Bed Bath & Beyond - Earnings Call - Q4 2016
January 31, 2017
Transcript
Operator (participant)
Good day, ladies and gentlemen, and welcome to the Overstock.com Q4 2016 earnings conference call. At this time, all participants are in a listen-only mode. If anyone should require operator assistance during the conference, please press star and then zero on your telephone keypad. As a reminder, today's conference is being recorded. I would now like to turn the call over to Mr. Rob Hughes, SVP of Finance and Risk Management. Sir, you may begin.
Rob Hughes (SVP of Finance and Risk Management)
Thank you. Good afternoon and welcome to our fourth quarter and full year 2016 earnings conference call. Joining me today is Dr. Patrick Byrne, Founder and CEO; Saum Noursalehi, President of our retail business; and Jonathan Johnson, our Chairman and President of our Medici business. Let me remind you that the following discussion and our responses to your questions reflect management's views as of today, January 31, 2017, and may include forward-looking statements. Actual results may differ materially. Additional information about factors that could potentially impact our financial results is included in the press release filed this afternoon and in the Form 10-Q we filed on November 3rd, 2016. Please review the Safe Harbor statement on Slide 2. During this call, we'll discuss certain non-GAAP financial measures.
The slides accompanying this webcast and our filings with the SEC, each posted on our investor relations website, contain additional disclosures regarding these non-GAAP measures, including reconciliation to these measures to the most comparable GAAP measures. Patrick, with that, let me turn the call over to you.
Patrick Byrne (CEO)
Thank you, Rob. I'll be walking through the slides. First, I'd like to open this by saying I intend to give you a deeper briefing on what is going on in the marketplace and how our company and some other companies are evolving in response than I have for a while. Many years ago, I used to be extremely fulsome in bringing the shareholders in, understanding real choices and dilemmas we were facing. I felt that at some point when I got in that fisticuffs with Wall Street, it led to giving people a lot of fodder to misrepresent, and anything I said they'd say, "Oh, that's an excuse or something." It's not an excuse. I'm just letting people know what's going on in the marketplace and how we are responding. So, with that preamble, let's go to these slides. Slide 3. Q4 results.
Now, remember, this is blended retail. Q4 results, we did keep 10% growth. Remember, this is retail and the Medici business, so I'm not sure that it makes a whole lot of sense for detailed financial metric walking for when we've smushed two unlike businesses together. So let's go to Page 4. Page 4, you see our retail business actually ended quite healthy. 19% growth on the gross profit dollars, contribution up 16%, and so on and so forth. $6.8 million in pre-tax income. We did have quite a big hit to that in a number of things we'll talk about. Let's go to Slide 5. So I'm focusing on this retail business only because Medici, there's a whole different set of a whole different framework within which we want to talk about the Medici investments. Okay, Slide 5, quarterly revenue growth. You see, we came out of our low.
There is a tick down, and I was disappointed in this. I'm going to tell you why this happened. I'm disappointed, although I think we have played this correctly. I would have liked to have seen this stayed at 15%-20%. What's going on in the market, well, I'll be getting to shortly. So Slide 5, there's a view that this tick down is. I believe we've played this correctly, but there's a couple real shifts going on in the marketplace that I want to be discussing. So I just note that tick down, and then I move on. Slide 6, even given that with our new pricing algorithms and analytics, and we have all these PhDs and theoretical nuclear physicists, literally kind of folks walking around here, they're doing a lot of great optimization, and we're moving farther and farther into the world of big data.
Even on that growth, we were able to grow gross profit 18%. Next slide, the contribution, which is what we really like managing to, is at 15%. I view that the downturn we have once again turned around. We tend to have a history of growing 15% or 20%, then something happens that knocks us into a tailspin, and then we figure out new things and innovate and climb our way out of it. We are past the past one, but now we'll just be talking about the future. Slide 8, this is a telling graph in that even though our margins were unusually high for Q4, typically in Q4 margins dip because there was a big shift away from high margin products to low margin commodified products.
Ours stayed high, our marketing cost increased, and yet still we ended 10.3% on contribution, which has been where on Q4. Typically where Q4 is, it's better than last year's Q4, and I think that Q4s are always going to have a lower contribution margin than we run through the other part of the year. Slide 9, very interesting graph. So, when I talk to analysts and people who are trying to deconstruct our income statement, this is made for them. We can now show you very clearly what's going on. If you just look at our G&A and hard dollar cost, you see how that's gone flat. We are really, in terms of corporate infrastructure, we have maintained real discipline.
On technology, we've been shifting, and so as a result of that, as a result of maintaining real discipline on corporate infrastructure expense, we've dropped from 4.9% of sales to 4.1% of sales. So I think that speaks of a lot of financial discipline from my colleagues. On technology spending, we've gone from 5.0% up to 5.5%. That's acceptable. That represents, on a dollar basis, a gradual swelling of our technology expenses, and I think that I want it to. I think that we probably underinvested in technology for a long, long time as we got our retail stuff sorted out, but now we really are turning into we have turned into a real tech company.
I hear this all the time from vendors who deal with us and very high-profile, large internet advertising companies who tell us, for example, that you know, I know we have pockets anyway where we are well ahead of the competition. So as a percentage of revenue, we see this nice trend. It's come down 9.5% for the year. So our expense control is, I think, very solid. And it's even. It gets hard to manage expense control as a percentage of sales when the sales growth itself is so lumpy. But if you just look at it in terms of hard dollars, we do manage the hard dollars of expenses very, very accurately. We're up to $50 million now, a quarter of total corporate expense. And we manage that. We come spot on in managing our expenses.
Now, it's not always what we anticipate as a percentage of sales because it's harder to predict sales growth quarter to quarter. Slide 10, annual results, $1.8 billion won't run through everything. The contribution dollars were a surprising 8% increase over last year. That was pleasing to me given where it started the year. Tech and G&A expense growing 8%. Pre-tax income, I want to point this out that you really have to look at our business as two different wings now. Our retail business made $32.3 million pre-tax last year. Now, in my view, pre-tax I look a lot at pre-tax right now because we don't actually pay cash taxes because we're burning through an NOL. But to me, that's healthy. We've got a nice healthy core retail business. Medici cost $11.8 million.
We hoped at the beginning of the year it might only cost zero or maybe a few million to the negative. It cost $12 million. I don't regret any of that. I think that we're really the epicenter of this blockchain revolution in so many ways, and I think this peanuts compared to the opportunity. So put all that together, $12.5 million of net income, and an operating cash flow of $39.6 million. Now, that's $54 million. There's something odd about the quarter of which you should be aware that's going to affect all retailers. Rob, why don't you explain about the timing issue?
