Good morning. My name is Marcus Lemonis, I'm the Executive Chairman of Beyond. Thank you for coming today. Today is going to be broken up into two distinct sections. First, we're going to spend some time, a material amount of time on the third quarter results as well as get into the strategic vision of where we're going. Before we jump into the details and Alexis reads the safe harbor, I want to be clear that as we review things today, what you're not going to hear us talk about is the macro environment, interest rates at a 20-year high, consumer demand and inflation. We're going to stay away from all of that because in our honest opinion, what we truly believe is fixable in our own business is absent the macro issues. And as the macro repairs itself and comes back, I think everybody will be a benefactor of all of that.

Thank you, Marcus. My name is Alexis Callahan. As most of you know, I head up Investor Relations for Beyond. We're excited about today's presentation and your interest with us today. You'll be hearing from several members of management today, including Executive Chairman Marcus Lemonis; Chief Financial and Administrative Officer Adrianne Lee; President Dave Nielsen; Chief Digital Information Officer Guncha Mehta; Chief Brand Marketing Officer Jennifer Evans; SVP of Finance and Corporate Development Alex Thomas; and VP of Loyalty and Partnerships Tim Ryan. We'll also have a few special guests to be introduced later. During our time today, we will discuss the quarter, how we are restoring our core businesses, as well as walk you through our strategic vision and where we are going. Before we dive in, a few cautionary statements. Today's discussion and our responses to your questions reflect management's views as of today, October 24, 2024, and may include forward-looking statements. 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, 2023, and our Form 10-Q for the quarter ended June 30, 2024, and in our subsequent filings with the SEC. During this call, we'll discuss certain non-GAAP financial measures. The slides accompanying this webcast, those published this morning on our IR site and our filings with the SEC contain additional disclosures regarding these non-GAAP measures, including reconciliations of these measures to the most comparable GAAP measures. You can find a copy of both of these presentations today on our Investor Relations website. We would encourage you to review the forward-looking statements disclosure on Slide 2 of each. As a reminder, this webcast is being recorded and will be available for replay on our Investor Relations website following the conclusion of today's live event. Finally, as Marcus mentioned, our intention with this event is to be highly interactive. So we'd invite you to ask questions as they arise. We'd like this to be as conversational as possible. Just one housekeeping item, we will be taking several breaks throughout this session. So with that, let me turn it back to you, Marcus.

Great. Thank you, Alexis. As Alexis mentioned, we're looking for more of a fireside environment today as opposed to us just talking at everybody. As we get into the Q3 financials, we're going to spend a significant amount of time going through each of these boxes because, obviously, the results on the bottom line are unacceptable to us as a management team. As we look back at the last 12 months, we're going to show you several slides that show you the sequential improvement. But these six boxes are going to get distilled down to essentially three problems: conversion, margin and SG&A. And throughout the day, we're going to keep coming back to conversion, margin and SG&A and what we're going to do about those things. I'll have Adrianne take us through the financial results for the quarter.

Thank you Marcus, and thank you. I'll just go through these boxes. I think this is a standard slide that we present every quarter, but wanted to share, obviously, our revenue results are down year-over-year. That is in part a decision — mainly driven by our decision and commitment to become profitable. So if you look at the next box, gross margin came in at 21.2%. This is a 110 basis point improvement versus Q2. And again, something that was by design. I do want to make a note on gross margin versus last year. If you look at the comparable periods where we were Bed Bath, so if we think back to Q3 last year, we were one month Overstock and two months Bed Bath & Beyond. So if I look at August and September, last year versus August, September this year, we're actually a 50 basis point increase year-over-year due to less promotional discounting, again, by design and on our path to profitability. You'll see our SG&A came in at $45.2 million for the quarter. We did announce a reduction in force this week in part to help us continue to drive this cost down. We expect this number to be kind of in the low 40s going forward, but happy with the progress quarter-over-quarter — $1 million improvement. All in, adjusted EBITDA, a loss of $32 million. This is an improvement versus Q2, which is what we had committed to doing, a 10% commitment, and it is. If you recall, we had a loss of $36 million in the second quarter. So pleased with the progress we're making, but obviously, a lot more work to be done.

As we go into the most important thing that gets everybody's attention, it's revenue. And when I come back to those three principal points of conversion, margin and SG&A, this slide is optically the most troubling. But we're actually encouraged by what we're seeing. If you take a look back and you eliminate these COVID years and you start to really study what happened in Q3 of '23, really, what we believe happened ultimately, and we're not going to spend a lot of time on it, is that when Bed Bath & Beyond and Overstock merged together into a general marketplace, the assortment that got created was not the assortment that the consumer wanted. They were used to coming to Overstock for furniture, for rugs, for patio, and they had a great success, generating over $1.5 billion and conversion in the range of 1.7% to 2.2%. Now we don't disclose that number. So I'm saying it just because I want you to understand the context. As we look through the following quarters after the merger of the two, you can see that revenue hung in there, and then all of a sudden revenue dropped off. And what we wanted to do, and we said it in the previous quarter, is to get a very acute focus on profitable transactions. Prior to the two brands merging together, at 1.7% or 1.8% conversion, that's a significant difference from where we are operating today, which is closer to 1.3%. I think the thing that we're most pleased with is that site traffic continues to be very robust. Principally, our fundamental problem comes down to conversion. When you look at the gross margin, you can see where Overstock historically was, anywhere from 23.6% to 26%. But if I eliminate these periods during COVID, even at 23.6% or 26.6% at the third quarter of last year, you can see that there is a significant distance between even the improvement we're at today versus where we were. When we started to mix things together and create this marketplace, while traffic remained robust and conversion started to drop, everybody understands that the only way you're actually going to generate sales is by overpromoting and overdiscounting, which is what took us to 19.2% in Q4, 19.5% and where we started to commit that we would have sequential improvement. Early indications in Q4 is that we should have another 50 basis points of improvement. So we're expecting to get pretty close to 22% in Q4. As you look at G&A and tech expense, this is a real goal of ours to get this number down into the low 40s. Keep in mind that in the previous years, we were operating one nameplate. We're now operating three nameplates. There's a little bit of an anomaly here in Q3 of '22.

Yes. And that was driven by — we had kind of a one-time accrual in that. So I would say a normalized Q3 is around $50 million, $51 million.

So we know that this number needs to live down in the low 40s. Again, back to conversion, margin and SG&A. The adjusted EBITDA is an awful story. Prior to the merger of these two brands in Q3 of '23, the company was able to maintain some level of profitability. Obviously, the COVID years inflated that, but even prior to COVID, there was a normal level of profitability and a decent level of revenue. As we look at what happened in these following quarters, quarter after quarter, we can see that margin, conversion, conversion, margin, all these things continue to come back over and over again. Here's the odd thing to us. Customers still love the business. Site traffic and site orders continue to be very robust. And even after we got far less promotional — raising prices and dropping promotions, we're still able to maintain a significant amount. If you go back to even the COVID peaks and you look at '19, you look at '22 and even the beginning of '23, we're still outperforming in those categories. Orders and average order have been a roller coaster for the company. Prior to the merger, you can see what was happening, all the way up to $243 is the high. But if you go back and you look at the historical averages, $167, $173, $214. We've been doing a pretty nice job of being in that $204 to $199 range. Again, the problem with that is we got too promotional on furniture on Bed Bath & Beyond. You never want to look back, but as you look at taking the marketplace of Overstock and then merging it with soft goods, top of bed, small appliances at Bed Bath, the customer arrived at the party, and they were just totally confused. We took a very curated Bed Bath assortment and a very hyper-focused Overstock assortment and created a marketplace of 13 million SKUs. And when the customer came, they didn't know what to do. Cart abandonment was high, people leaving the site was high. People not even going past the first page had exploded because they arrived at something they didn't expect. LTM orders and average order value also continues to be strong. And we believe there's still sequential improvement opportunity both in the orders and average order value in this graph as well. This is the slide that we want to spend the next 45 minutes on. And there are a lot of hypotheticals in here. We're not allowed to use the word pro forma, so 'goal state' is pretty similar to pro forma, but these are the actual results. And what we wanted to show people is that our path to profitability is not as murky as the outsider may believe because we understand what are the principal items that will drive that. In all of these cases, in every single example of this goal state, none of these items, from the top line of conversion to the gross margin, to the sales and marketing, to tech, are anywhere outside of what we believe is normal. This still assumes that there's macro headwinds. This still assumes that we're underperforming on the margin side from historical averages. This still assumes that sales and marketing is higher than our goal of 11%. This does assume that the tech and G&A will be $41 million. I think we'll see that probably middle to end of first quarter, beginning of second quarter, so it's not that far away. The reason you won't see it in Q4 is we made the RIF of 20% of our workforce yesterday. So that obviously hasn't had a chance to come in. I'm going to have Dave take us through these modifications, and Alex will bring some supporting document up to help you through that. Dave?

Okay. So let's talk about gross margin for a moment. When you think about the 25% gross margin, as Marcus said, when you think about historicals, fluctuated between 25% and 27%. So pegging at a 25% is not unrealistic and not on the top end by any means. Trying to be realistic. When you connect the dots between the 21.2%, which was what we experienced in Q3 of '24, to get to that 25%, there are some significant improvements that we know we can make. And Marcus talked about them, and it started in August of 2023 when we layered two brands on top of each other. The assortment of one brand and the coloration, shell and identity of another. As customers came to the website, they were confused. They didn't understand. They didn't — why furniture? Why case goods furniture, why upholstered furniture? So as we address gross margin, one of the significant components of gross margin is the amount of discounting we had to do to make it appealing enough to convince that customer that we were a legitimate place to purchase, but it had to be that kind of a deal. When you go to sales and marketing, along those same lines...

Can we double-click on the margin a little bit?

Yes.

So it is stunning, and in some cases, hard to believe that you can go from 21.2% to 25%. And the reason we want to spend some time on that is when you go back and you look at the historical averages and you take COVID out of the equation, because we know that COVID had margins at 28%, 29% in some months. And you take that away, it really is very simple for us. It's taking the SKU assortment and the marketing allocation of dollars on those SKUs and appropriately putting them back into the two brands where they respectively belong. Over the last five months, we have worked hard to peel and duplicate SKUs that were on Bed Bath that used to historically be at Overstock and put them back on Overstock. We have not eliminated any SKUs over at BedBathandBeyond.com to any great extent other than certain marketplace items that we didn't think were competitive, certain vendors that we didn't think were compliant. But other than that, we have not taken that away. As those SKUs move over, we've seen material improvement. Let's go ahead and get started. Just as a reminder, if you have a question, if you could raise your hand, folks on the video end of things cannot hear the question, so the answer feels a little truncated for them. Before we jump into the balance of the investor presentation, which we'll talk about where we're going and deal with some of the investment theses that are out there, we wanted to remind people that the company over a series of years made multiple investments in technology and technology bitcoin-type assets outside of the core business. Several years ago, the company entered into a transaction with Pelion Ventures to manage that portfolio. As I mentioned earlier, we invited Pelion to come here today as a paid agent of the company. They receive a fee, just as a reminder, and they declined to come. David Goone from tZERO and Luis from GrainChain were kind enough to come talk about their businesses, which are really the two larger pieces of the Medici portfolio. As it relates to both tZERO and GrainChain, we have both a direct investment in both of them as well as our investment through the Medici assets. So with that, David, we'll have you come on up. Thank you for coming.

