BBBY - NASDAQ

Good morning. My name is Aaron, and I'll be your conference operator for today. At this time, I would like to welcome everyone to the Q1 2025 Beyond, Inc. Earnings Conference Call. [Operator Instructions] 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 Lemonis; and President and Chief Financial Officer, Adrianne 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 29, 2025, and may include forward-looking statements, including, without limitation, statements relating to 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 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 2 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 6 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, 7 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 is 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 that are looking for value. We 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 buybuy BABY, an asset that I felt needed to be part of this company at all costs. Bed Bath & Beyond and buybuy BABY were known synonymously by consumers. And those 2 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 cost 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 6 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 4 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 Home. 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's stores, starts to level the playing field and makes the Kirkland's 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 buybuy BABY back to life. So we have authorized 1 store, just 1, 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 of 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 and then getting them to return. And there's oftentimes, particularly when you're doing that, where you have to use a great deal as bait. That will either come from increased spend on promotion, and we think that's going to range from 13.5% 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 cost on an annualized basis, and have gone to what we call an accordion-style 3PL, which means we pay you 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 mis-stabilization 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 Adrianne 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 drop ship, 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 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 1 were a product of that new team, trying new things, recognizing that we need more performance out of our e-mail 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, is the ability to pick up names at an almost 0 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 want to dispel 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 can 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, if we could survive, if 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 elephants 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 U.S.A., 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 U.S.A. We're also not naive to think that everything in the U.S.A. can satisfy all the categories. It cannot. And so we're working with a number of companies who have, in the last 4, 5 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 is 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 can 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 -- my points over to the Q&A, but I'm going to turn the call over to my partner and President, Adrianne Lee.

Great. Thank you, Marcus. Just wanted to start off with, as a result of our previously disclosed decision to eliminate noncontributory SKUs and vendors and prioritize efficiencies in our marketing channel, revenue declined 39% year-over-year in the first quarter. These actions drove fewer orders and fewer new customers. However, I am very pleased that first quarter AOV increased to $194, a $21 increase year-over-year, and units per order increased as we incent a bigger basket size. Order frequency continues to hold as we reestablished spend guardrails. We made significant progress on restoring our margin profile and are imminently shifting to a growth mindset and, as Marcus outlined, aiming for sequential revenue improvement quarter-over-quarter. Growth will be driven by offering customers value on a vast array of home products, trusted brands and deep discounts on designer items, while improving our site experience, findability, storytelling and addressing assortment gaps. The acceleration in our gross margin expansion exceeded our internal target. Gross margin landed at 25% for the quarter, a 560 basis point improvement compared to the same period last year. You may recall, we targeted a 25% gross margin at our October 2024 investor event, and we achieved that goal. Sequentially, we delivered a 210 basis point improvement as we were disciplined in our pricing and merchandising actions and improved freight costs. Important to note, and as Marcus discussed, we are testing opportunities to purchase inventory in an effort to improve SKU economics. We will be disciplined and opportunistic in these efforts. We have shown consistency in improving our margin profile over the last 4 quarters as we worked with the 6-part plan I outlined at the beginning of 2024. And I expect the team to maintain our margin guardrails and disciplined approach. Sales and marketing decreased by $37 million or 430 basis points as a percent of revenue versus last year, and improved 380 basis points versus the fourth quarter of 2024. This decline was mainly driven by the intentional reduction of less efficient spend while improving channels that are more contributory. We know we need to balance our efforts between acquisition and retention. The team is committed to doing this day in and day out while improving the site experience and sharpening pricing to support conversion. G&A and tech expense of $41 million decreased by $9 million year-over-year as a result of our commitment to reduce fixed costs by an annualized amount of $80 million. I am pleased to report we have identified the entire commitment and have realized 93%, allowing us to reinvest a portion of savings to support growth initiatives and innovation. With our more focused, agile org structure, I expect us to deliver a quarterly run rate of $38 million of tech and G&A expense excluding special items going forward. All in, adjusted EBITDA came in at a loss of $13 million, a 72% or $35 million improvement versus the first quarter of 2024 and an improvement of $15 million versus 4Q of 2024. Reported GAAP EPS was a loss of $0.74 per share for the first quarter. Excluding losses recognized from our equity method securities, adjusted diluted loss per share was $0.42, an $0.80 improvement year-over-year. We ended the quarter with cash, cash equivalents, restricted cash and inventory balance of $166 million. In the quarter, we funded our $8 million commitment to Kirkland's Home and purchased buybuy BABY for $5 million, which was mostly offset by $19 million of net proceeds from the sale of common stock. Cash used in operating activities increased year-over-year by $16 million, mainly driven by a $15 million cash use for our inventory program previously discussed. As Marcus mentioned, with the majority of our restructuring behind us, our teams are organized to be agile and laser-focused on delivering on our key operational guideposts with the intensity I expect. We made progress throughout 2024 and accelerated in the first quarter of 2025, creating a foundation to deliver both profitability and growth. With that, back to you, Marcus.