Rob Hughes (SVP of Finance and Risk Management)
Sure. That decrease in operating cash flow year-over-year was primarily due to a timing issue at year-end. With sales on and around Black Friday and Cyber Monday occurring several business days earlier in November in 2016, and in 2015, our suppliers had more days to ship orders by November 30th, which is our cutoff for supplier payments that we make in December versus paying in January of the next year. We estimate that if we normalize 2016 for the timing pattern in 2015, we would have paid $24 million less in 2016, paying it in January 2017 instead. That was the largest single factor affecting operating cash flow year-over-year.
Patrick Byrne (CEO)
Good explanation. So there's sort of a weird timing issue that shifts $24 million in payments out of the first few days of January into December of 2016. And I guess that means Q1 has a $24 million better cash flow than otherwise will. So it all just evens out. That just has to do with the shipping cutoff.
So cash flow is just fine. Let's look at Slide 11. The annual results for retail only. We've just walked through them. It's $1.8 billion on the top, $32.3 million pre-tax on the bottom. Next slide, 12. Again, you see our corporate employees, and this is a combination of tech and non-tech, although Rob seems to have reversed the colors. Tech in the previous a few slides ago, tech was that blue. But no, I just want to be sure. In this case, does this blue actually mean tech or does it match?
Rob Hughes (SVP of Finance and Risk Management)
Yes, it's tech.
Patrick Byrne (CEO)
Okay, so anyway, in terms of corporate infrastructure, we're stable, and if anything, kind of hollowing out the G&A cost and moving into tech. Slide 13, operating and free cash flow. Operating free cash flow, trailing 12 months. Again, that's $39.5 million, but you really need to add or count back $24 million based on this end-of-year thing. Setting that aside, we go from the $39.4 million to the -$32 million. A big chunk of that is we just built a finished building our building. What else do you want to say for that?
Rob Hughes (SVP of Finance and Risk Management)
That's the real explanation. In addition, there's the normal CapEx for our software developers and our IT infrastructure, but the building's now done. We had about $8 million in CapEx for the building in Q4, and that finished it off at $99 million in total.
Patrick Byrne (CEO)
So in the absence of building a new building and the absence of the $24 million, you'd have had $47-$67 million more. You'd have had over $100 million of operating cash flow, although we would have had to pay rent if we hadn't built the building. So anyway.
Rob Hughes (SVP of Finance and Risk Management)
I'm not operating. The building reduces free cash flow.
Patrick Byrne (CEO)
Right. Sorry, free cash flow. Okay. Slide 14, GAAP, trailing 12-month inventory returns and GMROI. Again, these are just outstanding. Not much else to say on Slide 14. Customer orders, Slide 15, customer orders and average order size. Here, there's something quite interesting. You'll see how our average order size the number of orders is the same, but the average order size moved very briskly from $162 to $181. That represents a mixed shift. Saum, do you want to add anything to that?
Saum Noursalehi (President of Retail Business)
I would just point out, yeah, it is a mix shift in categories. And while orders remain flat, they are focused on our more profitable customers, which are in categories like home. And we're shedding or moving away from categories like electronics and books. And so while orders remain flat, there was significant growth in customers in our valuable categories.
Patrick Byrne (CEO)
Right. So there's $19 more per average order. Slide 16, unique customers have stayed just about constant. Cost per customer has gone up. That's we are attracting these more valuable customers.
Saum Noursalehi (President of Retail Business)
Right. Because these customers have a higher lifetime value, we can spend a bit more to acquire them.
Patrick Byrne (CEO)
Now we get into what's really going on in the marketplace. And this is not a complaint. This is not anything but a statement of fact. I know there are people listening who are professional analysts of the e-commerce. Interesting thing to look at what's going on. Slide 17, let's start with the bottom. Wayfair visits versus Overstock visits. Now, this is out of Hitwise, a data source that I know many folks on Wall Street have. So this is third-party statistics. Their traffic versus Overstock. You see, they caught us pretty much in 2015, or they got close in 2015. In 2016, they surpassed us here and there. On the other hand, how much are we spending? And this is right out of each of our 10-Qs. They're spending far more than we have.
Now, they have not yet reported how much they spent for Q4, but they are spending a lot more than we are. How much more? Turn to Slide 18. Our ad spend per visitor is roughly a third of Wayfair's. And so this is and again, we don't have Q4 yet, but I can tell you this is how Q4 unrolled. Q4, and this was industry-wide. So there's all kinds of ways we can sort of see what's going on for the whole industry in terms of traffic and to a less degree conversion, to a fuzzier degree conversion. November was surprisingly weak for everybody. It got off to a real soft start. It sometimes happens when there's things going on for the whole nation, like an election, that this happens.
We look back, and it does this every four years, the first week of November, and everyone's focused on the election. It did start to come back in sort of late November, and we were having a bang-up Christmas season. Wayfair came up and just started their spending, their bidding three, four, five times what we're bidding and what we think is the appropriate economically correct bid for all kinds of terms.
I think that they. In fact, we had seen a sharp slowdown in their traffic that they seemed to have made. My guess is somebody just made a strategic decision there. They can't accept that, and so they just decided to firewall their spending on internet marketing, and we decided not to chase it. We decided not to chase it and to play our hand pat, and this is where we get to, well, let's go to Slide 19.
Wayfair's visit growth versus our visit growth. There was a point they were 60% ahead. I bet there was a month where they were closer to 100% ahead of us in terms of visit growth. That has narrowed considerably. That's down to 27%. The visit growth is narrowing. Meanwhile, they're spending 3x/ what we're spending. If we go to the next slide, you see the result of this is as they've made this move, they lost $150 million last year. They lost $150 million through their first four or two years ago. Through the first three quarters of 2016, they lost another $150 million. I don't want to opine. I have no idea what Q4 is going to look like for them, but I can't imagine that marketing spending.
I know that they made some predictions a couple of years ago about Q4 2016. I would be surprised if they came true based on what we saw them do in internet spending, and it has continued through January. They have a history of typically continuing this pattern of very high bidding up through the end of January in each year. So that, I think, in a nutshell, let's just say really where we are. We have a great business model. We have a great business model. We have a competitor now who has a very similar business model, doesn't have, I believe, a lot of the kinks ironed out that we do, but are making up for it by just spending 3x what we're spending to get a visitor.
