Bed Bath & Beyond, Inc. Q4 FY2025 Earnings Call

Hello, everyone. Thank you for being here, and welcome to the Q4 2025 Bed Bath & Beyond, Inc. Earnings Conference Call. I will now turn it over to Melissa Smith, General Counsel and Corporate Secretary. Please proceed.

Thank you, operator. Good afternoon, and welcome to Bed Bath & Beyond, Inc.'s Fourth Quarter and Full Year 2025 Earnings Conference Call. Joining me today on the call are Executive Chairman and Chief Executive Officer, Marcus Lemonis; and President and Chief Financial Officer, Adrianne Lee. Today's discussion and our responses to your questions reflect management's views as of today, February 23, 2026, and may include forward-looking statements, including, without limitation, statements relating to our future business strategy, goals, financial performance, outlook for the remainder of the quarter or for any other period, anticipated growth, stock price, profitability, macroeconomic conditions, the value of any of our brands and investments, relationships with third parties and agreements we are entering into with them, margin improvement, expense reduction, marketing efficiencies, conversion, customer experience, changes to brands or websites, product offerings, the merger agreement with the Brand House Collective, blockchain efforts and strategies, tokenization efforts and strategies and the 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, and in our Form 10-Q for the quarter ended September 30, 2025, and in our subsequent filings with the SEC. During this call, we will discuss certain non-GAAP financial measures. Our filings with the SEC, including our fourth quarter and full year earnings release, which is available on our Investor Relations website at investors.beyond.com contain 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'm here with Adrianne as well. I'm sure that some of you are in New York City. For the first time we're experiencing more snow than we have in Salt Lake. So happy skiing to everybody out there. Good afternoon, everyone, and thanks for joining us. 2025 was about stabilizing and building the base of this business. 2026 is about growing that base and expanding it within the framework of our 3-pillar ecosystem architecture. That framework that we announced on January 5 remains unchanged. Over the last 8 quarters, we have delivered consistent year-over-year EBITDA improvement while materially lowering the breakeven level of the company. That discipline continued in the fourth quarter. Revenue declined year-over-year, largely reflecting housing market softness and our deliberate decision to eliminate vendors and SKUs that generated negative contribution margin. We chose margin integrity over headline revenue. That was intentional, and it's also in our past. Importantly, the year-over-year revenue gap narrowed meaningfully in the fourth quarter, while adjusted EBITDA loss improved by more than $23 million or 84% on lower revenue. We also delivered meaningful gross profit margin improvement in 2025 compared to 2024 despite tariff headwinds and an unpredictable sourcing environment. That improvement reflects better vendor negotiations, improved product mix, tighter inventory controls and a more efficient operating structure. Our margin performance is increasingly structural, not cyclical. In 2026, our objective is to advance and progress our margins towards 25%, the midpoint of our 24% to 26% framework. Over time, as omnichannel scales increase and ecosystem synergies compound, we believe we can break through 26% and ultimately reset the original range higher. That progression is going to take time. We will not compromise top line growth or customer value simply to form for short-term margin expansion. We believe the true base of the business has now been established in 2025. We are seeing low to mid-single-digit year-over-year increases in revenue growth early in the year and are targeting low- to mid-single-digit revenue growth for the full year 2026 based on current trends. While we're not providing formal guidance, it is important because the company is in an active building phase, growing its base business while layering in complementary acquisitions across each of the 3 pillars, we believe it is important to provide directional clarity, so investors understand how performance should progress quarter-by-quarter and across the full year. This is a build. It is sequenced and it is deliberate, much like the last 8 quarters. We expect continued year-over-year improvement, but that improvement will not be linear. It will follow integration timing and execution milestones. In the first quarter, we expect year-over-year revenue growth and EBITDA improvement of at least 30% compared to Q1 of last year. This reflects stabilization of the base business and continued cost discipline. In quarter 2, we expect to close on the Kirkland's transaction on or around April 1. Q2 will reflect partial ownership and will include transition and integration activity. It will not reflect the full benefit of merger synergies. We expect approximately 90 to 120 days following the closing to execute meaningful integration initiatives, including consolidation of overlapping corporate costs, vendor contract alignment and purchasing leverage, shared services optimization, supply chain integration, technology integration and merchandising alignment. There will be transaction costs and transition costs associated with the merger and integration. Q2 should be viewed as an integration quarter, not a fully synergized quarter. But the base business will have increased revenue and will have improvement on the bottom line as it relates to EBITDA. Quarter 3 integration work should be executed, and Q2 should begin to flow through the financials in a more meaningful way. We expect positive top line growth and improved operating leverage with a stretch objective to approach breakeven. By Q4, assuming integration milestones are achieved, we expect positive top line growth again and improve margin leverage with an opportunity in Q4 for profitability. This framework reflects disciplined execution, not reliance on a housing recovery. Everything we are building fits into one of three defined pillars. I outlined them on my January 5 letter and again today on my February 23 shareholder letter. Nothing sits outside the framework that I've provided. The architecture is the filter through which we evaluate every deal, every acquisition and every decision. We are aggregators, not consolidators. A consolidator requires similar businesses to reduce costs and drive margin through scale. An aggregator, which we are, builds a connected system of complementary capabilities that strengthen one another. Later on, you'll be able to check our investor site to see the graphic that we've posted, one sheet graphic that will show you what that ecosystem looks like. We are building integration, not accumulation. The other one is pretty simple. It's our omnichannel business. It includes brands like Bed Bath & Beyond, Overstock, buybuy BABY and Kirkland's upon closing. Including Kirkland's, this pillar approximates $1.5 billion in annualized revenue with an additional omnichannel transaction agreed to in principle with the sellers expected to add an additional $500 million in top line. Look, retail drives engagement, purchasing leverage and customer acquisition. Pillar 2 is our protection advocacy, brokerage and financial solutions pillar. It includes property and casualty insurance, renters insurance, home warranties, product warranties, title services, renovations and renovation financing, mortgages and HELOCs, a credit union partnership and a scaled residential brokerage network. The brokerage platform is critical. We are pursuing the acquisition or development of a scaled residential brokerage network as we speak, of thousands and ultimately, tens of thousands of agents. Protection and advocacy come first. When trust is established, customers give us permission to extend those services. Financial services is an extension of trust, not the starting point. Pillar 3 is our home services installation and maintenance infrastructure. It includes flooring, cabinetry, closets and storage systems, carpeting, renovation services, professional installation, repair and maintenance networks. The differentiator is the installation labor model. Most homeowners cannot self-install flooring, cabinetry or renovation materials; installation is required. By building a professional labor network, we create higher transaction values, stronger attachment rates, greater customer stickiness and ongoing maintenance engagement. This infrastructure converts retail demand into completed projects and allows brokerage origination to flow into renovation activity. For all of this to work, you've got to make sure that everything has a unifying layer. Surrounding all 3 pillars is our proprietary loyalty and identity wrapper executed in partnership with BILT. We're also building a broader home operating system. The home operating system connects the homeowner in the home through durable digital records around protection, financing, renovation history, installation records, warranties, public records, surveys, titles, deeds and maintenance events. LifeChain supports this infrastructure by creating durable records around both the homeowner and the home itself on blockchain. Without this layer, these are separate businesses. With it, they become an integrated ecosystem. A key priority in 2026 is accelerated implementation of modern technology across the enterprise. Yes, that includes AI. We are deploying tools that increase conversion, improve inventory productivity, optimize pricing, enhance marketing efficiency and reduce operating costs. Technology is a performance lever designed to drive revenue up and costs down simultaneously. At this point, I'll turn the call over to Adrianne to walk through our fourth quarter and full year financial results in greater detail. Adrianne.

