Q4 2025 Bed Bath & Beyond, Inc Earnings Call

February 23, 2026

Speaker #1: Hello, everyone. Thank you for joining us, and welcome to the Q4 2025 Bed Bath & Beyond, Inc. Earnings Conference Call. After today's prepared remarks, we will host a question-and-answer session.

Operator: Hello, everyone. Thank you for joining us, and welcome to the Q4 2025 Bed Bath & Beyond, Inc. Earnings Conference Call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, press star one again. I will now hand the call over to Melissa Smith, General Counsel, and Corporate Secretary. Please go ahead.

Speaker #1: If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 1 again. I will now hand the call over to Melissa Smith, General Counsel and Corporate Secretary.

Speaker #1: Please go ahead.

Speaker #2: Thank you, Operator. Good afternoon, and welcome to Bed Bath & Beyond, Inc.'s fourth quarter and full year 2025 earnings conference call. Joining me today on the call are Executive Chairman and Chief Executive Officer Marcus Lemonis and President and Chief Financial Officer Adrianne Lee.

Melissa Smith: Thank you, operator. Good afternoon, and welcome to Bed Bath & Beyond, Inc.'s Q4 and full year 2025 Earnings Conference Call. Joining me today on the call are Executive Chairman and Chief Executive Officer, Marcus Lemonis, and President and Chief Financial Officer, Adrian Lee.

Speaker #2: Today's discussion and our responses to your questions reflect management's views as of today, February 23, 2026, 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 for any other period, anticipated growth, stock price, profitability, macroeconomic conditions, the value of any of our brands and investments, relationships with third parties, and agreements we are entering into with them, margin improvement, expense reduction, marketing efficiencies, conversion, customer experience, changes to brands or websites, product offerings, the merger agreement with the Brand House Collective, blockchain efforts and strategies, tokenization efforts and strategies, and the timing of any of the foregoing.

Melissa Smith: Today's discussion and our responses to your questions reflect management's views as of today, 23 February 2026, 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 for any other period, anticipated growth, stock price, profitability, macroeconomic conditions, the value of any of our brands and investments, relationships with third parties and agreements we are entering into with them, margin improvement, expense reduction, marketing efficiencies, conversion, customer experience, changes to brands or websites, product offerings, the merger agreement with The Brand House Collective, blockchain efforts and strategies, tokenization efforts and strategies, and the timing of any of the foregoing. Actual results could differ materially from such statements.

Speaker #2: 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, 2024, and our Form 10-Q for the quarter ended September 30, 2025, and in our subsequent filings with the SEC.

Melissa Smith: 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 31 December 2024, in our Form 10-Q for the quarter ended 30 September 2025, and in our subsequent filings with the SEC. During this call, we will discuss certain non-GAAP financial measures. Our filings with the SEC, including our Q4 and full year earnings release, which is available on our investor relations website at investors.beyond.com, contain 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.

Speaker #2: During this call, we will discuss certain non-GAAP financial measures. Our filings with the SEC, including our fourth quarter and full year earnings release, which is available on our investor relations website at investors.beyond.com, contain additional disclosures regarding these non-GAAP measures, including reconciliations of these measures to the most comparable GAAP measures.

Speaker #2: 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.

Speaker #2: 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.

Melissa Smith: With that, let me turn the call over to you, Marcus.

Speaker #3: Thanks, Melissa. I'm here with Adrianne as well. I'm sure that some of you are in New York City for the first time or experiencing more snow than we have in Salt Lake, so happy skiing to everybody out there.

Marcus Lemonis: Thanks, Melissa. I'm here with Adrian as well. I'm sure that some of you are in New York City. You, for the first time, are experiencing more snow than we have in Salt Lake, so happy skiing to everybody out there. Good afternoon, everyone, and thanks for joining us. 2025 was about stabilizing and building the base of this business. 2026 is about growing that base and expanding it within the framework of our three-pillar ecosystem architecture. That framework that we announced on 5 January remains unchanged. Over the last 8 quarters, we have delivered consistent year-over-year EBITDA improvement, while materially lowering the break-even level of the company. That discipline continued in Q4. Revenue declined year-over-year, largely reflecting housing market softness and our deliberate decision to eliminate vendors and SKUs that generated negative contribution margin.

Speaker #3: Good afternoon, everyone, and thanks for joining us. 2025 was about stabilizing and building the base of this business. 2026 is about growing that base and expanding it within the framework of our three-pillar ecosystem architecture.

Speaker #3: That framework that we announced on January 5 remains unchanged. Over the last eight quarters, we have delivered consistent year-over-year EBITDA improvement while materially lowering the break-even level of the company.

Speaker #3: That discipline continued in the fourth quarter. Revenue declined year-over-year, largely reflecting housing market softness and our deliberate decision to eliminate vendors and SKUs that generated negative contribution margin.

Speaker #3: We chose margin integrity over headline revenue. That was intentional, and it's also in our past. Importantly, the year-over-year revenue gap narrowed meaningfully in the fourth quarter.

Marcus Lemonis: We chose margin integrity over headline revenue. That was intentional, and it's also in our past. Importantly, the year-over-year revenue gap narrowed meaningfully in Q4, while adjusted EBITDA loss improved by more than $23 million or 84% on lower revenue. We also delivered meaningful gross profit margin improvement in 2025 compared to 2024, despite tariff headwinds and an unpredictable sourcing environment. That improvement reflects better vendor negotiations, improved product mix, tighter inventory controls, and a more efficient operating structure. Our margin performance is increasingly structural, not cyclical. In 2026, our objective is to advance and progress our margins toward 25%, the midpoint of our 24% to 26% framework. Over time, as omni-channel scales increases and ecosystem synergies compound, we believe we can break through 26% and ultimately reset the original range higher. That progression is going to take time.

Speaker #3: While adjusted EBITDA loss improved by more than $23 million, or 84%, on lower revenue, we also delivered meaningful gross profit margin improvement in 2025 compared to 2024, despite tariff headwinds and an unpredictable sourcing environment.

Speaker #3: That improvement reflects better vendor negotiations, improved product mix, tighter inventory controls, and a more efficient operating structure. Our margin performance is increasingly structural, not cyclical.

Speaker #3: In 2026, our objective is to advance and progress our margins toward 25%. The midpoint of our 24 to 26% framework. Over time, as omnichannel scales increases, an ecosystem synergy's compound, we believe we can break through 26% and ultimately reset the original range higher.

Speaker #3: That progression is going to take time. We will not compromise top-line growth or customer value simply to form for short-term margin expansion. We believe the true base of the business has now been established in 2025.

Marcus Lemonis: We will not compromise top-line growth or customer value simply to form for short-term margin expansion. We believe the true base of the business has now been established in 2025. We are seeing low to mid-single digit year-over-year increases in revenue growth early in the year, and are targeting low to mid-single digit revenue growth for the full year 2026, based on current trends. While we're not providing formal guidance, it is important because the company is in an active building phase, growing its base business while layering in complementary acquisitions across each of the three pillars. We believe it is important to provide directional clarity, so investors understand how performance should progress quarter by quarter and across the full year. This is a build, it is sequenced, and it is deliberate, much like the last eight quarters.

Speaker #3: We are seeing low to mid-single-digit year-over-year increases in revenue growth early in the year, and are targeting low to mid-single-digit revenue growth for the full year 2026 based on current trends.

Speaker #3: While we're not providing formal guidance, it is important because the company is in an active building phase growing its base business while layering in complementary acquisitions across each of the three pillars we believe it is important to provide directional clarity.

Speaker #3: So investors understand how performance should progress quarter by quarter and across the full year. This is a build. It is sequenced, and it is deliberate, much like the last eight quarters.

Speaker #3: We expect continued year-over-year improvement, but that improvement will not be linear. It will follow integration timing and execution milestones. In the first quarter, we expect year-over-year revenue growth and EBITDA improvement of at least 30% compared to Q1 of last year.

Marcus Lemonis: We expect continued year-over-year improvement. That improvement will not be linear. It will follow integration timing and execution milestones. In Q1, we expect year-over-year revenue growth and EBITDA improvement of at least 30% compared to Q1 of last year. This reflects stabilization of the base business and continued cost discipline. In Q2, we expect to close on the Kirkland's transaction on or around 1 April. Q2 will reflect parcel ownership and will include transition and integration activity. It will not reflect the full benefit of merger synergies. We expect approximately 90 to 120 days following the closing to execute meaningful integration initiatives, including consolidation of overlapping corporate costs, vendor contract alignment and purchasing leverage, shared services optimization, supply chain integration, technology integration, and merchandising alignment. There will be transaction costs and transition costs associated with the merger and integration.

Speaker #3: This reflects stabilization of the base business and continued cost discipline. In Q2, we expect to close on the Kirkland's transaction on or around April 1.

Speaker #3: Q2 will reflect parcel ownership and will include transition and integration activity. It will not reflect the full benefit of merger synergies. We expect approximately 90 to 120 days following the closing to execute meaningful integration initiatives, including consolidation of overlapping corporate costs, vendor contract alignment and purchasing leverage, shared services optimization, supply chain integration, technology integration, and merchandising alignment.