Sure. Thanks. Thanks for having me, Marcus. Hello, everybody. I don't know how much you know. I'll give you a quick background. My name is David Goone. I'm the CEO of tZERO. I came from a company called Intercontinental Exchange. I was actually retiring at Intercontinental Exchange and got approached at that time, would I like to be CEO of tZERO, and I thought there were some interesting things that tZERO had in its portfolio and assets of what it could do. So when I came over, tZERO was actually in need of working capital, cash. And I talked it over with the CEO of ICE, who was one of the original management team. He and I actually were the last two left, last men standing, I guess. He's the last man standing from the origination of ICE. And they made a significant investment, which gave us the working capital, and then through some other friends and family, people I knew in the business gave us some more capital, and that's where we kind of sat. Been here about 2.5 years. When I got there, tZERO is still primarily a secondary trading market. It's what they call an ATS, automated trading system, in a broker-dealer. And it primarily focused, as Marcus said, on digital or digitally enhanced assets. And its original founding was they believed in blockchain. I felt that I had some ideas on what to do. And I decided one of the things we would have to do is actually also do primary offerings, not just secondary. So you have to do capital raise and secondary. Just coming to get secondary kind of cuts off a window of a lot of people who would come to you. We're still probably the most active. In fact, I'm sure we're the most active secondary private market trading system. On average, we're still doing about tens of thousands of trades every week. We've probably done somewhere between 45 million and 50 million shares in the secondary market on tZERO. So I spent a lot of time redoing the technology, integrating in primary and secondary. And then along the way, we also, over the last several years, have been trying to get from the SEC, which is not the easiest entity to deal with in terms of doing things new, and they're not — anyone who follows this space knows they haven't been super clear on the digital asset front. If you look at what they're doing, they're kind of enforcing things by filing lawsuits against varieties of the crypto area of the world, saying that what your trading is a security. And they file a lawsuit. But they're not coming out with the rules and saying, this is what you should do. This is what you should not do. This is how you can do this. But we, along the way, for the last three years have been pushing to get a special purpose broker-dealer. We're one of only two and we just got that last month. That means we can actually custody digital assets. The only other company that can do it is a company called Prometheum, that was really done — and they haven't done much with it. But Prometheum basically is like a cryptocurrency. They have a cryptocurrency, and they are treating it as a security, as I understand it. And that's one of the reasons they got it. But we plan to do it for custody of digital assets. We're the first person out there trying to promote it. So that happened last month. So we have to put our money where our mouth is. So the first asset we're going to do is our own, which is TZROP as we — which is traded on our system. So we're going to convert that to a completely digital asset that will be custodied by ourselves. By doing that, we actually save a whole bunch of costs. So we don't have to use third-party custodians to house digital assets. It makes it much cheaper for people. So it also opens the door for other parts of the value chain where things, at least to me, seem pretty clearly a security, a digital asset that's a security. And we're talking to a whole bunch of people about how we can provide custody and use our broker-dealer within those parts of the chains. And once again, we just started that last month. I guess the last part because I'm trying to keep this pretty short. I know Luis is going to go on next about GrainChain, and Marcus wants to get back to Beyond. But we also have most of the Medici portfolio's IP. So I'm looking at ways to monetize that. Not only do we have our own IP, but we have a lot of the Medici's portfolio. We have some, I think, valuable IP, and we're looking at — we're pretty close along the way of ways we can monetize that value. The one nice — one of many nice things that tZERO had in its portfolio was, one, all the regulatory permissions to do these things because they started so long like 2014; and two, because they started so early, they filed for a lot of patents, and they were really well written. And they have a lot of patents across the digital asset space that really do kind of hold up. So working with some people and we're going to monetize them. There are some patents I may not use and I may sell and monetize in a bunch of different ways. So that's a quick summary of what we're up to. I mean I could talk a long time about it, but it's really about Beyond event.

David, thank you. Any questions for David? Okay. Great. Thank you. Thank you, David. Appreciate everybody. We're going to add Luis from GrainChain. He'll be audio only. Is that right? We have him in video as well. Great.

Good afternoon or morning for some. Can you hear me?

Yes. Can you turn his volume up a little? Great. Luis, can we get a test just so we can make sure we hear you?

Good morning. How is everyone?

We're great. Thank you. I know it's a little awkward, and I appreciate you taking time to be on the call. We're obviously very excited about your business. If you could give this room a very brief quick synopsis of what your business is and then maybe talk a little bit about it. And then we're going to have a few questions and then let you get back to your conference.

Absolutely. And thank you for inviting me. It's a pleasure. Just to give you guys kind of a reference of what GrainChain is, GrainChain is something unique. We started it quite a few years ago in the sense that we knew that there was an issue. We knew that we had problems in not only understanding where a lot of our food is coming from, but we also had issues in the ability to get liquidity for farmers. And this is something that has taken quite a few years to build, but we're in a very interesting place today. Our company consists of various amount of products, and it's something unique to the industry, where a lot of companies out there provide traceability products, a lot of companies out there provide logistics products, inventory management and settlement products. We're a company that combines all of those products into an offering for a variety of places in the agricultural market. So when you start talking about a grain such as corn, sorghum, coffee, we do about 24 different products around the world. There is a significant issue that comes to not only understanding where your food is coming from but understanding how to pay and value that food in an efficient manner. And GrainChain has taken on a very interesting path. We started this project with trying to understand what the product is, knowing how much product there is so that we can actually do a transaction and pay for it adequately. And as we got into the market, we realized that we need to understand more. And not only is our consumer asking more for the product — more information about the product, but all the steps along the supply chain require a lot of this information to be either compliant for certain regulations or to be able to pay for them properly. And what we did is we created a suite of products that starts with the farm, understanding where the farms are, what are they doing on the farm, how they're doing everything on the farm and creating a digital chain of custody that allows transfer from place to place. One of our flagship products, which is Trumodity, which is a blockchain-based transactional platform, what it does is it really understands not only where the product came from but using our products like HarvX, which is similar to a lot of the ride-sharing apps of today, allows for the ability for us to call trucks, move product from place to place. But what it's really giving us is the information of it came from this farm. It was deposited into this silo, and it went to this next place, and it pays all of the logistics participants. But it's giving us the ability to start creating settlements that are not only extremely efficient but extremely transparent. And what we'd like to call our system, the final results of it is really data-driven liquidity. And data-driven liquidity is something that's extremely unique to the market, but it's also extremely valuable to the market. If I know where the product came from, I know what the quality of the product is because of the actions that they took. I know the audits that were conducted on these products. I know what the real-time inventory is and the quality is. Then I also understand what the value of this is. And this is what gives a lot of our platform the ability to do very, very fast and efficient settlements. And as our company grew and grew exponentially over time, we realized we had a treasure trove of data, a treasure trove of data that not only gave us this information but gave us a very realistic view of this information. Most of the products that we manage, including corn, including coffee and a slew of other agricultural products, are starting to change the dynamic of how they're moved from country to country. They're starting to change the dynamic of how they move from the field to the consumer. And in order to be able to move these products properly, a lot of these products require the type of information that our systems inherently produce. So now instead of knowing — instead of getting a piece of paper saying, I hope this is accurate, our operational products give us the data to understand that these 1,000 farms are doing X, Y and Z and they're producing X, Y and Z. And this opened the door for a tremendous opportunity for us. What it ended up doing is giving us the ability to open that up to the financial institutions. And GrainChain at this point has done a tremendous job of opening up the capacity of liquidity to these individual entities. What it allows us to do is open up portals for various amounts of banks, funds and NGOs to be able to come in and fund these different groups but in a very different manner. What it gives us the ability to do is give them the information knowing that if a bank made a loan to an institution that buys coffee and buys grain, they know exactly when the product came in. They know what the quality of the product is and when the products are moving. Using our technology, we have the ability to create contracts that are auto executed, and millions of them have been executed to this date to where we have the ability to not only embed the liens to these products, but we also have the ability to embed the requirements for certification, the logistics movements, the payments and the clearing of title for a lot of these products. So in the recent — in the last two years, our company has grown exponentially. We've been able to secure not only a significant amount of business in Latin America. But our expansion in Mexico, Central America and Brazil has been exponential. We have closed a tremendous amount of deals with financial institutions equally to the institutions that are receiving these food products, processing these fruit products and bringing them down. But what we've done is we've opened up the clarity of knowing that in a traditional market when you loan money to these institutions, you're giving them millions of dollars. And you're saying, I hope the crop goes well. I hope everything goes well so that you pay me at the end. What we've changed is the ability to be able to pay on the receipt of a physical product with real-time inventory information, with real-time auditing information and with real-time execution. So when a bank today is able to say, hey, here is this amount of money, the money isn't given to them in a bulk sum. It is given to them on the actions of the infrastructure that we've built in the industry. When corn comes into a facility, our system reads that corn. It reads the quality of that corn. It verifies the authenticity where it came. It also pays based off of the corn that's coming in. So you start getting to a scenario where funds are being managed by systems and not people. And when that corn is paid for, our system is automatically grabbing those lien amounts, paying off the debt and sending the money to the final end user. It's completely changed the way that a lot of these different industries are functioning. We're working with a tremendous amount of large industry, medium and small industry. We've had the capability of not only creating a very, very close tight knit financial system but a very, very accurate operational system. We like to call our operational systems the operating systems of farms, going very similar to the days that you used to do everything on paper, and when the computer was introduced in the '80s, it gave you the ability to not only understand and see. We are installing a lot of these technologies in different industries. We're giving them the ability not only to have real-time information, but we're giving them the ability to have real-time business analytics. And we're giving that data over to the financial institutions to bring liquidity over to them. This is a phenomenal impact to the customers that we've implemented under in the last couple of months. You're going to be seeing in the very near future a lot of press releases. We have closed probably one of the largest deals in Central America for technology implementation into small and medium-stage farmers. We've had a very, very large growth in the Mexican corn, wheat, milo and cocoa industry. And we're also on the verge of announcing some very, very large implementations in Brazil. We've had a phenomenal growth in the last 2 to 3 years. This year has been exceptionally phenomenal as well. And we're going to be seeing some very, very interesting news in the very near future, within the next month or two, about where we are going. We're impacting lives. We're changing lives. We're changing the ability of how small and medium-stage farmers can access liquidity. And we're changing how they can operate in not only an efficient manner but a very, very effective manner. We're implementing some of the newest technologies out in the market to be able to help them not only analyze their business and grow their business. But we're doing things that are providing true and real impact.

Luis, we want to give — thank you for that great summary. And for those, we are super fans of the work that they're doing not only because of the impact, but we like to oversimplify how we think this business works. Much like Moody's provides ratings to the debt market, authenticating the results of the business and the risk attached to it, they really are providing that level of information between farmers and the lenders themselves. And as we know, liquidity has always been a hard thing to figure out in this particular market because crop yield and predictability are not as fluid back then as they are today. So the work that they are doing is phenomenal. I want to open it up for some questions. We can just go back to the slide presentation. Okay. Discussing the third quarter results, as you would imagine, were not easy to do. Identifying where we see the fixes was a lot easier to do. We want to be clear about our expectations going forward. And while our company does not provide guidance, we expect material improvement on the bottom line in Q4 versus Q4 of last year, and we expect improvement on the bottom line in Q4 versus Q3. The geopolitical macro environment, we are continuing to assume, is going to continue to be soft and struggle. So any assumptions or any hypothesis that we may have isn't accounting for any tailwinds that we may experience when the general macro market starts to return to some level of normalcy. This particular part of the day is what we have been building towards. And while we understand that the results of what is behind us are unacceptable and the results in the short term, at least from our standards, are not going to be as good as we want them to be, we are excited about where we're going. If you look at the original logo of the property that was established, it was really all under the premise, if you think back to an earlier call where we said we believed that we can create the AAA of homes. And coming off of the quarter that we just had, it's hard to cleanse your mind of some of those negative numbers and to move into this future state, but we would ask you to do your best to try to do that. We are very optimistic about not only the viability of what we're going to show you but the viability of our core business. The icons itself represents the four corners of the property. And it is our belief that the first thing that we need to do is obviously restore and recognize the issues in the core business. We don't want anybody to leave this room or this presentation with the idea that we're trying to divert anybody's attention to a future state. We want people to understand that we recognize and we understand the core principles that need to be fixed. We talked a lot about these things already, relaunching Overstock, restoring the brand's legacy strength, improving the customer experience to improve conversion. As a reminder for those people not in the room, both of these slide decks are available under the Presentations section of the Investor Relations tab on beyond.com. Dave, you want to join me for this, please? Adrianne, Alex, Guncha, Jen, you can be up here. As we mentioned earlier, we know the restoration of the core business is about driving marketing efficiency. We absolutely need to get back to sales growth, but under the premise that we have the right conversion and the right spend. We know we need to improve margin, and we know we need more than disciplined expense management. On the commerce side, it really comes from how much revenue can we drive and how do we drive improvements in profitability through margin. And we want to do that through a combination of our core business and also our partnerships. Joining us today in the room is the CEO of Kirkland's, who will be able to answer questions. Recently released their information, and so she'll be able to talk about her business to the extent that she can. Joining us up here are a whole host of folks that are going to talk about how we want to move this business into a further state of asset light but start to think about affinity and data monetization in a totally different way. When we joined the company earlier this year, we were all surprised by the fact that the company did not have a sophisticated segmentation model around data. And since that point, we've gone through an Axiom cleanse. We're getting ready for a Salesforce deployment, and we're ready to stack on other third-party solutions to improving the cleanliness of the data. As a reminder, when the company bought Bed Bath & Beyond's IP, part of the spin of buying the business in addition to the IP, in addition to the website was this unbelievable database that was being accumulated. The database is only as good as your ability to understand it, to use it, to segment it, to enrich it and to deploy it. And the only purpose to do that is to improve conversion, improve retention in your core business, build affinity with that customer and then drive them to buy other products and services offered by valued and trusted third-party partners. In no moment in time do I see this company taking on contingent liabilities around any credit product, financial services product, extended warranty product. But I see us using best-in-class outside of our company, and we'll take you through some of those partnerships to be asset light also means that you should be risk averse. That is the definition of asset light in my mind, including taking on portfolios. When we look at the data monetization, and Guncha will go through it in a little bit, it's really about understanding how to build the model, a model that will allow us to collect that data at different points, to augment that data and to segment that data and to de-duplicate that data. None of that has been done historically. And then the monetization piece is using everything in our toolbox, including licensing Bed Bath & Beyond, opening Bed Bath IP, licensing it internationally and using technology and financial services and all of these other items down below to capitalize on that database that we're spending a lot of money to build. We went through this slide earlier, but what we will come back to is the last column on this slide. So as a reminder, we start with this very simple base, and it makes a number of assumptions to get to each one of these. This one, I believe, Alex, and correct me if I'm wrong, is off of this base here?