Thank you, Marcus, for your insight into the significant financial progress we made in 2025 and our strategic path forward, as you mentioned, outlined in your shareholder letters. I will now turn to our fourth quarter financial results, which highlight the achievement of consistent earnings improvement throughout 2025 and the material progress towards our committed targets to restore our retail operating discipline. Revenue declined 10% year-over-year in the fourth quarter and 6% if you exclude the impact of discontinuing our operations in Canada. AOV improved 7%, driven by our continued focus on improving assortment on the Bed Bath site and an increased sales mix into Overstock. This was partially offset by less orders delivered in the quarter versus 2024. However, I am pleased orders delivered increased 13% in the fourth quarter versus the third quarter of 2025. Gross margin landed at 24.6% for the quarter, a 160 basis point improvement compared to the same period last year. For the full year, we improved gross margin by 390 basis points to 24.7%, driven by structural changes in freight contracts and returns economics as well as continued pricing and discounting rigor. We expected quarterly gross margin to be in the 24% to 26% range, impacted by seasonality, emerging categories and competitive landscape, and delivered just that. Sales and marketing decreased by $15 million or improved efficiency by 350 basis points as a percent of revenue versus last year. It's important to note, our full year spend efficiency improved by close to 350 basis points, another meaningful improvement to earnings power. We continue to navigate the balance of driving revenue and maintaining our ROAS guardrails while improving the site experience and sharpening pricing. We maintained our internal guardrails, launched retention tools, improved own channel and now need to optimize these tools and learnings for growth. G&A and tech expense of $33 million decreased by $15 million year-over-year as a result of our commitment to reduce fixed costs through rightsizing the organization, prioritizing efforts and mandating productivity. I am pleased that we exceeded our commitment to achieve a $150 million annual run rate. All in, adjusted EBITDA came in at a loss of $4 million, an 84% or $23 million improvement versus the fourth quarter of 2024. Full year adjusted EBITDA was a loss of $31 million, a $113 million improvement versus 2024. Reported diluted EPS was a loss of $0.30 per share, an 82% or $1.36 improvement year-over-year. Notably, full year net loss improved by $174 million and reported diluted EPS improved by 75% or $4.15. We ended the quarter with cash and cash equivalents, restricted cash and an inventory balance of $207 million. Full year cash used in operating activities improved year-over-year by more than $118 million or 67%, illustrating significant progress against the transformation initiatives and stabilization of the retail operations. 2025's performance reflects significant measurable and importantly swift progress in retaining our core retail operating discipline and materially reducing the expense to run the business. This is evidenced by the $113 million or 79% improvement in adjusted EBITDA year-over-year. As always, we will remain focused on continuous improvement, finding efficient ways to create a more variable cost structure with an intense focus on driving top line growth. With that, I would like to turn the call back to Marcus.