Speaker #3: There will be transaction costs and transition costs associated with the merger and integration. Q2 should be viewed as an integration quarter, not a fully synergized quarter, but the base business will have increased revenue and will have improvement on the bottom line as it relates to EBITDA.

Marcus Lemonis: Q2 should be viewed as an integration quarter, not a fully synergized quarter, but the base business will have increased revenue and will have improvement on the bottom line as it relates to EBITDA. Q3 integration work should be executed, and Q2 should begin to flow through the financials in a more meaningful way. We expect positive top-line growth and improved operating leverage with a stretch objective to approach breakeven. By Q4, assuming integration milestones are achieved, we expect positive top-line growth again and improved margin leverage with an opportunity in Q4 for profitability. This framework reflects disciplined execution, not reliance on a housing recovery. Everything we are building fits into 1 of 3 defined pillars. I outlined them on my 5 January letter and again today on my 23 February shareholder letter. Nothing sits outside the framework that I've provided.

Speaker #3: Quarter three integration work should be executed, and Q2 should begin to flow through the financials in a more meaningful way. We expect positive top-line growth and improved operating leverage with a stretch objective to approach break-even.

Speaker #3: By Q4, assuming integration milestones are achieved, we expect positive top-line growth again and improved margin leverage, with an opportunity in Q4 for profitability. This framework reflects disciplined execution, not reliance on a housing recovery.

Speaker #3: Everything we are building fits into one of three defined pillars. I outline them in my January 5 letter, and again today in my February 23 shareholder letter.

Speaker #3: Nothing sits outside the framework that I've provided. The architecture is the filter through which we evaluate every deal, every acquisition, and every decision.

Marcus Lemonis: The architecture is the filter through which we evaluate every deal, every acquisition, and every decision. We are aggregators, not consolidators. A consolidator acquires similar businesses to reduce costs and drive margin through scale. An aggregator, which we are, builds a connected system of complementary capabilities that strengthen one another. Later on, you'll be able to check our investor site to see the graphic that we've posted, one-sheet graphic that will show you what that ecosystem looks like. We are building integration, not accumulation. Pillar one is pretty simple. It's our omnichannel business. It includes brands like Bed Bath & Beyond, Overstock, buybuy BABY, and Kirkland's, upon closing. Including Kirkland's, this pillar approximates $1.5 billion in annualized revenue, with an additional omnichannel transaction agreed to in principle with the sellers, expected to add an additional $500 million in top line.

Speaker #3: We are aggregators, not consolidators. A consolidator requires similar businesses to reduce costs and drive margin through scale. An aggregator, which we are, builds a connected system of complementary capabilities that strengthen one another.

Speaker #3: Later on, you'll be able to check our investor site to see the graphic that we've posted one sheet graphic that will show you what that ecosystem looks like.

Speaker #3: We are building integration, not accumulation. Pillar one is pretty simple. It’s our omnichannel business. It includes brands like Bed Bath & Beyond, Overstock, Buy Buy Baby, and Kirkland’s, upon closing.

Speaker #3: Including Kirkland's, this pillar approximates 1.5 billion dollars in annualized revenue, with an additional omnichannel sellers, expected to add an additional 500 million dollars in top line.

Speaker #3: Look, retail drives engagement, purchasing leverage, and customer acquisition. Pillar two is our protection, advocacy, brokerage, and financial solutions pillar. It includes property and casualty insurance, renters insurance, home warranties, product warranties, title services, renovations and renovation financing, mortgages and HELOCs, a credit union partnership, and a scaled residential brokerage network.

Marcus Lemonis: Look, retail drives engagement, purchasing leverage, and customer acquisition. Pillar two is our protection, advocacy, brokerage, and financial solutions pillar. It includes property and casualty insurance, renters insurance, home warranties, product warranties, title services, renovations and renovation financing, mortgages and HELOCs, a credit union partnership, and a scaled residential brokerage network. The brokerage platform is critical. We are pursuing the acquisition or development of a scaled residential brokerage network as we speak, of thousands and ultimately tens of thousands of agents. Protection and advocacy come, come first. When trust is established, customers give us permission to extend those services. Financial services is an extension of trust, not the starting point. Pillar three is our home services, installation, and maintenance infrastructure. It includes flooring, cabinetry, closets and storage systems, carpeting, renovation services, professional installation, repair, and maintenance networks. The differentiator is the installation labor model.

Speaker #3: The brokerage platform is critical. We are pursuing the acquisition or development of a scaled residential brokerage network as we speak—1,000 and, ultimately, tens of thousands of agents.

Speaker #3: Protection and advocacy come first. When trust is established, customers give us permission to extend those services. Financial services is an extension of trust, not the starting point.

Speaker #3: Pillar three is our home services, installation, and maintenance infrastructure. It includes flooring, cabinetry, closets and storage systems, carpeting, renovation services, professional installation, repair, and maintenance networks.

Speaker #3: The differentiator is the installation labor model. Most homeowners cannot self-install flooring, cabinetry, or renovation materials. Installation is required. By building a professional labor network, we create higher transaction values, stronger attachment rates, greater customer stickiness, and ongoing maintenance engagement.

Marcus Lemonis: Most homeowners cannot self-install flooring, cabinetry, or renovation materials. Installation is required. By building a professional labor network, we create higher transaction values, stronger attachment rates, greater customer stickiness, and ongoing maintenance engagement. This infrastructure converts retail demand into completed projects and allows brokerage origination to flow into renovation activity. For all of this to work, you got to make sure that everything has a unifying layer. Surrounding all three pillars is our proprietary loyalty and identity wrapper executed in partnership with Built. We're also building a broader home operating system. The home operating system connects the homeowner and the home through durable digital records around protection, financing, renovation history, installation records, warranties, public records, surveys, titles, deeds, and maintenance events. Life chain supports this infrastructure by creating durable records around both the homeowner and the home itself on blockchain. Without this layer, these are separate businesses.

Speaker #3: This infrastructure converts retail demand into completed projects and allows brokerage origination to flow into renovation activity. For all of this to work, you've got to make sure that everything has a unifying layer.

Speaker #3: Surrounding all three pillars is our proprietary loyalty and identity wrapper executed in partnership with Built. We're also building a broader home operating system. The home operating system connects the homeowner and the home through durable digital records around protection, financing, renovation history, installation records, warranties, public records, surveys, titles, deeds, and maintenance events.

Speaker #3: Life change supports this infrastructure by creating durable records around both the homeowner and the home itself on blockchain. Without this layer, these are separate businesses.

Speaker #3: With it, they become an integrated ecosystem. A key priority in 2026 is accelerated implementation of modern technology across the enterprise. Yes, that includes AI.

Marcus Lemonis: With it, they become an integrated ecosystem. A key priority in 2026 is accelerated implementation of modern technology across the enterprise. Yes, that includes AI. We are deploying tools that increase conversion, improve inventory productivity, optimize pricing, enhance marketing efficiency, and reduce operating costs. Technology is a performance lever designed to drive revenue up and costs down simultaneously. At this point, I'll turn the call over to Adrienne to walk through our Q4 and full year financial results in greater detail. Adrienne?

Speaker #3: We are deploying tools that increase conversion, improve inventory productivity, optimize pricing, enhance marketing efficiency, and reduce operating costs. Technology is a performance lever designed to drive revenue up, and costs down simultaneously.

Speaker #3: At this point, I'll turn the call over to Adrianne to walk through our fourth quarter and full-year financial results in greater detail. Adrianne?

Speaker #1: Thank you, Marcus, for your insight into the significant financial progress we made in 2025 and our strategic path forward, as you mentioned and outlined in your shareholder letters.

Adrianne Lee: Thank you, Marcus, for your insight into the significant financial progress we made in 2025 and our strategic path forward, as you mentioned, outlined in your shareholder letters. I will now turn to our Q4 financial results, which highlight the achievement of consistent earnings improvement throughout 2025, and the material progress towards our committed targets to restore our retail operating discipline. Revenue declined 10% year-over-year in the Q4, 6% if you exclude the impact of discontinuing our operations in Canada. AOV improved 7%, driven by our continued focus on improving assortment on the Bed Bath site and an increased sales mix into Overstock. This was partially offset by less orders delivered in the Q4 versus 2024. However, I am pleased orders delivered increased 13% in the Q4 versus Q3 of 2025.

Speaker #1: I will now turn to our fourth quarter financial results, which highlight the achievement of consistent earnings improvement throughout 2025 and the material progress towards our committed targets to restore our retail operating discipline.

Speaker #1: Revenue declined 10% year over year in the fourth quarter, and 6% if you exclude the impact of discontinuing our operations in Canada. AOV improved 7%, driven by our continued focus on improving assortment on the Bed Bath site and an increased sales mix into Overstock.

Speaker #1: This was partially offset by fewer orders delivered in the quarter versus 2024. However, I am pleased orders delivered increased 13% in the fourth quarter versus the third quarter of 2025.

