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Beyond(BYON) - 2022 Q4 - Earnings Call Transcript
BYONBeyond(BYON)2023-02-22 15:35
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Financial Data and Key Metrics - Revenue declined by 34% year-over-year in Q4 2022, pressured by intense competition and the strategic removal of non-home products [39][40] - Gross profit decreased by 49millionYoYinQ4,withgrossmarginat22.149 million YoY in Q4, with gross margin at 22.1%, a 54 basis point decline due to higher discounting and elevated freight costs [41] - Adjusted EBITDA was 7 million in Q4, a decrease of 21millionYoY,withamarginof1.621 million YoY, with a margin of 1.6% [42] - Active customers declined to 5.2 million at the end of Q4, with order frequency down 4% YoY [43][102] - Full-year 2022 revenue was 1.9 billion, a 30% decline YoY, but a 34% increase compared to 2019 [75] Business Line Performance - The company transitioned to a 100% home-only retailer, with home product assortment more than doubling since January 2021 [50][51] - Mobile app adoption grew rapidly, with mobile app sales increasing by 500 basis points in 2022 [121] - The company added over 4 million new on-trend SKUs from thousands of partners, with more than one-third of Q4 revenue driven by SKUs added in the last two years [24][53] Market Performance - The furniture and home furnishings market is fragmented, with a total addressable market of over 400billion[56]−ThecompanyfacedcompetitivepressurefromincreasedandearlierdiscountingactivityduringQ4,particularlyduringtheCyber5period[27][40]−Thecompany′sSmartValuepricingstrategyheldupwellduringQ4,despitecompetitorsrelyingondeepdiscountstostimulatedemand[27]StrategicDirectionandIndustryCompetition−Thecompanyisfocusedonimprovingproductfindability,searchprocessing,andcustomerexperiencetodriverepeatpurchases[25][87]−Thecompanyisleveragingitsasset−lightbusinessmodeltomaintaincompetitivepricingandgrossmargins[95][101]−Thecompanyisexpandingitsloyaltyofferings,includinganewco−brandedMastercardcreditcardinpartnershipwithCitiRetailServices[54][120]ManagementCommentaryonOperatingEnvironmentandFutureOutlook−Managementexpects2023tobeataleoftwohalves,withperformanceimprovinginthesecondhalfduetonewproductassortmentsandloyaltyinitiatives[111][113]−Thecompanyanticipatescontinuedinventoryrationalizationintheindustrythroughatleastthefirsthalfof2023[112]−Managementremainscommittedtoprofitabilityfortheyear,despitepotentialfluctuationsinconsumersentiment[84][116]OtherImportantInformation−Thecompanyrepurchased400 billion [56] - The company faced competitive pressure from increased and earlier discounting activity during Q4, particularly during the Cyber 5 period [27][40] - The company's Smart Value pricing strategy held up well during Q4, despite competitors relying on deep discounts to stimulate demand [27] Strategic Direction and Industry Competition - The company is focused on improving product findability, search processing, and customer experience to drive repeat purchases [25][87] - The company is leveraging its asset-light business model to maintain competitive pricing and gross margins [95][101] - The company is expanding its loyalty offerings, including a new co-branded Mastercard credit card in partnership with Citi Retail Services [54][120] Management Commentary on Operating Environment and Future Outlook - Management expects 2023 to be a tale of two halves, with performance improving in the second half due to new product assortments and loyalty initiatives [111][113] - The company anticipates continued inventory rationalization in the industry through at least the first half of 2023 [112] - Management remains committed to profitability for the year, despite potential fluctuations in consumer sentiment [84][116] Other Important Information - The company repurchased 80 million in shares in 2022 and made a 50milliondirectinvestmentintZERO[30]−Thecompanyexited2022with50 million direct investment in tZERO [30] - The company exited 2022 with 371 million in cash and 34millioninlong−termdebt,resultinginanetcashpositionof34 million in long-term debt, resulting in a net cash position of 337 million [59] - The company's Medici Ventures portfolio continues to present a differentiated value opportunity, with significant progress in blockchain investments [31][61] Q&A Session Summary Question: Impact of competitor markdowns on sales and pricing algorithm adjustments [92] - The company maintains its Smart Value proposition by removing non-competitive products from the site, which can be disruptive but ensures pricing integrity [93][125] Question: Gross margin trends and inventory rationalization [94][148] - The company expects gross margins to remain consistent due to its asset-light model, despite industry-wide inventory rationalization [95][148] Question: Comparison of current home e-commerce market to past periods [97] - The company has historically performed well during economic downturns, as consumers become more value-conscious [150][151] Question: Performance of Overstock Day events and new customer demographics [132] - Overstock Day events drove strong mobile app adoption and sales, with a focus on attracting a younger demographic [155] Question: Profitability in a scenario of declining sales [157] - The company is committed to profitability for the year, with a focus on expense management and cost savings [158][159] Question: Active customer base and reactivation strategy [162] - The company is focused on increasing brand association with home and leveraging its loyalty offerings to drive engagement and reactivation [163] Question: Expanding assortment in the home category [144] - The company is strategically adding national brands and giftable assortments, with a focus on improving product findability [178]