That's correct. Yes.

Okay. So we can adjust this, and we'll be happy to do that by taking this and even applying it to this metric as well. Dave?

So we spent a lot of time on this. Tim, why don't you come up and join us? We spent a lot of time on these areas of key focus and how we're going to restore the core business to where it needs to be and where it was before. And I'm not going to get into these on this particular page other than to kind of tee that up earlier for you. But these are the four areas: marketing efficiency; sales growth, which is really conversion that we're focusing on; margin; and then expense management that Adrianne spoke with you about. Next slide. So what I'd like to do is get into showing you some historical data. So these are the previous quarters, starting with the most recent here, 17%, the third quarter of 2024. And you can see from a sales and marketing as a percent of revenue standpoint exactly where in the partial quarter, sales and marketing expense rose to 15% and then to 18% and has been up in that high level. Now we've talked about all the specifics about what happened with the brands and how we're unwinding that, but there are also some marketing efficiencies that we find really exciting in this partnership. So we want to spend some time on that bar column of optimization. Bed Bath & Beyond was known for advertising its moments, capitalizing on the moments: when the baby is born and the shower, the wedding and the gift registry, back to college with your student. And I would guess, in fact, if we asked how many of you were a part of Bed Bath & Beyond in your life, in your going back to college scenario, I think many of you would raise your hand on that. As you think about the opportunity we have with Kirkland's and we'll have with The Container Store, one of the challenges we face is with Bed Bath & Beyond as an e-commerce site, how do you get customers to physically send their product to some locker box or some location, whereas if it were The Container Store or Kirkland's and they could ship it to the neighborhood store, go in and pick it up and buy the other things they need, what an opportunity that would be. So when you think about marketing efficiencies in an optimized standpoint, taking advantage of those brick-and-mortar locations in an omnichannel presence, pretty significant. On the Overstock side, we will be — I mean, I have already had initial conversations about testing an Overstock outlet and return center. Maybe we plant one in the Southeast to start. And as we and Kirkland's and The Container Store funnel returns into those locations, you start to create a real opportunity for customers to come in and do what they love to do online but for those who love to do it in an omnichannel presence. The advantage to that is twofold: brand awareness, getting the customer thinking about it, but also the opportunity to make more on the margin side we'll talk about later. So just a couple of things. Beyond what we've already talked about with the confusion in the marketplace assortment and de-duplicating the assortment, making it a good, better, best assortment on Bed Bath & Beyond, there are many opportunities for us to improve our marketing efficiency by just having that omnichannel presence.

This idea around the omnichannel presence is very simple. It's a combination of the conversion and/or growth of small box stores through the Kirkland's brand, meaning that existing Kirkland's stores would convert not to just putting Bed Bath products on the shelf but name on the building, new product inside, looking like a hyper focused, highly curated model of what Bed Bath used to be. Bed Bath used to be 25,000 to 35,000 square feet, and 90% of the revenue came from 40% of the assortment. And when you really study what that 40% of the assortment was, it becomes a supply chain game at that point. Marketing efficiency is always driven when there's an omnichannel experience, and people can see and touch and be reminded that the business exists. Unfortunately, today, the only reminder are old signs on old buildings that are sitting empty today. And many customers who we email often contact the call center and say, is this a scam? Is this spam? We thought the company went out of business. So part of the strategy of bringing Bed Bath & Beyond, the brand and the offering back to life in an omnichannel way, in an asset-light way, in a risk-free way for our company is to remind people that the company is back. There has been a lot of press in the last seven days about Bed Bath & Beyond opening stores again. We always see a bump in traffic to the website any time that happens. Over time, it is our expectation that a combination of reminding customers that the business exists, getting and capturing their information at a zero cost basis because they're giving us their information in the register, we're not having to induce them into a transaction and allowing them to enjoy the value that the brand had before in creating efficiency and affinity is ultimately why we believe marketing efficiency, sales growth and margin start to really come together. The expense piece, which we'll get to in a bit, is actually pretty exciting as well. So when you hear this idea that Bed Bath & Beyond is coming back, I want to clarify it, the two forms that are being discussed. As it relates to Kirkland's, it would be a conversion of existing stores that Amy decides to convert in a 5,000 to 15,000 square foot format. We call that a neighborhood format. That is done entirely through the Kirkland's supply chain using their merchandising organization, using their store staffing model, using their balance sheet to bring that brand back to life. In exchange for that, Kirkland's received a $17 million senior secured loan from our company at a rate equal to the ABL lender. On top of that, we bought $8 million worth of equity. Not all of it has converted yet, but once converted after shareholder approval, would represent 40% of the common. From a financial enhancement standpoint, our company Beyond, for providing that transaction and providing other non-hard cost services, will receive 0.25% of all of Kirkland's revenue in totality, both in-store in the existing Kirkland's stores, online and the existing Kirkland's online business. And in addition to that, if any of the stores open up, when they open up as Bed Bath, we'll receive a 3% royalty on top of that 0.25% for every single dollar that's generated in those locations. Furthermore, we have come up with an arrangement where we will help monetize and improve kirklands.com. Kirklands.com today does about $115 million of top line on a TTM basis. Our company will receive 1.5% of all the incremental revenue driven over the $117 million. It is our goal to make available to Kirkland's a wider swath of offering so they can leverage their existing base. The Kirkland's brand has been around for over 50 years, started by a family, wonderful Kirkland family. It's not a made-up name. It is named after a family that started the business. After 50 years, we believe that brand has very strong dominance. When you look at the $0.5 billion they do through their 300-plus stores, it doesn't sound like a big number. But if you look at the average cost of the item, there are a lot of transactions. What we saw as an opportunity in that business is a superior management team who understands merchandising to the absolute best. You look at the margin profile of that business, north of 50% in gross margins. You look at the cleanliness of their inventory, very, very small percentage of their inventory is aged. And you look at the way they manage the store operations, and you see an absolute gold mine. From my perspective, taking very talented people with very tight process and giving them access to an asset that we believe the former Bed Bath did not manage properly, we believe that Bed Bath comes back leaner and stronger and more importantly, physically closer to the actual customer. On top of that, it is our expectation that Kirkland's, through the Bed Bath & Beyond brand, will offer, like it does today, local delivery. And whether that's DoorDash or GoShare or Instacart or whatever those metrics may be, we know that consumers forget their table cloth and need a blender and need something right now. And while Amazon is unbelievably competitive in that space, nobody filled the white space that Bed Bath left behind. Target took a little bit, and then it was pretty much nobody from there. So we see a lot of white space there. The thing that makes us most excited in addition to the things we outlined is that Kirkland's brand is strong. And when you take an unbelievable merchant and executive like Amy and her management team and you pair them with the knowledge that Dave and his organization has around high-ticket items like furniture, like rugs, like patio, and the list can go on and on, and you use that Kirkland's brand to brand those products and you sell them not in store because that is not part of the principles, but you sell them on bedbath.com, on overstock.com, on amazon.com, on wayfair.com, and you enter every single marketplace with the proper assortment of furniture, the proper assortment of rugs at the proper first cost, which I believe that Overstock knows how to do, and you use that Kirkland's brand, we believe it could be very disruptive to the marketplace because of the familiarity people have with that name. That's incremental revenue for Kirkland's company. That's incremental revenue for our company. And we see that our ability to penetrate that and have the Kirkland's brand become an important pillar inside of the Bed Bath assortment, inside of the Overstock assortment could be pretty phenomenal.

Free to ask questions?

Please.

Maybe on that point, when you think about the optimization of discounting, other potential drivers of the improvement in gross margin, I would imagine are sort of first cost improvements, mix changes from the business. So can we get some contextualization around the various components of the bridge, like how much is sort of first cost benefit that get negotiated already? And then just sort of working through the inventory lots, mix, discounting, anything I'm missing?

Yes. No. I don't believe that the gap from 21.2% to 25% has anything to do with adjusting first cost, zero. We're giving no credit to that. We're giving no credit to mix shift either. We're giving 100% of the attribution from 21.2% to 25% to selling the product at the right place at the right time. Bed Bath & Beyond cannot effectively and profitably sell large ticket furniture, rugs and patio on its site profitably. Overstock.com has historically and will continue to sell large ticket items at a double or triple contribution margin from what Bed Bath can do. In a very short period of time, Overstock is already ramped up to be approximately a $200 million run rate business. As we move things over, we think that's going to continue to accelerate. But not until several weeks ago did we actually start spending specific dollars on specific SKUs at Overstock? We had not done that until about three to four weeks ago.

A couple of weeks ago, yes. In fact, that takes us to the sales.

But let's stay on the margin for just a second.

So here's what we saw. We took a chunk of SKUs. We took 10% of the spend that we were spending on Bed Bath & Beyond, and we moved it over to Overstock. And on those products, leaving the SKUs in both places, when we move that spend over to Overstock, for that category, we saw a 90% increase in sales in the first week on 50% of the dollar spend that was required on Bed Bath. Now...

Yes, maybe on that you're talking about profitable orders for the goal. So I don't know if you can maybe give an example on how that sort of changed. Maybe one, define how you define profitable order? And then two, how did that change sort of improved mix of profitable orders versus non-profitable orders?

So that contribution margin is how we defined a profitable transaction, which includes multiple layers. You may want to go into that.

Multiple frictionals that play into the contribution margin, whether it's discounting, freight, ad spend, different components that we put in there, sponsored marketing that goes into it from the partner. But the one that you got to think about is it didn't require the same amount of discounting. And that's what improves the bottom line. But — and that's why I was just kind of holding out, Marcus, that the sales and marketing, that particular example has more to do with how we go from 16.7% to 12.0%. And that is — and this is a really important point. In the first week of transitioning, 10% of our ad spend to a campaign on a different website and getting 90% of the sales and only requiring 50% of the spend to do that is significant. It's even more significant when you realize that's the first week. And it typically takes up to four weeks for Google algorithm PLA spending to burn in. It will get better. Our anticipation, I'm not going to guess what it will be, but we're already seeing the 90% become 92% and 94%. We expect it to get over 100% and still be at significantly less dollars required on Google to get that same amount of sales.

So how that correlates to margin is there's less site sale. Because when conversion starts to rise and I'm not having to induce people with an extra $10 or an extra $20, we see them not moving around in their cart and walking away from it, and we send them another email. That margin from 27% down to 21.2% is not mix. And I don't want anybody to try to convince anybody that it's a mix issue. It's an overpromotion issue, trying to generate revenue off of a terrible conversion.

So if we were to get segment level P&L today, based on the $200 million run rate of sales in Overstock.com —

Which you don't get, but so we're going to have to be careful. Yes.

But we're sort of already operating at these levels.

You should anticipate that the contribution margin on an Overstock transaction is materially more profitable on those SKUs than it ever has been from the merger to now on Bed Bath. Materially more profitable.

Yes, materially. And it has been.

To be candid, more than the number that's in the column.

And has been from launch. And as we apply ad spend, as we apply promotions, holds. Because the customer understands it, the customer knows it. The customer comes to Overstock with those power categories in mind. That's what the brand was known for.

So one challenge is improving the margin on the Bed Bath transactions?

No. It's improving the margin on all transactions.

Okay. So the recent news is adding physical component to essentially sales for all the brands. How about adding Container Store sales? How about adding Kirkland's sales to improve the margin on all brands?