Speaker #1: Gross margin landed at 24.6% for the quarter, a 160 basis-point improvement compared to the same period last year. For the full year, we improved gross margin by 390 basis points to 24.7%, driven by structural changes in freight contracts and returns economics, as well as continued pricing and discounting rigor.

Adrianne Lee: Gross margin landed at 24.6% for the quarter, a 160 basis point improvement compared to the same period last year. For the full year, we improved gross margin by 390 basis points to 24.7%, driven by structural changes in freight, freight contracts, and returns economics, as well as continued pricing and discounting rigor. We expected quarterly gross margin to be in the 24% to 26% range, impacted by seasonality, emerging categories, and competitive landscape, and delivered just that. Sales and marketing decreased by $15 million, or improved efficiency by 350 basis points as a percent of revenue versus last year. It's important to note, our full year spend efficiency improved by close to 350 basis points, another meaningful improvement to earnings power.

Speaker #1: We expected quarterly gross margin to be in the 24 to 26 percent range, impacted by seasonality, emerging categories, and the competitive landscape, and delivered just that.

Speaker #1: Sales and marketing decreased by $15 million, or improved efficiency by 350 basis points as a percent of revenue versus last year. It's important to note our full-year spend efficiency improved by close to 350 basis points—another meaningful improvement to earnings power.

Speaker #1: We continue to navigate the balance of driving revenue and maintaining our ROAS guardrails while improving the site experience and sharpening pricing. We maintained our internal guardrails launch retention tools, improved own channel, and now need to optimize these tools and learnings for growth.

Adrianne Lee: We continue to navigate the balance of driving revenue and maintaining our ROAS guardrails while improving the site experience and sharpening pricing. We maintained our internal guardrails, launched retention tools, improved own channel, and now need to optimize these tools and learnings for growth. G&A and tech expense of $33 million decreased by $15 million year-over-year as a result of our commitment to reduce fixed costs through right-sizing the organization, prioritizing efforts, and mandating productivity. I am pleased that we exceeded our commitment to achieve a $150 million annual run rate. All-in adjusted EBITDA came in at a loss of $4 million, an 84% or $23 million improvement versus Q4 2024. Full year adjusted EBITDA was a loss of $31 million, a $113 million improvement versus 2024.

Speaker #1: TNA and tech expense of $33 million decreased by $15 million year over year, as a result of our commitment to reduce fixed costs through rightsizing the organization, prioritizing efforts, and mandating productivity.

Speaker #1: I am pleased that we exceeded our commitment to achieve a $150 million annual run rate. All-in adjusted EBITDA came in at a loss of $4 million, an 84%, or $23 million, improvement versus the fourth quarter of 2024.

Speaker #1: Full-year adjusted EBITDA was a loss of $31 million, a $113 million improvement versus 2024. Reported diluted EPS was a loss of $0.30 per share.

Adrianne Lee: Reported diluted EPS was a loss of $0.30 per share, an 82% or $1.36 improvement year-over-year. Notably, full year net loss improved by $174 million, and reported diluted EPS improved by 75% or $4.15. We ended the quarter with cash, cash equivalents, restricted cash, and inventory balance of $207 million. Full year cash used in operating activities improved year-over-year by more than $118 million or 67%, illustrating significant progress against the transformation initiatives and stabilization of the retail operations. 2025's performance reflects significant, measurable, and importantly, swift progress in retaining our core retail operating discipline and materially reducing the expense to run the business. This is evidenced by the $113 million or 79% improvement in adjusted EBITDA year-over-year.

Speaker #1: An 82%, or $1.36, improvement year over year. Notably, full-year net loss improved by $174 million, and reported diluted EPS improved by 75%, or $4.15.

Speaker #1: We ended the quarter with cash, cash equivalents, restricted cash, and inventory balance of $207 million. Full-year cash used in operating activities improved year over year by more than $118 million, or 67%, illustrating significant progress against the transformation initiatives and stabilization of the retail operations.

Speaker #1: 2025's performance reflects significant, measurable, and importantly, swift progress in retaining our core retail operating discipline and materially reducing the expense to run the business.

Speaker #1: This is evidenced by the $113 million, or 79%, improvement in adjusted EBITDA year over year. As always, we will remain focused on continuous improvement, finding efficient ways to create a more variable cost structure with an intense focus on driving top-line growth.

Adrianne Lee: As always, we will remain focused on continuous improvement, finding efficient ways to create a more variable cost structure with an intense focus on driving top line growth. With that, I would like to turn the call back to Marcus.

Speaker #1: With that, I would like to turn the call back to Marcus.

Speaker #2: Let me close with one broader perspective. Thanks, Adrianne. Our current plan does not assume a housing recovery. However, as mortgage rates moderate and transaction volumes return towards historical mid-cycle levels, the ecosystem we are assembling is positioned to benefit from that normalization.

Marcus Lemonis: Let me close with one broader perspective. Thanks, Adrienne. Our current plan does not assume a housing recovery. However, as mortgage rates moderate and transaction volumes return towards historical mid-cycle levels, the ecosystem we are assembling is positioned to benefit from that normalization. When incremental demand is layered on top of a fully integrated platform, with merger synergies realized and structural costs aligned, we believe the company has potential over time to generate substantial mid-single digit to high single digit EBITDA margins. That expectation reflects disciplined execution and a normal housing environment, not aggressive assumptions. 2025 stabilized the base. 2026 is about expanding the base with a disciplined architectural framework. We are aggregating complementary capabilities. We are integrating talent and expertise. We are building execution and infrastructure. We are connecting the homeowner in the home. We are very deliberate, and we are very confident in our sequencing.

Speaker #2: When incremental demand is layered on top of a fully integrated platform, with merger synergies realized and structural costs aligned, we believe the company has potential over time to generate substantial mid-single-digit to high-single-digit EBITDA margins. That expectation reflects disciplined execution and a normal housing environment.

Speaker #2: Not aggressive assumptions. 2025 stabilized the base. 2026 is about expanding the base with a disciplined architectural framework. We are aggregating complementary capabilities. We are integrating talent and expertise.

Speaker #2: We are building execution and infrastructure. We are connecting the homeowner and the home. We are very deliberate, and we are very confident in our sequencing.

Speaker #2: I'd like to now turn the call over for questions.

Marcus Lemonis: I'd like to now turn the call over for questions.

Speaker #1: We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up question. If you would like to ask a question, please press star one on your telephone keypad.

Operator: We will now begin the question-and-answer session. Please limit yourself to 1 question and 1 follow-up question. If you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, press star 1 again. Please pick up your handset when asking a question, and if you are muted locally, please remember to unmute your device. Please mute immediately after. Please stand by while we compile the Q&A roster. Your first question comes from the line of Steven Forbes at Guggenheim Securities, LLC. Steven, your line is now live.

Speaker #1: To withdraw your question, press star one again. Please pick up your handset when asking a question. And if you are muted locally, please remember to unmute your device.

Speaker #1: Please mute immediately after. Please stand by while we compile the Q&A roster. Your first question comes from the line of Stephen Forbes at Guggenheim Securities LLC. Stephen, your line is now live.

Speaker #3: Hi, Stephen.

Steven Forbes: Thank you, good afternoon, Marcus. Yes, Adrianne. Marcus, you mentioned a few 2026 growth drivers within the release and prepared remarks, right? AOV being one of them, conversion being another. As we look at some of the core KPIs that you report, I was curious if you maybe just walk us through how you're thinking about the active customer base. Like, are we reaching a troughing point? Is there visibility within the cohorts to rescale that in 2026? Then also, orders per active customer, Q2 in a row of stability, is that indicative of sort of that KPI also bottoming?

Speaker #4: Thank you, and good afternoon, Marcus. Yes, Adrianne. Marcus, you mentioned a few 2026 growth drivers within the release and prepared remarks, right? AOV being one of them, conversion being another.

Speaker #4: But as we look at some of the core KPIs that you report, I was curious if you could maybe just walk us through how you're thinking about the active customer base?

Speaker #4: Are we reaching a troughing point? Is there visibility within the cohorts to rescale that in 2026? And then also, orders per active customer, second quarter in a row of stability, is that indicative of sort of that KPI also bottoming?

Marcus Lemonis: Thanks for that question. We believe, excuse me, we believe that the trough is behind us, and that everything you see going forward will have growth. Growth in revenue, growth in EBITDA performance, growth in the number of active customers. What I want to be careful of is to land on AOV, because as Bed, Bath & Beyond starts to open up stores again, we believe that there's going to be a disproportionate amount of volume based on the last 12 to 24 months, that will lean into some of the historical Bed, Bath & Beyond categories. While we don't expect furniture, patio, and rugs to do anything but grow, when you start mixing in higher count items in your basket versus dollars in your basket, it could throw that off a little bit.

Speaker #3: Thanks for that question. We don't believe that—we believe the trough is behind us and that everything you see going forward will have growth.

Speaker #3: Growth in revenue, growth in EBITDA performance, growth in the number of active customers—what I want to be careful of is to land on AOV because, as Bed Bath & Beyond starts to open up stores again, we believe that there's going to be a disproportionate amount of volume based on the last 12 to 24 months that will lean into some of the historical Bed Bath & Beyond categories.

