Thank you for joining us. I'm Jeannie, your conference operator for today. I want to welcome everyone to the Third Quarter 2025 Bed Bath & Beyond, Inc. Earnings Conference Call. I will now hand the call over to Melissa Smith, General Counsel and Corporate Secretary. Please proceed.

Thank you, operator. Good afternoon, and welcome to Bed Bath & Beyond, Inc.'s Third Quarter 2025 earnings conference call. Joining me on the call today are Executive Chairman and Principal Executive Officer, Marcus Lemonis; and President and Chief Financial Officer, Adrianne Lee. I'm also joined by Alex Thomas, Chief Operating Officer. Today's discussion and our responses to your questions reflect management's views as of today, October 27, 2025, and may include forward-looking statements, including, without limitation, statements regarding our quarterly earnings reporting, forecast of and plans for our growth, revenue improvement, profitability or sustained profitability, business strategy, including plans for enhancing customer and shopping experience, our long-term goal of becoming the Everything Home company, margin consistency, improved conversion, expected conversions of retail locations, planned expense reductions, value and monetization of our intellectual property, future strategic ventures, including in PropTech solutions, improved financial performance, progress of and plans for the platforms we invest in, plans for improved efficiencies and technology-based solutions, including AI-driven strategies, and timing of any of the foregoing. Actual results could differ materially from such statements. Additional information about risks, uncertainties and other important factors that could potentially impact our financial results is included in our Form 10-K for the year ended December 31, 2024, our Form 10-Q for the fiscal period ended September 30, 2025, and in our subsequent filings with the SEC. During this call, we'll discuss certain non-GAAP financial measures. Our filings with the SEC, including our third quarter earnings release, which is available on our Investor Relations website at investors.beyond.com contain important additional disclosures regarding these non-GAAP measures, including reconciliations of these measures to the most comparable GAAP measures. Following management's prepared remarks, we will open the call for questions. A slide presentation with supporting data is available for download on our Investor Relations website. Please review the important forward-looking statements disclosure on Slide 2 of that presentation. With that, let me turn the call over to you, Marcus.

Thanks, Melissa. I feel like we took the whole time to do the disclosures. But good afternoon, everyone, and thank you for joining us for the third quarter call. As many are aware, consumer confidence in spending patterns remains uneven, but we continue to outperform our own expectations by staying disciplined, focused, and very customer-centric. During the quarter, we completed our name change back to Bed Bath & Beyond, a brand that continues to hold a deep connection and trust with consumers across homes. The third quarter marked another strong step forward for Bed Bath & Beyond, our seventh consecutive quarter of measurable improvement towards achieving profitability. We've stabilized the business and positioned it for growth. Year over year, we delivered a 93% improvement in net loss and an 85% improvement in adjusted EBITDA, and a 420 basis point increase in gross margin, driven by disciplined execution, sharper focus, and much smarter spending. We know what's working, and we also know what still needs improvement. Ahead, we'll place greater emphasis on data-driven decisions, faster technology, and customer-focused solution-based experiences. As we enhance our technology and analytics team, we're combining top internal talent with external experts and auditing every part of the customer journey to ensure personalized solicitation, discovery, checkout, and post-purchase experiences to deliver the conversion and retention our financial model requires. During the quarter, we strengthened our foundation. We invested an additional $3 million in GrainChain, our blockchain-based supply chain platform; acquired the Kirkland's home intellectual property for $10 million adding another trusted home brand to our family; and raised approximately $113 million through our ATM. We're using this liquidity to strengthen the balance sheet, expand existing investments, and pursue strategic investments or acquisitions in non-retail, home-centric technology, data, products, services, and select PropTech solutions, all aimed at building out our 'Everything Home' business. Homeowners today need simple, innovative technology to help them maintain their homes, manage products, projects, and realize the full potential of their property, including a personalized, frictionless shopping experience. Over time, we see PropTech playing a growing role in how consumers maintain, finance, and optimize their homes and how we help them unlock more value from where they live. Across the business, execution is improving, and the results reflect it. We've also continued to invest in the platform shaping our future. Both tZERO and GrainChain are making steady progress. At tZERO, over the last several months, we've driven the kind of change we expect from new leadership, a sharper outlook, and as of today, an acknowledgment that pursuing a public market listing could unlock new value. While tZERO has multiple growth paths, our focus is on its ability to unlock value for asset managers and homeowners. Fractional ownership, digital transparency, and verified title records can reshape how people access and invest in property, directly supporting our Everything Home mission. GrainChain continues to advance as a blockchain platform modernizing supply chains tied to home-related commerce. It improves transparency and efficiency across materials, logistics, and finished goods, strengthening trust across the ecosystem that builds and furnishes the home. Together tZERO and GrainChain connect the digital and physical worlds, enhancing transparency, ownership, and value creation. Alongside these efforts, PropTech will help integrate the home itself into this ecosystem, linking ownership, supply chain, and consumer experience in a way that's unique to Bed Bath & Beyond. With that, I'll turn the call over to Adrianne to review the results.