Let me close with one broader perspective. Thanks, Adrianne. Our current plan does not assume a housing recovery. However, as mortgage rates moderate and transaction volumes return towards historical mid-cycle levels, the ecosystem we are assembling is positioned to benefit from that normalization. When incremental demand is layered on top of a fully integrated platform with merger synergies realized in structural costs aligned, we believe the company has potential over time to generate substantial mid-single-digit to high single-digit EBITDA margins. That expectation reflects disciplined execution and a normal housing environment, not aggressive assumptions. 2025 stabilize the base. 2026 is about expanding the base with a disciplined architectural framework. We are aggregating complementary capabilities. We are integrating talent and expertise. We are building execution and infrastructure. We are connecting the homeowner in the home. We are very deliberate, and we are very confident in our sequencing. I'd like to now turn the call over for questions.

Your first question comes from Steven Forbes at Guggenheim Securities, LLC.

Marcus, you mentioned a few 2026 growth drivers within the release in prepared remarks, right, AOV being one of them, conversion being another. But as we look at some of the core KPIs that you report, I was curious if you can maybe just walk us through how you're thinking about the active customer base? Like are we reaching a troughing point? Is there visibility within the cohorts to rescale that in 2026? And then also orders per active customer second quarter in a row of stability? Is that indicative of sort of that KPI also bottoming?

Thank you for your question. We believe that the lowest point is behind us and that we will experience growth in revenue, EBITDA performance, and the number of active customers moving forward. However, I want to be careful when discussing the average order value (AOV). As Bed Bath & Beyond begins to reopen stores, we anticipate a significant increase in volume in some of the historical product categories. While we expect categories like furniture, patio, and rugs to grow, the mix of higher quantity items in shopping baskets compared to the total dollar amount could affect AOV. Additionally, as we stock inventory in our new warehouse in Jackson, Tennessee, following the Kirkland's acquisition, we expect to see an increase in items like towels, small appliances, gadgets, bedding, and housewares online, which may lower AOV but increase the average customer count. We will develop a clear method to differentiate the performance of historical categories from the legacy Bed Bath categories. It's important to note that much of our online sales today stem from what Overstock did over the years. Overall, we anticipate growth, but I want to be cautious regarding AOV due to the potential changes in our product mix throughout the year.