Speaker #3: And while we don't expect furniture, patio, and rugs to do anything but grow, when you start mixing in higher count items in your basket versus dollars in your basket, it could throw that off a little bit.

Speaker #3: And as we start stocking a lot of inventory in our potential Jackson, Tennessee warehouse through the Kirkland's acquisition, we're going to see more towels, more small appliances, more gadgets, more top-of-bed, more housewares go through our ecosystem online—ultimately driving that AOV down, but driving the average customer base up.

Marcus Lemonis: As we start stocking a lot of inventory in our potential Jackson, Tennessee, warehouse through the Kirkland's acquisition, we're going to see more towels, more small appliances, more gadgets, more top of bed, more housewares go through our ecosystem online, ultimately driving that AOV down, but driving the average customer base up. We will come up with a clean way to delineate historical categories and their performance, and legacy Bed, Bath categories and their performance. 'Cause as a reminder, a lot of our online business today is a function of what Overstock did for years. Yes, growth in all cases, I wanna be tempered on the AOV just because of the change in mix that could happen through the year.

Speaker #3: We will come up with a clean way to delineate historical categories and their performance, and legacy Bed Bath categories and their performance because, as a reminder, a lot of our online business today is a function of what Overstock did for years.

Speaker #3: So yes, growth in all cases. I want to be tempered on the AOV just because of the change in mix that could happen through the year.

Speaker #4: Thank you for that. And then, a follow-up: as we think through the opportunity you expressed via pillar two and pillar three, I was curious if you could maybe explore your ability—if you have measured, I guess—interest among your active customer base, or intent of utilization of such services, if the demographic profile sort of caters to those said services.

Steven Forbes: Thank you for that. Then a follow-up. As we think through the opportunity you expressed via Pillar Two and Pillar Three, I was curious if you could maybe explore your ability, if you have measured, I guess, interest among your active customer base or intent of utilization of such services, if the demographic profile sort of caters to those said services. I guess, what gives you conviction and what should give us conviction that the opportunity is addressable to Bed, Bath & Beyond?

Speaker #4: I guess, what gives you conviction—and what should give us conviction—that the opportunity is addressable to Bed Bath & Beyond?

Speaker #3: Well, I think you have to start to think about Bed Bath & Beyond differently, and stop thinking about Bed Bath & Beyond as the old Overstock e-commerce business, and start to think about the overall housing market.

Marcus Lemonis: Well, I think you have to start to think about Bed Bath & Beyond differently and stop thinking about Bed Bath & Beyond as the old Overstock e-commerce business, start to think about the overall housing market. When I look at the size of the TAM in the trillions, not billions, in the overall housing market, we believe that an ecosystem that taps into all the parts and pieces of that is quintessential to our business. The omnichannel business is really the first place we meet the customer. When you look at Bed Bath & Beyond, Overstock, buybuy BABY, Kirkland's, and the pending acquisition that has yet to be announced, we will have rounded out all of the important, what I would call, categories of soft and hard goods inside the home.

Speaker #3: And when I look at the size of the TAM in the trillions, not billions, in the overall housing market, we believe that an ecosystem that taps into all the parts and pieces of that is quintessential to our business.

Speaker #3: The omnichannel business is really the first place we meet the customer. And when you look at Bed Bath & Beyond, overstocked Bye Bye Baby, Kirkland's, and the pending acquisition that has yet to be announced, we will have rounded out all of the important—what I would call—categories of soft and hard goods inside the home.

Speaker #3: When I go to the other side of the paper, which is pillar three, the home services, we know that for decades these things have existed independently.

Marcus Lemonis: When I go to the other side of the paper, which is Pillar Three, the home services, we know that for decades, these things have existed independently. Whether that's flooring, closets, cabinetry, carpentry, installation services, and renovation services, we know those things are going to exist regardless of what's happening in the general economy. We believe that the connection between those two is that they're both originators of new customers. What I like about Pillar Three is its ability to spark larger transactions that call for things like financing or warranties. If I'm putting an all-new cabinetry in my kitchen, that could be a $7,500 to 8,000 order. That's gonna largely come with financing and maybe some other services along the way. It also gives us the ability to get into the home with a homeowner and build a relationship.

Speaker #3: And whether that's flooring, closets, cabinetry, carpentry, installation services, or renovation services, we know those things are going to exist regardless of what's happening in the general economy.

Speaker #3: And we believe that the connection between those two is that they're both originators of new customers. What I like about pillar three is its ability to spark larger transactions that call for things like financing or warranties.

Speaker #3: If I'm putting an all-new cabinetry in my kitchen, that could be a $7,500 to $8,000 order. That's going to largely come with financing and maybe some other services along the way.

Speaker #3: It also gives us the ability to get into the home with a homeowner and build a relationship. Putting in new flooring, putting in new carpeting, putting in new closet systems don't just apply to a first-time homebuyer; they apply to renovations, they apply to expanding families, they apply to life-changing events.

Marcus Lemonis: Putting in new flooring, putting in new carpeting, putting in new closet systems, don't just apply to a first-time home buyer. They apply to renovations, they apply to expanding families, they apply to life-changing events. What we're doing is we're taking the proprietary knowledge we have of why customers shopped at Bed Bath, and more importantly, when they shopped at Bed Bath, and we want to exploit all of those life events by selling them more than towels. The middle section is probably the easiest to understand, because we know it's a competitive landscape as it relates to mortgages, HELOCs, insurance, and warranties. As a reminder, insurance and warranties are regulated, so it's not easy for people to discount those services. That comes from trust. When it comes to banking and things like banking, whether it's savings, checking, mortgages, or HELOCs, we're gonna take two avenues.

Speaker #3: And what we're doing is we're taking the proprietary knowledge we have of why customers shop at Bed Bath and, more importantly, when they shop at Bed Bath, and we want to exploit all of those life events by selling them more than towels.

Speaker #3: The middle section is probably the easiest to understand because we know it's a competitive landscape. As it relates to mortgages and HELOCs and insurance and warranties, as a reminder, insurance and warranties are regulated.

Speaker #3: So it's not easy for people to discount those services. That comes from trust. When it comes to banking and things like banking—whether it's savings, checking, mortgages, or HELOCs—we're going to take two avenues.

Speaker #3: The first avenue is, we are launching a partnership to launch what we believe to be the first-ever homeowners' credit union in America. It's a unique proposition, and it will offer three products: market-leading savings rates, market-leading checking rates, and what we believe is market-leading mortgages and HELOCs.

Marcus Lemonis: The first avenue is we are launching a partnership to launch what we believe to be the first-ever homeownership credit union in America. It's a unique proposition. It will offer three products: market-leading savings rates, market-leading checking rates, and what we believe is market-leading mortgages and HELOCs. That's a more traditional buyer. When they see credit union, they know there's value there because the layer of making money between the cost of funds and the retail rate that the banks have to make a profit, credit unions do not have. We want to show our customers that value is squarely there. We signed a new deal with Brown & Brown to launch both a property and casualty insurance agency, a choice model that puts multiple carriers in front of people, as well as a full relationship on home warranties and product warranties.

Speaker #3: That's a more traditional buyer, and when they see 'credit union', they know there's value there because the layer of making money between the cost of funds and the retail rate that a bank has to make a profit, credit unions do not have.

Speaker #3: We want to show our customers that value is squarely there. We signed a new deal with Brown & Brown to launch both a property and casualty insurance agency, a choice model that puts multiple carriers in front of people, as well as a full relationship on home warranties and product warranties.

Speaker #3: Product warranties and shipping insurance are through extent. The only reason why I'm 100% confident that this ecosystem works is that I did it in my former life.

Marcus Lemonis: Product warranties and shipping insurance are through Extend. The only reason why I'm 100% confident that this ecosystem works is that I did it in my former life. By understanding where origination starts and where all the other tentacles for lifetime value expansion exist. Candidly, what's missing in that middle stack, and maybe lost on people, is brokerage services. As I mentioned in my prepared remarks and in my letter, we are pursuing three large transformative Pillar acquisitions. One in Pillar one, which I disclosed, is a deal in principle that's agreed to for Pillar one. Pillar three is a deal in principle that's been agreed to on the home services side. In the middle Pillar is a deal that's in process, pretty close to being agreed to, that I think will give that business the teeth of origination that it ultimately, ultimately leads.

Speaker #3: By understanding where originations start, and where all the other tentacles for lifetime value expansion exist. Candidly, what's missing in that middle stack, and maybe lost on people, is brokerage services.

Speaker #3: As I mentioned in my prepared remarks and in my letter, we are pursuing three large transformative pillar acquisitions. One in pillar one, which I disclosed, is a deal in principle that's agreed to for pillar one. Pillar three is a deal in principle that's been agreed to on the home services side. And in the middle pillar is a deal that's in process, pretty close to being agreed to, that I think will give that business the teeth of origination that it ultimately needs.

Speaker #3: If those three acquisitions pan out the way we expect them to, it would be north of $1.5 billion of additional revenue on top of the existing base that I described. That also includes Kirklands.