Thank you, Marcus. We are proud of the progress this quarter. Our focus on execution, efficiency, and balance sheet strength continues to deliver results. Net revenue was $257 million for the third quarter, down 17% year-over-year or 13% excluding the impact from our exit from Canada. Average order value improved 3% driven by our continued focus on assortment, removing unproductive SKUs, and leaning into better best offerings. This was partially offset by orders. However, I'm pleased orders were nearly flat versus the second quarter, highlighting business stability. Gross margin was 25.3%, up 420 basis points year-over-year, driven by lower fulfillment and returns costs and tighter promotions. Sales and marketing expense improved by 260 basis points to 14% of revenue reflecting a more efficient channel allocation and improved return on spend. Notably, our efficiency has been relatively consistent throughout 2025, which makes it a good time to take additional steps towards improved efficiencies. This month, we launched a new private label credit card as an important retention tool. Technology and G&A expense declined by $13 million year-over-year as we rightsized our organizational structure, streamlined vendors, and automated key functions. Overall, net loss narrowed to $4.5 million, a 93% improvement year-over-year, and adjusted EBITDA loss of $4.9 million improved 85%. We ended the quarter with $202 million in cash equivalents and inventory, plus $36 million from ATM settlements post quarter end. We believe our improved balance sheet provides stability and flexibility for the future. Operationally versus a year ago, average order value is up. Fulfillment costs and returns are down. Marketing is more efficient with owned channels performing better, and fixed costs are down, all early signs that our digital and operational work is paying off. With that, I'll turn it back to Marcus for closing remarks and our view on 2026.

Great. Thanks, Adrianne. While we're encouraged by our progress, the footing we've found isn't enough. We're not satisfied. Our sales and marketing expenses remain higher than we want, and conversion is key. The shopping experience is improving but still requires more focus on customer experience, improved cart conversion, suggested card building, increased personalization and site speed are at the top of our list. We're integrating AI-driven strategies to improve both the customer experience and platform efficiency, predicting intent, personalizing recommendations, and streamlining operations. The groundwork is being laid for lasting improvement in engagement and conversion. Our goal is to deliver a simple user-centric experience that earns confidence and trust. Over the next several quarters, we intend to broaden our connection with customers by focusing on how they live, how they manage, and how they create value around their home. Bed Bath & Beyond will not be purely a retail play. Transactions, both online and in-store, are meant to build relationships, and those take time to nurture. Our omnichannel transformation is progressing, and we expect all 250 locations to be converted by mid-2026. Together with our local franchise model, this creates an asset-light network of local operators using our brand, our infrastructure, and assortment to reach more markets efficiently. We've also identified $20 million in additional operating expense efficiencies that we expect to realize over 2026, reinforcing that spend discipline remains a priority, specifically targeting a 2026 goal of 12% around our marketing expense. As we look forward to 2026, our focus is clear: expand the Everything Home ecosystem, connecting retail, services, and digital innovation; deepen AI and data integration to drive smarter marketing, better conversion and stronger retention; maintain margin discipline while driving top-line improvements; and continue to deliver consecutive quarters of bottom-line improvement on a year-over-year basis. The combination of retail scale, technology innovation and asset management makes Bed Bath & Beyond uniquely positioned in the home category. Through our marketplaces, our brands, technology platforms and emerging PropTech capabilities, we're building a connected ecosystem that creates long-term value for our shareholders and, most importantly, our customers alike. The majority of the heavy lifting is behind us. Now it's time to accelerate, to be more accountable and to have consistent execution. To our team, thank you for your focus and resilience. To our partners and Board, thank you for your trust and support. And to our shareholders, thank you for your long-standing confidence. We're building something enduring and we're doing it the right way. We'll now open up the call for questions.

