Bed Bath & Beyond, Inc. (BBBY) Earnings Call Transcript & Summary

Thank you, Allison. As Allison mentioned, proposal #4 in the proxy statement is usually called the Say on Frequency vote. Although the vote is not binding, the Board will consider the results of the vote in determining how often we should hold future Say on Pay votes. Shareholders may vote for any of the 3 alternatives: every year; every 2 years; or every 3 years; or they may abstain from voting on the proposal. The Board has recommended that shareholders select every year. I move for our shareholders to approve, on a nonbinding advisory basis, the Board's recommendation of every year for proposal #4 as described in the proxy statement.

Thanks, Joanna. You've heard the motion. Is there a second?

I second the proposal.

Thanks, Joe. I suggest those shareholders voting on the online virtual meeting portal now vote. The fifth matter to be submitted to the shareholders for action is proposal #5, the approval of an amendment of the company's amended and restated 2005 Equity Incentive Plan to, among other things, increase the number of shares of common stock reserved for issuance by 2,755,000 shares. I'd like to call on Robert Shapiro for the recommendation of the Board of Directors in this regard. Rob?

The Board of Directors unanimously approved the amendment to the company's amended and restated 2005 Equity Incentive Plan on March 30, 2023, subject to the further approval of our shareholders at this meeting. I move for our shareholders to approve the amendment to the company's amended and restated 2005 Equity Incentive Plan as described in the proxy statement.

Thank you, Rob. You've heard the motion. Is there a second?

Yes, there is. I second the proposal.

Thank you, Clay. I suggest those shareholders voting in the online virtual meeting portal now vote. Okay. There being no further voting to be done, I declare the polls closed. I will now ask that the secretary of the meeting report the preliminary results of the voting. Glen?

The inspector of elections has provided a preliminary tabulation of votes and based on the preliminary tabulation and reports, we confirm on a preliminary basis as follows: first, the holders of a plurality of the voting shares represented at this meeting have voted for the election of Allison H. Abraham and William B. Nettles Jr., as named in the proxy statement for director terms expiring on the date of the annual meeting in 2026, or until a successor is duly elected and qualified; second, the holders of a majority of the voting shares of the company represented at this meeting and voting on the matter, which shares voting affirmatively also constitute at least the majority of the acquired quorum, have voted in favor of the ratification of the appointment of KPMG LLP as the company's independent registered public accounting firm for the fiscal year ending December 31, 2023. Third, the holders of a majority of the voting shares represented at this meeting and voting on the matter, which shares voting affirmatively also constitute at least a majority of the acquired quorum, have voted through a nonbinding advisory vote to approve the compensation paid by the company to its named executive officers, the Say on Pay vote, as detailed in our proxy statement. Fourth, the choice of every year received the most votes represented at this meeting and voting on the matter on a nonbinding advisory basis regarding the frequency of the Say on Pay votes, the Say on Frequency vote as described in the proxy statement. Fifth, the holders of a majority of the voting shares represented at this meeting and voting on the matter, which shares voting affirmatively also constitute at least the majority of the required quorum, have voted for the amendment to our amended and restated 2005 Equity Incentive Plan to, among other things, increase the number of shares of common stock reserved for issuance by 2,755,000 shares.

