Neighborhood Intelligence, Inc. (NXH) Earnings Call Transcript & Summary

Everybody, and thank you for joining us today. I'm here with the Chairman and CEO, Marcus Lemonis of the new Neighborhood Intelligence, formerly Bed Bath & Beyond. And we got a great list of prepared questions that we're going to go through and learn a little bit more about the Neighborhood Intelligence story, what's driving the stock today and how Marcus sees intrinsic value for his ultimate vision in the long term. So thank you again for coming today, Marcus. Very happy to have you here.

Appreciate you guys doing this.

Yes. No, of course.

So I want to address one of the most recent news items first. Yesterday, you guys announced that you're mutually terminating the agreement with F9 for that acquisition. Can you expand more on what happened? And also what does that mean for your strategy overall, specifically the Home Services pillar? Because forgive me, I think a lot of brands were coming from that.

Yes. I think you have to back up and really understand like what is the acquisition strategy and how are we thinking about bringing companies into the fold? And back in January, we clearly identified that we wanted to set up a 3-pillar structure: Omni-Channel businesses, which is largely led by our asset-light e-commerce business; Home Services businesses, which are high margin, high recurring once you cross the threshold businesses; and then Home Ownership, which includes brokerage, mortgage, title and all of the things that go along with that Home Ownership business. And we've looked at a lot of transactions over the last, call it, 6 or 7 months. And as we started to think about what that strategy would look like, it's important to know that the company isn't just buying businesses. It's not trying to go out and find like what businesses are broken, what went bankrupt, what's in the home space and what can we get for cheap. That isn't the strategy. The strategy is, it really started with the identification of a problem. And the problem is, when you look at home ownership today and you read the headlines or you watch TV or you read a newspaper article, all you hear about, from a political standpoint, is affordability is a problem. Home affordability is a problem. Well, it's been a problem for decades. And it's really a function of a supply and demand curve that's broken. You could argue today that Americans are short 10 million homes from what is actually needed. And so I started to unpack, if there is an affordability issue, our company, any company, the federal government or anybody else should come to the conclusion that it's going to be next to impossible to solve the affordability crisis as it relates to the price of a home. You're never going to be able to build enough homes fast enough with quality materials and a quality process and satisfy demand. So if that's the case, the real problem is, the expense of home ownership over a lifetime. The average American buys and stays in their home for about 11 years. And so it started with this 11-year problem. How does our company or any company stitch together all of the things that happen to a homeowner from the moment before they choose to buy the house to the moment they sell the house? And what are all of those different pain points, those frictional things that happen to them that cause home ownership, not the price of a home, but homeownership to become unaffordable? And whether it starts with the brokerage side and all the noise that went around the cost of paying brokers and people being frustrated and consumers being frustrated to the price of mortgages, which we know are driven by long-term treasuries to the price of insurance title, moving in, renovating, decorating and all of those life events that happen along the way. And so when we laid that out on a whiteboard as a team, we said, do we believe that we could address all of those pain points by acquiring capabilities, specific capabilities that can address all of those points along the way. And so we already had a spectacular business in Overstock.com and bedbathandbeyond.com. Company started as an asset-light e-commerce business. And it's had sort of like an interesting pass, I'll say the least, had an interesting pass. When I joined the business a little over 1.5 years ago, a little almost 2 years, the company was in a real difficult situation. It had already owned Overstock.com. It bought the intellectual property only, just the intellectual property only of Bed Bath & Beyond. And while Bed Bath & Beyond had an e-commerce business, it was largely a brick-and-mortar business. That's where the bulk of the revenue came from. When the company bought the business, I think it made a little bit of a fatal flaw mistake where it turned Overstock.com off and it redid the whole website, and it opened back up as Bed Bath & Beyond. And if you go back and you look at the quarterly reports, back half of '23, beginning of '24, the company was losing $40 million to $50 million a quarter. And it came out of 2 things. It came out of COVID, and so demand dropped. Then you made this change and taxonomy and the cost of marketing and the margins fell apart. The margins went from 27% to 17%. The cost of marketing went from 9% to 17% and the revenue was all over the place. And so we spent the first, call it, 15 months in a, what I would say, a declining housing market, trying to figure out how to get this business to cash flow neutral or positive. And what people were very unhappy about, rightfully so, is that in order to do that, you had to deconstruct the business, and you had to take it all the way down to the studs by eliminating vendors that didn't work, eliminating products that didn't work and eliminating SG&A that didn't work. For a little bit of -- and we'll move on from here, but for a little bit of context, when I joined the business as a Board member, not as an executive, when I joined as a Board member, the company had 1,396 employees. Today, it has just over 200. It's a significant shift. And we believe there's an opportunity to consolidate even more in particular areas where we see that technology is allowing us to be more innovative and not live on legacy systems. I'm happy to tell you that, that portion of the business, what I would call our base business, has had 8 quarters, 9 quarters, 10 quarters of operating performance improvement. But to say that you suck less or lose less isn't really enough for me or for any shareholder. They want to know when is that base business going to stop losing money. We knew that in order for that to happen, 2 things had to happen. The SG&A had to be rightsized. And for context, the SG&A on an annualized basis for that business is $218 million less a year than what it was. But it also had to have revenue growth. You can't cut your way to a profit. And so we've had now reported 2 quarters of revenue growth, and we expect, based on how we're trending as we sit here today, a third quarter of revenue growth. What is most exciting is that third quarter of revenue growth, this quarter that we're in today, with margin stabilization and continual SG&A reduction, if it was reporting by itself, will scare or be at cash flow neutral to positive for the first time in a long time when you exclude all the merger synergies and legal costs that aren't -- all the onetime fees that are in there, the pure operating business. What's driving it? Bed Bath & Beyond is having nice growth. Overstock is having significant double-digit quarter after quarter of top line growth, margin stabilization. And that for me is like what we wanted to land the plane with first.