They've made a strategic decision to just that they can't afford to let their growth if you go back a slide and you see how their growth is compressing. They can't afford to take that. So they've just chosen to be a company that loses $150 million-$175 million for the year, while we're a company that makes our retail business made $32 million pre-tax. I would have once said that we live in a universe where we can make $32 million a year longer than they can lose $180 million a year. Given that this is the internet, I'm not sure that's true anymore. But I know that we can lose $180 million and we can have a $4 billion business overnight. We can do this overnight. That's not the but we're not going to do that.
We said years and years ago that we were trying to structure our business to be profitable once we reached $1 billion. We reached $1 billion. I don't know how many years ago, but since then, I think this since we reached $1 billion, we've been consistently profitable, and here they are at $3 billion or something, and they're still losing $150 million-$180 million a year. So I don't know what to tell you about that. Like I say, strategically, I would have once said, "Let's just rope-a-dope. Let's just sit back, and these folks will burn themselves out like everyone else." I won't lie to you. Competing against somebody who has copied your business model and then is comfortable just losing $150 million or more per year is a tough nut.
But what it means is that it drives us to further innovation, spending smarter. And I think you have to look at how we do things, and you can already see that we do things smarter. We are spending is smart. And that's why we're spending a third less than I mean, a third of what they're spending to get a visitor. I wish I had the kind of pockets. I guess Goldman Sachs and Bank of America are behind them. How odd. But they just have pockets that say, "Go ahead and lose this kind of money." I'm not sure I see a way out of it for them, but we'll see. What it means for us, though, is it puts a primacy on being smart, innovating, and being smart. We're already. I mean, I think that we already. The facts are clear.
On our marketing spend, how precise we are, but we are up against somebody who just doesn't seem to mind having these kinds of losses. We've got to be smarter, and it means that we have to innovate faster. We see lots of places. I've got a whiteboard in front of me of the 10 or 12 things we need to do this business year, this year, innovate in our business. Some of it represents real evolution in our business model, and you'll see more change in our business model over the course of this year than you've seen in, I think, any year in our history. We are evolving in response to this. To me, it's all a race to see who can evolve quicker and who can get smarter faster and come up with these innovations.
We've done, I think, a very good job on a minuscule amount of capital compared to the guys where we come up against. But we have reorganized the business along this principle. Saum and I have spent the first month of this year organizing the retail business into teams with highly incentivized pay structures where we're pushing a lot of authority to the teams and asking them to innovate faster, putting pardon me.
Jonathan Johnson (Chairman and President of Medici Business)
Bless you.
Patrick Byrne (CEO)
Thank you. Technologists on the teams and really reconfiguring the company into a group of about 40 teams that each have highly incentivized compensation structures for their team's success. We believe this will accelerate our already pretty dominant innovation cycle. I mean, again, I hear all the time from outsiders who work with us that tell me how ahead of the other folks in the internet our teams are.
We've had to because we didn't have the same kinds of capital. We've had to be, I think, very smart in how we do things. But now we have to be innovating and getting smart at an even faster pace. That is what has driven this move towards quite a decentralized and highly incentivized organizational structure. Saum really led the way on that and was terrific. So now, would you like me to break there at Saum and say, "Would you like to add anything to what I just said?
Saum Noursalehi (President of Retail Business)
No, I think that was spot on. We're, yeah, again, heavily invested in analytics and technology and automating functions throughout the business.
Patrick Byrne (CEO)
And we're getting unbelievable people, people so far above anything we've ever attracted. Sometimes people from senior positions from our competition, but a lot of times just real scientists and not from our competition, but we're just getting an unbelievable, we're attracting a strain of talent like we've never been able to reach before. Next slide, Medici. You can see each of the investments in Medici. Jonathan runs this. Jonathan Johnson, Chairman of Overstock, is President of Medici. Soon, I hope to be CEO once we spin this off out of the nest and it flies on its own. Jon has done a fabulous job, frankly, in the last four months. My gosh, what an executive my old general counsel has turned into.
He and Steve Hopkins have done a fabulous job in getting this corporate structure organized, correct the corporate books done, getting these investments, setting up real procedures for vetting new investments. And the real theory of Medici, I think, is starting to already show. The theory is this is somewhere I'm not even sure what the right name for it is. It's not a VC. It may be kind of an incubator.
But we have now this table of six investments. Jonathan says he might take it up to about a dozen investments. There's a few more processes that we might want to have a stake in. But we're having all kinds of synergy emerge. The work we've done in tZERO is world historic. I mean, I think in 10 years, the security markets will all be blockchain. The world's first private or public security just got well, let's go to Slide 22.
Jonathan Johnson (Chairman and President of Medici Business)
May I just comment on Slide 21 for a second? Because we had a similar slide last quarter. But there's some new entities on here. Toward the end of the year, we invested in Factom, which is using the blockchain to develop mortgage compliance and land titling solutions. We think that's an area ripe for growth with the blockchain.
This month, we've closed a deal with SettleMint, which is a company based in Belgium that's using the blockchain for both voting and land titling. And then you'll see underneath tZERO, our fintech company, we've made investments in two companies since we last talked. One, Blue Ocean Technologies, and the other, FusionIQ. We think those are going to be particularly useful not just for tZERO, but in doing things, integrating into Overstock and providing.
Patrick Byrne (CEO)
Oh, sorry. Retail.
Jonathan Johnson (Chairman and President of Medici Business)
Overstock retail. Thank you. Providing growth there. So we continue to see blockchain deals. We get the first look all the time. I think there are three things that blockchain companies find appealing about Medici Ventures. One, we're investing in the space. Two, we have unique human capital that we can provide to help companies that we invest in. We've got a very good stable of developers, a development team that works on different projects of companies that we've invested in that's appealing to these startup companies.
And third, the synergies that we see among this portfolio of companies we've invested in is just fantastic. We had three of them out earlier this month. We'll be having all of them out at different times during the year. This is such a greenfield of opportunity that when the bright minds get together, good things seem to always happen.
Patrick Byrne (CEO)
Yes, exactly. We're getting these people together from different countries, different companies, even different continents. And you have somebody saying, "Gee, that module, we plan on building this module next month." And someone else is there and said, "Well, we just built it ourselves." And so there's real advantage emerging in this group. And we do have, as Jonathan says, we have first look at, I think, any blockchain investment.