Your first question comes from the line of Steven Forbes with Guggenheim Securities.

Marcus, I was curious if you could maybe expand on a comment you just made around targeting the 12% sales and marketing expense ratio in 2026? As we think about that in conjunction with this return to growth narrative that you had within the press release, maybe you could just expand on the conviction there, right? Like where are the efficiencies coming from as you see it? And is the return to growth narrative also indicative of you seeing stability in the active customer base on the horizon?

Let me break that down, Steven, into two sections. From a growth mindset standpoint, we believe that we have found the bottom and that we intentionally landed the plane quarter after quarter after quarter in the '25 calendar year in the same range of revenue to prove out that we can take the individual KPIs that built the financial statement and saw improvements in those. And whether that's margin, sales and marketing, etc., we knew we needed to do that on a consistent basis, not a flash in the pan. And we felt like the revenue being all over the place — big highs and big lows — wouldn't give us that really uncontaminated view of where we needed to be. Through that process, though, it also uncovered a number of inefficiencies in our business. And where we really have not delivered from an expectation standpoint is around conversion. Any time you look at driving revenue and improving conversion, the one toggle that's inside of there aside from site sales and being overly promotional, is how much money are you spending to bring people to the party. Over the last couple of years, I think when the company bought the intellectual property out of Bed Bath in 2023, there was a misstep or miscalculation of assuming that the data that it acquired was going to translate into e-commerce revenue. And what we learned is that we needed to spend a considerable amount of time and money augmenting and segmenting the data to really understand who those customers were, where they originally came from, what their propensity was to do business with us, and how we were going to reattract them to our business and, more importantly, convert them into the second sale. If you go back and you look at the financial statement at the end of '23 and quite frankly, most of '24, we were just adding as many people to the file with no real logic behind the lifetime value calculation inside of them. It became buy a PLA ad, sell a couch, lose a couple of hundred bucks, and then not really worry about how we're going to retain them. What's really been instrumental in 2025 is we've started to see retention start to pick up. And while we're not disclosing those numbers just yet until we know that they're pure and not contaminated, we have started to see return buyers come back on it, quite frankly, more repetitively than we had originally anticipated. When we look at the target of 12% for 2026, we know there's a multitude of factors. And I'll start with us making sure that the data set that we have — both from our omnichannel partner, our different brands, legacy data — is clean, pure, de-duped, and really in a condition that can be monetized. I think the second thing that we learned is that one size doesn't fit all. And in 2024 and even the first part of '25, it was like ready, aim, fire. We would just send e-mails out to everybody. There was no personalization. And we've started testing a high level of personalization using the Overstock platform first, largely because the risk wasn't as severe if we made a mistake. We're seeing site speed increase, conversion increase, but more importantly, we're seeing consumers who are served up a personalized experience start to convert better, engage better, and return at a better rate. Additionally, as we think about it, we have work to do in our performance marketing. Our performance marketing over the previous 12 months has been good. It's been good enough for '25. It is not good enough for '26, and whether that's continuing to cleanse the site, continuing to work on different strategies, we know that between adding internal talent and partnering with external talent, we think there is a ton of money left on the table. It could be as much as $10 million of inefficient spend still existing in our business today. I look at inefficient spend as a low margin transaction with a low propensity to return. That's what I consider inefficient. It's not, did we have a positive ROAS of some amount. We have a finite amount of capital. We want to make sure that we're chasing that capital and chasing that customer with a high contribution margin: 6%, 7%, 8% contribution margin with a high AOV and a high likelihood to return again. Ultimately, that's the stack that we think we need to build. So there is a lot of conviction and there is a lot of work to get there at the same time. But I wanted to put that number out there both for external purposes and to lay the gauntlet down that in our side of the business, efficiency is the mandate.