Yes. And one clarification too, just so the audience is aware too, this growth that you've been seeing in those businesses is inorganic despite the fact that you're doing deals that is going to inorganically grow revenue.

The growth that we're talking about is purely on the base business with no acquisitions included. And so when we report numbers, it's important that when you see a 50% revenue growth for the quarter, the bulk of that is because of acquisitions. Nobody should get any credit for it. And we're not asking for it. What we're asking for acknowledgment of is this base business had mid-single-digit growth in Q1, had mid-single-digit growth in Q2, and we think it can have high mid-single -- we think it can have high single-digit growth here in Q3 with a nice margin profile. And so that is what our team is most proud of right now.

Yes. Well, I mean, like you said, you joined 1.5 years ago, and sometimes if you got to turn a ship another way, it takes time to turn a vessel. And it sounds like you have the solid foundation now in place to hopefully make it easier to continue growing [ looking ] forward.

Yes. In January, I decided to retire from a business that I founded 25 years ago and to do this full time. And everybody, including my family and my friends were like, what are you doing? This other business is a great business. It's a $6 billion, $7 billion business, and now you're going to take on this really big challenge and there's reputational risk, there's financial risk. There's a lot of risk associated with it. And what I said to them is, there's risk if you don't live in the business every day and understand what we're doing and we're looking on the outside in. And there's risk because the idea of creating a 3-pillar strategy specifically around making home ownership simpler and more affordable, it's ambitious. It's wildly ambitious. And it required companies to be acquired. It required companies to be integrated. And if I was looking at it from the outside in, I would acknowledge how ambitious it is. I'm on the inside, and I can tell you, it's ambitious.

Yes. Well, you've got skin in the game yourself, too. So I believe that you do have a vision here.