Great. Well, we'll turn it over to the Q&A. And operator, we'll open it up to our first question, please.

[Operator Instructions] Our first question for today is from the line of Seth Sigman with Barclays.

Marcus, you discussed restructuring and reimagining the business over the last year. Part of that was rebasing the business. You've refocused, you rationalized the inventory and the offering. I guess I'm focused on revenue specifically. Can you talk about the confidence level that this is the bottom and you're guiding to revenue growth sequentially through this year? What gives you confidence in that?

Thank you for the question. I feel like the revenue that was achieved in Q1 is the floor, and none of us are happy with the revenue. I want to be super clear. We have been really working towards getting to profitability and we understand what the levers are. The levers are very simple. The margin needs to be in the range, that tech and G&A needs to be in the range, and the sales and marketing expense needs to be in the range. But under no uncertain terms is revenue not the absolute most important driver of getting to profitability and getting above that 0 number that we all are adamant on getting to. I'm confident because we know how to pull the levers now and we understand how the marketing infrastructure works. And every single day, we're getting better at e-mail efficiency, we're getting better at ad spend efficiency, we're getting better at site conversion. And because I see those things moving, it literally is very simple. We could spend $1 and get a positive ROAS. And we haven't been spending the kind of dollars because we weren't confident that we would get the positive ROAS out of it. And we're still -- there are still parts of our business that do not perform up to our standards and we don't lean in yet. There are still things about our website that don't perform the way we want to and we don't lean in yet. And what we've learned and created a culture of is you don't spend unless you're sure. And the way you're going to tell me that you're sure is you're going to show me small sample sizes and you're going to show me the efficacy and the proof points. And absent that, you don't spend. So what we've given the team permission to do is, in those areas where they have excelled, like retargeting e-mails late at night when we have cart abandonment, which we started to really perfect, or picking a specific campaign and building a beautiful funnel around it and understanding how to chase the funnel and get positive ROAS, those are the things that give us confidence that, once you build that floor, which we tried very hard to tell everybody we were going to get to, once you build that floor, then building the blocks from there becomes far easier because everybody's mindset is around you don't spend do unless you're sure and that dollar better have a positive ROAS. So that's why we are confident that the base of Q1 of $232 million will have growth in Q2 and growth in Q3. And I will reserve my judgment for any quarter after that until I understand the general macro and what's happening with the consumer and how tariffs have affected the customers.

Our next question is from the line of Jonathan Matuszewski with Jefferies.

Marcus, the first one was just on the roadmap to breakeven EBITDA. Obviously, some drivers ahead in terms of eliminating some more vendors and rationalizing some more SKUs. You have a streamlined kind of G&A base as well. I guess when we put together all the margin drivers, is there a way to help kind of put a stake in the ground in terms of maybe a roadmap or a milestone for reaching breakeven EBITDA in which we can then sequentially grow for positive EBITDA dollars?