Marcus Lemonis: If those three acquisitions pan out the way we expect them to, it would be north of a billion and a half dollars of additional revenue on top of the existing base that I described. That also includes Kirkland's. You take approximately $1.5 billion base of our original e-commerce business, you add the omni-channel business of Kirkland's to it, you add these three transactions, you could end up with an annualized run rate of about $3 billion, one in each of those pillars, really providing the foundation for how those businesses will be built.

Speaker #3: So you take the $1.5 billion, approximately $1.5 billion base of our original e-commerce business, you add the omnichannel business of Kirklands to it, and then you add these three transactions, and you could end up with an annualized run rate of about $3 billion.

Speaker #3: But one in each of those pillars is really providing the foundation for how those businesses will be built.

Speaker #4: Thank you.

Thomas Forte: Thank you.

Steven Forbes: Thank you.

Speaker #1: Your next question comes from the line of Jonathan Matuszewski from Jefferies.

Operator: Your next question comes from the line of Jonathan Matuszewski from Jefferies.

Jonathan Matuszewski: Thanks for the time. Marcus, I had a follow-up question first on just pillars two and three, and just trying to get a better hold of maybe the trajectory for how you see those two mixing into the overall kind of revenue base. Would it be correct to assume that the margin profile of those, pillars two and three is going to be kind of the overall driving factor of EBITDA margin expansion over the medium term? Is that kind of the next leg in terms of margin expansion? That would be my first question. Thanks.

Speaker #5: And thanks for the time. Marcus, I had a follow-up question first on just pillars two and three. And just trying to get a better hold of maybe the trajectory for how you see those two mixing into the overall kind of revenue-based and would it be correct to assume that the margin profile of those pillars two and three is going to be kind of the overall driving factor of EBITDA margin expansion over the medium term?

Speaker #5: Is that kind of the next leg in terms of margin expansion? That would be my first question. Thanks.

Speaker #3: Yeah, we've talked for a while now about the margin range of 24% to 26%, and that's been on the historical e-commerce business. And we know the retail business is slightly better than that, 2 or 3 points better than that in a normal environment.

Marcus Lemonis: Yeah, you know, we, we've talked for a while now about the margin range of 24 to 26, and that's been on the historical e-commerce business, and we know the retail business is slightly better than that, 2 or 3 points better than that in a normal environment. What we know for certain is that the home services, the cabinets, the flooring, the closets, the installation, the renovation, they all come with far greater margins than that, in excess of 40%. Part of our strategy in growing our overall profitability is expanding our overall company consolidated margin through, A, the acquisition of those types of businesses in pillar three and being able to absorb those.

Speaker #3: What we know for certain is that the home services—the cabinets, the flooring, the closets, the installation, the renovation—they all come with far greater margins than that.

Speaker #3: In excess of 40%. And part of our strategy in growing our overall profitability is expanding our overall company consolidated margin through, A, the acquisition of those types of businesses in pillar three, and being able to absorb those.

Speaker #3: We will have work to do to take out some of the merger synergies and lower their CAC so that their EBITDA coincides with our expectations.

Marcus Lemonis: We will have work to do to take out some of the merger synergies and lower their CAC so that their EBITDA coincides with our expectations, but from a gross margin standpoint, materially higher than selling towels and couches online. The middle section is probably the one that I'm most excited about, and it takes several years for it to come to fruition. The acquisition that we have on the table will build a solid, call it $400 million foundational base, of which we'll build stuff on top of. In that particular instance, whether it's the credit unions, the insurance, the warranties, keep in mind that the cost of goods associated with all of those is de minimis. There is no real asset.

Speaker #3: But from a gross margin standpoint, materially higher than selling towels and couches online. The middle section is probably the one that I'm most excited about, and it takes several years for it to come to fruition.

Speaker #3: But the acquisition that we have on the table will build a solid, call it, $400 million foundational base, of which we'll build stuff on top of.

Speaker #3: In that particular instance, whether it's the credit unions, the insurance, the warranties, keep in mind that the cost of goods associated with all of those is de minimis.

Speaker #3: There is no real asset. In many cases, because we are never taking on the liability, we're not acting as a bank, we're not acting as an insurance company, we're not acting as a warranty insurer. We are a marketing and sales organization, making commissions and fees off of those.

Marcus Lemonis: In many cases, because we are never taking on the liability, we're not acting as a bank, we're not acting as an insurance company, we're not acting as a warranty insurer. We are a marketing and sales organization making commissions and fees off of those. The margins are explosive, north of 50%. So over time, as we start to see those mature, we would expect a consolidated margin in the next 36 months, pending these acquisitions coming together, to expand above and beyond 30% for the overall ecosystem. The key is making sure that we take the costs out of these businesses. One important distinction that I'm sure many of you are thinking, and I want to address upfront is, we are gonna operate these pillars individually, with their own leaders and their own, call it CEOs, sort of presidents of those businesses.

Speaker #3: The margins are explosive—north of 50%. And so, over time, as we start to see those mature, we would expect a consolidated margin in the next 36 months.

Speaker #3: Pending these acquisitions coming together, to expand above and beyond 30% for the overall ecosystem. The key is making sure that we take the costs out of these businesses.

Speaker #3: And one important distinction that I'm sure many of you are thinking—and I want to address upfront—is we are going to operate these pillars individually, with their own leaders and their own, call it CEOs, sort of presidents of those businesses.

Speaker #3: These are people that are foundationally subject matter experts in those disciplines—not taking those businesses and trying to have e-commerce people run them. We believe in having independence for entrepreneurs, to be able to operate as subject matter experts.

Marcus Lemonis: These are people that are foundationally subject matter experts in those disciplines, not taking those businesses and trying to have e-commerce people run them. We believe in having independence for entrepreneurs to be able to operate as subject matter experts. Where consolidation will exist is twofold. One, from a financial and treasury standpoint, wanting to make sure that we're taking out any redundant back-office costs, and from a data consolidation standpoint, meaning that each of these businesses are obligated to remit their financials, sign up for our code of conduct and the way we want to do business, and contribute data in a form and a manner to the overall ecosystem that matters. We feed that data into a data fabric, which is being operated by a third party, and we partner with a master wrapper loyalty program, functioned and partnered with Bilt, B-I-L-T.

Speaker #3: And where consolidation will exist is twofold. One, from a financial and treasury standpoint, wanting to make sure that we're taking out any redundant back-office costs.

Speaker #3: And from a data consolidation standpoint, meaning that each of these businesses are obligated to remit their financials, sign up for our code of conduct and the way we want to do business, and contribute data in a form and a manner to the overall ecosystem that matters.

Speaker #3: We feed that data into a data fabric, which is party. And we partner with a master wrapper loyalty program functioned and partnered with built.

Speaker #3: B-I-L-T. You can do your research and find out what they do today. We, as you can tell as a company, believe in partnering and buying as opposed to building everything because technology moves so fast.

Marcus Lemonis: You can do your research and find out what they do today. We, as you could tell, as a company, believe in partnering and buying as opposed to building everything because technology moves so fast. The operators are really in their own little cocoon, and we are acting as aggregators. The most important aggregation of where we think we're going to get the real cost synergy is lowering the CAC for each of them, finding administrative costs that can be eliminated, and sharing in treasury management efficiency. That's ultimately why we are so confident that this business, in short order, 3 years, can be in a normal mid-cycle environment, can be mid-single digit to high single digit EBITDA contribution because of those factors.

Speaker #3: So the operators are really in their own little cocoon, and we are acting as aggregators. But the most important aggregation and where we think we're going to get the real cost synergy is lowering the CAC for each of them, finding administrative costs that can be eliminated, and sharing in treasury management efficiency.

Speaker #3: And that's ultimately why we are so confident that this business, in short order, three years, can be in a normal mid-cycle environment, can be mid-single digit, to high single digit EBITDA contribution because of those factors.

Speaker #5: Very helpful. And then CAC is a nice segue, just for a follow-up. Would love to just hear how you're thinking about measuring the success of your ads pilot with instant checkout.

Jonathan Matuszewski: Very helpful. CAC is a nice segue just for a follow-up. Would love to just hear how you're thinking about measuring the success of your ads pilot with instant checkout and maybe the types of customer activation or, or the, the volume of activation that you'd maybe need to see to divert more advertising dollars to, to, to that experimental channel. Thanks, Marcus.

Speaker #5: And maybe the types of customer activation, or the volume of activation that you'd maybe need to see to divert more advertising dollars to that experimental channel.

Speaker #5: Thanks, Marcus.

Speaker #3: We're talking—that you're talking about chat?

Marcus Lemonis: We're talking, you're talking about chat?

Speaker #5: Yes.

Jonathan Matuszewski: Yes.

Speaker #3: Yeah, it's too early. I mean, it's been a couple of weeks, and we were one of the pilot programs with them in getting launched, but it's really early in the innings.

Marcus Lemonis: Yeah. It's, it's too early. I mean, it's been a couple of weeks, and we were one of the pilot programs with them in getting launched, but it's really early in the innings. There's a lot of learnings that have to happen. One thing that we have noticed in the last several months is that layering in different learning machines and different technologies is allowing us to get better. Let me be really clear. We are nowhere, nowhere near where we need to be in the next 12 to 24 months, and we've started to engage with outside third parties to help us assess our tech infrastructure, look at our overhead, look at the connectivity between everything, and look at integrations.