So back to the F9. We've looked at maybe a dozen transactions since January. And the ones that people know about are: we acquired Kirkland's; we acquired The Container Store; we acquired Elfa, which is an organization system out of Sweden; and we acquired Closet Works; and we acquired SFV and Installed Right. And they all fit into specific pillars. And we were already in the Home Services business with Elfa, with Closet Works, with SFV. So we've existed already. It wasn't like a new idea. The F9 transaction was our attempt to address capabilities in the flooring and the kitchen space and with 2 good brands; Cabinets To Go and Lumber Liquidators. And Lumber Liquidators has had its own challenges. It had formaldehyde issues a decade or so ago. It went public. It then filed bankruptcy. And so I think people's indictment of you just keep buying these broken bankrupt brands, I guess, is technically correct, but it's philosophically incorrect because usually, when they go through that process, they're cleansed and they're rebirthed and they're reborn. When we did the transaction with F9, we were very disciplined about the price, we were very disciplined about the closing conditions. And our willingness to modify or compromise on our closing conditions is 0. And we went through the same thing with TCS, and we were buying it from the banks that foreclosed on it and put it through bankruptcy. Our willingness to compromise on anything is 0 because our shareholders expect that their equity and their capital is managed with an iron fist. In all of those transactions, F9, TCS and all of them included, they were all done at a significant premium to our current stock trading price. In most cases, they were done at $7. The F9 transaction was also done at that, which makes the imputed purchase price even lower. Why did we do it with stock? People ask me that question all the time. We've done it with stock because we believe that when you buy the business at a premium of your price and you're able to get what we believe is a great transaction, you make those businesses partners with you. Part of the misnomer in making those acquisitions was, why were we able to buy them so cheap? I never told anybody nor will I ever that they were cheap. They were properly value priced for the circumstance and situation that they were in. And in most cases, they were losing money. And in most cases, they lacked any working capital of any kind, which would be contributing to the fact that they were losing money. We went through the process with F9. We like the management team. We like the store staff and the owner and myself would go back and forth on the transaction over and over again. And so we got a little bit of deal fatigue. And at the end of the day, the closing conditions were not met, and we were unwilling to modify or compromise. And during that period of very intense discussions, we determined for our shareholders, and that's all that matters, that we were able to either acquire or integrate those capabilities into our business in flooring and kitchen without having to buy a business. I wanted to do the transaction. It was $0.5 billion of revenue. The company was losing money today. We felt like we could fix that, but I didn't want to compromise and then have to dig out of a hole. If the business was making good money and I felt like the working capital was sufficient, maybe I would have compromised, but I don't think our shareholders want us doing any of that right now because they already see a lot on our plate and they already see integration risk. So we terminated that transaction. We no longer have any responsibility to them nor them to us.

Got it. No, it saves you some shares to be issued as well, which we'll get to that topic...

It saves us some shares, not necessarily to be issued. It saves us some shares from diluting our current holders anymore because it is not something that they want done. It's not something that I want done to myself as well.

Sure. So I want to pivot topics a bit, but stay on current focus. Your earnings call a couple of weeks ago, you talked about the digital asset portfolio and the process to unlock value there. Do you have any updates you could share with us today? And the second part of my question, I think tZERO is the biggest or most notable asset in the portfolio. I would love to know your view of that business itself.

So to give everybody a little bit of background, Overstock.com's founder, Patrick Byrne, was a wildly innovative guy. He was way ahead of his time. I mean he saw things, and while there's obviously always controversy surrounding him as an individual, nobody should take anything away from him in terms of his creativity and innovation, particularly around blockchain and tokenization. And he really understood that the market was playing games with stocks. And he wanted to have quick settlement on trades, and he wanted to have the ability to put records on paper, not literally, but records out there that allow people to know what exactly is happening with their asset, very innovative. As the company continued to invest, and this is an important thing to know, almost $350 million in the previous 10 years to [ 2020 ]. So between, call it, 2012 and 2021, '22, almost $350 million of that company's capital was deployed into any kind of project, big company, small company, companies they birth, companies they invested in across that entire portfolio. And it became what was known as the Medici portfolio. And that was the name that they came up with. And all of those assets went into that, we'll call it, entity, idea to that concept. And it was separate from the online marketplace business. Over time, as the online marketplace business started to pick up steam or started to lose steam, those assets sat and started to become what I would say, undermanaged, undernourished. And I think the company started to take those assets for granted. And the management team, in my opinion, started to become exhausted by the necessity to manage the businesses, report the businesses and made the decision 3.5 years ago to parse them off and to spin them out to an asset manager in Salt Lake City, known as Pelion, where they entered into a partnership where our company would own 99% and they would own 1%, but then they would take over all the management decisions, removing our company from any SEC accounting consolidation issues that could exist. I always look back at that transaction and become frustrated by it because the company hired this firm, and they're a well-run reputable firm and paid them $17.5 million of prepaid management fees over 7 years and gave them north of $30 million of cash to invest in how they saw fit. The company lost its rights to terminate that agreement. There were no performance metrics. But what's important to know is, as we sit here today, our company has direct investments in tZERO and indirect, through the Medici portfolio in Pelion, direct investments in GrainChain through a convertible note and indirect investments through the Medici portfolio and then a handful of other smaller companies that sit in the Medici portfolio. We believe that those assets that sit on our balance sheet are being given 0 value. We believe that our holders want access to those assets. They want to have them in their hand. They want to own them directly in one form or another. And the Pelion transaction doesn't necessarily give us the ability to do that as fluidly as we would like. So we have been putting a lot of pressure on tZERO over the last 12 months. The previous CEO that was put into the company by ICE, David Goone, and ICE was a great partner to the company. They put $50 million into the business. There was a number of other folks who invested in the business at the time as well, put David Goone in there. And David didn't necessarily deliver the results that our company wanted, that their Board wanted, and we pressured tZERO's Board to make a change to an individual that we thought, that I thought, would really put the company on the right path. David Goon was removed and Alan was put in as the CEO. And if you look at the last 12 months, we've been very pleased with the progress that Alan has made in that business. And while the company does not generate the type of revenue that any of us want, Alan included, he really needed to rebuild the entire infrastructure, take out costs. And I always tease him, he hasn't taken out enough costs, but he's working hard to do so. But what really became apparent to me is that, that business needed to see some sort of monetization moment, liquidity moment of some kind. And we pressured the company into looking at going public, looking at coming up with some solution. Alan has been working his tail off to try to achieve that. He's looked at every idea under the sun, including shells and SPACs, et cetera, and it's a long process. We don't have patience for it anymore. So our company has decided to hire an investment banker, which we've done to put a special committee together, which we've done to take the tZERO asset that we have and between direct and indirect, we own 38.7% of that company, to take our GrainChain asset, which we believe is actually a hidden gem and to take the rest of it, put it together in a bucket and to find a way to give our shareholders access to it sooner than later. So we are underway in a process that we think could achieve that. There's no guarantee that it will happen. That was a possibility. And at the same time, tZERO is working feverishly to unlock the value for themselves as well. So the relationship is a little clunky right now. We're super fans of what Alan is doing. We are frustrated with the lack of revenue. They know that. They're frustrated too. But our shareholders needed access to that asset. And so the idea would be, what could we do with these assets? Could they be contributed to another public company? They're not -- I want to be clear about this. They're not up for sale. I want to be crystal clear. We are not looking to sell that asset to raise capital for our business because we think the embedded value is far greater than any transaction that we could execute today, and we're not looking to short sell something because we think we need capital because we think that upside is way bigger, but we are looking to give access to our shareholders that asset. And today, that's not happening.

