Beyond, Inc. (BYON) Q4 2024 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call highlights a 21% revenue decline, reliance on ATM for cash fortification, and a $1.66 GAAP EPS loss, indicating financial strain. The Q&A reveals management's reluctance to provide specifics on key metrics and timelines, raising concerns. While gross margins improved, the focus on cost-cutting and restructuring suggests ongoing challenges. The ATM stock sale and risks in blockchain and AI ventures further weigh on sentiment. Despite some positive steps, such as improved margins and strategic investments, overall sentiment is negative due to financial pressures and operational uncertainties.

Key Financial Performance

Revenue $1.4 billion for the year, an 11% decline year-over-year; decline attributed to trade-off decisions to right-size margin profile.

Gross Margin 23% for Q4, a 380 basis point improvement year-over-year; improvement due to optimized pricing, improved freight costs, and rationalized assortment.

G&A and Tech Expense $48 million, decreased by $6 million year-over-year; reduction achieved through disciplined execution of cost-cutting measures.

Adjusted EBITDA Loss of $28 million, a 43% or $21 million improvement year-over-year; improvement attributed to focus on profitable commerce and expense management.

GAAP EPS Loss of $1.66 per share; adjusted diluted loss per share was $0.91.

Cash Balance $186 million in cash, cash equivalents, and restricted cash; balance strengthened through net cash proceeds from building sale and common stock sale.

SG&A Reduction $65 million in expenses cut throughout 2024; exceeded goal through disciplined execution.

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Operating Highlights

Investment in Kirkland's: Completed a transaction to own 40% of Kirkland's, a $400 million business, which has shown positive EBITDA in recent quarters.

Partnership with Salesforce: Selected to partner with Salesforce to implement Agentforce across different parts of the business, enhancing customer experience.

LifeChain Initiative: Announced plans for LifeChain, a platform for secure, verifiable, and tokenized asset management, initially focused on home ownership.

Gross Margin Improvement: Achieved a gross margin of 23% in Q4, exceeding the target of 21.5%.

SG&A Reduction: Exceeded the goal of cutting $65 million in expenses, with a focus on achieving a $165 million annual G&A and tech run rate.

SKU Rationalization: Reduced SKU count from 12 million to under 6 million, with plans for further cuts to improve efficiency.

Focus on Profitability: Shifted focus from revenue growth to establishing a profitable foundation before pursuing long-term growth.

Vendor Consolidation: Continuing to consolidate vendors to improve margins and operational efficiency.

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Risk or Challenges

Market Conditions: The company acknowledges that its positive outlook assumes stable market conditions, indicating potential risks if market conditions deteriorate.

Vendor Consolidation: The company is in the process of consolidating vendors to improve margins, but acknowledges that they still have too many vendors, which could complicate their path to profitability.

Tariffs and Competitive Advantage: While the company does not anticipate tariffs to disproportionately affect them, they recognize that the entire marketplace is subject to the same cost pressures, which could impact competitiveness.

Revenue Decline: The company reported a 21% decline in revenue year-over-year, indicating challenges in maintaining sales while restructuring for profitability.

Marketing Efficiency: The company aims to reduce marketing expenses from 17% to below 14%, indicating current inefficiencies that could hinder profitability.

Supply Chain Management: The company is closing a distribution center, which may pose risks to supply chain efficiency, although they have access to other distribution centers.

Investment Risks: The company is using an ATM to fortify its balance sheet for growth, but there are risks associated with stock dilution and the effectiveness of these investments.

Blockchain and AI Integration: The company is exploring blockchain and AI strategies, which carry regulatory and operational risks, particularly in compliance and execution.

Overall Profitability Goals: The company has set ambitious profitability targets but acknowledges that achieving these goals will require significant ongoing effort and may be impacted by external factors.

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Guidance & Outlook

Path to Profitability: Management believes they are on a path to profitability with multiple inflection points expected throughout the year.

Gross Margin Target: A bold target of 21.5% for Q4 was set, and the actual gross margin landed at approximately 23%. The goal is to exceed 27% and strive for 30%.

SG&A Reduction: The company committed to cutting $65 million in expenses throughout 2024 and exceeded that goal, with plans to find an additional $5-10 million in savings in 2025.

Marketing Efficiency: The goal is to reduce marketing expenses from 17% to below 14% in Q1, aiming for closer to 11% as improvements are made.

Strategic Partnerships: Partnerships with companies like Vercel and Salesforce are expected to enhance customer experience and drive down SG&A.

Acquisition Strategy: The company completed a transaction to acquire 40% of Kirkland's, a $400 million business, to enhance their market position.

LifeChain Initiative: Beyond is developing LifeChain, a platform for secure, verifiable, and tokenized asset management, initially focused on home ownership.

Revenue Expectations: Revenue for the year ending December 2024 was $1.4 billion, an 11% decline versus 2023, with expectations of continued revenue contraction in the short term.

Adjusted EBITDA: The company reported an adjusted EBITDA loss of $28 million for Q4, with expectations for sequential improvements in EBITDA performance.

Cash Position: The company ended Q4 with a cash balance of $186 million, bolstered by $17 million from a building sale and $43 million from stock sales.

Future Growth: Management is focused on rebuilding a profitable foundation before shifting focus to long-term sustainable growth.

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Shareholder Return Plan

ATM Usage: The company filed a $200 million shelf registration to sell shares into the market, which was used to fortify the balance sheet for growth and return on investment.

Investment in Kirkland's: Beyond, Inc. completed a transaction to own 40% of Kirkland's, a $400 million business, which has shown positive EBITDA in recent quarters.

Cash Proceeds from Stock Sale: The company recognized $43 million in net proceeds from the sale of common stock pursuant to the ATM.

Cash Balance: The company ended the quarter with a cash, cash equivalents, and restricted cash balance of $186 million.

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Key Q&A

Q:Can you provide insight on the monthly cadence of revenue throughout the quarter and how it trended as ad spend was reduced?

A:We don't disclose revenue by month, but revenue declined from October to December as we eliminated unprofitable vendors and SKUs. This contraction is part of our strategy to drive margin and profitability.

Q:What progress has been made in moving SKUs from Bed Bath back to Overstock, and what is the current status of gross margin expansion?

A:We expect sequential margin improvement throughout the year, driven by growth from Overstock and vendor consolidation. We're aiming for a short-term goal of 27% gross margin, but the ultimate goal is above 30%.

Q:Can you discuss efforts to generate shareholder value from Medici Ventures' portfolio and updates on GrainChain?

A:We are focused on unlocking value through use cases and bringing brands to the forefront. We aim to provide updates on GrainChain in the future, but specific timelines are uncertain.

Q:How does the average contribution margin compare between Bed Bath & Beyond and Overstock today?

A:Overstock has a slightly better contribution margin than Bed Bath & Beyond, and we are working to improve both through vendor and SKU rationalization.

Q:What is the near-term outlook for gross margins and how should we model marketing efficiency?

A:We aim for a gross margin of 25% in the near term, with expectations for improvement as we work with vendors and enhance marketing efficiency.

Q:Can you provide more details on conversion rates and how they performed throughout Q4?

A:We are focused on improving conversion rates and margins, but we are currently operating in a vacuum to achieve profitability, so I can't comment on industry trends.

Q:What work remains to be done on marketing efficiency?

A:We need to improve site experience, email execution, and vendor relationships to enhance marketing efficiency.

Q:Review of Unclear Management Responses

A:Management avoided providing specific timelines for updates on GrainChain and did not disclose detailed revenue figures or contribution margin specifics.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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