As we consider the opportunity you highlighted in Pillar 2 and Pillar 3, I would like to know if you have assessed the interest among your active customer base or their intent to use these services, and how well the demographic profile aligns with them. What gives you confidence, and what should assure us that this opportunity is viable for Bed Bath & Beyond?

You need to start viewing Bed Bath & Beyond in a new light, moving away from the old perspective of it being solely an e-commerce retailer like Overstock. Instead, consider the vast size of the housing market, which is measured in trillions rather than billions. Our vision involves creating an ecosystem that encompasses all elements of this market, as it is crucial to our operations. The omnichannel business is where we first interact with customers. When considering Bed Bath & Beyond alongside Overstock, buybuy BABY, Kirkland, and an upcoming acquisition yet to be disclosed, we will cover all essential categories of home goods, both soft and hard. Regarding home services, we recognize that services like flooring, cabinetry, and renovations have existed separately for a long time. These will persist regardless of economic conditions, creating new customer opportunities. I appreciate how home services can facilitate larger transactions that often require financing or warranties. For instance, a kitchen remodel might involve an order between $7,500 and $8,000, typically associated with financing and other services. This allows us to build relationships with homeowners through installations such as flooring, carpeting, or closet systems. These services are not restricted to first-time buyers; they also appeal to those undergoing renovations, expanding families, or facing significant life changes. We are leveraging our insights into customer behavior to maximize life events and sell more than just towels. The competitive landscape for mortgages, home equity lines of credit, insurance, and warranties is well understood. Insurance and warranty services are subject to regulation, which can limit pricing flexibility and hinges on trust. In banking, we plan to take two approaches. First, we aim to introduce a groundbreaking homeowners credit union that will offer competitive savings, checking rates, and mortgage options. This concept leverages the inherent value of credit unions, which often have lower profit margins than traditional banks. Additionally, we've partnered with Brown & Brown to create a property and casualty insurance agency, presenting customers with multiple options and a comprehensive warranty service. Product warranties and shipping insurance will be provided through Extend. I am confident in this ecosystem's viability because I have experienced its success in my previous role, where I understood the starting points for customer engagement and potential for long-term value growth. One aspect that might be overlooked in the middle of this strategy is the need for brokerage services. As I mentioned earlier, we are pursuing three significant acquisitions. One of those for Pillar 1 is already agreed upon, and another for home services in Pillar 3 is also in place. We are close to finalizing a deal within the second pillar that will enhance our origination capabilities. If these acquisitions progress as expected, they could add over $1.5 billion in revenue on top of our current base, which includes Kirkland's. By combining our existing $1.5 billion e-commerce business, the omnichannel contribution from Kirkland's, and these three new transactions, we could potentially reach an annualized run rate of around $3 billion, with each pillar providing a solid foundation for growth.

Your next question comes from the line of Jonathan Matuszewski from Jefferies.

Marcus, I had a follow-up question first on just Pillars 2 and 3. And just trying to get a better hold of maybe the trajectory for how you see those 2 mixing into the overall kind of revenue base? And would it be correct to assume that the margin profile of those Pillars 2 and 3 is going to be kind of the overall driving factor of EBITDA margin expansion over the medium term. Is that kind of the next leg in terms of margin expansion? That would be my first question.