That was super helpful. And then maybe a quick follow-up. Nice to see the gross margin progression in the quarter. I don't think you updated but you haven't, right in the presentation, sort of that medium-term target of 25%. So I just wanted to sort of ask the question, if the third quarter has informed sort of your medium-term or long-term gross margin targets or if this is just a more accelerated recapture pace?

I'm going to look at the margin on a transaction basis first, just to kind of give you my holistic view of how I'm thinking about the overall transaction margin. We have set a short-term to medium-term goal of a product margin between 24% and 26%. I will tell you that in some cases, we've been very successful at avoiding tariff price increases and getting caught up in that overly promotional, call it, tariff black hole. We do have to recognize, though, that as we start to add our omnichannel business, particularly on the textile side, bedding and towels, they're going to come with an in-stock margin of 55% to 57%. This gives us the ability to get some margin accretion on the soft side of things, on the textiles. Conversely, on the other side, we believe there are a number of categories where we're not as competitive as we need to be. If you look at some of the upholstered furniture and some of the patio business, we could be missing out on some market share. Rather than just pulling the ripcord and going for it, we knew that we needed to augment that or sort of mitigate whatever risk would exist in going after market share for those higher AOV transactions with higher gross dollars by supplementing it with the textile margins at 55%, 60% so we can define that balance. We believe that we'll be prepared and in-stock in the spring of 2026 with that full assortment in our partners' warehouse in Jackson, Tennessee, giving us the ability to be more competitive, far more competitive and a far more margin accretive on that side, giving us permission to be more aggressive on the furniture side. That's partially what's giving me the confidence that we will be able to maintain that margin range while growing revenue. We just need that offset to help. Additionally, the other piece that we've noticed in the overall transaction is our product protection warranties have started to really accelerate. As we continue to improve attachment on that, we'll look at that overall transaction profitability. As we start to see the private label credit card integrate into the transaction, we'll look at the money we make on that. We need these other little attachments to more than just the product: whether that's shipping insurance, product warranties, or whether that's using our credit card or something else — we need that whole blend to come together so that the overall transaction is more profitable in '24 to '26.

This is Francesco Marmo filling in for Tom. Just one quick question for me. Could you please elaborate on your comments of the expected revenue growth on a year-over-year basis expected for 2026? If you can give us some color around what particular initiative you think is going to drive that? And what kind of shape that growth profile should we expect?