Speaker #3: There's a lot of learnings that have to happen. But one thing that we have noticed in the last several months is that layering in different learning machines and different technologies is allowing us to get better, but let me be really clear.

Speaker #3: We are nowhere near where we need to be in the next 12 to 24 months. And we've started doing gauge with outside third parties to help us assess our tech infrastructure, look at our overhead, look at the connectivity between everything, and look at integrations.

Speaker #3: We recently engaged with Alvarez, and they'll be doing a full study for us, particularly in light of all of these acquisitions to make sure that we're squeezing out every last dollar and capturing every last bit of information.

Marcus Lemonis: We recently engaged with Alvarez, and they'll be doing a full study for us, particularly in light of all of these acquisitions, to make sure that we're squeezing out every last dollar and capturing every last bit of information.

Speaker #5: Thank you.

Jonathan Matuszewski: Thank you.

Speaker #1: Your next question comes from Bernie McTernan at Needham. Bernie, your line is now open.

Operator: Your next question comes from Bernie McTernan at Needham. Bernie, your line is now open.

Speaker #4: Great. Thanks for taking the question. Just had a follow-up on pillar two on to make sure I understood the right thing. So you said a large acquisition happening in pillar two for origination.

Bernie McTernan: Great, thanks for taking the question. Just kind of follow up on pillar two. I want to make sure I understood the right thing. You said a large acquisition happening in pillar two for origination. Should we assume then that all those, you know, whether it's insurance, home warranties, HELOCs, all that will be after the acquisition, you'll be able to offer all of that on a 1P basis, and then, you know, partnering with, you know, a big residential brokerage to basically sell those services?

Speaker #4: So should we assume then that all those, whether it's insurance, home warranties, HELOCs, all that, will be after the acquisition? You'll be able to offer all of that on a 1P basis, and then partnering with big residential brokerage to basically sell those services?

Speaker #3: So the way I'd like you to think about it is there's kind of like a two-funnel approach. Funnel number one is using all of the customer engagement from pillar one and pillar three to offer all of those services in pillar two.

Marcus Lemonis: The way I'd like you to think about it is there's kind of like a 2, a 2 funnel approach. Funnel number 1 is using all of the customer engagement from pillar 1 and pillar 3 to offer all of those services in pillar 2. That's a little bit harder hill to climb quickly. You can get there over time after you build trust, after you improve your customer service experience, after people understand the connectivity. The acquisition in pillar 2, around the brokerage services, provides instant, I would call it, integration. I would expect on day 2 of that acquisition that the products and services that we have lined up, whether it be with the credit union, whether it be with the insurance companies, whether it be with the warranty companies, whether it be with the titling companies, would immediately be embedded.

Speaker #3: And that's a little bit harder hill to climb quickly. You can get there over time, after you build trust, after you improve your customer service experience, after people understand the connectivity.

Speaker #3: The acquisition in pillar two, around the brokerage services, provides instant I would call it integration. And I would expect on day two of that acquisition that the products and services that we have lined up, whether it be with the credit union, whether it be with the insurance companies, whether it be with the warranty companies, whether it be with the titling companies, would immediately be embedded.

Speaker #3: The piece we like most about this potential acquisition in pillar two is that it has already started some of those services, and has seen early success, but doesn't necessarily in our opinion have the technology or the capital to invest in technology that can supercharge that.

Marcus Lemonis: The piece we like most about this potential acquisition in pillar two is that it has already started some of those services and has seen early success, but doesn't necessarily, in our opinion, have the technology or the capital to invest in technology that can supercharge that. When you think about that real estate brokerage network, what you're really talking about is thousands, if not tens of thousands, of sales agents who are commission-based. That's how they sell things. We believe that there's an interesting and proper way to motivate those agents to receive commissions, not only from the things they're permitted to inside of their real estate license, but also to be able to sell other products and services in the ecosystem for commissions that are compliant with whatever the state regulation is.

Speaker #3: When you think about that real estate brokerage network, what you're really talking about is thousands, if not tens of thousands of sales agents who are commission-based.

Speaker #3: That's how they sell things. We believe that there is an interesting and proper way to motivate those agents to receive commissions not only from the things they're permitted to inside of their real estate license, but also to be able to sell other products and services in the ecosystem for commissions that are compliant with whatever the state regulation is.

Speaker #3: When you can pick up a 10,000-person army of salespeople who are commission-based, who are hungry to provide value to customers only on things they need, you get instant activation.

Marcus Lemonis: When you can pick up a 10,000 person army of salespeople who are commission-based, who are hungry to provide value to customers only on things they need, you get instant activation. I would expect that within 12 months of making that acquisition, we would be running at relatively full steam, looking for attachment in a more traditional manner.

Speaker #3: I would expect that within 12 months of making that acquisition, we would be running at relatively full steam looking for attachment in a more traditional manner.

Bernie McTernan: Okay, understood. That, that's really helpful. Thanks, Marcus. Then just a quick follow-up. I know we're not calling it guidance, but directional commentary on 2026 for low to mid-single digit revenue growth. Is that inclusive or exclusive of Kirkland?

Speaker #4: Okay, understood. That's really helpful. Thanks, Marcus. And then just a quick follow-up. I know we're not calling it guidance, but directional commentary on 2026 for low to mid-single-digit revenue growth.

Speaker #4: Is that inclusive or exclusive of Kirkland?

Speaker #3: So let me take my time here and go very clear. In the mid-single revenue growth numbers that we're talking about, that is omnichannel. Excuse me.

Marcus Lemonis: Let me, let me take my time here and go very clear. In the mid-single revenue growth numbers that we're talking about, that is omni-channel. Excuse me, that is e-commerce only. Low to mid-single digit is e-commerce only. Kirkland's will have similar growth at the same time. When we close on that acquisition for Q2, we're going to provide you a forecast. What you can expect out of our base business for 2026 is low to mid-single, hopefully closer to mid-single digit growth for the full year. Margin expectation for that base business, we were 24.7 in 2024. Excuse me, in 2025. We want to get to 25%, which is the midpoint, and that's a push, particularly with all the noise around tariffs and the more recent noise, as in, like, Saturday.

Speaker #3: That is e-commerce only. Low to mid-single digit is e-commerce only. Kirkland's will have similar growth at the same time. And so when we close on that acquisition for Q2, we're going to provide you a forecast.

Speaker #3: But what you can expect out of our base business for 2026 is low to mid-single, hopefully closer to mid-single digit growth for the full year.

Speaker #3: Margin expectation for that base business—we were at 24.7% in '24. Excuse me, in 2025, we want to get to 25%, which is the midpoint.

Speaker #3: And that's a push, particularly with all the noise around tariffs. And the more recent noise, as in like Saturday, we want to get ourselves to 25.

Marcus Lemonis: We wanna, we wanna get ourselves to 25. On the sales and marketing expense, we're probably gonna look maybe flat to similar in 2026 versus 2025. I'm hedging myself a little bit there because I think we have some unlocks that haven't fully been realized, and we expect nice improvement in EBITDA every single quarter over its previous year, with the outside spot, stretch, stretch, stretch goal in Q3 of profitability, a little less of a stretch in Q4 for profitability of 2026. That does not include any of the larger acquisitions we're talking about. I promise you this, the shareholder letter and the amount of disclosures that we've provided, they will continue to be as robust as we're providing them now, so that when we do make an acquisition, you will understand how 1 plus 1 equals 2. There will be no hiding the weenie.

Speaker #3: On the sales and marketing expense, we're probably going to look maybe flat to similar in 2026 versus 2025. I'm hedging myself a little bit there because I think we have some unlocks that haven't fully been realized.

Speaker #3: And we expect nice improvement in EBITDA every single quarter over its previous year, with the outside shot—stretch, stretch, stretch goal—in Q3 of profitability, and a little less of a stretch in Q4 for profitability of 2026.

Speaker #3: That does not include any of the larger acquisitions we're talking about. But I promise you this: the shareholder letter and the amount of disclosures that we've provided will continue to be as robust as we're providing them now, so that when we do make an acquisition, you will understand how one plus one equals two.

Speaker #3: There will be no hiding the weenie. You'll understand it full throttle. What we have to tell you, though, in order to make the numbers work long-term, it takes from the moment we get the keys because we can't influence change before we close, but from the moment we get the keys, in some cases, 90 to 120 days, in other cases, when you're getting out of leases or getting out of distribution centers or consolidating contracts, it could take anywhere from 8 to 12 months.

Marcus Lemonis: You'll understand it full throttle. What we have to tell you, though, in order to make the numbers work long term, it takes from the moment we get the keys, because we can't influence change before we close, but from the moment we get the keys, in some cases, 90 to 120 days, in other cases, when you're getting out of leases or getting out of distribution centers or consolidating contracts, it could take anywhere from 8 to 12 months. We will show you that when we lay it out. We'll show you what it looks like, we'll show you what we think the pro forma could look like, and we'll show you maybe like a 2, 3-year cadence of what that could look like as well. I will tell you, I'm really excited by what we're seeing in the early forecast.