So when — and he asked about negotiating first cost down. This idea that Beyond has an influence with vendors in an asset-light model to get people to lower their prices is just — it's nonsense. It's not possible. Because when you think about the compression that the vendors have taken on inflation, on freight and everything else, their willingness to hold all of the goods on their books, have all the 3PL issues on their books and then us to be able to press — put a website up and drop ship product, our inability to move that needle has been obvious for probably four or five months. Yes, are there certain vendors where we've gotten improvements? Absolutely. Is it material enough to get us to our goal of 27%? Not possible. So the idea behind the transaction with Container Store — the potential transaction with Container Store and the completed transaction with Kirkland's is to put Bed Bath & Beyond back into an omnichannel experience. It's going to have nothing to do with the consumer directly. But when we look at that cooperative negotiation between a vendor and us, and we can offer them more distribution, shelf presence and the ability to buy product and put it in the warehouse, we believe that the wholesale prices that typical retailers enjoy from those vendors will then be passed on to their asset-light partner. Our ability to find incremental return on investment from those potential transactions is far greater than the surface economics that you see. It is our belief, and we've validated that already, that if you sit with a vendor that was historically part of the Bed Bath assortment and you can bring them retail assortment back again, you can buy product and stick it in their warehouse and you can drive their revenue. You're going to be able to negotiate like Kirkland's would or like Container Store would or like Bed Bath would, an appropriate wholesale price for taking in the product and taking on the risk and putting it in the warehouse. Our company has not been able to enjoy the benefits of what that wholesale pricing would give us for all the reasons I mentioned. The way that we have started to renegotiate with vendors isn't giving me a better price. It's, I'm going to give you more cash, and you're going to give me more margin. That is the problem that we ultimately have, is that our ability to influence or exert pressure on people isn't going to happen unless you're handing them purchase orders. And that's ultimately what they want. So our margin improvement that takes us from 25% to 27%, not 21.2% to 25%, is our belief that there's 300 to 400 basis points of first cost improvement by singularly presenting that vendor with an omnichannel experience. And many this week have been critical. Why are you investing in Kirkland's? You're going to open up Bed Bath stores. Why are you doing this with Container Store? It's very simple. We love being an asset-light model. We want to be more asset-light tomorrow than we are today, both in people and in hard assets. We want to look more like a tech and data company. But in order for that e-commerce core business to get back to the 1.5 plus revenue that we need, we can't afford financially to spend what we're spending to drive customers and to convert that customer by inducing them with the kind of discounts and the kind of spend that we're operating with today. We believe it's possible to reverse that trend by offering them the omnichannel portfolio that nobody ever replaced when Bed Bath went away. Nobody ever replaced it.

On that topic of customer acquisition costs and partnerships, can you just talk about bridging that 16.7% for sales and marketing to at 11% for mid-cycle or later? There's a lot of talk about this unified loyalty program and you're going to be able to take the email addresses you have, along with Kirkland and Container Store. So maybe just give us some more meat there in terms of knowing the customer more and how that's going to help you shape up those couple of hundred basis points in terms of better performance.

So before we get to the optimized state, I want to stay into what we know the goal state should have looked like, had we not merged these two sites together. And I hate to keep coming back to that. But this column here is what we believe the performance would have been if Bed Bath and Overstock always operated as two sites, and we never destroyed the optimization that Overstock had. And rather than having to revise this history, it's taking us way too much time and way too much money to get back to that state. But we believe it. And if you go back and you look at the average order improvement, holding the active order and customer frequency, the G&A and tech expense and the gross margin sequential improvement, that's what gives us confidence, a lot of confidence to make this a more idealistic state for us without any macro improvements and without any optimization of the transactions. We just want to make sure that we don't leave this column without you understanding that it is our belief that if all the SKUs are back at Overstock the way they're supposed to be and the Bed Bath & Beyond current site is curated to what the customer knows it should be and the PLA spend is appropriately allocated to the SKUs on the appropriate sites and conversion just gets back to the lowest number in the band of average that Overstock enjoyed before — the lowest number in that input is below the company's lowest level of conversion ever. That is below the company's lowest level of conversion ever. And I hate to oversimplify it. It is literally right SKUs, wrong place.

So we spent a lot of time on the SKUs. When you think about moving these SKUs, I got to take you back to something Marcus just said about the domain authority that we lost with Overstock. If we were to pick up the SKUs that are the most important SKUs for Overstock that are currently on Bed Bath and move them all at once, catastrophe. We would see sales plummet. We would be in big trouble. And so we have to — we have SEO strategies that we're working on. Overstock is moving through that. We pulled that website up six months earlier than we had intended to launch it. The team busted it. They wanted to make this happen. But we launched it without some experiences that in hindsight, we probably should have waited a little bit longer, maybe not the full six months, but maybe taking another couple of months to get it right. As we have begun pulling SKUs off, we are seeing SEO rebound. We're up to about eight-ish percent of Overstock being that SEO portion of the traffic, that organic traffic coming in. We've got a long ways to go with that. We're going to continue in a very methodical approach to move those SKUs over. But on the first of August, when the site went from being red to blue, and the redirect and we lost domain authority for Overstock, that is all with Bed Bath, all the buying guides, all the history, all the deep links. All that is on Bed Bath & Beyond. So we're building that site from scratch, and it's going to take a few months to even the end of the year, end of 2025 to get there.

A lot of the SKUs are already there. It's really where we are spending the marketing dollars. And in an effort to really prove out our thesis in anticipation of today when we started to move $1 million, $0.5 million on very specific categories that were endemic to Overstock going back to the file, telling people things were back. We not only noticed the conversion has doubled since Overstock launched; it's doubled. It's still below the Overstock standard, but it has doubled. What we saw that was more glaring to us is how conversion started to go up, how discounting started to go down and how margin performance started to go up. A good contributor to the margin improvement here has been the sequential rollout of Overstock. Every single quarter, we went from like $100 million run rate to a $200 million run rate with no real ad spend. That incremental margin improvement and the one that we're telling you we believe is on track to happen in Q4, another 50 basis points, is coming from moving it from one pocket to the other. We just can't move it fast enough. And I don't say that to be tongue in cheek. We can't move it fast enough because we're tired of losing money. And because we know exactly what would fix the problem, we have this urge to rip the Band-Aid off and just move everything tomorrow. What the smartest people in the room outside of our company and inside of our company has said, if you want to kill everything, go do it. So you got to just figure out how to spend less, pull things back and contract and have everybody understand in the market that for a short period of time, what you're trying to do is improve profitability. We sold — I think it was 22% less in Q3 against Q2. And we lost $4 million less. What that's telling us is we don't need to chase revenue for a minute, and we understand that market share is an important game, but it shouldn't be market share on a commoditized product in a very bad macro environment at all costs. And the fact that we are able to hold on to the traffic, the active orders and the customer file is really what we're managing to. If you said, what are the three KPIs that you're looking at today, we want to hit the profitability forecast that the market expects us to believe to hit. If you look at the quarter, our revenue was way off for the quarter, but our EBITDA was right on top of what the consensus was. We were managing to that. We were managing to the active file. We were managing to the average order, and we were managing to delivering the sequential margin improvement that we committed to and the SG&A reduction that we committed to. We don't like the result, but we like some of the green shoots that we see in the business.

Can you talk about how many quarters it will take to get to these kind of medium-term targets? And kind of — Adrianne, how much cash do you think it will require between now and then?

So we're not going to make the mistake by giving you a solid date on when it's going to happen. But what I am going to tell you is that we believe it's a couple to a few quarters. And we also believe that you're going to, for the first time, not see 10% improvement in EBITDA quarter-over-quarter, but you're going to see a material improvement in EBITDA year-over-year. This fourth quarter will be the first quarter that there is no noise in the numbers, because Q3 of last year had about 36 days of just Overstock at the high levels of conversion, the high levels of margin, and then the balance was a train wreck from there. It was a difficult situation. As we move forward and you see Q4, we're expecting to be up in revenue from Q3 to Q4. We're expecting to be up in margin from Q3 to Q4. We're expecting adjusted EBITDA, because we have some RIF costs in there, up materially from Q4 of last year and an improvement to Q3 of this year. And there's no magic to it. It's conversion improving and margin improving and SG&A reducing. I truly believe that we will start to accelerate some of those changes as we get into January because we don't want to risk our Q4 revenue when things are very active. I would expect that Dave will start to accelerate more than just 10% movement at a time. But we still want to be really scientific about it. On the cash side, do you want to address that?

Sure. Just a couple of things. I think on the onset, we did enter into a contract to sell our headquarters. So we'll expect a cash inflow here in the fourth quarter for that, which will be helpful. We obviously continue to have things on our balance sheet that we want to monetize. We have some direct investments in some blockchain companies as well as an indirect interest, which I think everybody in this room is aware of. So we'll continue to monetize our assets. And then as we improve our profitability and begin our journey to a cash flow neutral, we think we'll be able to do that journey with the things I just mentioned.

From a pricing perspective historically we've seen really consistent pricing at Overstock demand and competition. How do you think about — what have you guys learned in the last 6 to 12 months about how to more effectively price? And I mean, in theory, that's both a sales opportunity and also a margin opportunity just given how wide some of those gaps have been historically. So I think it ties in. I would just love to hear some feedback on that.

You can imagine. When you do what we did to Overstock by layering over Bed Bath & Beyond, the shock to the algorithm, the pricing algorithms in that instance — what those price algorithms are optimizing to is product margin. And when we start looking at these SKUs and the performance of them and the conversion, it sends things into a bit of a tailspin. And what we've seen is with our pricing that — and I'll go back to the example we talked about with gross margin. The exact same SKU with the exact same price and cost on Bed Bath versus Overstock, one sales, one requires discounting. And so our pricing has been a little bit shaky, partially because on Bed Bath to try and make up some of this loss of discounting that we've had to do. We've been testing price elasticity wherever we could to find a little bit of room here and there. While on Overstock, we just keep the price the exact same right now. To the point earlier with SEO transition and moving products over, it's going to take us a little bit of time to really bifurcate the assortment so that one's on one. Others, the right products are on Bed Bath, the right products are on Overstock. But it's going to take us some time to do that. And the algorithms will find their way back to competitive targets. We scrape the market. So we know somebody had produced a report in here on our competitive pricing, and they were dead on with what we understood as well. But in trying to accomplish this — meaning that we had raised prices. And so as we looked at our margin improvement, that was a part of it. Now it was done through price elasticity testing and only leaving it if we could get there.

Yes, question on cash flow structure for a moment. There's question cash and cash run rate, does it make sense to use leverage or debt. Does it make sense to use your ATM and the other question is was the ATM tapped this past quarter?

The ATM was not tapped this past quarter. We did secure a $25 million revolver from BMO as a bridge to the sale of the building, and we want to keep that flexibility out there. I'm not a fan of leverage in a business like this. I would prefer not to. When we made the very difficult decision to lay off 20% of our workforce, that's an acknowledgment that the overall cost structure needs to be restructured. When you look at the balance sheet and I look at some of the assets that are on there — and by the way, David Goone is expected to be here right after the first break to talk about tZERO, and we're attempting to get a hold of Luis from GrainChain, who's at a conference. It is something that we look at, how do we explore different options with the blockchain Medici assets? We invited Pelion to come today. They declined for whatever reason. But we will be filling you in on some of those things a little later and exploring those assets and other IP that we have inside the company is also an option. For those of you who don't remember, we sold Wamsutta for $10 million. And we have some other things that we think we can monetize here. I would prefer to manage with what we have right now. That would be my preference. And to keep a very tight, rigorous focus because as we look at how we're all incentivized, anything that we do to put us further away from that optionality is not a good thing. We don't want to do bad things for the business. And so we want to make sure we're making the right decisions about how we're allocating capital and how we're thinking about using cash. Right now, it's about fixing the core business, getting the SKUs back to the right sites, improving conversion, which ultimately improves margin. And we think, had some of those things just been average, today's conversation would be very different. There is no increase in any site traffic at all, no increase in demand in that number. There is just the adjustment on a hypothetical basis of going from just under 1.3% in conversion to below the company's lowest historical conversion average ever. And that's what that would have resulted in. We feel confident in putting that up there because we see the early results of doing that piece by piece, and we see the sequential margin improvement. Are we worried about cash? I'll just ask that question for myself. Yes. We think about it every day. That's a finite thing. We also like the fact that we don't have interest payments to make and covenants to deal with. We think that's even a better thing, to be honest.

On allocating capital by investing in Container Store and Kirkland's. So if you're monitoring cash why invest in those?

Well, the Kirkland's transaction is nothing more than a swap of cash out of a debt asset that cost us $8 million to keep into an active asset where we're going to be getting an interest rate, a collaboration fee, a licensing fee and bringing Bed Bath & Beyond stores back in an omnichannel way without us taking an ounce of risk, other than the loan and the investment. So that's taking a debt asset and turning it into a working asset that we ultimately believe, and we'll get to it a little later, will increase traffic, will increase gross margin, will increase a lot of things. And we'll own 40% of a business that we think has a very bright future because pre-COVID that business was profitable. Pre-COVID, Kirkland's was profitable.

Marcus, just to take a step back, I'm kind of curious what Overstock will be when it grows up?

The website?

Yes. Because it seems like it's gone through a couple of different iterations over the last 6 to 12 months. I mean, my impression was it was a home furnishings website, then you went to make it a closeout website, get back to its roots but very focused on closeout. And now I think you're going back to a more of a broader home furnishings, like everyday low price offering. But, I guess, I'm confused what Overstock will be a year from now?

What it is today that you see on the site is what we hope it's going to be years from now, which is a combination of things that it did a decade ago — five years ago before it decided to become a home retailer and it got rid of $200 million of revenue from apparel and jewelry. We want to put that back. If you could flash back time to when Overstock sold furniture and rugs and patio and jewelry and footwear and apparel, and it did so with the closeout mentality, which is what the brand is, that is the business that we are building towards again.