Yes. So I, like you said, like to think about the modeling around how investors should understand what the cash uses are, how we're going to get there and really build it. And we don't provide guidance and we're not going to particularly in light of this, but we are going to do a better job of giving people very specific guideposts that will help us get there. The simplest math that I can give you is that at 25% margin and 13% marketing expense, both of which are not totally locked in yet, I think the margin has that range of 24% to 26% and the sales and marketing is 13.5% to 14.75%. I think that in order for us to get to where we want to get to, which is positive, we would need to do $1.2 billion annualized at a 25% margin with 13% sales and marketing. And then once you start from there, you can toggle things up and down. You can move your margin up to 26%, you could pull your revenue down. You could take your margin down, you have to take your revenue up. You could move those numbers all around. But that's actually the abacus that we're using in our business. And as we wake up every day, if we feel like we're short contribution margin, we'll pull back spend and we'll pull back promotions. If we feel like we're not acquiring enough customers, we're going to increase spend. And we're going to continue to map out very, very scientifically on a dot plot exactly what happens when we do those things, so we can build our own mental algorithm of: when we do this, this is what happens. And we need to prove out that thesis over and over again. So I would use $1.2 billion on an annualized basis, which is what all of our goals were, we just didn't know what that was, to be able to figure out, okay, when you say you want to get in the neighborhood of profitability, what does that look like? You have to do an average of $300 million a quarter, average, some quarters more, some quarters less, if your margins are going to be 25% and your sales and marketing is going to be 13%. I'm not telling you whether I think those numbers work or not. I think the margins need to strive for 27%. We're going to work our fannies off over the next many quarters to get there. We think that the marketing expense, candidly, as Adrianne smacked me around a little last night and said, "Hey, we could get to 11%, we could get to 10%. Stop saying 12% and 13%. We have to find that balance." We got to get to 13% before we think about 12%. And I think this company has to set realistic goals.

That's helpful. And then just a quick follow-up question on buybuy BABY. Maybe just some quick thoughts on brand activation strategies to kind of reestablish consumer awareness. And are those embedded in kind of the advertising spend framework that you provided?

So we are going to be very careful and very steadfast in not allowing any initiative of our company to cause us to unnecessarily lose money. The inverse of that is that we have to be very mindful that, to generate revenue and to bring that business back to life, we have to spend money. The core business in my mind has to be in that 13% to 14% and 14.75% range right now, and we have to get to 13%. But when we launch a new brand or we acquire something, there is a separate and conscious spend on what that's going to look like. And what we're going to do very well as a company is to disclose those things going forward that, when buybuy BABY launches on May 8 and has its token get launched and has its grand opening on the same day, there is money that's going to be spent to reintroduce and remind people and restart that amount. We expect that revenue to have a nice growth over time. We're starting from a $30 million most recent trailing 12 months revenue base on buybuy BABY. Over time we know we can do a lot of damage to that number. What we don't want to build is we don't want to build the model that solely relies on PLA. We want to build content. We want to find moms in communities closer to them. We want to work with organizations like Baby2Baby that really are out there doing good things for families and for children. We want to make sure that the voice of buybuy BABY is very much female-dominated and mom-dominated and community-oriented and thoughtful-oriented and, most importantly, addresses every potential mom, every expecting mom, at the income level that they're able to be at, and that the buybuy BABY offering satisfies a product and offering for everybody. That takes time. The assortment that we acquired from Dream On Me that bought it out of the bankruptcy state did not have that same ethos. They were focused on selling baby furniture. That's what they did. We can't do that. And together with our partners at Kirkland's and the merchant team there as we think about the store, we're going to be starting from the base. We've been working with JLL, the big national firm that designs retail concepts, to think about what it looks like and make sure the website works, build the assortment out so that it addresses that. And we're going to go slow and we're going to be smart and we're going to build the brand that can last forever. I know that was a lot around buybuy, but I want you to understand that we think about our core business and we think about initiatives, and we'll be disclosing those separately going forward.

Our next question is from the line of Thomas Forte with Maxim Group.

Great. So Marcus, just one for me. So Marcus, as a long-time follower of the company and the stock, I appreciate your efforts to position Beyond for sustainable profitable sales growth. I also appreciate your efforts to show value for the blockchain investments. So can you compare and contrast the tokenization of Overstock versus buybuy BABY? What are you trying to achieve and what does success look like, including the valuation of those investments?