Yes. We've talked for a while now about the margin range of 24% to 26%, and that's been on the historical e-commerce business, and we know the retail business is slightly better than that, 2 or 3 points better than that in a normal environment. What we know for certain is that the home services, the cabinets, the flooring, the closets, the installation, the renovation, they all come with far greater margins than that in excess of 40%. And part of our strategy in growing our overall profitability is expanding our overall company consolidated margin through, a, the acquisition of those types of businesses in Pillar 3 and being able to absorb those. We will have work to do to take out some of the merger synergies and lower their CAC so that their EBITDA coincides with our expectations. But from a gross margin standpoint, it will be materially higher than selling towels and couches online. The middle section is probably the one that I'm most excited about. And it takes several years for it to come to fruition. But the acquisition that we have on the table will build the solid, call it, $400 million foundational base of which we'll build stuff on top of. In that particular instance, whether it's the credit unions, the insurance, the warranties, keep in mind that the cost of goods associated with all of those is de minimis. There is no real asset. In many cases, because we are never taking on the liability. We're not acting as a bank. We're not acting as an insurance company. We're not acting as a warranty insurer. We are a marketing and sales organization, making commissions and fees off of those, the margins are explosive, north of 50%. And so over time, as we start to see those mature, we would expect the consolidated margin in the next 36 months pending these acquisitions coming together to expand above and beyond 30% for the overall ecosystem. The key is making sure that we take the costs out of these businesses. And one important distinction that I'm sure many of you are thinking, and I want to address upfront is we are going to operate these pillars individually with their own leaders and their own, call it, CEOs sort of presidents of those businesses. These are people that are foundationally subject matter experts in those disciplines, not taking those businesses and trying to have e-commerce people run them. We believe in having independent entrepreneurs to operate as subject matter experts. And where consolidation will exist is twofold. One, from a financial and treasury standpoint, wanting to make sure that we're taking out any redundant back-office costs and from a data consolidation standpoint, meaning that each of these businesses are obligated to remit their financials, sign up for our code of conduct and the way we want to do business and contribute data in a form and a manner to the overall ecosystem that matters. We feed that data into a data fabric, which is being operated by a third party. And we partner with a master wrapper loyalty program, functioned and partnered with BILT, B-I-L-T. You can do your research and find out what they do today. We, as you could tell as a company, believe in partnering and buying as opposed to building everything because technology moves so fast. So the operators are really in their own little cocoon and we are acting as aggregators. But the most important aggregation and where we think we're going to get the real cost synergies lowering the CAC for each of them, finding administrative costs that can be eliminated and sharing in treasury management efficiency. And that's ultimately why we are so confident that this business in short order, three years can be in a normal mid-cycle environment, could be mid-single digit to high single-digit EBITDA contribution because of those factors.

Very helpful. And then CAC is a nice segue just for a follow-up. Would love to just hear how you're thinking about measuring the success of your ads pilot with instant checkout and maybe the types of customer activation or the volume of activation that you'd maybe need to see to divert more advertising dollars to that experimental channel?

We're discussing chat, and it's still too early to make definitive statements. It's only been a few weeks since we became part of the pilot program, so we're still in the initial stages. There’s a lot we need to learn. However, over the past several months, we've found that incorporating various machine learning technologies is improving our progress. That said, I want to emphasize that we are far from where we aim to be in the next 12 to 24 months. We have also begun collaborating with external parties to evaluate our technology infrastructure, overhead, connectivity, and integrations. Recently, we engaged Alvarez to conduct a comprehensive study, especially considering all the recent acquisitions, to ensure we maximize efficiency and capture all relevant data.

Your next question comes from Bernard McTernan at Needham.

Great. I wanted to follow up on Pillar 2 to clarify my understanding. Regarding the significant acquisition in Pillar 2 for origination, should we expect that after the acquisition, you will be able to provide services like insurance, home warranty, and HELOCs on a first-party basis, and then partner with major residential brokerages to market those services?

So the way I'd like you to think about it is there's kind of like a two-funnel approach. Funnel number one is using all of the customer engagement from Pillar 1 and Pillar 3 to offer all of those services in Pillar 2. And that's a little bit harder hill to climb quickly. You can get there over time after you build trust, after you improve your customer service experience, after people understand the connectivity. The acquisition in Pillar 2 around the brokerage services provides instant, I would call it, integration. And I would expect on day 2 of that acquisition that the products and services that we have lined up whether it be with the credit union, whether it be with the insurance companies, whether it be with the warranty companies, whether it be with the titling companies would immediately be embedded. The piece we like most about this potential acquisition in Pillar 2 is that it has already started some of those services and have seen early success but doesn't necessarily, in our opinion, have the technology or the capital to invest in technology that can supercharge that. When you think about that real estate brokerage network, what you're really talking about is thousands, if not tens of thousands of sales agents who are commission-based. That's how they sell things. We believe that there is an interesting and proper way to motivate those agents to receive commissions not only from the things they're permitted to inside of their real estate license but also to be able to sell other products and services in the ecosystem for commissions that are compliant with whatever the state regulation is. When you can pick up a 10,000-person army of salespeople who are commission-based who are hungry to provide value to customers only on things they need, you get instant activation. I would expect that within 12 months of making that acquisition, we would be running at relatively full steam looking for attachment in a more traditional manner.