And what you'll find interesting about the Overstock of old, that is why we're launching jewelry, why we're launching beauty, why apparel. They are high frequency visit categories. You get a lot of traffic. And the Overstock customer is at her core, at his core, they are a treasure hunter. They love the thrill of the hunt. They're smart. They're smart, value-driven buyers. And you need those product categories. We almost — we call them traffic bait. They are the traffic drivers to get you to the website. When we set out a decade ago, two decades ago, we didn't set out on Overstock to make home goods the core of our business. Home goods evolved into the core of our business from all of the other categories. People are comfortable buying area rugs. They're comfortable buying furniture, case goods, upholstered furniture, and they're comfortable buying seven-piece patio sets for $1,800. They'll buy diamond rings for $8,000. That's the Overstock customer. It's not about a cheap price point. It is a very unique customer base that is very loyal. And as we bring back those things that they loved, we'll see the continued acquisition cost reduction because of those product categories that drive the high frequency visit to our site. People don't frequently come and check out, hey, I wonder what sofa they have this week. But they do come and check out, I wonder what apparel closeouts they have or what liquidation buys are taking advantage of.

Overstock is built on the value proposition, unlike Big Lots, that was built on how much junk can you put in the giant box. What consumers want is they want a heck of a deal, and that's what Overstock was known for. And when they started to narrow it down to just the home, it subjected itself to an unexpected macro environment where rates took off to 20-year highs, housing starts dropped, housing sales dropped and home improvement dropped at the same time, and it had nothing else to lean on. That whole value category even around luxury jewelry had been taken away from it, and it became singularly too dependent on one silo that has some cyclicality to it. We don't believe that the apparel, jewelry, beauty piece has as much cyclicality. And we went back and looked at the evidence from years past, yes, the average order was a little lower, but the profitability in the margin was exceptionally higher. In fact, I think there were some quarters that was the high 27s to low 28s when the jewelry and the apparel was selling.

Last one on this. I've studied closeout for a long time. So most closeout retailers, they're not 100% closeout. Big Lots, Ollies, others. There's a branded closeout element, and there's an engineered closeout where it's just everyday low price. Where will Overstock land or where was that in 2019, just so we can help frame this?

Those two places that you just described, a pure markup-markdown retailer understands how to value engineer certain closeouts by buying bulks or big lots of things. I want to remind everybody that Overstock is still an asset-light environment. So when you talk about Big Lots and they buy hundreds of millions of couches in an engineered program, that still is capital that's out there, that's still warehousing, there's still a lot of fixed costs. We don't get to enjoy that at the same level that a Big Lots would, but we don't get to take on all the fixed costs that a Big Lots would. In our belief, Overstock is a perfect combination of both value-engineered sourcing and closeouts. In the last 24 months prior to today, it abandoned the whole closeout environment. And it just became who's willing, what marketplace vendor is willing to sell Overstock product under a construct of as much as 40% or 50% off. That was really what happened. I think as we go forward today, we need to convince people by showing them products that are true values. So part of the Kirkland's transaction and part of the Container Store transaction and part of any other affiliate transaction that may not require an investment is to require those companies to list their aged inventory on Overstock. That is an absolute mandate, not because we think they're bad inventory managers because they need to get better returns and Overstock needs to continue to find value in a way that isn't always something they have to take on to their balance sheet. So to dig into Amy's warehouse or into Amy's stores or into Container Store's warehouse and have access at a predetermined contribution margin that will sit on the site with name brands and other things that are very familiar to people, we believe gives Overstock another competitive advantage. And in a future state, many, many years from now, it wouldn't surprise me if either Kirkland's or Container Store decided to open up a collective outlet because we still have to deal with returns. We still have to deal with open box. We still have to deal with damaged goods. So we look at improving margin, part of optimizing margin is improving returns. Part of optimizing margin is making sure that we don't have to sell it all to jobbers at $0.10 on the dollar. We need to try to keep that all inside the ecosystem to the best of our ability. And Overstock is the one thing that gives Kirkland's and Container Store a competitive advantage that they did not have before.

Just because it's recent for the tech and G&A, the 20% reduction in force, any more color there? I mean, it feels like it was partially some of the tech staff?

No.

Okay. So any more color in terms of who is impacted and any thoughts in terms of potential business disruption?

Yes. The tech stack, the true tech stack — Guncha, do you want to come speak to this? We'll hand you a mic.

All right. Thank you. So the recent reduction that we did a couple of days ago, that wasn't — that did not impact the technology team at all. So that doesn't mean that we're not looking at the full outsourcing model and finding cost optimization efficiencies on the technology team side. We are actively working on it and doing it in a very phased manner. So we have selected an outsourcing partner, and we are working very closely to do it in a phased manner so we don't interrupt the business or add any risk, but the most recent reduction in force did not have any technology team impact.

It had — you're probably referring to the named officer on the product side. And to be as direct as I can and as respectful as I can, I function in a meritocracy, hard stop. And when things don't perform the way they're supposed to perform, we function in a meritocracy. We took out more than 150 people, which was an awful day for us. We believe that our business will be faster and smarter and leaner and quicker. And our ability to influence change wasn't moving fast enough. And our ability to show growth in conversion wasn't moving fast enough. And our ability to work with vendors to find ways to improve margin wasn't working fast enough. We have brought back a lot of people that had been previously let go by the previous regime that are key components to the Overstock business. And so as we sell that building and we move to a much smaller B-class space, that building is going to be filled with a lot of old and familiar faces to the Overstock brand.

So one of the structures that we're really excited about, we have two leaders from the old Overstock and one of the best home furnishings merchants that I know in the industry. We have them leading as general managers, full P&L management of the Bed Bath & Beyond brand and the Overstock brand. And they are singularly tasked with the responsibility of executing on each of these line items. And we'll get into more details later today of some of the tactical strategies and surgical strategies that we have in place that they are executing against. But no more is it a chief over all these different brands. It is dedicated at the business — the book of business at the P&L.

And taking specific responsibility for each one of these things. When you have an app in the third quarter not functioning with the level of efficiency that you need it to, it impacts conversion. When you have product on the wrong site or the site experience isn't good, you have problems with conversion. And problems with conversion lead to site sale, which leads to margin compression. So as that conversion fixes itself, it not only fixes revenue, but it dramatically improves margin. And we've seen that really quickly here. The other two columns here are nothing more than illustrative that if the general macro environment started to get better, what would it look like? Ten percent, twenty percent. These are hypotheticals, and all they're doing is just laying on top of these three key metrics getting resolved. This particular column here is what we're going to save for after the break as we take you through how we're transforming the business from an asset-light model to even a more asset-light model. Any other questions?

We can just go back? We can just go back. Discussing the third quarter results, as you would imagine, were not easy to do. Identifying where we see the fixes was a lot easier to do. Two-part question. Sorry if I missed this, but what in the illustrative environment columns is like the final split of the business between Overstock and Bed Bath? And then second part, great to hear about the 10% of the SKUs that you kind of migrated over. I guess, maybe the devil's advocate argument would be, well, maybe that was the lowest hanging fruit. You guys kind of targeted the SKUs that made the most sense. So can — what can you say to kind of give investors confidence that this will apply across the board as you fully transition the entire business?

I'll take the first one, you take the second one. We don't report the brand separately at this time. It is our hope in the future as Overstock gains more scale, that in a perfect world, we would break out all of the different banners that we own.

So the makeup of that first move involves a particular product category and then all of the low sellers because what we wanted to do was make sure we didn't pull the best sellers on Overstock or on Bed Bath & Beyond over to Overstock and hurt Bed Bath and not gain on Overstock. So 1 product category, and the rest are the low sellers on Bed Bath & Beyond that we moved over. Now you could argue that that's cherry picking. I would argue, the best is yet to come. Because when I take the patio sets that are working on Bed Bath & Beyond but that I know when I don't have to mark them down quite as much, don't have to play as much marketing spend and discounting. And I moved them over to Overstock and I've got the traffic coming, I believe, we have a better result than what I told you was the first result. I don't think it's cherry picked.

Any other questions before the break? We're going to take a quick five-minute break, and then we'll jump back in. We'll start with an update on the Medici assets, and then we'll move into the strategy.

How are you monitoring, I guess, your progress? What would be like the KPIs for tZERO to see how you're doing? I think it's amazing you've got one of the two definitions.

Yes. So it's a good question. So I think there are several aspects to that question. So the first thing I would say in my KPIs was getting the technology right, securing the right — so internally, I look at things like did we get the primary built, did we integrate primary into secondary, special-purpose broker-dealer, all these types of things there. Other KPIs are reducing cash spend and number of clients we can bring on and then goals within different areas. So one of the things we're working on, for example, and things take time, but we provide white-label solutions for entities for both primary and secondary markets. And one of my focuses have been, let's call it, alternative nontraditional assets. So whether it's in sports entertainment. We did one with the hotel business with St. Regis Aspen, which was the first hotel to digitize its shares. So those types of things. We look at the number of goals that we are getting in the pipeline where we're at. I should add one more thing we have is another company called Verify. We own, I think, 81% of it, which is the leading accreditation software or firm that does particularly Reg D offerings 506(c). So 506(b), that's when people come to me or you or private equity offerings and they know you. When it's 506(c), they're doing general solicitation after you have a third-party verify it. The name is Verify. They're the largest person. So on that one, those are easy KPIs. We meet every week, what's your monthly revenue. That's a cash positive business that's doing quite well.

David, Dan Weiskopf here. So bring us up to speed in the context of balance sheet risk, where you are in that, meaning you need capital immediately. And then also speak a little bit about how your business model works. When do you get revenues?

Sure. Right. So in terms of balance — I was just talking to Adrianne. We just took a little longer than I'd like, but finishing our audit. No issues for 18 months. You have to make sure you're around for 18 months. We're around for 18 months. No problem. And I have plans of certain things we can do should we need more capital. So I would say I don't have any concerns in that area. In regards to the business model — how we generate revenue, it's pretty straightforward. We generate it in several ways. We generate it in primary or secondary. There's initial upfront fees. Then there's transaction fees. And then when we're getting into some of these white-label deals, what I decided to do is also try and get a percentage of the business. So we have several of these. I won't tell you the percentage, but for example, in the hotel one, we're going to own a percentage — a decent percent of the business. So if it works and even if the technology evolves outside of the world of tZERO, we're going to own a percentage of the business. So I think those are kind of the pillars of what I'm trying to do, is get a percentage of some businesses where we have true partners and we're all aligned. Transaction revenue, and then usually, what I'll call consulting and revenue upfront. Now as we add the digital assets piece, we're also going to have custodial fees and things like that, which get more into asset under management type percentages.

David. So with tZERO, there's been a couple of different theories out there that this could be a huge business, and it could also be a niche business. Maybe just help frame it up. Do you think it's going to be focused on the tokenization of assets? The other pitch is that Wall Street has an outdated settlement system with T+2. Inherent in your name is tZERO. So there's a capability here that could be more broadly used across Wall Street. You have a great background, a lot of connections. So help us understand the real opportunity.

So in the — I would say we're not even in the first inning in the digital asset space. You see lots of people spending a lot of money on digital securities and real-world assets getting in there. So there's definitely opportunity for us as that business grows. I don't know that in the securities world, which is now going to T+1, I think. So I used to be on the Board of the DTCC, which is the settlement for all securities. I think technology-wise, I think — I'm sure they could do tZERO. Today, it's not that. It's the infrastructure of all the banks, all the broker-dealers and how they intermesh in their systems. So I think in public securities, that's not really where we sit. We sit more in the market prior to it. And with ICE's investment, we're kind of, hopefully, the conveyor belt as people get into the public securities. But I do believe we are in the very first innings of real-world asset digitization. And if you look at all the large companies getting into that space and putting a lot of money into it, I think we're situated very well to capitalize on that infrastructure. But I really — just to be clear, I don't think on the public security side that's where we'll see a wholesale change quickly; there's a big consortium already. Maybe we have some things and some IP that might work in that way, but I wouldn't expect them all to run to somewhere else. They already have their consortia.

So first off, Luis, congratulations on your success. I'm very impressed by how you're empowering farmers. The exponential growth is also very impressive. I wanted to know if you could give a high-level explanation of your business model. Do you have a SaaS revenue model with elements of one-time revenue, recurring revenue? And are there examples where you get a percent of the volume?

So thank you for your question. So you kind of hit it on the nail. We are a SaaS platform where we receive monthly fees for the implementation of the infrastructure. So a lot of our farming institutions are paying us on a monthly basis to be able to use the software. But we do get a percentage of all of the transactions that they conduct. So our revenue model is based off of a monthly SaaS, which covers all of the five-suite of products that they're using on a monthly basis. But we are also getting a percentage of the buy and the sale of every one of these. But we are also getting a percentage of all the liquidity that we're deploying. So when a bank — when a financial institution works with us, when they deploy the funds, we get a percentage of that deployment. And when they receive the funds back, we get a percentage of that deployment. On products like our logistics right — similar to the ride-sharing apps, we get a percentage of every truck that comes and leaves that gets paid for from every farm that gets deposited to every port. So we do have multiple revenue streams, and all of those revenue streams are growing at an accelerated rate.