Thank you, Glen. Subject to the final tabulation of the votes, I declare that the shareholders of Overstock.com have duly elected all nominees for Director, Allison H. Abraham and William B. Nettles Jr., as named in the proxy statement. I'm pleased to announce that the shareholders have duly ratified the appointment of KPMG LLP as the company's independent registered public accounting firm for the fiscal year ending December 31, 2023. I'm pleased to announce that the shareholders have, on a nonbinding advisory basis, voted to approve the compensation paid by the company to its named executive officers, the Say on Pay vote, as detailed in our proxy statement. I'm also pleased to announce that the shareholders have on a nonbinding advisory basis, indicated their preference for holding future Say on Pay vote to Say on Frequency vote for every year as described in the proxy statement. Finally, I'm also pleased to announce that the shareholders have voted to approve the amendment to our amended and restated 2005 Equity Incentive Plan to, among other things, increase the number of shares of common stock reserved for issuance by 2,755,000 shares. On behalf of the Board of Directors, I thank our shareholders for their support. We will provide final results of the votes in the Form 8-K, which we will file with the SEC within 4 business days. There being no other official business today, this concludes our 2023 Annual Meeting of Stockholders. I again thank our shareholders who attended the virtual meeting. The meeting is now adjourned. Now we're in the part of our agenda provided for a discussion about the current state of our business as well as the Q&A period at the end. If you have any questions you would like answered during today's meeting, please type them in. I'm going to turn our time to our CEO, Jonathan Johnson. Jonathan?

Thank you, Allison. It's great to be with our shareholders today, even if it's only remotely. During 2022, we completed our 3-year purposeful, strategic and transformational journey of becoming a 100% home-only retailer. This transformation coincided with a dynamic shift in consumer spending behavior within the furniture and home furnishings category. As a result, comparing our results to pre-pandemic levels is a better representation of the progress we have made. Between 2019 and 2022, we grew revenue by over 50%, expanded gross margin nearly 300 basis points and adjusted EBITDA margin nearly 500 basis points. Including the recent first quarter 2023 performance, we have delivered 12 consecutive quarters of positive adjusted EBITDA. 2023 is Overstock's first full year as a home-only retailer in our 21 years of being a public company. We view this year as a period of rebuilding for Overstock. We remain confident in our ability to execute against our plan to turn around top line performance and recover market share. Let me start with a few recent corporate updates. First, we thank our shareholders for approving the conversion of both our Series A1 and Series B preferred stock into common stock at last year's annual meeting. We now have a simpler equity capital structure and have eliminated any confusion in the ownership of Overstock. Second, through the end of 2022, we returned $80 million to our shareholders via share repurchases. In addition, during 2022, we made a $15 million direct investment in tZERO. In January of 2023, we directly invested $10 million in GrainChain. We believe that both are promising Medici Venture portfolio companies, and I encourage all our shareholders to tune in to the Medici Ventures Day Virtual Event on May 31 being hosted by Pelion Venture Partners. The event should provide helpful information on the markets in which these companies operate and their business models. Considering these additional direct investments in the Medici portfolio and the share repurchases, we have invested over $100 million or about 20% of our cash balance since the beginning of 2022, Board's value-driving initiatives for our shareholders. Third, as I noted earlier, we completed the transition to 100% home -- the transition to 100% furniture and home furnishings retailer during 2022. Following this, we strategically refreshed our vision of Dream Homes for All to making Dream Homes Come True to emphasize our purpose and inspire our employees, partners and customers. With our new vision in place, we created the Get Comfy brand campaign in October last year, and partnered with 6 high-profile home-centric brand ambassadors on social media. Last month, we launched the new phase of our marketing campaign with the Your Home, Your Treasure commercial. This new marketing campaign specifically focuses on Overstock's brand pillar of Smart Value, meaning quality on-trend products for less. Our Smart Value brand pillar is a differentiator in the marketplace. And fourth, during 2022, the Overstock leadership team underwent some major changes in the marketing, merchandising, supply chain and product groups to upgrade our talent and identify and fill gaps and expertise. As we progress through 2023, these new teams will deploy new and exciting tactics to drive growth. We are confident we have the right people in key positions to lead our growth initiatives. Our strong balance sheet and minimal debt obligation continue to be a highlight and differentiator for Overstock. It not only provides us with the necessary cushion to navigate the current macro and consumer landscape, but also gives us the opportunity to focus on executing against our key growth drivers while being opportunistic about capital deployment. This slide shows our balance sheet highlights as of March 31, 2023. It is important to note that our cash balance sheet increased quarter-over-quarter during Q1, even after directly investing an additional $10 million in GrainChain. We should serve as key growth drivers flywheel slide regularly. It highlights our efforts, we believe, are critical to supporting growth in the short and long term. While these key growth drivers are not new, we are always evolving the underpinning of our drivers to improve performance. As an example, from an assortment standpoint, we increased our SKU count by 20% in the first quarter of 2023. This is on top of doubling our assortment over the last 2 years through 2022. Our merchandising team continues to identify new opportunities that are helping to close the gap to competition, a good example being our strategic decision to add national branded giftables during Q4 of 2022, the category which outperformed in the quarter. Mobile app adoption has grown rapidly. During 2022, mobile app mix of sales grew around 500 basis points. We will continue to focus efforts to accelerate its growth. It is our best customer engagement platform, one with better order frequency and higher average order values. We are always working to improve customer retention through our loyalty efforts. In February, we launched an exciting loyalty offering, a new co-branded Mastercard credit card in a partnership with Citi Retail Services, which offers Club O member points they can -- I'm sorry, which offers our Club O member points they can redeem that check out on our website through purchases on qualifying apparel, department store, gas and other purchases. In essence, this card is an extension of our Smart Value brand pillar and offering, enabling holders to stretch their dollars further. Improving product find-ability or how customers browse and engage with product pages on our site is table stakes for any e-commerce retailer. Still, we can improve our search processes and results recommendations to deliver a better experience for customers. Our product and tech teams are collaborating with leaders in the space to improve our search and web experience in a way that aligns with our asset-light business model. We are making progress on growing our Canadian business. We continue to increase local assortment and market our brand to create awareness. We've also upgraded our leadership team on the Canada project with a focus on expanding our presence in the market. None of these growth drivers is capital or resource intensive. All are aligned with our asset-light business model. All will help us retain and acquire customers, increase order frequency and gain market share while we continue to be disciplined managers of our balance sheet and income statement. We are confident we have the right strategies in place to grow. We continue to direct our efforts to drive sustainable, profitable, market share growth within our financial recipe card targets. We did not achieve all the elements of this targeted financial model in 2022. Achieving all these metrics continues to remain difficult in 2023. However, we believe this targeted framework is the right model for our business in the long and in the medium term. I'm encouraged by our strong gross margin performance in 2022 and through the first quarter of 2023, even as we navigate through a hyper-competitive landscape. Both the team and I know we must turn around performance. I firmly -- I still firmly believe we can expand our presence in the significant white space available to us, take market share in the over $400 billion total addressable market while running a profitable business. With that discussion, let's now take some questions. Operator?