Yes. Thank you. As a reminder, we don't provide guidance on either revenue or bottom line, but we are committing today to have positive revenue growth in 2026. Part of that revenue growth is really much of what I said to Steve a minute ago, which is really understanding how we can balance being an asset-light company and utilizing the supply chain and the store footprint of our omnichannel partner to really bring in overall revenue and overall margin increases. I expect that to be — I wouldn't call it material, but I expect conservatively for it to be positive. Additionally, we need to continue to explore new categories. If you look at what we did at Overstock in 2025, we could potentially end up generating anywhere between $15 million and $20 million in Overstock.com alone that came from categories that did not exist for almost half a decade, and that is in the luxury space, in the jewelry space, and in some of those other categories, a little bit of apparel as well. We never want to use those three things as foundation builders for our overall business, but we do want to use those things as value anchoring around the rest of the products that we sell. Overstock will, and probably always will, be largely driven by rugs as number one, patio as number two, and upholstered furniture as number three. We're trying to find the balance of how we can coexist with brands and certain values and not contaminate our Bed Bath & Beyond business. On the Bed Bath & Beyond side, what we expect to happen in '26 is the collaboration of the merchandising organizations between our omnichannel partner and our existing marketplace merchandising team. The current merchandising team that we have at bedbathandbeyond.com is really just Overstock people reskinned and rebranded. They knew patio, rug, and furniture. What we're finding and seeing on the omnichannel side is that group, our subject matter expertise in kitchen, housewares, textiles, decor, and a variety of other things that our current group doesn't either possess the relationships with or the know-how. As we merge those two merchant organizations in 2026, you'll see better category segmentation, whether it's in the bedding, bath, kitchen, furniture, patio categories, and a deeper and broader knowledge of how to drive more vendors to the site, how to drive increased penetration to the site, and how to present the product in a way that we think is going to ultimately help conversion. Lastly, and maybe the most important thing, if conversion improves, revenue will also improve because it is literally spend a certain amount on a day, get a certain amount of traffic, and then get a certain amount of conversion. We need at least — we're operating in the 1.1 range, 1.2 range. We need to be north of 1.3 in the short term. That doesn't sound like a lot; it's probably $27 million to $35 million of revenue with a good contribution margin in the 6% to 8% range, all falling to the bottom line without any incremental expense. So when we start thinking about revenue growth, it's not really a hope to; it's a have to.

Marcus, my first one was just on what you're hearing from conversations with your suppliers as it relates to their willingness to pass along price on your marketplace, maybe last quarter relative to maybe the first half, and whether you're picking up on any change in behavior on their behalf with the more recent tariff noise. Obviously, AOV is moving in the right direction for you guys. I think some of it is idiosyncratic with initiatives to reduce markdowns. But just wanted to get a sense of maybe what you're seeing on a like-for-like basis on your platform.

Yes. As you would imagine, and a lot of credit goes out to the suppliers that feed our company, but there has been a lot of pressure on them for longer than just a quarter in dealing with the tariffs and the — quite frankly, the lack of predictability around them. I would like to tell you that I could have a crystal ball on what's going to happen today, tomorrow, next week, and next year, and I do not. What we've told our team internally is we want to really be thoughtful to ensure that the relationship that vendors have with us is a profitable relationship. We have to find ways to take other frictions out of our own business to mitigate some of the costs that we believe that they should pass on. The question is, how do we pass those on? There's been a perfect blend in my opinion between understanding where the elasticity curve is, understanding how much the vendor can take on, and us accepting the willingness to take it on as well. We believe that as Bed Bath & Beyond rebuilds its credibility in the marketplace, both in-store and online, vendors need to feel like this is a profitable, risk-free relationship. As we look forward to 2026, we understand that there could be more pricing pressure that could be presented both to the vendors, then to us, then to the consumer. What we have landed on is that, that's probably going to happen. We're almost operating under the assumption as we built out our '26 forecast that that's probably going to happen. What we need to do and what we are doing now is continuing to eliminate those unprofitable SKUs or vendors who aren't giving us a profitable transaction and doubling down with those vendors with whom we can generate some profitability. As we accept that pressure, we need to come back around to them and look for volume targets and rebates associated with them to make the 365-day margin profile look as healthy as we need it to. I don't know that vendors could absorb much more today, particularly on the upholstered furniture side. Every time we turn around, the sourcing of origin is shifting. One week, it's China, the next week, it's India, the next week, it's somewhere else, then it's back to China. It has been difficult to say the least. I think part of the benefit of being an asset-light retailer is that we don't have a ton of risk in our inventory. We're talking about $150 to $175 per store and enough safety stock in the warehouse. For us, it's a perfect blend of sourcing and good margin management.

That's helpful. And then a quick follow-up. You mentioned removing costs in your own business to soften the blow for vendors. We've been picking up on more and more AI automation in the customer service function as of late, a number of examples in home furnishings — how do you think about a potential cost savings opportunity for Bed Bath if you were able to increasingly automate a chunk of your potential chat inquiries? And is that something you're exploring?