Well, it sounds like you have a disciplined strategy on that end to like you were talking about with F9, there's no need to compromise when you believe in the intrinsic value of something. So kind of going back to some M&A integration and synergy realization because that's where I get a lot of questions. You guys are, like we talked about doing a lot of things at once. You closed on the Container Store, Elfa, Closet Works, Brand House Collective or Kirkland's and SFV and have signed but not closed Fathom yet. Does the termination of S9 have any impact on Fathom? I understand it's still pending stockholder approval and regulatory clearance and is expected to close at the end of this year. But if there's any visibility into timing or any color you could provide to us on that deal?

Look, we have -- at the end of August, and this is a really important distinction because I think if you go across the marketplace, whether it's Bloomberg or CNBC or Yahoo or anything else out there, the current share count is wildly misunderstood on what it exactly is. As we sit here at the end of August, it's about 97 million shares. And that includes the fold-in of Kirkland's, TCS, SFV. It includes all of those transactions. It does not include anything from F9 because that transaction is terminated. And it doesn't include the contemplated closing of Fathom, which will be between 6 million and 7 million shares. So we're starting from a base of about 97 million shares. As we look at the integration of these businesses, and I think I mentioned this to you, I think the biggest challenge for me and where I did a very poor job of communicating is that these transactions were done at extremely favorable terms, but they were deficient of working capital. The Container Store business is a fabulous business. It is beloved by customers. The tenure of the staff in the stores is an average of 9 years. You don't find that in retail companies. You have people that have been there 30 years. And the assets, the locations are widely underused and undervalued. So the reason that we did that transaction is we like the capability that storage and organization and closet and those types of things bring to our homeowners. And we like the fact that The Container Store would allow us to integrate bedding, kitchen, bath and the traditional Bed Bath assets to bring together one retail experience without our company going out and signing new leases and spending a bunch of CapEx and doing a bunch of things. The challenge and what I learned during the diligence process of TCS and know it to be true today is that it doesn't have sufficient working capital. And it doesn't have the right amount of inventory on the shelf. And we tested that theory out in about 1/3 of the stores by pushing more inventory and spending some of our cash. That's why you saw -- if you looked at the last quarter, you saw our working capital go from all cash to cash and inventory. And that happens in the business. You can -- working capital is fungible. When we did that, we saw a massive acceleration in the TCS business in those stores that we put inventory on the shelf, which meant the brand is still healthy, the customer is still healthy, but they can't buy what doesn't exist on the shelf. So it's a big challenge for us. So what we also learned through that process is that the Kirkland's business and The Container Store business, now Container Store Bed Bath business is really one retail organization. To remind everybody, Kirkland's was a public company with a public Board, with a public CEO with all the public company costs and all of the wasted money that goes on with doing so. TCS was a public company, and at one point, not too long ago, 3 years ago, those 2 businesses had a combined market cap of more than $2.5 billion. That's a really important thing. We paid $137 million for the businesses combined, $137 million. It's missing about $50 million worth of working capital. We would have paid $187 million and nobody would have been upset. But we didn't because we didn't have the working capital. We need to generate that working capital. And we'll generate that by creating positive cash flow in our e-commerce business, but we're also going to generate it by raising capital. And I think people are angry with us that we need to raise capital. And I understand that maybe not being as clear about the deficiency in working capital, I'll take full responsibility for it. But that's the fact. We believe that, that omnichannel business, combined with our e-commerce business can become cash flow positive at a point in 2027 once we get the inventory on the shelf. And when we looked at this last weekend, which is Labor Day, TCS was up nicely in the stores that had inventory, and it was flat to slightly negative in the stores that did not. I don't need any more testing. I can see it. And as I visit stores that have inventory and don't have inventory, they have the same amount of traffic, but a different level of conversion. People are frustrated that we got into this. You were an asset-light company and you didn't have all this infrastructure. At the end of the year, we will have consolidated our retail business entirely. We told the market, I think, 30 days ago or whatever we had our call that we believe we can take out $50 million to $60 million of costs. I think that number is higher than we originally anticipated. We closed on the transaction for TCS 60 days ago. We closed on it on the 11th of July. We haven't owned it that long. And so what we're doing today, unfortunately, is we are collapsing supply chain. We are collapsing technology. We have already taken out close to $30 million between Kirkland's and TCS in annualized costs. And we think there's another $40 million to $50 million to come out. That's duplicate SaaS contracts, consultants. It's a variety of nonsensible things that the company took on, the company engaged in that we just have to rid ourselves. The challenge is whether you're getting out of leases, and we've closed -- by December, we will have closed 9 TCS stores, 9. When the company went through bankruptcy, they closed 1. It was the worst bankruptcy ever executed in the history of bankruptcy by TCS. They spent $40 million and ridded themselves of nothing. We will have closed 9. We believe that we will have rid ourselves of almost every location that's cash flow negative. In some cases, we were able to do blend and extend with certain landlords on other good properties. In other cases, we had to write big checks to terminate leases. Of the $28 million of costs that we've gotten rid of, we've also had to write big severance checks just because we don't believe in dropping people on their head, especially people that have worked there a long time. We've had to purge ourselves of bad inventory, a lot of it, over $30 million of the inventory between both those businesses had low GMROI. That's gross margin return on investment of less than 1, not acceptable. And we have to really get disciplined around how we spend money marketing and how we do things. What I noticed in TCS that I was most disturbed by was the casualness around spending money on CapEx, spending money on staff, paying people in a non-meritocracy manner and the amount of staff. We're down 30% in headcount in that business in less than 60 days. Sadly, we're going to be down more. And we're going to continue to take costs out. And so what people saw me do in the e-commerce business by ripping out costs and ripping out these negative SKUs and ripping out negative vendors to get to breakeven we had to decline revenue. In the retail business, I'm promising everybody today, we will rip out all of those costs, and we will grow revenue. We don't need to go backwards to go forwards other than closing locations, which people would want us to. We don't need to be taking on that water.

No. Well, again, it speaks to the discipline you have as a capital allocator, whether it's an acquisition, CapEx investment, whatever it may be. I think you already hit on most of the points to my next question. I was going to just go over how integration has been with the recently closed deals. It's been a short window. Anything else have you learned about TCS or Kirkland's that would have an impact going forward again? I think you were pretty thorough before, but...