I'm not at all because of our sort of premier role in the blockchain and the Bitcoin community. I was just at a group of a gathering of the entrepreneurs in this field called the Satoshi Roundtable. And I'm frequently told that people would rather have investments from us than any VC. We bring so much credibility in so many ways along with this great support.
It's really working out beautifully to have when somebody at one of these companies needs an expert on database architecture or something, we have 700 people in our company, technologists who can offer support. So it's really worked very nicely having this incubated within the Overstock retail structure. On the next page, you see this was the March to History. Jonathan, why don't you?
Jonathan Johnson (Chairman and President of Medici Business)
I just really have to have people focus on the bottom bullet. In December, we had the first-ever digital equity offering that trades on the blockchain. Overstock has a preferred share, OSTKP, which trades off an exchange on the tZERO platform and settles immediately or the same day on the tZERO blockchain. It's a big deal, and the offering went well. We raised about $12 million between the two different preferred stocks. We were pleased with it. We kind of viewed it as a proof of concept to show that this could be done, but frankly, the way it's performing, we see it as something that works and is not just a proof of concept.
Patrick Byrne (CEO)
Right. And I'm going to go back to Slide 21 for just a second just to point out how I'm thinking about this. If you set aside so there are synergies. By having Medici housed right here in Overstock and having kind of first call on tech assets and being part of this culture, there's a lot of good value that is created by that. You also have the possibility of synergies between Overstock retail and some of the stuff in tZERO. If we set those values aside, those are pebbles on the scale. If you set that aside, what the gods of economics want to have happen is Medici gets spun off. Probably the right way to do it is we have opportunities to capitalize. I believe we have opportunities to capitalize tZERO in the near future.
There are other people who are interested in capitalizing at the Medici Ventures level. The reason is people who want to invest in the blockchain but who themselves aren't going to be picking investments and working at this level with them and then give their money to a venture capitalist. But what we have here is sort of a venture capitalist plus. We are putting some capital in these companies and really helping them. And some of these people are real startups and just having a professional HR department that can stand up their HR department and lawyers and accountants who can step in and show some of these startups or a lot of the blockchain folks are young revolutionaries. And they don't maybe know exactly how to keep a chart of accounts.
And so it's been, I think, that Overstock headquarters has provided a lot of structure and help to them. But all that said, so there are people who want to invest in blockchain and who have talked to us about Medici Ventures being something to invest in. And I think Jonathan and I think of it as a general strategy. We probably want to focus on getting investment into tZERO. But there's somebody else that we're talking to that might put something into the Medici Ventures level.
Of course, it's kind of funny. The cheapest thing would just be to buy Overstock stock, and that gives them the stake in it. And in closing on that, I'm quite open. If you set aside the values of having it enmeshed in Overstock retail and the value setting aside that Overstock retail might do business with a couple of these, setting that aside, Medici Ventures probably does belong being spun off on its own.
Jonathan Johnson (Chairman and President of Medici Business)
We're exploring that. That's something that we will find the right way to do. If good partners want to invest in Medici Ventures, we're going to look at that. We think we've got a great portfolio and a portfolio that will expand into the areas that we're focusing on. But it's nice to be part of Overstock today. There are a lot of synergies at some point. I do think we'll be a little bit more autonomous.
Patrick Byrne (CEO)
Yeah, and I'd favor a cash-free spinoff. However, there are IRS we have to do the analysis on: can we get the IRS to let us do a cash-free spinoff, so everybody has a share in Overstock. It's a share in this or something.
Jonathan Johnson (Chairman and President of Medici Business)
We're doing the work. We'll get there, and we'll keep our shareholders posted as we get more answers.
Patrick Byrne (CEO)
Yep. And that may not be possible. What I just said may not be possible. So people with law degrees are working through it.
Jonathan Johnson (Chairman and President of Medici Business)
So we've had a number of questions emailed in ahead of time. Let me kind of emcee as those have come in and have them put out for answer. We've been in the headquarters for a little less than half the year. Are the near-term and long-term financial benefits that we're experiencing those that we thought? Patrick, tell us about the headquarters.
Patrick Byrne (CEO)
Certainly the cultural benefits are enormous. Having these departments which have been in buildings 15 miles apart now all together and working together, there's benefit there. The company is so much happier. There's all kinds of karmic and cultural benefits. Financial benefits, I think, are going to show up in the stability of that number on that bar on that bar graph showing what our corporate G&A costs are. I think that it's going to buy us several more years of being able to grow with the company with a relatively flat G&A structure. We won't really know. We made some gambles on things like healthcare. We improved the quality of our healthcare offering substantially.
We also threw another a couple of million dollars into things for employee welfare on this new campus from daycare to a gymnasium to healthy food and all kinds of things like that. It'll take a couple of years of experience before the actuary on staff can tell us did it, in fact, defray expense. But we've tried to be relatively modest in that bet. But we have sunk a couple of million dollars. We've had for a few years, a number of years, a higher voluntary attrition rate than I would have liked. We used to have some of the lowest I'd ever heard of. We had like a 5% or 6% voluntary attrition rate. It went up to several multiples of that. It's now on its way back down.
The real cost of attrition, the attrition consultants will tell you that the real cost of attrition in our company might be $15 million-$20 million a year. Of course, that's your own barber telling you you need a haircut. But as our attrition comes down, that should have other salutary effects throughout the income statement. Jonathan?
Jonathan Johnson (Chairman and President of Medici Business)
I would also say I think our employees, by and large, are happier, more productive, and more creative in the new space. It's remarkable what simple things like having direct access to sunlight in every office, conference room, working space, cubicle, every place has direct access to sunlight. The collaboration that I see in our open spaces happening every day is really quite impressive. So I think the building has been a great investment.
Patrick Byrne (CEO)
I was going to let me hit these next questions because they're for you.
Jonathan Johnson (Chairman and President of Medici Business)
There's some that are related to the building that have come in here. Someone's asked, do we see our technology hiring being done, or have we hit a place where our G&A and tech expense lines are flat?
Patrick Byrne (CEO)
The G&A line is flat. We want more technologists.
Saum Noursalehi (President of Retail Business)
Yeah. I think while we are running lean, there are still areas we need to invest a bit more in technology. So I think we're going to continue to grow there.
Patrick Byrne (CEO)
But I think this may be a race to who can hire and integrate the most and the best technologists. Can I move on to a different?
Jonathan Johnson (Chairman and President of Medici Business)
Sure.