The blockchain assets have become very crystal clear to me. And in the first 7 months of being here, I really couldn't understand why a company like this would have ever invested hundreds of millions of dollars into things that have no direct correlation to their core business. It was our mandate from our shareholders and a lot of big investors, who had some very tough calls with me, that they expect the blockchain assets to be fully monetized and fully realized. And so as we spent the holiday, Christmas to New Year's time, crafting out work paper after work paper after work paper of what needed to happen, it really became clear that we needed to do one thing first. We have 2 primary investments in our blockchain assets that we believe have a tremendous amount of value. The first one is GrainChain. And the GrainChain asset for me is probably the most under-realized, undervalued, under-recognized asset out there. And I blame part of that, quite frankly, on the founder's and leader's ability to clearly articulate in different ways how amazing the business he built is. I think part of that is he's busy building his business. And that's why they've had revenue growth year after year after year after year. I look at that business, which most people think as an agriculture supply chain business, that's why it's called GrainChain, but as I tease Luis all the time, it's really called -- should be called SupplyChain, because the technology that I've learned about that business has the portability to do far more than just agriculture. And whether that's manufacturing parts or that's 3PL goods moving across the country through real supply chains, or whatever that may be, I think we're about to see some really solid things and some big announcements coming out of GrainChain that I'm aware of, but I don't want to spoil his story. I think over time, we, as a company, want to utilize our direct interest in GrainChain and our direct interest in t

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

Marcus, maybe transitioning back to the growth playbook here, can you help us better understand the contribution margin mix and maybe spread of contribution margin between the brands today? And then on that point, has the assortment been tailored within all the brands to a point where you sort of expect all transactions on a go-forward basis to carry a positive contribution margin? Or is there still a subset of transactions and/or brand itself, right, that you expect to remain dilutive as we return to this growth platform?

Steve, it's Adrianne. How are you? Just to go as far as kind of the mix by brand and to set the tone here, the bulk of our transactions are still on the Bed Bath & Beyond site. So we launched Overstock, obviously, earlier -- or last year, excuse me. I'm getting my years mixed up. And we're still building that brand back up, still adding categories, merchandising efforts and assortment. So I would say the bulk of our transactions, the vast majority of our transactions are still on Bed Bath. And that's actually the platform by which we've done most of our SKU kind of, I'll say, remediation efforts or removing SKUs and vendors, because that's the platform by which we have the, as Marcus talked about in his scripted remarks, the 12 million or so SKUs that we've now reduced by over 6 million SKUs. So I would say, again, mixed, vast of the transaction still on Bed Bath. Bed Bath is really the site by which we continue to tweak our SKU and vendors to have contributory transactions. And I think we're really close to kind of seeing all that through and come to fruition. Alex, any comments?

Yes. The only thing I'd add is, on the brands, right, we're really focused on where the product offering is really competitive and where we can acquire new customers. So I think balancing those transactions was a key piece of the first quarter. And we'll continue to focus on that through the rest of the year.

It's not unrealistic to think that we're not going to have a transaction that loses money, and not because of customer service, because we are a marketplace and sometimes vendors can manipulate the system. And we're working to create more of a closed marketplace and an open marketplace so we don't sell random things like water filters. And so we have some work to do there. But I also think it's important that we understand how to capture growth. And one of the things that I think I bring to the table that's unique to this company that it hasn't had is understanding the affordability band across customer bases and how to hook people. And you're oftentimes going to create these barn burner ideas, these flash price drops. You can visit the 2 sites today and they have -- and Kirkland's is coming soon, where flash price drops becomes really a brand standard for us. We use price flash drops to lure people in, to get them to buy one thing hoping they visit the rest of the site. That doesn't mean that there won't be 1 item in a cart of 6 that we lost money, but the goal is to have a profitable transaction with the customer. And so once in a while, Alex and some of the other merchants remind me that we are in the fishing business and that sometimes we need a little bait to do that. So you're going to see those things develop over time. But as a mantra, we don't sell things consciously that we lose money at. That is like -- you will not work in this company if I find you doing that. And we have evidence of that by there are certain people that don't work here anymore. If you don't understand that we don't sell things that lose money, you cannot work here.

