 's first quarter 2025 earnings conference call. Joining me on the call today are Executive Chairman and Principal Executive Officer Marcus Limonis, and President and Chief Financial Officer, Adrian Lee. I'm also joined by Leah Putnam, Chief Accounting Officer, and Alex Thomas, Chief Operating Officer. Today's discussion and our responses to your questions reflect management's views as of today, April 29th, 2025, and may include forward-looking statements, including without limitation, statements relating to our future business strategy, goals, financial performance, outlook for the remainder of the quarter or any other period, anticipated growth, stock price, profitability, macroeconomic conditions, and the value of our brands and investments, relationships with third parties, agreements we are entering into with them, margin improvement, expense reduction, marketing efficiencies, conversion, customer experience, changes to brands or 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 our 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, 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 first quarter earnings release, which is 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 two of that presentation. With that, let me turn the call over to you, Marcus.

Thank you. Wow, that's a lot of stuff. Just to make sure that we are crystal clear, on our investor website, we have put together not only a robust release that has financial information as part of it, but a very robust slide deck that will give you a really simple illustration of how we actually think about the business. And the reason that we would encourage you to go through that slide deck is that those are really a highlight identification of how we think about the key guideposts and metrics that all of us as a management team use on a daily basis. As we think about this business, and we are really excited to be here today, But as we think about this business here in talking about our first quarter results, we really feel like the first quarter was the first quarter of a brand new business. And it's been about a year that this restructuring had started. And when I first arrived, I anticipated that it was a little more of a transformation. And we all know the story about the first six months of the company since I've been here and how we had to learn a lot together. But as we move into 2025, We feel like we have restructured and rebuilt and reimagined an entirely new company. Both the employees that work here today, in fact, about 65 to 70% less of them, have a different mindset. We have built a real organization solely around winners, waking up every day, seven days a week, working on the websites, thinking about the customer, making sure that the customer experience is solid. And while we're not fully done with our transformation on the websites, the team's working every single day to improve site experience, add new technology, find new third-party vendors to lay over our websites and plug into our websites, we know that the road ahead seems to be filled with tons of green shoots. I think the important reason that I want to really focus on the first quarter of this year being, in our opinion, the first quarter of a new business is because we have in our possession some really valuable assets that didn't exist before. The resurgence of the overstock.com brand. And we encourage you to visit that website to see how different it is. Never in a million years did people expect to see Overstock selling Gucci bags. It's doing so and it's doing so successfully while it's also selling furniture and other high brand, high ticket items that customers are looking for. They're looking for value. We've really reimagined the Bed Bath & Beyond site. We've cut almost 8 million SKUs off of that site. And to say that we're done would be an understatement. At this point, while we're continuing to eliminate vendors that we don't think fit our ethos or products that don't meet our margin profile, we want to start getting into adding new categories and thinking about new things. I wouldn't have imagined years ago that Bed Bath & Beyond would become a very large furniture retailer, patio, rug, furniture. And it's changed the name of the business. We've had to learn how the taxonomy works and how to make it more efficient while never forgetting the core items that Bed Bath & Beyond built its brand on, kitchen, bed, bath. As we think about the future, we want to continue to build those up and we'll do so. But we also want to have people learn, get comfortable, have positive experience, and return to the site in categories that Bed Bath & Beyond never sold. We recently acquired Bye Bye Baby, an asset that I felt needed to be part of this company at all costs. Bed Bath & Beyond and Bye Bye Baby were known synonymously by consumers. And those two brands really set the table for what that company was, which was a life events company. We've gotten away from that. You could expect us to lean back into that again as we think about everything from the birth of a child to the first home to the wedding to the going to college and everything in between. We know we have to excel. But as part of excelling in that particular area, we know we have to meet the customer in different places. Selling online is a very complicated business and few do it very well. We want to be one of those few, but we also know that we have to lower our cost of marketing. We have to increase the size of our retained database, and we have to figure out how to build basket size over time. Part of our investment thesis around doing that is the investment that we made in Kirkland's, a 330 store home decor business based out of Nashville, Tennessee. What we liked about it as a management team was small format, low risk, low expense, low real estate costs, and high margin products inside of them. And while we've seen those results of that company continue to improve, we know that the future of that business through our investment and the future of our business requires us to work together far more. About six months ago, we put a collaboration