Well, everybody should assume that AI is an absolute mandate inside of our company as it is in almost every company. I think we're in a unique position where we have a pretty blank canvas, and we don't have a lot of, I would call it, technical debt from a legacy standpoint. Sure, we need to improve our unified code structure and our base of how we're operating. We probably have some work to do in our PIM. We think that we're at this really interesting tipping point where when we decide to make new investments into a PIM or in our POS in our omnichannel business, we have a clean slate of paper and not a lot of historical contracts dragging us down. I've said this internally and externally. AI will solve really two problems for our company. One, it will create staffing efficiency. What does that mean in plain English? We will be able to operate with fewer people and have greater efficiency. That isn't a maybe or I would like to; it's going to happen in '26. Number two, we believe that AI will create a better customer experience. Again, I’m going to tie it back to conversion. Can we find the customers in a more personalized way, communicate to them what they want, when they want it, how they want it, and get better conversion in the moment and retention in the long haul? We are, though, for the first time in history, not acting like we're the company that can build everything. You always hear this buy it, build it mentality. We created a special committee at the Board of Directors level that sits side by side with audit and compensation with governance, in the tech committee. The Chairperson of that tech committee is a very astute person. We have started to engage third parties to tell us what we need to do in our business and not assuming that this company has to build everything that it does. I would expect a big bright future, and it will happen fast. We're happy to be on that road map.

Great. Maybe just a follow-up from one of the previous questions. Talking about the personalization tools and how they're working on Overstock right now. What's the timeline to think about those coming to Bed Bath? And does that inform maybe the quarterly cadence of revenue expecting next year? Obviously, on a full-year basis, expecting it to be positive, but how should we expect it to trend throughout the year, acknowledging doing that provide guidance so we might be overreaching here, but figured that I would try.

During the third quarter, unbeknownst to probably anybody, we moved on to a new unified tech stack at Overstock. This was a big risk for us. So we chose to do it there because we knew that there were conversion contaminants that could hurt our business. To be candid with you, we believe that we probably, through the quarter, because of the swap over from Shopify, didn’t give us all the marketplace tools we were looking for. We feel good because since we launched it, the revenue has bounced back, and the conversion has started to accelerate. We're going to take one solid more quarter at a minimum to ensure that as we add Apple Pay, as we add Shop Pay, as we add other features and benefits to that platform that we know that we have built it. The way that Overstock unified code structure was built is that we put a top layer on top of it. We layered Versal on top of it, which really gave us the ability to speak to each consumer in a very specific way, meaning that customer X and customer Y may, in some cases, see something totally different. One of the byproducts of that stack was that the site moves faster. Until we see a 1.3% or better conversion, until we start to see 10%, 15% quarter-over-quarter growth for Overstock, I don't want to tinker or risk the massive revenue that bedbathandbeyond.com does today. However, we are learning things, like how do we improve the cart checkout process, and we aren't waiting to bring over certain portable ideas that don't require a whole new evolution. It would be my hope that by mid-year, maybe middle of the third quarter, we will have modified the code structure at Bed Bath & Beyond. We hope to have all the Bed Bath & Beyond conversion stores open by mid-2026 and to be able to tie the POS and a new unified code structure together so the customer can transact however they want. We've spent the last several months architecting what we think that could look like. We are bringing on new talent to be announced shortly and some new vendor partners to be announced shortly that we think tie all of that together. It won't be tied together with one single company. It will be tied together with multiple subject matter experts that integrate properly into something viable. So time, testing, and proof are how we are running this business, which is why you see seven quarters of material improvement, and we want that to continue.

Due to time constraints, this concludes today's question-and-answer session. I will now turn the call back over to Marcus for closing remarks.

Great. Thank you so much. As we mentioned earlier, the most important thing for us is to have people feel comfortable. As the company prepares for 2026, we expect year-over-year revenue trends to turn positive. We believe this upward trajectory, combined with margin consistency, an additional $20 million in operating expense efficiencies, and improved site conversion position the company to achieve its profitability objectives. Thank you, and we'll see you next quarter.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.