Patrick Byrne (CEO)
There's a couple of questions that have come in regarding crypto and fintech. So let me give these to Jonathan. One, I'll combine the first two. With the crypto stock and bond offerings complete, have you been able to generate interest from other companies in leveraging your technology for their own offerings? Can you discuss the economics to Overstock of such transactions? And can you give us your update on your thoughts on monetizing these Medici efforts, including licensure technology and spinning off any of your holdings?
Jonathan Johnson (Chairman and President of Medici Business)
Sure. So there has been interest. We've had several companies reach out to tZERO to use their platform. The platform works well. Companies need to do a filing with the SEC so that they can issue digital shares. Some are in the process of that. But there has been a lot of interest. I think breaking the speed of sound, so to speak, and getting this done, there was a sonic boom that many heard.
We continue to have people overseas, in particular, interested in using the technology we're developing within tZERO. So the economics to Overstock, as far as tZERO and Medici being rolled up into Overstock's financial statements, anything that tZERO and Medici can do better will help Overstock. I do think we're probably at least a year away from Medici being profitable in and of itself. But I could be surprised. The interest coming from others has been significant, and as far as spinning out, Patrick talked about that. We are looking to raise money. We're going to do it.
Patrick Byrne (CEO)
Medici.
Jonathan Johnson (Chairman and President of Medici Business)
Medici Ventures. I'm sorry. Medici Ventures is looking to raise money, and if we can figure out how to spin it out in a good way for the company, Overstock's shareholders and Medici Ventures, we will.
Patrick Byrne (CEO)
Yes. I will point out, if you go back to Slide 21 and you look at our investments in these businesses, it roughly comes to $50 million and some giblets. I believe that our ownership of this stable of assets, and these are some of them, are the real tZERO is the world leader. I have to emphasize something. I go to these blockchain conferences on Wall Street and all this stuff. And what people always point out, and it's nice to hear, they say, "Gee, other folks show up at these conferences and they talk about what they're going to do and their big dreams and stuff." Every conference we show up, and we've done something.
We've checked something off from a private bond offering to an SEC approval to a FINRA this, to a public offering. So I think that tZERO is the world leader, I believe, on blockchain meets capital market. PeerNova, Jonathan, why don't I let you speak for a moment about PeerNova? I don't want to—you're on the board or.
Jonathan Johnson (Chairman and President of Medici Business)
Yeah. So PeerNova is also involved in the fintech space. They're developing great technology that lets banks use the blockchain for their compliance needs. Banks spend hundreds of millions of dollars on compliance that can be done so much cheaper on the blockchain. They've finished proofs of concept for a bank or two and are close to having a first-in-production piece. We like PeerNova. We invested in them originally. They were originally miners. Then they became kind of a hardware play. But their business has morphed to solving a problem that the banks need solved and are willing to pay for.
Patrick Byrne (CEO)
Yeah. It's really like the Consolidated Audit Trail that the SEC is supposed to be developing. It kills me. They're going to be spending $1.5 billion, I think I heard, on this solution. And a blockchain-based capital market, all that comes out for free. An audit trail because blockchain is immutable and transparent and everything. You get all that. So a great application are these PeerNova applications they are pursuing.
Bitt is the world's leader on blockchain meets central banking. Factom is the name in blockchain meets land titling and blockchain meets well, they've kind of pivoted into blockchain meets mortgages. Mortgage applications because they see land titling, I guess, as the next step. IdentityMind, just one it's not blockchain. It is fintech, and it just was named one of the 50 hottest young tech companies in America or something. SettleMint is the only one that people wouldn't know.
It's a group of very fine blockchain people in Europe, and we're really, really attracted to them as people. They came out of the banking industry, very good technologists, and I mean, we know everybody in this field. They come through our offices. Everybody in this revolution, we're on a first-name basis with, I think, and we selected these people just really on, they're really quality technologists and people. We made an angel investment. But if you set that aside, so we have $53 million or something invested across this stable of assets. The value of this stable is a lot higher than $53 million.
Jonathan Johnson (Chairman and President of Medici Business)
Oh, no question.
Patrick Byrne (CEO)
So Jonathan is creating a lot of value with this already.
Jonathan Johnson (Chairman and President of Medici Business)
No question. Let me.
Patrick Byrne (CEO)
Oh, let me go one more from outside. Somebody asked, What was the rationale between your acquisition of Blue Ocean?
Jonathan Johnson (Chairman and President of Medici Business)
So Blue Ocean is a very interesting technology that's a fintech company that's allowing people to trade in U.S. equities aftermarket overseas. There are Chinese investors who are eager to participate in the U.S. equity markets aftermarkets. And Blue Ocean is doing that, and we think it's a nice fit within fintech. We got a great deal on it and made the investment.
Patrick Byrne (CEO)
And it leverages the assets that we acquired within SpeedRoute because it requires an ATS, which we have, a licensed ATS. Okay. So next, why don't you?
Jonathan Johnson (Chairman and President of Medici Business)
In our investor call at the end of November, we suggested the retail sales could grow at a step function prior to the first quarters of the year. How did performance deviate and why?
Patrick Byrne (CEO)
It did not grow at a step function. If anything, it took a step down. And that really came about because in December, because of this phenomenon I described from Wayfair, that you just saw this radical, what would in our view be an overspending on marketing, where they're spending way beyond, literally bidding 4x or 5x what we bid for a keyword. They were really, really chasing growth.
They are really clearly afraid for growth to come down, and they're going to keep growth up at any cost, although that cost is going up and up. So once we saw that, Sun Tzu has said, "When the enemy advances, I retreat. When he occupies the highlands, I occupy the low." I don't want to go up against Goldman Sachs and a Goldman Sachs-backed venture on who can bid more for barstools as a keyword. It just means we're having to. There's other places for us to focus our efforts, and Saum, why don't you add to that?
Saum Noursalehi (President of Retail Business)
Yeah. I'd say, to your point, we were focused on profitability. And we did see a step up in October. But as Patrick mentioned, the elections, we saw a decrease in growth during the election period. And then again, we marketed our profitable categories, which you saw the 132 basis points and increase in gross margins. That's a result of that. But this hurt us in top-line growth because those categories became a larger percent of our mix.
Jonathan Johnson (Chairman and President of Medici Business)
Okay. Another question that came in is, "Congratulations on a resurgence in sales. To what extent is this being helped by the significant ramp-up in SKU count in the fourth quarter? And what do we see in 2017?
Saum Noursalehi (President of Retail Business)
We realized some of the benefit in Q4, but we're still at the early stages of testing this. You can expect to see revenue accelerate from SKU growth in the coming quarters.