agreement in place that showed the idea behind how we would bring our powerful brands to market through another company. Beyond is not prepared today to go open a bunch of stores, nor would anybody in this room ever vote for spending $1 on CapEx to build out, take out locations, build out things. We want our dollars to be built on technology, investing in the customer experience, figuring out how to exploit and get more out of our blockchain assets and look to acquire other valuable IP in the same family and home space so that we can then take those brands to our investment vehicle of Kirkland's and see those brands come to life. Shortly, people will learn that Kirkland's will start transforming a number of their locations. In the early stages of that discovery, we have made the decision that we're going to open up at least four overstock stores, geographically placed so both that our vendors and our customers can ship product to and return product to in a more efficient manner, which over time will improve our financial performance, primarily through margin improvement and returns. Secondarily, we will be launching in a very, very low CapEx way, Bed, Bath & Beyond Homes. Let me be clear, that is very different from the True Blue store that all of us have known for years, which focused on bed, bath, kitchen, and small accessories. Bed Bath Home looks a lot like Kirkland's and incorporates a lot of the products that Bed Bath Beyond is selling today successfully online. Small furniture pieces, a little bit more textiles, a little bit more decor. And the purpose of those stores is to meet the customer at the value proposition we're looking at. If you look at Kirkland's today, they truly are a very well-merchandised, very well-curated attempt to do a lot in what home goods does. We believe that the assortment coming from Bed Bath & Beyond and potentially Overstock into those Bed Bath Home stores And in the future, some of those Kirkland stores starts to level the playing field and makes the Kirkland stores and the Bed Bath Home stores real players in the off-price, highly curated, well-merchandised, non-dumpster-looking environment that we believe customers are looking for. A lot of value for a very low price. That is our customer base. As we also look at that store footprint, we're looking at ways to bring buy-buy baby back to life. So we have authorized one store, just one, to be opened and tested. More than likely, that will happen in the Nashville market because we believe that's a great demographic to understand all of the different spectrums, including really every new customer that's coming to that market and every existing one. So it's a really thriving market. When we think about our core business, we think about a few basic principles. I'll call them guideposts for this discussion. We believe that in the short term, and I'll say the short term is the next couple quarters, we believe that our margin profile is going to range on the product side from 24 to 26%. You saw the arrival at 25.1. I have to wonder once in a while when you're testing different elasticity and different promos and different offers, Are you doing enough to capture enough customers? As a reminder, our company pays its bills with gross profit dollars, not just gross profit margin. While we need that margin to continue to improve towards our goal of 27%, we know that we also need to start in the next 60 days thinking about building the customer file again, getting better at retaining the ones that we have, getting better and more efficient at finding new ones. then getting them to return and there's often times particularly when you're doing that where you have to use a great deal as bait that'll either come from increased spend on promotion and we think that's going to range from 13 and a half to 14.75 in the short term or it can come from extra discounting which could cause the margins to range from 24 to 26 But one strategy that we have tested, and we hope you see it on the balance sheet, is our ability to continue to be asset light, but asset smart. You'll see about $25 million of inventory sitting on our balance sheet. We have eliminated our distribution center, which was about $2 million in fixed costs on an annualized basis, and have gone to what we call an accordion-style 3PL, which means we pay for what we use. We love variable models, including starting to disseminate variable pay plans. As we do that, we're doing that for a couple of reasons. We're looking for ways for us to exploit the liquidation or the misstabilization of other retailers or other manufacturers by taking on product at 30%, 40%, 50%, 60%, 70% off the original wholesale value. Part of what we're doing is we're just testing out how effective can we be and where can we effectively do that. And we're not opposed to testing. I want to be clear that already through April, we'll have already wound that number down by about half as we sit here today. But we may wind it up a little bit more from time to time. But you should think about $25 million as what Adrian describes to the merchants as the authorized playbook, what you're allowed to test into. We can get into it quickly, but we have to be confident we can get out of it quickly. In some cases, it's been the way that we've had to attract certain vendors that we want, particularly some of the larger appliance vendors on the Bed Bath & Beyond side who didn't want to participate in dropship. But we felt that the connection between their brand and our brand made sense, and they treated us very fairly on the first cost side. So that was an extra incentive. As we look at marketing expense, you can see that there was a massive pullback year over year. Well, that's not because we didn't spend money this year. That's because the way that the company was marketing a year ago is just not sustainable. And we didn't really think, I didn't really believe that the spend that we were generating to find new customers was being put into a data lake that gave us confidence that that we can extract that information, retain that information, expand that information, because