BED BATH & BEYOND, INC. Q4 FY2024 earnings call

• Core business: Eliminated millions of SKUs and reduced vendors to improve margin. Set a Q4 gross margin target of 21.5% but achieved 23%, aiming for north of 27% by rationalizing SKUs and vendors. SG&A reduced by $65 million, exceeding the goal, and working towards a $165 million annual G&A and Tech run rate. - Marketing: Aiming to reduce sales and marketing expense as a percent of revenue, with Q1 target below 14% and moving closer to 11% through site experience improvements. - Investments: Own 40% of Kirkland's, a $400 million business, and made strategic investments. - Blockchain/Tokenization: Exploring tokenizing assets like BuyBuyBaby, working with tZERO and GrainChain, and developing LifeChain platform for secure asset management.

In the fourth quarter, gross margin was 23%, a 380 basis point improvement year-over-year, with a sequential 180 basis point improvement. G&A and Tech Expense was $48 million, down $6 million year-over-year, achieving the $65 million fixed cost reduction goal. Adjusted EBITDA was a loss of $28 million, improving by $21 million from the fourth quarter of 2023. The core business focuses on margin improvement, vendor consolidation, and marketing efficiency, while the blockchain/tokenization segment involves exploring asset tokenization and platform development.

• Expect sequential margin improvement quarter after quarter, with Q1 targeting sales and marketing expense as a percent of revenue below 14% and progressing towards 11% with site optimizations. - Anticipate EBITDA to show sequential improvement from Q4 to subsequent quarters. - ATM used for strategic investments and balance sheet rebuilding to support growth and return on investment. - Goal is to achieve profitability in 2025, then shift focus to growth.

• Market conditions could materially impact results. - Vendor consolidation may not proceed as expected, affecting margins. - Marketing efficiency improvements may not materialize as planned. - Uncertainty in unlocking value from the Medici Ventures portfolio.

Q: About top line revenue cadence as ad spend was reduced.

A: Focus on profitable transactions, revenue contracted due to eliminating unprofitable vendors and SKUs, expect revenue to be tighter in first couple of quarters but EBITDA to improve.

Q: On gross margin progress and SKU rationalization.

A: Overstock has better contribution margin, ongoing work to rationalize SKUs, aiming for 27% gross margin and north of 30% long term.

Q: On Medici Ventures and GrainChain update.

A: Working to unlock value from Medici portfolio, exploring tokenization, GrainChain has promising progress but not all companies are functioning well.

Q: On marketing efficiency and consumer demand.

A: Focus on site experience, e-mail execution, and vendor relationships, revenue tight due to profitability focus.

Q: On marketing modeling and near-term gross margin.

A: Marketing efficiency work ongoing, aiming for sales and marketing expense as a percent of revenue to improve, gross margin target to reach 25% and progress towards 27%