We have a question over on Michael Schneider. Is tZERO progressing in line with expectations following David Goone's arrival?

Michael, thank you for that question. And I hope you join the May 31 Medici Day that Pelion Venture is hosting. David Goone will be interviewed and featured on this. The answer to your question is yes. It is progressing as we'd hoped. I think David is coming from ICE and with ICE's investment in this is being very thoughtful in how to build the tZERO marketplace. And I think he is doing so in a measured and strategic way. And I know people would like to hear more about what he's doing, but I applaud David for doing what he's doing and then being able to tell us what he's done rather than promising things he wants to do and then may or may not get there. So the short answer is yes. I think you'll learn more on Medici Day at the end of this month.

Jonathan, I'll hand it over back to you, no further questions.

Thanks, Lars. I want to thank all of our shareholders for participating, whether it be a question or just listening in, in today's meeting. Even in a tough macro and industry environment, I'm bullish on the Overstock business. I believe our business model is advantageous and resilient within different economic cycles. We are arresting our top line slide. We remain focused on our profitability tenet, allowing us to maintain our strong balance sheet. Thank you for your interest in and ownership of Overstock. Allison?

Thank you, Jonathan. We will now conclude the informal part of our meeting. We again thank our shareholders for attending today's virtual meeting.

This concludes the meeting. You may now disconnect.