Patrick Byrne (CEO)
Yes. And I would jump on that with, this is one of the evolutions in our business model. You will see a radical expansion of our assortment. For years, we were focusing on being the curated assortment, and we were up against people who were also trying their own curated assortment and so forth. At the end, who was it that said, "Quantity is its own kind of quality"? Somebody like Stalin or something or Patton or I don't know. "Quality is its own quality.
Jonathan Johnson (Chairman and President of Medici Business)
Those are two very different people, Patton and Stalin.
Patrick Byrne (CEO)
It was a military leader who was saying that at the end of the day, you can curate all you want with your 50,000 products, and do all the best selection of the products and matching everything with the curtains and all that stuff that you want. Somebody comes along with 6 million products. They've got quantity as its own form of quality, so we are radically expanding our SKU count. We'll also be approaching, I think, 5 million-6 million over the next, and that's up about five times from a year ago. By the end of this year, by the end of Q3.
Saum Noursalehi (President of Retail Business)
End of this year.
Patrick Byrne (CEO)
It gives us a different ground to compete on. Anyway, we'll be talking about that.
Jonathan Johnson (Chairman and President of Medici Business)
So are you still discounting and promoting to drive sales? If so, is it helping? And what impact does it have on operating profitability, gross margin?
Saum Noursalehi (President of Retail Business)
Yeah. It is part of our strategy. We are Overstock.com, which is a discount retailer. But our spend was in line with other Q4s, which helped drive a lot of that improved gross margin mix that we talked about. We're focused on offsetting these costs, however, with supply chain efficiencies and partner subsidies and more intelligent targeting.
Patrick Byrne (CEO)
Yes. I think that this is an example of how we pivot. As we see an opponent doing what they're doing in the digital marketing and just radically expanding what they're willing to pay to get a visitor, rather than fight them there, we have other places we can put the money. We have a little jiu jitsu. We have places we can pivot to, and there's always some place where there's always a vulnerability, and when we saw what they were doing, we decided this time not to go head-to-head against it, but to go other places, and that sort of explains why we are still doing more discounting and promoting than I would have anticipated.
Jonathan Johnson (Chairman and President of Medici Business)
So there's a number of questions that have come in on Club O, some of which we may ask for information we don't provide, but let me ask them. What's our subscriber count? What's our subscriber count for Club O as a percentage of sales? What percent are Club O sales? And just update us on the trends with Club O members, including Club O Gold. Are we happy with the way the Club O program is performing?
Patrick Byrne (CEO)
I'll give a quick note. It did kind of stall for a year. We introduced Club O Silver, and that probably hurt Club O Gold. We've now changed Club O Silver, and Club O Gold is back doing nicely.
Saum Noursalehi (President of Retail Business)
Yeah. It was a free-for-email sign-up program that earned 2%. We ended that. We sunsetted that at the beginning of Q4, late Q3. And we're focused on our Gold program, which is a significant part of our business. I don't know if we want to talk about the exact amount, but I think there is a lot of opportunity here. And we're currently exploring a premium tier of the program that I think will be of great value to our customers.
Patrick Byrne (CEO)
Yes. And it would be a premium tier devised in a way or the set of benefits that nobody else has brought, anything like it, to the internet. So it will really pick out a nice subsection of the market that we want to have as our customers, the benefits we will be offering in the next Club O program that we introduce.
Jonathan Johnson (Chairman and President of Medici Business)
Next question. Patrick has to deal with international. How did international sales perform in Q4, and give us some thoughts on your mix on international going forward.
Patrick Byrne (CEO)
I think that we finally have the right constellation of people in international. We did write down the Middle East. We have found a couple of places to focus that we think we can, and we have brought the technology live. Back last night, we switched something big on. And I think that you'll continue. It's actually international is growing nicely faster than the rest of our business at this point. And I would expect you'll see international this year start contributing enough percentage points to the business that people will take notice. Saum, you want to add anything?
Saum Noursalehi (President of Retail Business)
No.
Jonathan Johnson (Chairman and President of Medici Business)
So our question about Q4 2015, when the questioner says we had strong sales of hoverboards, wants to know if that created a tough comp for the 2016 holiday period.
Patrick Byrne (CEO)
No, not really. Although we didn't. Well, I think we talked about this last time. It wasn't a significant impact in sales. And if anything, it had high returns. They were catching on fire, so it actually hurt our margins quite a bit. Yeah. This year, we focused on the Samsung Galaxy S7 instead. I was a kid. That was a joke.
Jonathan Johnson (Chairman and President of Medici Business)
Yeah. If you've been on the plane, you know you're not allowed to own it or carry it on the plane. Here's a question about, did we do special promotions over Black Friday and Cyber Monday? And in the past, we've ramped up promotions up and down based on concerns about types of sales. How was our Q4 promotions, and what do we think they did to help us going forward?
Saum Noursalehi (President of Retail Business)
I think we had really strong promotions during those peak shopping periods like Black Friday, Cyber Monday. But again, our strategy was more on profitability. And we saw competitors just significantly overspend in Q4. And if anything, I think Q4 this year, we actually may dial back a bit.
Patrick Byrne (CEO)
Yeah. I don't want to chase. Yeah.
Jonathan Johnson (Chairman and President of Medici Business)
So another question came in about Wayfair, and this was sent before you went over the four or five slides you did. But Patrick, do you want to say anything more about how we compete with Wayfair?
Patrick Byrne (CEO)
Sure. When I think, a lot of people have started off on the internet with a model that says, "We'll lose money and grow," and just gets so big that at some point, it becomes impossible to lose money. A lot of businesses went bankrupt with that model. I can think of one that took that and made it work, Amazon. When they were multi, multi, tens of billions of dollars, they got to the point they were profitable. I haven't seen anyone else make it work. And we've had a lot of people make runs at us over the years that are sort of roadkill now. People probably barely remember the names, and I won't bring them up, but who had that strategy.
We think the discipline that we show back on slide, whatever it was, 2020, that discipline of keeping the retail business nicely profitable is a good discipline. We can turn around and do what Wayfair is doing in a heartbeat. The trick is having growth without losing $200 million or spending 3x or spending marketing is 8%-10% of our GAAP base. I guess it's somewhat over 8% of our cost. We can triple that and have another we can triple that and have it be 24% and growing like crazy too. But that's not how we're going to run the business, and we've taken this. We've been at this juncture against opponents many times and sort of stuck to our principles.