I think Kirkland's is a very special business for me because it really understands global sourcing. And global sourcing is a capability that we believe is necessary to remove friction for the consumer. And if consumers have seen inflation year after year, administration after administration, no matter whatever your political view is, inflation has persisted since COVID, and it doesn't seem to be receding. And if customers are feeling that pinch, we have to take that matter into our own hands. And we have to figure out how to remove SG&A, which allows pricing to come down and how to remove supply chain costs, which allows pricing to come down. Kirkland's brings something that TCS and Bed Bath never had, which is a deep knowledge on design, sourcing and supply chain. And Kirkland's for years prior to COVID, prior to -- after COVID was always a wildly profitable business. And it brings something to the table, the softer side of Bed Bath, funny story. I had a chance to meet and have lunch with a number of legacy executives from Bed Bath that were part of like the greatest run in retail that most people had ever seen. And one gentleman handed me a book from over a decade ago. And it was the Board of Directors Strategy for Growth book. And this was like when the business was like at an all-time high, printing money. And the strategy for growth was we want to acquire Kirkland's and we wanted to acquire The Container Store. And what it said was the same thing that we believe in, which is everybody brings a different capability, but the customer doesn't want to have to do all that work. They want to be able to have all of that stitched together for them. So take that from a retail standpoint and expand that out over Home Services and everything else, and that is our business. What we learned at TCS through this last process is that they didn't love product anymore. I love product. Two things that I love to do. I love to spend time in the stores, and I love to spend time with vendors and product developers because ultimately, when you go into a home, you're trying to solve problems, not just look pretty. And I think the company got away from that. Kirkland's did not, but TCS got away from that. It got away from understanding how to bring value to the customer, and it got away from understanding how to be innovative. And the founders of TCS were some of the greatest merchants that ever existed in the home retail space. When they left, the magic left. And so I spend a lot of time and Amy Sullivan, who's our leader and I call her our Chief Merchant as well, spends a lot of time on product, a shocking amount of time we spend on product. And so when you -- I would encourage anybody today who's thinking about investing in the company to go visit a TCS. You'll see Bed Bath in there, you'll see Kirkland's product in there. You should talk to the staff. You should ask them what's changed. You should ask them where the company went wrong. You should ask them how they feel about things today. They'll all be honest with you. And disguise yourself as a customer, so they don't know what you're asking. And what you're going to find is, they're motivated again to bring value to the customer. We believe that when you do that, you get back to profitability. We're $100 million short in the retail business from being profitable. Just to give you context, the TCS business on a trailing 12, because I think people are probably doing their building math, the TCS business on a trailing 12 is about $580 million of trailing 12 revenue, including Elfa. That number is down from its peak, 40%. From its peak. That business, well you can go out and look at their filings, for TCS. It was a $1 billion business. We don't need it to be a $1 billion business again to be profitable. We're going to rip costs out, but we do believe it needs to be a $680 million business. And by the way, that's $8 million a month. That's $300,000 a store. That's -- we can -- you can do the math. It's a couple of thousand dollars a day. It's not a lot. And so we think the path to profitability is quick as long as 2 things happen. We rip out the costs, which we've proven we can do, and we get the working capital to put the product on the shelf. Those 2 things happen, it's a $680 million to $700 million business 1 year from today as we take it.

Got it. I want to tangent just a bit because you brought up path to profitability. What I think drives the story and you've done a great job showing the revenue growth after what was it 19 quarters of decline. The next step is showing EBITDA profitability and then eventually cash flow positivity. Could you talk about how you view the time line? Like I know you just said you expect more cost savings from the acquisitions you've done. And correct me if I'm wrong, that when you originally put out the $50 million to $60 million number, that was including any cost synergies from F9. Now as that's off the table, you're getting more from what you've already acquired, if I'm understanding correctly or...

The $50 million to $60 million did not include that.

Oh, it didn't, okay. My apologies.

No, when we finished our last quarter, F9, both the revenue projection that we gave for Q3, just for clarity, was $505 million to $525 million. That was the range. And we talked about the fact that in the quarter, it would cost $25 million to $30 million to clean up all of the things that were out there. We were very transparent. What we want to start to do is get to a point where we could start to provide forward-looking guidance. We think our shareholders not only demand it, but deserve it. We have to understand what we have. And so we're going to continue to do that quarter-by-quarter until we get to 2027. I believe that we have a great shot of being cash flow positive, EBITDA positive in 2027 if we can put the inventory on the shelf. I'm not worried about us taking costs out. We're going to do it. There's not a question. In order to get to $680 million of revenue and then add another $200 million on for Kirkland's, we need to get inventory on the shelf. And I don't want to keep belaboring the point. But when anytime anybody asks me about profitability, I'm always going to say, if I have inventory, I will be profitable because we're going to rip the SG&A out. We're going to rip the SG&A. And the fact that the e-commerce business has arrived at that in the worst housing market that we believe has it been in 20 years. I don't know the last time rates were this bad and 4 million homes were sold. We feel very proud that we've done it in the trough, and it's not going to be a trough forever. We think 2027 is still going to be a very rough housing market. We don't see any green shoots that tell us it's going to be different. We still think we can get there.

So there's potential additional upside should the market work in your favor as well, too?