Okay, that's really helpful. Just a quick follow-up. I know we're not calling it guidance, but can you provide some directional commentary on the expectations for low to mid-single-digit revenue growth in '26? Does that include or exclude Kirkland?

Let me clarify. The mid-single revenue growth numbers we are discussing pertain solely to e-commerce, which is projected between low to mid-single digits. Kirkland's is expected to have similar growth during the same period. After we complete the acquisition in Q2, we will provide a forecast. For our base business in 2026, we anticipate low to mid-single-digit growth for the full year, ideally closer to the mid-single-digit range. We had a margin of 24.7% in 2025 and aim to reach 25%, which is a challenge given the current uncertainties, particularly with tariffs. Regarding sales and marketing expenses, we expect them to remain relatively stable in 2026 compared to 2025, though I am being cautious as we have opportunities that have not yet been fully realized. We anticipate significant improvement in EBITDA each quarter compared to the previous year, with a challenging target for profitability in Q3 and a more achievable goal in Q4 of 2026. This does not take into account any of the larger acquisitions we are considering, but I assure you that we will maintain robust shareholder communications and disclosures, ensuring clarity on the impacts of acquisitions. From the moment we obtain the keys to the acquired businesses, change cannot be influenced until then. The timeframe to see results can vary; it may take 90 to 120 days in some instances, while in cases involving leases or distribution centers, it could take 8 to 12 months. We will provide a clear outline of our plans and demonstrate potential pro forma scenarios over a 2- to 3-year period. I am very encouraged by the early forecasts we are seeing, and it is important to note that none of this anticipates a housing recovery. If the housing market does recover, we will be in a much stronger position.

Your next question comes from Thomas Forte with Maxim Group.

Congrats on the improvement in the quarter and the year. Regarding the everything home ecosystem and pillars, the first question, and I'll wait for the answer and then one follow-up. So Marcus, when I look at each pillar, how do you determine when to work with a strategic partner versus when to own and operate an asset? On the surface, it seems like Pillar 1 is all owned and Pillars 2 and 3 are more partnerships or combinations of owned and partnerships?

Pillar 1 is largely owned, but we are working on some larger licensing transactions with both the existing brands we have and some of the brands that we're acquiring. Secondly, we already have the relationship in Canada where we licensed and sold the intellectual property in Canada. We expect them to start opening stores, and they'll be contributory. But for the most part, Tom, you're right. The bulk of it is owned. In Pillar 2, the delineation between when we should be in it and when we shouldn't be in it, is when there's a lot of regulatory complexity to it and a lot of what I would call balance sheet risk. We are not in a position and probably won't be in the near future to take on any balance sheet risk around claims, or around reserves or around insurance, or around financing, or any of those things. We just don't believe that we are subject matter experts in that result. We are an origination machine, and we expect to make money through all of these different transactions, including the brokerage services in all of those. I would never expect us in the short term to be anything more than an insurance agency, a seller of warranties, a provider of financing. What we like about that is that there's no inventory requirement, there's no capital requirement, there's no reserve requirement and the money flows pretty nicely. But there also isn't a big staff required to execute those. And so while some have said to me, 'Oh, you're giving up margin by not being the bank or not being the insurance company.' There is truth in that, but what they forget is all of the costs associated with doing that and the regulatory complexity with doing that, that is not where we want to spend our time nor our money. In Pillar 3, we want to own as much of that as we can, including providing the home services, installation services and all the products that go with it. We believe that that is a gateway to meeting the homeowner where they need us most. The margins are explosive and the opportunity to surprise and delight and upsell is easier if we're controlling the journey than a third party is controlling the journey.

Great. And then for my follow-up, can you walk us through, recognize it's still early, your vision for the home operating system in the home OS? I know you've talked about it a couple of times.