Speaker #3: We will show you that when we lay it out. We'll show you what it looks like. We'll show you what we think the pro forma could look like.

Speaker #3: And we'll show you, maybe, like a two- or three-year cadence of what that could look like as well. I will tell you, I'm really excited about what we're seeing in the early forecast.

Speaker #3: And again, none of this contemplates a housing recovery. The housing recovery happens. Then we're going to be in much better shape.

Marcus Lemonis: Again, none of this contemplates a housing recovery. The housing recovery happens, then, you know, we're gonna be in much better shape.

Speaker #4: Great. Thanks for walking through all that again. Thanks.

Bernie McTernan: Great. Thanks for walking through all that again. Thanks.

Speaker #3: Yep.

Marcus Lemonis: Yep.

Speaker #1: Your next question comes from Thomas Forte with Maxim Group. Thomas, your line is now open.

Operator: Your next question comes from Thomas Forte with Maxim Group. Thomas, your line is now open.

Speaker #5: Great. So, Marcus and Adrianne, congrats on the improvement in the quarter and the year. Regarding everything home ecosystem and pillars, the first question I'll wait for the answer and then one follow-up.

Thomas Forte: Great. Marcus and Adrian, congrats on the improvement in the quarter and the year. Regarding the Everything Home ecosystem and pillars, the first question, I'll wait for the answer and then one follow-up. Marcus, when I look at each pillar, how do you determine when to work with a strategic partner versus when to own and operate an asset? On the surface, it seems like pillar 1 is all owned, and pillars 2 and 3 are more partnerships or combinations of owned and partnerships.

Speaker #5: So, Marcus, when I look at each pillar, how do you determine when to work with a strategic partner versus when to own and operate an asset?

Speaker #5: On the surface, it seems like pillar one is all owned. And pillars two and three are more partnerships or a combination of owned and partnerships.

Marcus Lemonis: Pillar one is largely owned, but we are working on some larger licensing transactions with both the existing brands we have and some of the brands that we're acquiring. Secondly, we already have the relationship in Canada, where we licensed and sold the intellectual property in Canada. We expect them to start opening stores and they'll be contributory. For the most part, Tom, you're right. The bulk of it is, is owned. In pillar two, the delineation between when we should be in it and when we shouldn't be in it, is when there's a lot of regulatory complexity to it and a lot of what I would call balance sheet risk.

Speaker #3: Pillar one is largely owned, but we are working on some larger licensing transactions with both the existing brands we have and some of the brands that we're acquiring.

Speaker #3: Secondly, we already have the relationship in Canada where we licensed and sold the intellectual property in Canada. We expect them to start opening stores and they'll be contributory.

Speaker #3: But for the most part, Tom, you're right. The bulk of it is owned. In pillar two, the delineation between when we should be in it and when we shouldn't be in it is when there's a lot of regulatory complexity to it and a lot of what I would call balance sheet risk.

Speaker #3: We are not in a position and probably won't be in the near future to take on any balance sheet risk around claims or around reserves or around insurance or around financing or any of those things.

Marcus Lemonis: We are not in a position, and probably won't be in the near future, to take on any balance sheet risk around claims, or around reserves, or around insurance, or around financing, or any of those things. We just don't believe that we are subject matter experts in that result. We are an origination machine, and we expect to make money through all of these different transactions, including the brokerage services, in all of those. I would never expect us, in the short term, to be anything more than an insurance agency, a seller of warranties, a provider of financing. What we like about that is that there's no inventory requirement, there's no capital requirement, there's no reserve requirement, and the money flows pretty nicely. There also isn't a big staff required to execute those.

Speaker #3: We just don't believe that we are subject matter experts in that result. We are an origination machine, and we expect to make money through all of these different transactions, including the brokerage services, in all of those.

Speaker #3: I would never expect us in the short term to be anything more than an insurance agency. A seller of warranties, a provider of financing, what we like about that is that there's no inventory requirement.

Speaker #3: There's no capital requirement. There's no reserve requirement. And the money flows pretty nicely. There also isn't a big staff required to execute those. And so while some have said to me, "Oh, you're giving up margin by not being the bank or not being the insurance company," there is truth in that.

Marcus Lemonis: While some have said to me, Oh, you're giving up margin by not being the bank or not being the insurance company, there is truth in that. What they forget is all of the costs associated with doing that and the regulatory complexity with doing that. That is not where we want to spend our time nor our money. In pillar three, we want to own as much of that as we can, including providing the home services, installation services, and all the products that go with it. We believe that that is a gateway to meeting the homeowner where they need us most. The margins are explosive, and the opportunity to surprise and delight and upsell is easier if we're controlling the journey than a third party is controlling the journey.

Speaker #3: But what they forget is all of the costs associated with doing that and the regulatory complexity with doing that, that is not where we want to spend our time nor our money.

Speaker #3: In pillar three, we want to own as much of that as we can, including providing the home services installation services and all the products that go with it.

Speaker #3: We believe that that is a gateway to meeting the homeowner where they need us most. The margins are explosive, and the opportunity to surprise and delight and upsell is easier if we're controlling the journey than if a third party is controlling the journey.

Speaker #4: Great. And then for my follow-up, can you walk us through, recognize this still early, your vision for the home operating system and the home OS?

Thomas Forte: Great. Then for my follow-up, can you walk us through, recognize it's still early, your vision for the home operating system and the HomeOS? I know you've talked about it a couple of times.

Speaker #4: I know you've talked about it a couple of times.

Speaker #3: I liken the home operating system similar to how I liken loyalty. It's a wrapper around the entire ecosystem. And many people know home operating systems because they have Alexa or they have a Ring doorbell.

Marcus Lemonis: I liken the home operating system, similar to how I liken loyalty. It's a wrapper around the entire ecosystem. Many people know home operating systems because they have a Alexa or they have a Ring doorbell. At the end of the day, society and homeowners and renters are moving towards a connected home. While it's nice to connect your lights and your AC and your TV and your radio and all those things, that isn't what we believe is the most important part of the operating system. The most important feature of the operating system, in our opinion, is a real estate ledger, a blockchain ledger that captures all of the important documents for two different sets of items.

Speaker #3: But at the end of the day, society—and homeowners and renters—are moving towards a connected home. And while it's nice to connect your lights and your AC and your TV and your radio and all those things, that isn't what we believe is the most important part of the operating system.

Speaker #3: The most important feature of the operating system, in our opinion, is a real estate ledger. A blockchain ledger that captures all of the important documents for two different sets of items: one, the homeowner themselves, and all the things that make up everything that they do.

Marcus Lemonis: One, the homeowner themselves and all the things that make up everything that they do, and the home asset itself, including title, deed, survey, insurance, maintenance records. Because we know that the homeowner is portable, they're gonna move in and out, and that home stays relatively constant. We like it on blockchain because we think it, over time, provides integrity for insurance providers, lenders, homebuyers, maintenance providers, warranty providers to see the true health report and the true lineage of that asset, giving people an opportunity. No different than if you drive a car and you don't have an accident over time, you get better rates. People have to know what the health is. We think blockchain is a great way to do that.

Speaker #3: And the home asset itself, including title, deed, survey, insurance, maintenance records. Because we know that the homeowner is portable—they're going to move in and out.

Speaker #3: And that home stays relatively constant. We like it on blockchain because we think it, over time, provides integrity for insurance providers, lenders, home buyers, maintenance providers, warranty providers, to see the true health report and the true lineage of that asset giving people an opportunity.

Speaker #3: No different than if you drive a car and you don't have an accident—over time, you get better rates. People have to know what the health is.

Speaker #3: We think blockchain is a great way to do that. If you look at that particular product being existent, back when the Palisades fire happened and all those folks had no records of anything that happened, we want to solve problems like that both because people are transient, both because people buy and sell houses every seven years, and because there are these catastrophic events that cause that to be necessary.

Marcus Lemonis: If you look at that particular product being existent back when the Palisades fire happened and all those folks had no records of anything that happened, we wanna solve problems like that, both because people are transient, both because people buy and sell houses every seven years, and because there's these catastrophic events that cause that to be necessary. You would access that information both through an app and through a touch screen in your home. As a feature, as a benefit, as a nice-to-have, in addition to the important center of the universe with Life Chain. Of course, you'll be able to handle your lights and handle your alarm and handle your doorbell and your AC and all those other things that we're all used to, but that should be features and benefits, not the core deliverable.

Speaker #3: You would access that information both through an app and through a touchscreen in your home. As a feature, as a benefit, as a nice-to-have in addition to the important center of the universe with life chain, of course, you'll be able to handle your lights and handle your alarm and handle your doorbell and your AC and all those other things.

Speaker #3: We're all used to that. But that should be features and benefits, not the core deliverable. We expect to be developing a good chunk of that over the next 12 months and hope to launch something like that in partnership in 2027.

Marcus Lemonis: We expect to be developing a good chunk of that over the next 12 months and hope to launch something like that in partnership in 2027.