Maybe just a quick follow-up on the answer, because as I think back to the investor event last year, I believe there was a comment, right, made about sort of 1,000 or so basis point spread in contribution margin around selling furniture on Overstock, right, versus the Bed Bath & Beyond website. And so is the message today that that sort of has been resolved and the learnings around assortment and maybe the learnings around conversion and acquisition have really allowed you to tighten that spread in contribution margin on selling like-for-like SKUs between the 2 different websites to the point that sort of solidifies your confidence that you're relaying today?

Two things. I think there are 2 very specific things. One is we have to deliver an assortment that speaks to the brand that people expect. And so whether there's great contribution to margin or not, when you go to Bed Bath & Beyond, that assortment, which is not even coming close yet to meeting my standards, we have another 60 days to go there, really needs to address what all of us knew that I would get when I went there. And then it has to balance out the endless aisle that it's created and the brand extensions that it's created through patio, rugs, furniture, lighting, all of those things. But what I want to be sure of is that, as we get into the endless aisle model, the things that are not historically native to Bed Bath, I don't want to see any experimenting when it's reckless. If you want to test out fitness equipment, you better bring me the business case on why fitness equipment, what the TAM is going to be, what the effort is going to be, how much time it's going to take, what the margins are going to be, what the contribution is going to be and what it's going to do to confuse people. So Bed Bath & Beyond has to be locked and loaded. When we get to Overstock, that is a place that we are going to test different categories. And when I look at what we did with a designer shop that's really like 60 days old, and we're not going to disclose the revenue that it does, but it's shocking how much revenue people want to spend on getting 40% off Gucci bags or watches. And you can expect that category to expand materially, and we have a trip scheduled to New York where we're going to be selling very, very high-luxury, top-name brand watches, top jewelry. The key for Overstock for me is that brand is all about what you want at a value you can afford. And it has to feel aspirational. But again, we're not going to put things on there that do that. Now in that particular model, you will see us curate a little bit more when we know the margins are good. So jewelry is a great example. This company, when it had 28% margins, had a lot of jewelry in its heyday going through it, selling $100,000 rings. That may sound crazy. We know it's possible. We're seeing people start to look at those things and we're going to lean into that. But at the same time, we want to be smart about it. And we had to clean up that assortment continuing to do that as well.

Our next question is from the line of Peter Keith with Piper Sandler.

This is Alexia Morgan on for Peter Keith. We are wondering how you think about the ending of the de minimis exemption which will make retailers like Temu and Shein more expensive. Do you think that this will have any positive impact on your business? And then second, with Overstock focused on closeouts, could growth be hindered in 2025 as suppliers try to maximize margin on non-tariffed inventory? Or how do you think about that?

Yes. So let me address your second question first. I actually think that we're going to see more opportunity rather than less. We're going to see more opportunity around big retailers really continuing to struggle. And we've had more contact from banks where they're looking at ABLs that are constricted and looking at a lot of things. So I think that supply chains are going to be tight. But the vendors that we do business with are great capitalists. They're really, really good capitalists. And they understand that turning their inventory makes sense. Now they're tightening up their certain features and benefits that they're giving us around some of the newer stuff. But on the older stuff, and price flash drop is a great example, they still need to turn stuff into cash. So I don't think we're going to be -- I don't think we're going to be too concerned about that. Adrianne, do you want to take the first question?

I sure will. And I think how we're thinking about it, obviously, landscape is ever-evolving with tariffs and competition. But as far as your first question with the Temus of the world and de minimis, what we're seeing right now is they're not doing as much performance marketing as they have historically. So there's kind of a spot for us to play there and really try to capture some eyeballs.

I think that's the first thing. The second thing is we don't sell that junk.

Our next question is from the line of Rick Patel with Raymond James.

Question on the trend lines as we look ahead. What do you see as the primary drivers of sequential revenue growth as we consider customers, orders and AOV? And is it safe to assume that gross profit improvement is going to follow a similar path as revenue? And how do you think about the potential for gross profit to even achieve overdrive given it sounds like you still have some runway left for better margin expansion?