we didn't have the systems in place. I'm proud to announce that Salesforce has been fully integrated, and we have brought on an entire new, what I would call direct-to-consumer marketing team. Some of the efficiencies that we saw in the end of quarter one were a product of that new team, trying new things, recognizing that we need more performance out of our email channels, more performance out of affinity relationships, more partnerships with our vendors, and that Beyond on its own and its Google spend can't continue to be the only source of information. Again, that's why we also like the relationship with an omnichannel retailer, the ability to pick up names at an almost zero cost. As we look towards the next quarter, the one that we're in today, the one that we'll report shortly, We are finding that April is turning out to be a pretty consistent month. I wanted to spell any notion for anybody out there that there is this tremendous amount of pull forward demand. We have not seen a tremendous acceleration in site visits because we're not spending more. We haven't seen a tremendous increase in AOV other than the normal patio increases that we see. And any notion that the customers out there trying to buy as much as they can to hoard it in their garage in anticipation of tariffs, At least in our company, we don't believe to be true. We may see that in the future, but we don't believe to be true. One of the headlines of our press release is that we believe that we are 60 days away from transitioning from a restructuring company to a growth company. That doesn't mean that we think we're going to make a bunch of money in 60 days. What that means is that we feel at this moment in time that on the 60th day from today, to be very specific, we will have done what we needed to do with our SKU count. We will have done what we needed to do, at least for the most part, with new technology being implemented, new platforms being initiated, new layers being laid on top of on the technology side that make us more efficient. We want to move away from cutting, cutting, cutting. You don't cut your way to a profit. You sell your way to a profit. That is why I came here. But in order to do that, you had to understand what the base was. You had to build the foundation so that you could understand that we're building a company that can last in the worst of times. As a reminder, we're dealing with a terrible, terrible economy today. Interest rates are at a 20 year high. The 10-year treasury bounces around from 4.3 to 4.6. We know what that does to mortgage rates. We know what home sales were in March. And our belief as a management team is that if we could make it, we could survive, we could find our way to the neighborhood of profitability in this environment, then what we were really setting ourselves up for is the ability to be so nimble that no matter how tough the economy could get, we could survive. And we could be very much prepared to participate, and quite frankly, accelerate when the tailwinds start to come, which we believe they will. Tariffs are always the elephant in the room these days, and any company that tells you that they know exactly what's going to happen has absolutely no idea what's happening in their own business if they say that. The tone-deaf nature in which people are making prognostications about what's going to happen is something that this company will not do. But what we can tell you is that we are in a unique position, unlike a lot of other companies, to be able to deal with tariffs. As a reminder, we're debt-free. So we're not chasing these massive interest payments that scare the crap out of us. And we want to continue to stay that way to the best of our ability, unless there's a reason to do it, and it's accretive for our shareholders. We have continued over time to diversify our offering. And if you visit our websites today, you'll see all the things that are built in the USA. Even if it's parts and pieces assembled here, we believe that we have a great strategy and we're continuing to expand that strategy of built in the USA. We're also not naive to think that everything in the USA can satisfy all the categories. It cannot. And so we're working with a number of companies who have in the last four or five years since the last tariff scare have adjusted their own sourcing. So when you look at our vendor concentration, we don't have as much risk as others may, but that doesn't mean that we aren't susceptible to something, which is partially why we also create that margin band of 24 to 26. We have to be realistic. We're not exempt from everything. We have seen in the last couple of weeks, a number of partners come to us asking for price increases. I know, they know, you know, that none of them have actually experienced those tariffs. Those are anticipatory price hikes. Oddly enough, most of that has existed in the jewelry space on our overstock business, which continues to do very well. We haven't seen a big rush on the furniture side, but we anticipate that we're going to see, like many other retailers, an increase in some furniture pricing. We're going to work with those vendors and we're going to tighten down our belts even more to ensure that our customers and our shareholders don't take the brunt of that. But it is true that everybody's going to be playing by the same rule book. So if that means that furniture sales are going to slow down, the odd thing for us is that I don't know how much more they could slow down. And we believe that even if they slow down on a macro basis, the TAM is still big enough. The market is still big enough for us to get our fair share and still experience revenue growth in the second quarter of 2025 compared to the first quarter of 2025. And we also believe that we could experience revenue growth in Q3 of 2025. So we expect some revenue growth in Q2 from Q1, some revenue growth in Q3 from Q2, while we continue to work on stabilization of every other part of our business. We'll turn the rest of those mic points over to the Q&A, but I'm going to turn the call over to my partner and president, Adrienne Lee.