Any other questions? In the Form 10-Q that is going to be filed shortly, there are disclosures around what our stake is both in tZERO and GrainChain directly and indirectly as well. So we're very pleased, and we're excited by both of these assets, and we think they provide a lot of upside for the company. And we also appreciate our relationship directly with both of you. So if there are no more questions, Luis, thank you very much for all you do and keep hustling. We appreciate it. Thank you.

Thank you very much.

David, thank you as well.

Maybe just a follow-up on that. As we think about timing of the five stores that Kirkland's is testing next year, where are we in sort of the phase of development of the store model? I don't know if you could speak to capital cost of the stores or of the conversions, the timing. Are we sort of in the process of identifying what locations we want to test? And maybe if you could speak to sort of the demographic profile and the setting of those five stores. Are you testing urban, college sort of campus markets? What are we targeting in the test and looking to identify?

So we are on week one of kicking off our collaboration. And Jen here is going to be my key partner within the Beyond organization. Jen has a ton of legacy Bed Bath experience. And so it is our goal to bring back the iconic legacy exactly what she expects from it. From a timing and real estate perspective, if you ask Marcus, the store would open tomorrow. If you ask me, it's probably early 2025. We want to look at the real estate strategy from our vantage point of where does Kirkland's do really well and where does Kirkland's have good brand recognition. But we have a lot of areas where we don't. And so if I think of the East Coast, Jersey. That's sort of where we're looking for those first few stores. We obviously want to get it right the first time because everything you heard today about the confusion of the brand and how we need to make sure that the brand comes back holistically for both of our companies, it's important that we get it right during that pilot. And then we'll do a fast follow from there.

Other questions about that particular topic? Okay. As it relates to The Container Store — oh, yes, sorry.

The five stores is a nice start. I mean I know it's early one week in, but what's the vision here? It seems like it has to be 100-plus stores to become a reasonable licensing fee to Beyond.

Before we get into how many stores get open and what the licensing fee is, it is in our best interest to drive the overall revenue of Kirkland's because we enjoy a 0.25% just on that, absent the Bed Bath & Beyond stores. So before one Bed Bath & Beyond store opens, we will be getting 0.25% on $500 million. Our motivation to drive that and to do it prudently and wisely is to also make sure that Kirkland's balance sheet doesn't get out of whack again. So we also see the opportunity to grow that online. We think that Kirkland's online experience doing $117 million — we see a ton of opportunity there. They also have great traffic, also struggle with conversion like we all do. And we see an opportunity to widen the assortment not to furniture and other crazy things out of the gates but to certain things that we believe their design team and that particular customer is going to enjoy.

And I would say if you look at the historic Bed Bath numbers and think about it in a neighborhood format, it should do multiples of what the average Kirkland's store does. So we would be very aggressive in a store growth format. You also think about the potential Container Store opportunity and how do we strategize the two of those together to make sure that the real estate strategy has looked at holistically from the brand. We spend a lot of time talking about that. With multiple partners in the mix, the brand has to be consistent. The brand standards have to be consistent, and we have to look at it as one customer experience.

I think the thing that was also surprising to us is that more than 90% of the Kirkland's stores are four-wall positive. That number is much higher than that, but it's more than 90%. And so this isn't about taking underperforming Kirkland's locations and thinking that the Band-Aid is Bed Bath & Beyond. It's understanding where did Bed Bath & Beyond perform really, really well and what sort of store concentration does Kirkland's have today, can that store concentration in said market be bifurcated and can an average of $1.2 million to $1.5 million become $2.5 million to $3.5 million to $5 million. So we get the bump on the 3% royalty growth that happens there, but we also get that extra 0.25 points. I think from my perspective, and I know she was kidding that I would want it tomorrow, I don't want it tomorrow. The reason that I don't want it tomorrow is that I want everybody to take their time and make sure that that first store, that first set of five stores is reminiscent of the days when Bed Bath & Beyond was at its best execution, where we weren't trying to create private label to solve everything in the box, where we're recognizing that the top-tier national brands need a place to be sold on a daily basis. And whether that's SharkNinja or whatever it may be, we know that those vendors are excited to get back in front of customers. We also know that a customer doesn't want a new slick, modern day experience. And so you should expect these stores to physically look, aesthetically feel like they did 15 years ago, very simple, very stark in terms of its assortment with the white Formica shelves and bins. We believe that bringing it back to what it was when it was the best in a smaller footprint, far more efficient with much lower SG&A, with faster turns of inventory is really the model. But what are we really playing for both in the Kirkland's deal and in The Container Store deal? Yes, we want to bring that Bed Bath & Beyond brand back. We have it in Mexico today. We're negotiating in Korea. We want to do that. We have the new licensing deal. But what we really want is we want data. I want the consumer information that's going to come from that because the cost of acquisition for online businesses today is death-defying. And when we talk about getting that marketing expense from 18 back to 11 or 12, what we need is the acquisition of names. We need the acquisition of customers that are walking in the front door, and we're not having to pay for them truly for walking in the front door. On The Container Store side, just so we can get it behind us, that proposed transaction will not close until we are satisfied with what both the senior lender and the ABL lender are proposing as an extension. No money has left the building in that transaction at all. It is our expectation that while that business is still on a look back perspective, $40 million EBITDA positive, we see a ton of opportunity there. What was attractive to us wasn't just the stock price or the fact that we knew that the leverage was causing that stock price to be low, but we saw a perfect partner in excellent real estate in big markets where we didn't think Kirkland's could actually penetrate that market. Their model is an inexpensive, opportunistic real estate model. Container Store has historically had the most superior real estate, but it's oversized. And as the market got more robust and competitive, the only way they were able to fill that space is by getting into categories that wasn't their core competency, which tends to be a theme in the home space. People looking to grow by getting into categories that aren't their core competency. So rather than trying to make Bed Bath a different animal and make Overstock a different animal, the idea was to build a consortium, a collaborative of complementary products and services with subject matter experts doing just what they know how to do and not trying to be anybody else and then find a shared services model that allows SG&A to come down and find a data lake model that allows the customer acquisition cost and the retention cost to come down not just for us because our investment in those two businesses is for one reason: to double and triple and quadruple our money there. Our belief is that with our help, the market cap and the financial performance of those businesses have to move forward as well. We are not playing singularly for a 3% licensing fee. That is — I don't know what we do with that. And then in terms of Container Store, our ability to influence change with a brand that still makes great money, but a brand that potentially maybe needs to be adjusted to understand how to drive same-store sales back to positive and to untap that services business. Today, everything that Container Store sells around custom spaces, whether it's hardwire, shelving, metal shelving, our wood manufacturing, much like California Closets, is vertically integrated and manufactured by them, top to bottom across the globe. The capacity of that business to manufacture more without increasing fixed cost is probably threefold. What it needs is distribution. What it needs is to be offered as a service. What it needs is to be brought to more markets than just you have to drive to Sixth Avenue if you live in New Jersey. We have to figure out how to make that concept more portable and, quite frankly, even mobile which is what California Closets did to win white space. They come to your house. They take the pictures, they take the measurements. They give you a quote. You never have to go anywhere. There's nothing that magical to it other than the willingness to invest and test the mobile application event, which we will do from her stores and from the existing Container Stores.

Marcus, I'd love to chime in on that actually. That Bed Bath & Beyond store that's right across the street was the top-performing college store because of its proximity to the NYU campus. So when we start to look at the proximity, in college markets and re-unlock pack and hold, there's a ton of upside.

Yes. The Container Store was also attractive for one simple reason. I love durable goods, but I don't love durable goods as I love services businesses. And if you unpack the Container Store, about one-third of its revenue comes from its custom spaces business, and the margins are in excess of 70%. It reminds me of an automobile repair shop, which I have some familiarity with, and understanding that you need to have transactions to build the moat and the database around driving those services business. What has been restrictive for Container Store is its inability to distribute that alpha product, its inability to communicate that custom spaces business outside of its core 100-store footprint. It is my expectation that as Amy opens up small neighborhood stores, that in the corner of the store, there will also be a custom spaces consultant. And if anybody has ever been in there, they design it for you, you give them the space, they give you the quote and we'll talk about how we're going to help them pay for that as well. So the Container Store is a really different animal than Kirkland's. And just for clarity's sake, Amy and her team will be driving 100% of the in-store vision for any place that Bed Bath & Beyond exists in the world. So Container Store will be participating in complying with the assortment, the look, the feel, the messaging, the signage, the promotional cadence; they will be the same to avoid a customer walking in and having a different experience. We're already working with a list of premier vendors. If you take yourself back to the old days, whether it's Calphalon or Cuisinart or whatever it may be, those are the vendors. Those are big parts of Dave's business. Those are parts that we have just recently got them to agree to drop ship. They didn't even want to do that. The bait and the carrot for them is the ability to get back into these stores on Sixth Avenue where they can do $5 million just with their brand alone. So I understand that everybody is really focusing on the economics behind each one of those transactions why we disclose them so fluidly. But what we see is hidden gems in those two businesses that had broken balance sheets. They had broken assortments and getting them back to their core competency and leveraging their core competency and then lining up complementary companies is really what leads us to that. When I met you guys back in the early part of this year, I told you, in a very quick sentence and I walked away, that I wanted to create the AAA of homes. I don't want to be singularly just an e-commerce business forever because it's a competitive landscape. It's very difficult. And Amazon is not getting smaller, and Wayfair is going to continue to spend money. I don't believe that affinity comes from buying a couch. I believe that affinity comes from delivering an experience, an omnichannel experience that's rooted in more than transactions. It's rooted in home services with companies like Thumbtack. It's rooted in providing financing by getting a HELOC through companies like Better. It's rooted in providing people discounts on their insurance, by working with and partnering with companies like Allstate. And I don't drop those names as hypotheticals. I use those names because those are the kinds of partners that we want in this ecosystem. What's interesting is if you look up here at the Beyond holding company, inside of that sits intellectual property, media and advertising, product warranties, loyalty, credit cards, financial services, insurances and home services. And you would look at that and think to yourself, I assume that these companies all just dump their data into here. But the model that we've been working on for six months that we have finally been able to articulate is that that isn't the model. This is the model. This is a funnel model. And so rather than trying to identify how to find people and scrape the Internet, spending tons of money trying to induce people through PLA ads, where you know you have to be $1 cheaper than the other person, we're going to use these brands and their subject matter expertise with their proper capitalization and the resources that are available to them to find top-of-funnel customers in a profitable way that lead us to a data set down below that lowers the cost of acquisition for the company at the bottom who wants to sell all those things to zero. If you go out and you look at all of these businesses individually, and the reason that nobody has ever been able to capture the entire white space of the financial and protective services of a home is because the cost of acquisition to find those customers is death-defying. And people will tell you that you can buy that data from Google, and you can do all these other things. And it is true. You can find names and addresses from Google. But what I ultimately want to do is I want to build the garage for every consumer. And inside of a garage, there are three walls and a door. And when that door pops up, and the reason data monetization is such an important part of what we're doing, is that each one of the walls of the garage contain certain information specific to that homeowner. If a homeowner buys a set of sheets in-store or online today, I'm going to bounce it against six or seven other databases and I'm going to know everything about their financial history, when they bought their house, how many rooms they have, what their square footage is, what their mortgage is, the last time they pulled the permit, what their current credit is, and I'm going to serve them up a predictive suite of products that are customized to their behavior, not my desire to make their behavior something different. And when you do that, conversion goes up, margins go up because you're not selling on price, you're selling on expertise and experience. This is the ultimate model that we want Beyond to be. And absent this unbelievably terrible time where we're working on fixing the conversion and the margin here, absent that, we have two other businesses in both Container Store and in Kirkland's that are profitable, that are just stumbling along because their cost of acquisition is difficult. They have a competitive landscape. Their balance sheet may be a little out of whack because they had to borrow money from somebody that locked them up in a very predatory way. I don't know. And so unlocking that value and finding unbelievable managers that are subject matter experts, giving them the access to assets that they don't have, which changes the landscape against their competition is really the business model. What will happen down here is really the frosting. So I don't want anybody to leave here thinking that we are ignoring or avoiding the necessity for all of this to be far more lucrative than it is today, far more profitable, more importantly, than it is today. Sales growth matters only because it's the ability to acquire a customer. If we're going to lose money acquiring a customer in any of those bubbles, we have to be able to have almost certainty that the lifetime value of that customer will be a repeat buyer and a taker of one of these things. It doesn't work any other way. And for those other e-commerce competitors that are out there, if they believe that their path to profitability long term is doing just selling products and services in a marketplace, I worry. Because when I look at the influence from overseas and the ability for people to create dupes and the ability for governments to subsidize e-commerce purchases at a rate that I've never seen before, I don't know what two years looks like from now. But I still believe, to my core, that properly sized, with the right SG&A fixed model, with a properly trained labor model, the brick-and-mortar model is still viable, not 40,000 square feet and not 2,000 stores, tight and right all the time, and then using this IP to exploit other forms of revenue.