I'm going to break the margin down into 2 things up. I don't expect the gross margin percentage to continue to accelerate, which is why I identified the 24% to 26% band, for a while. Because I want to -- I don't want to mess with elasticity too much and start deterring people away from our business when other people may need to be liquidating things for whether it's a company like at-home or anybody else. We don't know what that landscape looks like. I think ultimately what we want to really do is get very smart about how we spend our money. And so when we talk about revenue growth, that's a conscious decision as we sit here today to know that we're going to spend the dollar with a positive ROAS because our system works. And as we get more confident and as we learn more about the customization, the segmentation and the audience building and the journey building and the Vercel implementation, you're going to see us lean into that. So when you hear me talk about in 60 days we're going to have a greater growth mindset, it's largely driven by the continual confidence around the data lake, around the audience segmentation, around the journey building, around the funnel creation, around the Vercel customization stack that lays on top of that. So when that journey gets executed, the customer lands on something that speaks to them. Once those things are in place, which they are really starting to fall in line, we're then going to spend more. And the reason we're going to spend more is because the conversion is going to work and the ROAS is going to be there. The reason we stopped spending money is because the conversion wasn't there and the ROAS was negative. So if you have good products in your assortment and you have great vendors, which, by the way, less is better because you're more important to them, and you have a good e-mail strategy and you have a good PLA strategy, and you have a very, very solid customer data lake strategy and funnel strategy, then there really isn't a limit to the growth other than how much the market will allow you to spend in a given day based on what's happening in the world. Sometimes you could want to spend $300,000 in a day growing your business and the market just isn't there. You don't get to the $300,000 unless you break the ROAS curve. We are staying disciplined. And if anybody breaks that curve, they will not work here, until the management team decides that is permitted to do that. So guardrails and structure is how we're going to build this company for the future.

We have time, it looks like, for one final question. This is from the line of Bernie McTernan with Needham & Company.

Great. Just wanted to talk about the path to $1.2 billion of run rate revenue. And just any discussion in terms of how much of that is just continued marketing efficiency and better ROAS versus adding new inventory in channels like buybuy BABY, omnichannel, continuing to build out Overstock? And then the second part of the question is the guidance for 13.5% to 14.5% sales and marketing as a percentage of revenue over the next couple of quarters. So we're at the low end of that right now, so implying some incremental investment. But then longer term getting to 12% or even lower, really like how does that play out in the real world? And what's the timeframe to maybe achieving those lower targets?

Well, the good news is I live in the real world, which is why I took the range higher than we are today because I didn't like the customer count and the transaction count that we had in the quarter. And we need to transition to a growth mode, which means build the file, learn how to retain them, get more lifetime value out of them, and we can't keep contracting and contracting and contracting. Ultimately, the way that we see revenue growth going, it comes from 2 very specific areas. One is the continued curation and assortment around the specific brands, including adding products to buybuy BABY. Those things are contributory to the growth. But the more important thing to balance with that is the science and the art around how we spend money and how we create marketing efficiency. The marketing efficiency is not where we want it to be today, and the customer file is not where we want it to be today. So what I told the team from this day forward is that we're going to have a band of flexibility that they're going to be able to play in. The sandbox is going to be here. And over time, as the e-mails get better, as the marketing efficiency gets better, as the funnels get better, as the categories get better, that sandbox is going to close and the range is going to go from 12.5% to 13.5%, and it's going to go from 12% to 13%. But what I don't want to do is stop the growth. I don't want to decline the company anymore. I don't want to have revenue go backwards anymore. That doesn't serve our vendors right. That doesn't serve our business right. That's not good for morale inside of our company. And we have reached that point where it's now time to really think about it another way. And I've given the team the flexibility to play in the sandbox because I don't want them to be scared of me or you or anything else while they're trying to build the business back to $1.2 billion, $1.5 billion, $2 billion, whatever the number is, smartly, intelligently and profitably.

Thank you for your question. And that will conclude our Q&A for today. Marcus, I'll turn it back over to you for any closing comments.

Thank you very much. We look forward to the one-on-one calls with our analysts, and talk to you then. Thank you.