And over time, we've yet to see anyone but Amazon pull off what Wayfair is trying to do, which is just grow like crazy, lose a bunch of money, and someday you're going to turn down the marketing, and you're going to have a great business. We've modeled their business, and I believe we have the same retention rates and such as they do. I think that that strategy, if they dial their business down, their growth down, if they dial their marketing down to the point that they were not losing this much money, I think that you would see their growth tip over. So is it a freight train? Yes, it's a freight train, but.
Jonathan Johnson (Chairman and President of Medici Business)
Anyway, we've had some more questions come in during the call. You mentioned companies that have gone bankrupt in the past. Someone asked, "It appears some retailers had very hard fourth quarters. What kind of opportunities does this present for Overstock to purchase excess inventory at potentially attractive terms?
Patrick Byrne (CEO)
I just sent a link to some colleagues of mine who are in that side of the business about just this and the retailers who are struggling, and we want to reach out to them. However, the truth is, in the past, the right thing to do once goods are in the retail distribution system and they've made their way all the way down to the store at some department store, generally, the reverse logistics of working with us make it prohibitive. It's better to be working with the manufacturers. And so this holiday season did crush retailers, and I think that this will go down. This will have been a historical Christmas season. It really was the death knell for brick and mortar, old-style brick and mortar. And I'd much rather have our hand than theirs.
But really, the real opportunities come in at the manufacturing level, not so much buying from these retailers themselves, although where if they already have the inventory, what the gods of economics want to have happen is that they put the inventory up on our site and handle the shipping themselves. So there will be opportunities if it's somewhere in the supply chain because of this. And I think it is. I think it's bloody out there for them. And we were looking all through the Christmas season at the foot traffic statistics into the stores. I almost felt badly for them. I mean, I did feel bad. Yeah.
Jonathan Johnson (Chairman and President of Medici Business)
Not too badly. Anything more you want to say on North American expansion? We've talked about growing in Canada in the past. A question came in. What more can we say on the progress there?
Patrick Byrne (CEO)
That was actually the big thing we rolled last night. A whole new checkout process. It's been in test for a couple of months with Canada. We've now rolled it across Canada. You will see a lot more of activity from us in Canada this year. That's where I think you'll see very significant international growth.
Jonathan Johnson (Chairman and President of Medici Business)
Okay. Here's a question that came in that I fully expected because we've heard about when will we repurchase shares quarter-after-quarter. Can you explain how you were able to buy back stock that you announced earlier this week?
Patrick Byrne (CEO)
Yes. We bought back $10 million worth from Fairfax. I'd like to buy a lot more back. I'd like to buy a lot more back. Because of our building's mortgage, we have bank covenants that somewhat shackles us. So there's ways around that. One would be to sale-leaseback and take out the mortgage and then use the capital. But believe me, it's a high. We have a board meeting in two days, and the hot topic on everyone's list is buyback or other such strategic decisions. Rob, why don't you opine about our constraints if you want?
Rob Hughes (SVP of Finance and Risk Management)
I would just add we are in discussions with a number of parties, including our current bankers, who I think now understand what we want to do. Also, some parties have come to us with interest in sale-leaseback possibilities. We're also in discussion with some bankers about bond raising possibilities. That's the backdrop to accomplish your objective. We're having discussions with all of them right now. We'll see where that goes and where the board wants to go.
Patrick Byrne (CEO)
Yeah. I would love if only we have how much cash do we report at the end of the quarter?
Rob Hughes (SVP of Finance and Risk Management)
$183 million, I think it was.
Patrick Byrne (CEO)
That was after we did that extra $24 million that. So where do you think cash will stay stabilized by the end of this quarter? You say within the.
Rob Hughes (SVP of Finance and Risk Management)
That's a little hard to predict. I'd rather not predict that.
Patrick Byrne (CEO)
Okay. We have ample cash, and I would love to go out and splurge and buy in another four million shares, frankly, or five million shares. We currently wish and maybe do it to buy that many in. Either we do it. It was nice being able to do this with Fairfax at the market. We did it at the market. And that's a nice, convenient way to buy stock in, but we can also do things. We have talked to bankers about conducting a Dutch auction tender for us, which would be another way to buy in stock. But if we have somebody who will sell us this at the market, that's, to me, a preferred plan.
Jonathan Johnson (Chairman and President of Medici Business)
I mean, frankly, to be able to buy 10 million shares without moving the market because it's in a single block was a unique opportunity, and we were pleased to execute on it.
Patrick Byrne (CEO)
Yeah. $10 million worth.
Jonathan Johnson (Chairman and President of Medici Business)
$10 million. And so, yeah. Thank you for correcting me.
Patrick Byrne (CEO)
Can you stand by just a moment? I'm putting you on mute. Hang on.
Jonathan Johnson (Chairman and President of Medici Business)
I would say if there are shareholders on the call that are interested in purchasing a large block, you may want to talk to Fairfax.
Patrick Byrne (CEO)
Yeah. Whenever I talk to hedge funds and investment funds, which isn't so often, one of the things people invariably say is, "Gee, we like this, but we can't develop any position. We can't accumulate any position. Your stock trades 50,000 shares a day. We can't." There's a chance for anyone who wants to develop a large position, I think should probably call Fairfax and could do a deal.
Jonathan Johnson (Chairman and President of Medici Business)
Yeah. You talk about thinly traded stock. A question came in. There's been very little liquidity in market pricing in our Overstock Series B Preferred. This is the non-digital preferred in the month it's been trading. Will we consider converting them to common so the shareholders have some liquidity in market pricing? Let me answer.
We've been working with several market makers that have filed what are called Forms 211 with FINRA to create a more liquid market in the Series B stock. FINRA is working through those applications. We do expect them to be approved before too long to create more liquidity in the Series B. If it continues the way it is, we do have the ability to convert the Series B into common, and we would consider that.
Patrick Byrne (CEO)
But why would someone do that if they're giving up? Well.
Jonathan Johnson (Chairman and President of Medici Business)
If there's very little liquidity and today, without the market makers, there isn't much, they might.
Patrick Byrne (CEO)
Is there a big liquidity discount in the B?
Jonathan Johnson (Chairman and President of Medici Business)
Yeah. There's very little liquidity there.
Patrick Byrne (CEO)
What is it?
Jonathan Johnson (Chairman and President of Medici Business)
Because there's no market makers, and we've got four that have submitted applications to FINRA to do that.
Patrick Byrne (CEO)
Is there a bid-ask currently, a bid-ask for the B?
Jonathan Johnson (Chairman and President of Medici Business)
I couldn't tell you.