I like in the home operating system similar to how I like in loyalty. It's a wrapper around the entire ecosystem. And many people know home operating systems because they have Alexa or they have a ring doorbell. But at the end of the day, society and homeowners and renters are moving towards a connected home. And while it's nice to connect your lights and your AC and your TV and your radio and all those things, that isn't what we believe is the most important part of the operating system. The most important feature of the operating system, in our opinion, is a real estate ledger, a blockchain ledger that captures all of the important documents for two different sets of items. One, the homeowner themselves and all the things that make up everything that they do and the home asset itself, including titled deed, survey, insurance, maintenance records because we know that the homeowner is portable. They're going to move in and out and that home stays relatively constant. We like it on blockchain because we think it over time provides integrity for insurance providers, lenders, home buyers, maintenance providers, warranty providers to see the true health report and the true lineage of that asset giving people an opportunity. No different than if you drive a car and you don't have an accident over time, you get better rates. People have to know what the health is. We think blockchain is a great way to do that. If you look at that particular product being existent back when the Palisades fire happened, and all those folks had no records of anything that happened, we want to solve problems like that, both because people are transient, both because people buy and sell houses every seven years. And because there are these catastrophic events that cause that to be necessary. You would access that information both through an app and through a touchscreen in your home. As a feature, as a benefit, as a nice to have in addition to the important center of the universe with LifeChain. Of course, you'll be able to handle your lights and handle your alarm and handle your doorbell and your AC and all those other things that we're all used to. But that should be features and benefits, not the core deliverable. We expect to be developing a good chunk of that over the next 12 months and hope to launch something like that in partnership in 2027.

Your final question comes from Seth Sigman from Barclays.

Can you guys hear me? I wanted to go back to your comment about low- to mid-single-digit revenue growth early this year. Is that meant to say what you're running right now? And if so, can you just bridge us versus, I think it was down 6% in the fourth quarter year-over-year? What is driving the top line improvement maybe across categories, perhaps consumer cohorts. What are you seeing? Because obviously, that would be a pretty meaningful improvement.

We have experienced positive year-over-year growth starting in January and continuing through today, although it remains in the low to mid-single digits. Our goal for the year is to push towards the mid-single digits and ideally exceed that. We have made significant improvements to our online product assortment and are actively working on pricing enhancements. Our marketing efforts have also improved, encouraging repeat purchases from customers. We are being careful with our marketing expenditures, investing more in new technologies, including a pilot program with chat and innovative SMS techniques. We believe that our omnichannel launch will increase overall awareness. While we are not satisfied with the current low to mid-single-digit growth, we prefer to be cautious and aim to outperform market expectations. Our focus is on building cash flow and setting achievable projections based on our historical performance over the past several quarters, where we have successfully met or exceeded our commitments. Earning customer trust and confidence involves setting realistic expectations. A significant part of our growth comes from refining our operations, such as eliminating vendors and products with poor margins and improving how we present brands. It's crucial for us to not just acquire customers but to retain them effectively. We are beginning to see positive trends in this area. Regarding Q1, we anticipate a revenue increase of approximately 3% to 5% and are aiming for around a 30% improvement in EBITDA margin year-over-year from Q1 last year. Current margins are expected to be between 24.5% and 24.7%. However, we anticipate some pressure as we move into the patio season. For Q2, we expect the same revenue growth of 3% to 5% but might see margins decrease slightly to around 24.1% or 24.2%, while still projecting EBITDA improvement. In Q3 and Q4, we forecast stronger growth, potentially reaching around 5% to 6% revenue increase, and expect margins to stabilize around 25% as we continue to reduce costs. We are optimistic about achieving better results in Q3, although we aren't certain if we will completely break even. For Q4, following a reported $4.4 million EBITDA loss, we are aiming for break even or better. We recognize there is work to be done, but we are excited about our progress as a company. We are growing, acquiring customers, and generating revenue, and we have moved beyond a phase of downsizing. This transformation is a key reason I chose to join this company full time.

There are no further questions at this time. I would love to turn the call back to Marcus Lemonis, Executive Chairman and Chief Executive Officer, for closing remarks.

Great. Thank you so much. We look forward to seeing you on our next quarter call. Take care. Bye-bye.

This concludes today's call. Thank you for attending. You may now disconnect.