So big picture on the data lake and the customer database, pointing out what's critical is the cross-selling with all the customer data. I think these presentations always sound really attractive, but I've come across too many experiences where companies have a big data lake and they can't sell brands across the portfolio. Do you have any proof points that this works? Where others have failed, do you know why they have failed and why you might be different?

Well, I'm going to break that up into two things because you made it about cross-selling products along the top. Is that what I heard?

I think there's both, selling across the top and then bringing the top down at the bottom.

Okay. Great. So I want to separate those two, and I'm going to answer the second one first. I believe that I understand the bottom section better than most, because I do it today in my other life. And this particular business looks eerily familiar to the other business that has $100 million of EBITDA and $180 million of revenue. So understanding how to do that is not the hard part. The hard part is understanding how to properly augment and segment and enrich this data so that you're delivering the customer information that is specifically relevant to them. And without knowing a lot of details about that consumer, you're going to do nothing but just spray them with information that you hope sticks. If driving conversion, which I started this meeting off with, and driving margin are the quintessential drivers of profitability for this company, the only way you'll ultimately do that is by understanding who that customer is down to what their preferences are and then marketing to them in a way that speaks to them. We know that the conversion is infinitely higher under that model. All I ask you to do is buy off on Bed Bath and Overstock converting back to the bottom end of what their previous, previous model was when they had no CRM, no data segmentation and didn't think about it at all like that. So I'm not concerned about this part. And whether it's signing up for media and advertising with firms like Carter, or selling extended warranties, which we do today through Extend, or developing a global loyalty program, which Bed Bath, Overstock, Kirkland's, Container Store are obligated to use, including the credit card. In the Kirkland's stores and in the Container Store stores, the credit card, when the term of their current arrangement runs out, will be the Beyond credit card. The loyalty program in all of those businesses and any affiliate that's up there will be the Beyond Plus card. So it is true that that's the easy part. The hard part is understanding how to actually cross sell. And rather than thinking about it as cross-selling, you would think about it as journey-triggering. Cross-selling sounds like I'm going to borrow your database and I'm going to send out a bunch of emails and I'm going to borrow yours, and I'm going to send a bunch of emails. And that is not the model that we ultimately want. We want the behavior by a specific customer to result in a journey trigger out a sales force with a predictive logic and machine learning behind it that says, if this, then that, and we believe we're capable of that. And whether we outsource some of those to world-class organizations that can help us with it in combination with doing it internally, we don't ever want to think about anything being cross-sold. We want to think about journey-triggering through behavior that we know that customer actually just did four minutes ago. If they bought a set of sheets, Bed example; and they bought a comforter, Bed example; and they bought some pillows, they bought everything there. And we knew they weren't shipping it to the University of Texas campus. It was going to set address, so we knew who that customer was, it would be stunning to me, within minutes, if they didn't get a bounce-back offer on buying a new bed and a new rug and all the case goods that go with it. Because oftentimes, when people buy all of those things, they have either moved, they have somebody moving in or they're looking for something fresh and new. Along with that offer to buy $8,000 worth of furniture or $5,000 worth of furniture will be certain financial services products that don't exist today. And whether it's partnering with Notable, which is a home card service, or accessing a HELOC, we know that conversion back to conversion, whether you're standing in an alpha store, looking at a $16,000 closet system or getting ready to buy a whole room of furniture is all based on my ability to communicate to you exactly what you want with lots of options right now, including payment options. That is cross-selling. That's data monetization, for me, by understanding who that customer is. I don't believe that's that difficult. And that's how I built my whole career in my other life, by acquiring businesses that did nothing more than feed the monster. That's all it does. But those businesses have to be world-class and perform at the highest level on their own, which is why Dave drives his business and Amy drives her business and the Container Store management team drive their business.

Yes. So Zulily. Timeline expectations, how does it fit into the whole scheme of things here?

So the reason that Zulily was attractive for me is when I think about the four corners of the property or the four walls of the house, I'm looking for consumer information, and Zulily, which we were shut down in December — on December 22, 2023, shut down, everybody fired, all the vendors burned and literally, the site went away. We picked it up in the spring. We've relaunched it on a soft launch recently. But the reason we did it is because I like that particular customer, because it was built on two principles: a working mom and her buying for herself and for her kids. And the predictive logic that can be accumulated through seeing moms and working moms and kids products be sold tells me a lot about who they are, what they buy, what their aesthetic look is. And now — and I don't even know if we have it up here — when we launched Baby & Beyond in the future, we use things like what happens in the Bed Bath stores, what happens on Zulily to launch that business more profitably. There is a team of four people today running Zulily. The team was 800, and we laugh about that, but the reason that's not that hard to believe is because those four people are sitting on top of Guncha's tech organization and Dave's merchandising organization. So we start to get real scale there. The true launch, the hard launch of Zulily will probably be in the beginning part of November. I think we'll have most of the vendors up there by then. And we expect it to be a positive contributor from the jump, top and bottom. We don't expect it to be a drag. We don't expect it to be a drag. Any questions about this particular...

What do you define as a win?

Very simple question for me. In all of these cases, we have historical KPIs and around margin conversion and profitability of those respective businesses. Anything short of getting back to that average is a loss, period, hard stop. I believe that Overstock ends up being the real winner in this process because it had a legacy brand that has not been disrupted. It didn't go bankrupt. Bad things didn't happen up to it. It wasn't written everywhere. And the customer only visited Overstock 1.5 times a year on average. So there are certain customers that don't even know that it went through this significant trouble. Winning for me is growing the active database, getting conversion back to historical levels, getting margin back to the bottom point of what that range was before and building that file and seeing recurring revenue happen. I don't really want a one-and-done. I'm not going to buy the PLA ad, win the ad for the day, and then they go buy everything else somewhere else and I never see them again. We need to create stickiness and I think that is what is going to be our biggest challenge in the short term is what products and services and information and expertise and ideas do we have to create stickiness. In the short term, we're still very transactional. In the long term, we got to use other things, and we think offering a brick-and-mortar experience, offering instant gratification experiences could help that, but we know it's going to take a lot more than that. It's our expectation that every single thing across the top, starting with primarily this business, these businesses gets back to profitability in a very quick period of time. In my world, my hope and my dream and my absolute utopia, this is not a forecast, this is not a prediction of a date, would be by third quarter next year, we're feeling a heck of a lot better about the positive cash flow and the positive contribution that business gets us to. And the only thing we need to do is just fix conversion. And that is it. As it relates to Kirkland's, I'm expecting stock appreciation, revenue growth and earnings power. That's what I'm expecting from it. We didn't do it just to get a 3% fee. That's — I don't know what we do with that. And then in terms of Container Store, our ability to influence change with a brand that still makes great money, but a brand that potentially maybe needs to be chiropractic to understand how to drive same-store sales back to positive and to untap that services business.

Saw sponsored product advertising as an opportunity, I'm just curious kind of what inning you're in for sponsored ads and where you see it going?

Hi, everyone. This is Shobhit. I'm founder and CEO of Carter. We are a retail media platform based out of Toronto. We're working actively with Tim and Marcus here to launch a data platform within the Beyond network. As you talked about sponsored products, yes, that's an opportunity in figuring it out across all the brands, because right now, a lot of these brands are going back to Google or Meta to buy the same exact customer. So how do you ensure that Marcus is shopping on Bed Bath & Beyond, and he's already done the shopping? You show the right ad from Zulily or Backyard or from a Container Store or Kirkland's in the future, that's going to be the key. And at the same time, getting more money in the platform business from the sponsored product ads coming and sponsored by the vendors who are already spending money within the ecosystem.

So it is our belief that rather than us trying to figure this out on our own, we go to a world-class partner that understands this landscape far better than we do. We avoid taking on the fixed cost of adding layers of staff and the bumps in the road that happen, and we engage with a company like Carter and they're given full stop to do what they do best across the portfolio. So this isn't just about adding that leverage and scale just for us. And whether that's Salesforce or Resell or Axiom or Carter or Allstate or anything else, the way we've structured these deals, both with Kirkland's and Container Store is that if you are part of this consortium, any arrangement that we have to enhance technology to refine the PIM, to go on to a common web platform so that we have easy interchangeability of both products and websites is an absolute. You can't be part of the group unless you understand that these are the synergies and these are the scalable things that we're going to do. And Shobhit is an example of that.

I would just add to that as well. So from a Bed Bath & Beyond perspective, we're doing that today with partners. We've seen some good success. What Shobhit and the team at Carter will help us is scale that across other brands, which we're really excited about and then also expand our capabilities to non-endemic ads, which we believe is a really big opportunity to evolve the Beyond services.

Can you talk a little bit more about Zulily where you expect to be year three years out and now? It's quite an organization at one time and started from scratch. So — and just leaning in — are you going to invest short-term ROI, is it applicable, too?

From a technical standpoint, the guardrails that Adrianne put around Dave and I is that you can test everything you want with Zulily in the world as long as I don't see anything with the red. So you can test into it, yes, as much as you want. The reason that that team makes sense for us is as we stand up apparel and footwear and beauty at Overstock, as we take these product categories to different brands and different websites, we'll have the opportunity to also sell the capabilities that go along with that, if Zulily takes off.

So as we take these product categories to different brands and different websites, we'll have the opportunity to also sell the capabilities that go along with that as Zulily takes off.

Zulily on a trailing 12 basis, to the best of our knowledge because we never actually got audited financials when they closed, was at a TTM of $900 million in December of 2023. We don't believe, candidly, that that is possible in the short term without losing a bunch of money, which we're not willing to do. So for us, it's about what is the contribution from that business. And if we can make $5 million or $10 million doing $100 million, and that's it in the short term, do not put it at risk. I think our path is gain customers, pick up free cash flow and grow profitably over time. I think that for us is the recipe that we want to go with. Do we think that business can build over time? Of course we do. In the short term, we're not going to build it to a point doing anything other than being profitable.

Saw sponsored product advertising as an opportunity, I'm just curious what inning you're in for sponsored ads and where you see it going?

We've talked about marketing efficiency and how all that works. We've talked about sales growth and what we think happens. I do want to just get back to this margin piece again, because margin solves, not everything, but pretty much everything. And so when we look at the Kirkland's and the Container Store deal, and I talked about this earlier, one of the hidden returns on investment for those two transactions on top of all the other economic principles we told you about is our ability to influence the vendor community in this home space by giving them multiple outlets in the way that they traditionally are used to. And so while I may have a good relationship with a vendor, they will say to me, 'But it's a drop-ship model. And I still have to carry the stock and my people still have to touch it, and I still have to take the returns. So my best first cost to you is going to be this. But if you want to buy the product wholesale from me and you want to put it in your warehouse, I'll give you a wholesale price that looks materially different.' Our thesis, and we've started to see the yesses from that, is if I give you these other two, can I improve my cost basis in an overarching cooperative vendor agreement that allows my first cost at bedbath.com to be more competitive than what it is today. And that is ultimately how we think we get up to that 27% that we talked about earlier. We think the path to this optimized margin is singularly driven from 25% to 27%, principally out of influencing the outcome by giving people more revenue, becoming a bigger part of their business than we have before. What we've added to that equation that has been attractive to a lot of the vendors is their ability to use Overstock as well, which historically did not happen, both for returns, for damaged goods, for open box, for excess inventory. So that's why we will always still be a closeout because when we go to that cooperative vendor agreement, part of our offering in addition to brick-and-mortar Kirkland's, brick-and-mortar Container Store, bedbath.com is what Overstock can do for them that they don't really want to tell anybody about in a closed marketplace.

Marcus, could you flip forward to that gross margin page that showed all the trailing quarters? I just want to point out the number of quarters historically for the Overstock brand that we're at the 27% that is to be fully optimized far right side of the chart. I think that's really important to highlight. When we say 25%, it's not an unrealistic target for us, and that's without the opportunistic wholesale buys that we're going to have access to.

You can see the absolute inflection point that happened. I don't even have to tell you when this was. This was Q3 of '22 with the partial Overstock quarter and a partial merged quarter. And then this was Q4, where it was just a marketplace of mush. And you can see that it's starting to climb out. In some cases, and some of you have commented, it's because we just started raising prices just to see where the elasticity was. None of this, as your question earlier, is a function of us going back and grinding people for a better first cost. We don't think that's the right way to do business. We think we come hat-in-hand, 'Here's what we have to offer. Here's the doors that we can open you up in. Here's the preferred status you can have. This is the arrangement that we would ask for you to consider.' And when you do it that way, most people say yes. Nobody wants to have their arm twisted and told, 'If you don't do this, I'm not going to do this.' That's not our style.