Speaker #4: Thanks, Marcus.

Thomas Forte: Thanks, Marcus.

Speaker #1: Your final question comes from Seth Sigman from Barclays. Seth, your line is now open. Oh, please stand by while we bring up Seth.

Operator: Your final question comes from Seth Sigman from Barclays. Seth, your line is now... Please stand by while we bring up Seth.

Speaker #4: Can you guys hear me?

Seth Sigman: Can you guys hear me?

Speaker #1: Seth, your line is now open.

Operator: Seth, your line is now open.

Speaker #4: Hey, guys. How are you? Thanks for taking the question. Nice progress. I wanted to go back to your comment about low to mid-single-digit revenue growth early this year.

Seth Sigman: Hey, guys. How are you? Thanks for taking the question.

Marcus Lemonis: Great, thank you.

Seth Sigman: Nice progress. I wanted to go back to your comment about low to mid-single digit revenue growth early this year. Is that meant to say what you're running right now? If so, can you just bridge us versus, I think, it was down 6% in the Q4, year-over-year. What is driving the top line improvement, maybe across categories, perhaps consumer cohorts? What are you seeing? Obviously, that would be a pretty meaningful improvement. Thanks so much.

Speaker #4: Is that meant to say what you're running right now? And if so, can you just bridge us, versus—I think it was down 6% in the fourth quarter, year over year.

Speaker #4: What is driving the top-line improvement, maybe across categories, perhaps consumer cohorts? What are you seeing? Because obviously, that would be a pretty meaningful improvement.

Speaker #4: Thanks so much.

Speaker #3: Yeah, so a couple of things. We have seen positive year-over-year growth starting in January through today. It's low- to mid-single-digit. It is our goal over the course of the year to push ourselves towards mid-single-digit, and hopefully even bust through that.

Marcus Lemonis: Yeah. A couple of things. We have seen positive year-over-year growth starting in January through today. It's low to mid-single digit. It is our goal over the course of the year to push ourselves towards mid-single digit and hopefully even bust through that. Here's what's ultimately changed: We have really done a nice job of cleaning up the assortment online. We've done a nice job, plenty of work to do left on improving the pricing. We've got better at marketing and getting people in our ecosystem to come back for the second and third purchase. We're being very diligent about the kind of marketing dollars that we're spending, spending a little bit more on new technology, including a new pilot with chat, new techniques around SMS, and we believe that the omni-channel launch will help just create general awareness.

Speaker #3: Here's what's ultimately changed. We have really done a nice job of cleaning up the assortment online. We've done a nice job. Plenty of work to do left on improving the pricing.

Speaker #3: We've gotten better at marketing and getting people in our ecosystem to come back for the second and third purchase. We're being very diligent about the kind of marketing dollars that we're spending.

Speaker #3: Spending a little bit more on new technology, including a new pilot with chat, new techniques around SMS, and we believe that the omnichannel launch will help just create general awareness.

Speaker #3: We are not pleased, and I know this is going to sound funny. We are not pleased with low to mid-single-digit growth. We want to be conservative.

Marcus Lemonis: We are not pleased, and I know this is gonna sound funny, we are not pleased with low to mid-single-digit growth. We wanna be conservative, and we want to outperform that in the market, but we also wanna build our cash flow and our projections around something we know we can hit. If you go back and you look at the last four or five quarters, we've been pretty good at saying we're gonna do something and delivering it. I think that's the key to this business. We know we need to earn that trust and earn that confidence, and the only way to do that is set realistic expectations, meet them or exceed them.

Speaker #3: And we want to outperform that in the market. But we also want to build our cash flow and our projections around something we know we can hit.

Speaker #3: And if you go back and you look at the last four or five quarters, we've been pretty good at saying we're going to do something and delivering it.

Speaker #3: And I think that's the key to this business. We know we need to earn that trust and earn that confidence. And the only way to do that is set realistic expectations, meet them, or exceed them.

Speaker #3: But so much of it, Seth, came from cleansing things, getting rid of vendors with bad margins, getting rid of SKUs with bad margins, getting rid of products on the website that had no relevance to our site.

Marcus Lemonis: So much of it, Seth, came from cleansing things, getting rid of vendors with bad margins, getting rid of SKUs with bad margins, getting rid of products on the website that had no relevance to our site, cleaning up how we're presenting brands, figuring out how we're ultimately going to get the customer back for their second purchase that may have come through on a PLA ad. We can't keep just buying the customer. We have to earn, win, and maintain that customer, and that's what we're starting to see happen. When we look at Q1, just to give clarity around it, we are expecting, call it, 3% to 5% in revenue improvement in Q1, and we are stretching for about a 30% improvement in EBITDA margin year-over-year from Q1 of last year.

Speaker #3: Cleaning up how we're presenting brands, figuring out how we're ultimately going to get the customer back for their second purchase that may have come through on a PLA ad.

Speaker #3: We can't keep just buying the customer. We have to earn win and maintain that customer. And that's what we're starting to see happen. When we look at Q1, just to give clarity around it, we are expecting call it three to five percent in revenue improvement in Q1.

Speaker #3: And we are stretching for about a 30% improvement in EBITDA margin year over year from Q1 of last year. We're expecting margins to be where they're trending now is where we think they're going to end.

Marcus Lemonis: We're expecting margins. They're where they're trending now is where we think they're gonna end. They're around 24.5% to 24.7%. That starts to get a little bit of pressure as we start indexing into patio. When we get into Q2, we would expect to see that same 3% to 5% growth. We think there'll be a little bit of pressure on margins because more in the patio, probably pushing closer to, like, 21%, 24.1%, 24.2%. We expect EBITDA improvement again in Q2.

Speaker #3: They're around 24.5 to 24.7. That starts to get a little bit of pressure as we start indexing into patio. When we get into Q2, we would expect to see that same 3 to 5 percent growth.

Speaker #3: We think there'll be a little bit of pressure on margins because we're more into patio, probably pushing closer to like 24.1, 24.2. But we expect EBITDA improvement again in Q2.

Speaker #3: And then when we get into Q3 and Q4 is when we think we're going to start to see a little bit more wind in our sails.

Marcus Lemonis: Then when we get into Q3 and Q4 is when we think we're gonna start to see a little bit more wind in our sails, where we expect that revenue to maybe be 5%, 5.5%, hopefully forcing it to 6%, getting the margins to stabilize around 25% in Q3 and Q4, and having taken more costs out, which is what's giving us confidence to have a stretch, stretch, stretch goal to make some money in Q3. We know we'll be better in Q3. We don't know if we can get all the way to zero. Then in Q4, as we just reported, I think a $4.4 million EBITDA loss, getting to zero or above.

Speaker #3: Where we expect that revenue to maybe be 5%, 5.5%, hopefully forcing it to 6%. Getting the margins to stabilize around 25 in Q3 and Q4.

Speaker #3: And having taken more costs out, which is what's giving us confidence to have a stretch, stretch, stretch goal to make some money in Q3.

Speaker #3: We know we'll be better in Q3. We don't know if we can get all the way to zero. And then in Q4, as we just reported, I think a 4.4 million EBITDA loss.

Speaker #3: Getting to zero or above. And we know we have time, and we know I have work to do. But that is something that's really exciting in our company that we're doing it the right way.

Marcus Lemonis: We know we have time, and we know I have work to do, but that is something that's really exciting in our company, that we're doing it the right way. We're building, we're growing, we're adding customers, we're generating revenue, we're making acquisitions. We are no longer in, holy crap, the place is burning down, and we need to cut stuff. We're now in the kind of mode that caused me to leave my old company for this full-time.

Speaker #3: We're building or growing. We're adding customers. We're generating revenue. We're making acquisitions. We are no longer in we are no longer in, "Holy crap, the place is burning down, and we need to cut stuff." We're now in the kind of mode that caused me to leave my old company for this, full-time.

Speaker #4: Yep, all right. Very helpful. Thanks so much. I'll leave it there.

Seth Sigman: Yep. All right, very helpful. Thanks so much. I'll leave it there.

Speaker #1: There are no.

Operator: There are.

Marcus Lemonis: If there are no more questions.

Speaker #3: There are no more questions. Thank you. There are no more questions.

Operator: Yep.

Marcus Lemonis: Thank you.

Operator: Go ahead, Mike.

Marcus Lemonis: Are there no more questions? Yep. Do we have any more questions?

Speaker #4: Yep.

Speaker #3: Do we have any more questions?

Speaker #1: There are no further questions at this time. I would love to turn the call back to Marcus Lemonis, Executive Chairman and Chief Executive Officer, for closing remarks.

Operator: There are no further questions at this time. I would love to turn the call back to Marcus Lemonis, Executive Chairman and Chief Executive Officer, for closing remarks.

Speaker #3: Great. Thank you so much. We look forward to seeing you on our next quarter call. Take care. Bye-bye.

Marcus Lemonis: Great. Thank you so much. We look forward to seeing you on our next quarter call. Take care. Bye-bye.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

Q4 2025 Bed Bath & Beyond, Inc Earnings Call

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