Patrick Byrne (CEO)
When last I saw on the A, the digital, the blockchain, there was a significant, say, 6%-10% liquidity discount in the bid. So I can see your point that somebody might want to get out of the B and get common, and that would be great.
Jonathan Johnson (Chairman and President of Medici Business)
Yeah. A couple more questions. Can we comment on the amount spent in the fourth quarter on fintech, and what do we expect CapEx to be in 2017? I don't know if those are questions we typically answer. CapEx in 2017 and fintech spend in Q4.
Patrick Byrne (CEO)
Let's go ahead. CapEx. Rob, why don't you tell them what our real CapEx is?
Rob Hughes (SVP of Finance and Risk Management)
Yeah. On the CapEx, without the building and so forth, in a more normalized year for our software developers and our IT infrastructure, typically runs around $25 million each. Occasionally, there's some overhaul of our server systems, and it'll be a little lumpy, but on average, that's what it would run.
Jonathan Johnson (Chairman and President of Medici Business)
Okay.
Patrick Byrne (CEO)
Yeah. And that basically matches our depreciation. I mean.
Rob Hughes (SVP of Finance and Risk Management)
Pretty close. I think the depreciation issue is a little higher than that, but.
Patrick Byrne (CEO)
But they just.
Rob Hughes (SVP of Finance and Risk Management)
Okay, but I'm trying.
Jonathan Johnson (Chairman and President of Medici Business)
Fintech in Q4, do we want to?
Patrick Byrne (CEO)
Fintech.
Rob Hughes (SVP of Finance and Risk Management)
Do they mean?
Patrick Byrne (CEO)
Do you mean in Medici?
Jonathan Johnson (Chairman and President of Medici Business)
Yeah. I mean, I guess.
Rob Hughes (SVP of Finance and Risk Management)
I mean, I'm not sure what that means. We have Medici results in the press release.
Jonathan Johnson (Chairman and President of Medici Business)
Yeah. I mean, it lost money in the fourth quarter. Frankly, we'll lose money in 2017, likely, unless some of this interest material turns into licensing revenue quicker than we think. We have plans for that to happen, but if it doesn't, we're ready to continue at pace and build the business because we think the long-term enterprise value of Medici will be significant.
Patrick Byrne (CEO)
Okay. I have an email has come in from Carl. I recognize the name. I'm trying to remember where this gentleman is. But Patrick, tech investments continue at a feverish pace, but the important investment in technology surrounds encryption. How, when, and how much is the blockchain investment for Medici being over $11 million in 2016 going to garner returns for owners?
I, for one, would like to see licensing revenues sooner rather than later. And you've set expectations high, Patrick, contrary to what the old man from Omaha advises. It's not unfair of us to ask for fast returns from these mammoth capital expenditures. Well, first of all, I think I will say that while this lost $11 million last year, Medici, we think that maybe cutting that in half this year is the right order of business.
I'm not sure that I don't recall ever promising fast returns from these Medici investments. If anything, just the opposite. We're almost at the level of fundamental research like R&D. We are commercializing it, but I would not expect fast returns. On the other hand, there are opportunities. Jonathan?
Jonathan Johnson (Chairman and President of Medici Business)
I mean, there are opportunities in tZERO for significant licensing revenue. Some of the investments that we've made that are on that structure slide, because we own a sliver of them, as those companies make money, it does not roll up into our financial statements. There's still great value being created for our shareholders, our owners.
Medici Ventures is a little bit of a difficult beast to describe. At some level, it's like a venture capitalist firm. At some level, it's like an incubator, a fosterer of new businesses. We do have businesses that we operate. Most of the money we've deployed is in businesses that we are operating, tZERO, and its subsidiaries. I think we're creating value for shareholders.
Patrick Byrne (CEO)
Yeah. I think the value you're going to see in 2017 out of Medici is that you will see investments in some of these assets at significantly higher valuations than we are in. So on a see-through basis, you will see if tZERO is able to turn around and get an investment at a multi-hundred-million-dollar kind of pre-value valuation, then it has created hundreds of millions of dollars of value. It's just not showing up on a see-through earnings basis. It shows up, but.
Jonathan Johnson (Chairman and President of Medici Business)
I'd also comment that some of the companies that are in the Medici portfolio, specifically PeerNova and IdentityMind, have had up rounds of investments since we invested. So other investors like them, their businesses are growing, their value is growing. That does not hit Medici Ventures' bottom line today, but we do think it's creating value for Medici Ventures and thus the Overstock shareholders.
Rob Hughes (SVP of Finance and Risk Management)
Yes. And where I just said see-through earnings is to substitute intrinsic value. On an intrinsic value basis, we believe we are really on the ground floor of this revolution. And I think that we are creating intrinsic value in these investments, but that's how you're going to see it in 2017. Unless there's a tZERO is bringing some very interesting products to market, and any one of them being a hit would make all of these numbers look silly. But in the absence of that, I'm thinking in 2017 in terms of intrinsic value.
Jonathan Johnson (Chairman and President of Medici Business)
So those are our questions. We appreciate our shareholders and our owners listening in, asking questions, holding us accountable. I'll say it's been six months since I've been back in the saddle and in the building. I'm enthused. I love seeing what Saum and Patrick are doing with the retail business. It's exciting. And I love being in the Medici Ventures space. I think we've got lightning in a bottle.
Rob Hughes (SVP of Finance and Risk Management)
Yeah. I mean, we really have a unique position on the Medici Ventures side where we're getting first look at this whole revolution. Saum, a lot is riding on you. You've got our cash cow here spitting out $30 million a year in pre-tax income. Are you scared of these competitive threats we talk about every day?
Patrick Byrne (CEO)
No. I think our strategy is clear. I mentioned a little bit about it on the last call, but our initiatives are focused around our pricing, our assortment, and the convenience of our experience. I think if we focus on those things, we'll have a great year.
Yep. Exactly. Thank you for attending. Look forward to the shareholders' meeting will be this May here in our new building. So we hope our owners, some of you, many of you will fly out and see the new building we built for ourselves.
Jonathan Johnson (Chairman and President of Medici Business)
Peace Coliseum and it's campus. It is magnificent to behold, so come and see it.
Rob Hughes (SVP of Finance and Risk Management)
Cheap and under budget.
Jonathan Johnson (Chairman and President of Medici Business)
Yes. Yes. Thanks.
Patrick Byrne (CEO)
Thank you.
Operator (participant)
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone have a great day.