However, respectfully for all those partners that are listening on the call, we are grinding down costs every day.

Yes. To take us through, this is kind of how we're focused on our KPIs here.

So we had talked about kind of the Beyond services ecosystem. Just a couple of things to clarify for the team. So many of these things are already actively in place today. So I'll use an example, partnering with a services platform for assembly and installation services. And the idea of this is twofold. One, to drive conversion at checkout across the site. So if I'm browsing a bookshelf, this gives the customer the ability to actually have someone come to their home, install or assemble a bookshelf and get that service seamlessly through Beyond, and second of all, also drive a meaningful supplemental revenue stream to the business. In addition to that, today, we have a paid loyalty program. That has a ton of opportunity. It's just on Bed Bath & Beyond. And so as we evolve this ecosystem, we'll scale that across all of the brands, including Kirkland's and Container Store. And so I think this just gives you an idea of some of the different ways in which we're building and evolving the platform here. And again, all of this is really driven on leveraging the relationships with their customers that we have to the sites to offer these services in a really seamless and convenient way.

This all has been terrific. Thanks for laying all this out. I guess maybe just, kind of at the highest level, from the customer perspective, you've doing all these things to get to know the customer, understand when they might need a product or a service at a certain time. But in this day and age, where I can see a reminder, in 60 seconds, I could be checking out this item on Temu or Amazon on my app on my phone. Like what is, in your view, going to drive the customer to transact with you guys? Is it the idea that there'll be price leadership? Is it the loyalty program? Just kind of help me bring it over the line in terms of what actually seals the deal from the consumer's point of view.

I'll take that. So for us, price does matter. Competitive price matters. You don't have to be the lowest price, but you have to be priced very competitively. I believe that brands matter, particularly in the day of age where there's a lot of knockoffs. I believe that brands matter. But I don't think that over time, brands are everything, but they do matter. And I think lastly, the customer experience to get ideas, information and expertise have to matter. When you say you go on to Temu, have you ever bought anything from there? Have you bought any clothes? What have you bought from there?

Really cheap toolsets, accessories.

Right. So when we think about gifting and registry and life events in your first home and going to college, we think that while those marketplaces are always going to exist and they're going to be very disruptive, there are certain things that people won't do that with. I don't know that, over time, that doesn't change, but in our belief, the brands do matter. And so when you're selling small appliances or you're selling furniture, you're selling a variety of other things or you're walking into a store and getting expertise, information, training, knowledge of what you need, the customer still does like that. We should become a solution-oriented business. Customer has a problem, what's the solution. And when you go on to those other marketplaces you sometimes don't know what you're trying to solve for or you think that what you're going to buy is going to solve for it. Now the argument against it is, well, I can go on and I can buy a toolset and the tools work. But you may still want to buy a Craftsman tool, I don't know. We're not selling those things. We're selling things that we believe do matter to put inside of people's homes, in their bedroom, in their kitchen, in their bathroom, in the middle of their family room.

Marcus, I think you did a really good job explaining why you're devoting capital to Kirkland's, potentially to Container Store, things of that nature. At what point — given that you have potentially $20 million coming from the sale of the headquarters, at what point do you envision having free cash flow to support the stock?

Back to where do we think we're going to get to profitability?

And when would you start prioritizing, like, buybacks as compared to making these other investments?

Which one do you want me to answer, the buyback question first? I don't believe that buybacks are something that we should even be discussing right now. I think generating free cash flow is something that should be very front and center right now, improving conversion, improving margins, improving the customer experience and actually making sure that all these ideas that we have on the top of that funnel come to life. As I said earlier, we're not going to predict when we think that free cash flow or profitability is going to happen. But in my hopeful wish, in my mind, it would happen in mid-2025. So I think that if we start to get this kind of scenario, if it turns into this, are we going to use $8 million of that free cash flow to go buy stock back? No. I don't think anybody would want to do that until we get consistency in delivering those metrics, until we build the coffers up so that we can have optionality in the business.

I would just like to go back to also the question about why do we think a customer would buy in our brands earlier versus buy off Temu. For me, the number one reason, and it will be burned into my brain for the rest of my career, when you change the brand from Overstock to Bed Bath & Beyond, overnight, same cost, same merchandise, same price point, look at what happened. There is a reality that brand matters to customers. It's a real value that we each value in today's world of merchandising. It's not everything, but it matters. And I believe that standing behind those brands and getting back to the blocking and tackling of great customer service, customer loyalty, providing the products, curating the products that fit the brand — that's what's going to drive each of those brands, and that's where the merchandising piece of this comes in. There is still an element of human nature to manage your brand that has to exist in today's world.

Marcus, up on the slide was HELOCs. And when I think about a HELOC, maybe I'm missing something, it surprises me that you would be involved in that area of the business. Is it speed that you would lead with? It isn't going to be price. And if it's speed, I know Figure can do a HELOC in 5 hours.

And Better can do it in one hour. The goal behind it, and I keep coming back to conversion, and I take myself to large purchases of big format furniture at Overstock or I take myself to a custom space that's being presented in a Container Store, when you look at the amount of leads that they get and the amount of quotes that they write up and you look at the conversion, we know that one of the stumbling blocks is, well, you can put it on the Container Store credit card. And if people have to apply and the credit card feels scary and I have a lot of credit cards in my wallet. So the ability to give people lots of different tools in their toolbox is meant to do nothing more than increase conversion and make some extra money doing it. But when you say you're surprised that I'm into a HELOC, is it because it's not an inexpensive rate?

No, you explained it. I get it.

Just going back to the data side of that, too. I think it's an important call just to make the connection here. So if you think about this in terms of the traditional model, that a customer maybe changes their address, they move to a new home — and that's when retailers typically flag and identify that the customer may be in the market to buy these types of products. And so if you think about it in the context of this, having visibility into consumers who are shopping mortgages accelerates all of that to bring our products and services to that customer before they even make the move or buy the home or move to that address. And so that's a huge advantage if you think about the data and creating the right personalized experience that we're working to build.

Just kind of a big picture question for Marcus and the team. Marcus, I know you've talked in the past about how the company could operate virtually. So you've sold the headquarters. I'm not sure if you're going to sublease space in there now. But I guess, as more and more companies are bringing people back in the office, and you guys are kind of building something new out of a couple of different parts. It seems like a virtual setup would be very challenging, so maybe I'm wrong on that, but that's not your view.

We don't want — while we appreciate the talent that we have in the company today that is remote and value their contribution, we are a Salt Lake based business with the necessity to be physically together. And unfortunately, as part of the reduction in force a lot of it was driven by the remoteness of some of that staff. I really enjoy people being together, being able to argue and collaborate and put stuff on a whiteboard and bring samples in and think about stuff. We are subleasing space starting once the sale of the building is done, that instead of being 200,000 square feet — no, instead of being 200,000...

35,000.

It's just over 30,000 square feet, including the tech rooms and all the staff. We were successful in negotiating with the buyer of the building.

We were able to successfully negotiate a five-year lease with our buyer at a really under-market rate. So we feel great about getting that opportunity and then also allowing Guncha the time to manifest the strategy that she needs to when the cost or the P&L becomes available to also handle that.

We want to be in Salt Lake City, first week of December, second week of December, third week of December, we'll be in the office.

When you look at Q3, I know there are a lot of company-specific things happening, but did you notice anything in the consumer backdrop getting better or getting worse?

From my perspective, Q3 was one of the toughest quarters that I can remember in general commerce. It was a lot of noise. I think the interest rate moves and the 10-year moving the other direction gave people a lot of confusion and then we started to see — wait and see. We saw more friction in Q3 than we had originally anticipated. And I don't know if it has much to do with heading into the election, where rates are. As I mentioned earlier, we're sort of putting all of the responsibility and accountability on us for our performance. The macro backdrop was definitely not a helper. We believe that had we had a better macro backdrop, that conversion probably would have been higher, that site traffic would have been higher, that margins potentially would have been $22% instead of $21.2%. And when you're inducing people just to try to do something, it was expensive for the quarter. I don't think we're unique in that situation from the research that I've done. I don't know how the home space is doing in Q3, but the data that I have access to doesn't look great for anybody.

As we look at our competitive intel each week and look at the promotions being offered by others in the home industry, it's as aggressive as it's ever been in terms of the promotional and discounting and the way that people are going about messaging in their emails and on their home page. They're being incredibly aggressive. And then you see the big lots of the world and what's happening with them, some of these stalwarts that have been around forever, and it's tough out there.

I would just add, if you think about the brick-and-mortar perspective, and we've shared this quarter after quarter recently, there is definitely a bit of return to store and a return into positive store traffic. But I would definitely agree that it's requiring discount at a heavier level, but we've definitely been pleased in Kirkland's, and we have a brick-and-mortar growth strategy, and that's why it really matters here, too. But the traffic has been better than we would expect.

When you think about challenges you face this quarter and the risk that next year doesn't stabilize, doesn't look better, maybe is actually worse, how do you think about prioritizing all of the different things that you have going on here? How do you think about maybe opportunities to dig a little bit deeper on the cost side just to sort of manage through that environment?

So we are going to dig deeper on the cost side regardless of how good the market gets. We have to become a more efficient organization, and we have to outsource more and look for that efficiency even if the market's up 20 points. So I don't want to connect the necessity to continue to be rigorous on costs to what the market is doing. I find it interesting that you think that 25% could be worse. That's not on our bingo card. We're not expecting it to be mid-cycle. But absent all of those things, we believe this column is in our control. And if you look at the web traffic that was used in this column and the web traffic that was used in this column, they're identical. The only thing that changed is that we improved the efficiency of what we're doing. We improved the margins marginally in what we're doing with the expectation that this has to be a goal for us. These on this side, we put them on here so people understand what mid-cycle looks like, but we think this is what we would define as success at this point. I do think the consumer is going to continue to be sluggish for a little bit. And this idea that rate cuts are sparking demand is, in my opinion, not accurate to really expect. I don't think we've put enough on this. I know our stock is getting beaten up today. I know people are disappointed with the results. I want to end on a couple of things. The consensus in the room was that our EBITDA would be where it landed. So I just want to frame that up. The disappointment was the top line that led to that. But from my perspective, we were able to sell less and perform to the expectation. The expectations are awful. Like, we don't like the number. But we are living in an environment where interest rates are the highest they've been in 20 years. And we are living in a political environment where people have a lot of uncertainty. So there's a lot of headwinds in our face right now. We believe that we see the other side very clearly and we take responsibility and accountability for how many quarters it took us to very precisely identify exactly what the issue was and exactly what the medicine was that was required. Pulling revenue back is never a fun thing. It affects cash flow. It affects our vendor relationships. But continuing to drive those two things just to lose more doesn't make sense. What we're very focused on is can we materially improve the bottom line of the business and get to cash flow positive, and how long will that take. What we would ask for is let's not get hyper focused on how much revenue it takes to do that. Let's get focused on what the KPIs are that it takes to do that and have we brought the metrics back in line. We — none of us want to shrink the business anymore. We're growth people. That's what we do. But I don't want to grow at all costs, and I don't want to break the company any more than it already is broken to get there. So as you look forward and you build your models out for the next couple of quarters, I would encourage you to look at probably 21.5% to 21.7% on the margin side. We don't report conversion, but conversion is nominally and sequentially improving. We expect our top line to be modestly better in Q4 than it is in Q3, and we expect our bottom line to be materially better in Q4 than it was in Q4 last year, materially, maybe the biggest jump of improvement that we have had. And we have some insight into that being that we're through one month already. So if you have modest improvement in top line, we've told you what we think the margin improvement will be. The SG&A is going to look much like we said in Q4, probably in the $44 million, $45 million range because we made these reductions inside of the quarter, and there are some separation agreements with those folks. And we'll show you that adjusted EBITDA when we report the quarter of what the RIF costs were. The other piece that's missing is through the year, through the annualized SG&A, there were the launch costs and the build of Overstock, there were the launch costs in the build of Zulily. Here was the re-machination of Bed Bath & Beyond, and there was far more people. I think, the number that I have, one year ago today, there were how many people working in the company?

900-ish.

And today, there are?

650-ish.

Yes, a lot lower. And so it's not a great thing, but unfortunately, necessary steps. So conversion, SG&A and margin improvement, you should expect sequential improvement. And for those — I want to get to — we want you to have confidence in this. Merger, Q4, one, two, three. We want you to have confidence that, sequentially, it's moving in the right direction. And the toggle is measuring elasticity without breaking the entire business. Any other questions before we close? Thank you for being supportive of the business, and we expect to deliver better results going forward. So thank you.