Best Buy Co., Inc. · NYSE:BBY
Best Buy — FY2022 Earnings Presentation
92 slides from Best Buy's earnings presentation, Mar 3, 2022
Slide 1: FY22 Results and Investor Update
FY22 Results and Investor Update March 3, 2022 1
Slide 2: Agenda
FY22 results and FY23 outlook Strategic setup and membership 8:00 a.m. Omnichannel Agenda (ET) Best Buy Health Financial discussion 9:20 a.m. Break (ET) 9:30 a.m. Q&A (ET) 2
Slide 3: Non-GAAP and forward-looking statements notice
This presentation includes non-GAAP financial measures, such as non-GAAP operating income, non-GAAP operating income rate, non-GAAP diluted earnings per share (“EPS”), non-GAAP EPS growth, non-GAAP return on investment (“ROI”), non-GAAP gross profit rate, non-GAAP SG&A expense and free cash flow. Th
Slide 4: Chief Executive Officer
Corie Barry Chief Executive Officer
Slide 5: FY22 Results
FY22 Results. BEST
Slide 6: FY22 was a record year
FY22 was a record year. 6
Slide 7: FY22 Highlights
FY22 Highlights. BEST BUY. * Delivered record revenue and profitability * Drove online and in-store NPS improvements * Expertly managed supply chain challenges * Reached fastest-ever package delivery speeds * Launched bold new membership program * Piloted multiple store formats * Invested in employe
Slide 8: FY22 Financial Results
10.4% 30.8% FY22 110 bps $4.2 billion Financial Results. 27% Note: Please refer to the supporting schedules entitled "Non-GAAP Reconciliation" for reconciliations of non-GAAP measures to the most directly comparable financial measures, which can be found on the last four pages of this presentation o
Slide 9: Environment and Community Commitments
Environment and Community Commitments. $1.2 billion 100 Teen Tech Centers Drive circular carbon neutral economy • Collected 192+ million pounds of consumer products for recycling in 2021 • Over 2M products found a second life through Trade-In, Geek Squad repair and Best Buy outlets in 2021 9
Slide 10: ESG Recognition
ESG Recognition. TOP BARRONS Most Sustainable CLIMATE Companies PLACES TO WORK 2022 for LGBTO+ Equality WORLD'S MOST S|ETHICAL ™|COMPANIES* Dow Susi bility Indices, Powered by the S4P Global CSA a BEST WORKPLACES, FOR INNOVATORS, 2022 10
Slide 11: Q4 Results
Highest-ever Record holiday Q4 store customer customer shipping satisfaction speed Results. Online sales Acquired two companies almost 40% to drive future of total U.S. sales growth 11
Slide 12: Chief Financial Officer
Matt Bilunas Chief Financial Officer
Slide 13: Q4 Revenue Performance
Q4 Revenue Performance. Enterprise Revenue Year-over-year revenue highlights ($ millions) $16,937 • Domestic comparable sales (2.1%) $16,365 • International comparable sales (3.8%) $15,196 • Domestic category growth drivers: Appliances, virtual reality, home theater, headphones FY20 FY21 FY22 Gaming
Slide 14: Q4 Non-GAAP Gross Profit Rate and SG&A Expense
Q4 Non-GAAP Gross Profit Rate. Key drivers of gross profit rate 20.7% 20.2% FY21 FY22 Q4 Non-GAAP SG&A Expense. Key drivers of higher SG&A ($ millions) $2,477 $2,348 FY21 FY22 14
Slide 15: Totaltech is a near-term investment to drive long-term value
Totaltech is profitable on a standalone basis. Totaltech now includes services, such as extended warranties and installation, that are also standalone profit streams. Over time, Totaltech is expected to drive incremental Totaltech is a near-term recurring revenue and product sales from our members t
Slide 16: FY23 Financial Outlook
Enterprise revenue FY23 Enterprise comparable sales growth Non-GAAP operating income rate Financial Non-GAAP effective tax rate Outlook. Non-GAAP diluted EPS Capital expenditures Share repurchases 16
Slide 17: FY23 non-GAAP operating income rate drivers
FY23 non-GAAP operating income rate drivers. Non-GAAP Operating Income Rate Planning assumptions 6.0% Reset incentive compensation ~5.4% Growth in Best Buy Ads Cost reduction and efficiencies Totaltech impacts Technology expense, including depreciation Promotional environment Supply chain costs FY22
Slide 18: Chief Executive Officer
Corie Barry Chief Executive Officer
Slide 19: The Path Forward
The Path Forward. 19
Slide 20: Key Takeaways
Technology is a necessity, and we are 1 the unique tech solutions provider for the home. Key We have built an ecosystem of Takeaways. 2 customer-centric assets, delivering experiences that no one else can. Our differentiated abilities and ongoing investments in our business 3 will drive compelling f
Slide 21: Purpose and Vision
Purpose To enrich lives through technology. Vision We personalize and humanize technology solutions for every stage of life. 21
Slide 22: We have far surpassed our FY25 financial targets
We have far surpassed our FY25 financial targets. 2019 Investor Update FY20 FY25 Target FY22 Revenue $43.6 billion $50.0 billion $51.8 billion Non-GAAP operating income rate 4.9% 5.0% 6.0% Non-GAAP $2.1 billion $2.5 billion $3.1 billion operating income $8B+ Increase in revenue FY20 – FY22 22
Slide 23: We are in a strong position to drive growth
We are in a strong position to drive the business forward and deliver growth. Remain a Deepen customer Deliver top- and Best Place to Work relationships bottom-line growth Revenue Non-GAAP operating income rate Non-GAAP operating income FY25 Targets 23
Slide 24: FY25 target has materially increased since 2019 Investor Update
FY25 target has materially $4.0 increased since our 2019 Non-GAAP Operating Income ($ billions) Investor Update. $3.5 $3.0 What has changed since 2019? • CE industry grew faster than we expected $2.5 • Online mix has nearly doubled $2.0 • Our operating model has become more flexible and efficient de
Slide 25: Our business has dramatically evolved
Our business has dramatically evolved. FY15 FY22 Change The products we sell are more 3.5% 4.0% +50 bps relevant than ever. 10% 34% +24 ppts Our business is much more digital. N/A 517M N/A We use our stores differently as 8.7M 41.7M +380% customers have higher expectations for speed and convenience.
Slide 26: Technology is a necessity
1 Technology is a necessity, and we are the unique tech solutions provider for the home. 26
Slide 27: The traditional CE industry is large and growing
The traditional CE industry is large And we are entering and growing. new categories. ~$300B Health Outdoor Living ~$80B ~$30B Electric Transportation Indoor Living FY15 FY22 FY23 FY25 Outlook ~$3B ~$30B Source: Historical view based on selected BEA Personal Consumption Expenditure category data; ou
Slide 28: Consumer spend on technology has been stable over time
Consumer spend on technology has been stable over time. 9.0% Share of Consumer Spending 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Electronics &Technology Appliances Groceries Clothing & Footwear Auto Education Furniture Economic slowdown Sour
Slide 29: Behavior has permanently shifted
A majority of new or increased users intend to continue engaging with digital and Behavior has remote solutions after the pandemic. permanently shifted, Digital Exercise Machine underscoring the Wellness App importance of Online Fitness Telemedicine: Mental Health technology in Playing online games
Slide 30: Larger installed base of consumers using technology
The average U.S. There is an overall larger household now has a installed base of consumers total of 25 connected devices, across 14 using technology. People different categories own more tech devices than compared to 11 in 2019. ever before. Source: Deloitte (2021): How the Pandemic Stress-Tested t
Slide 31: People will continue to use technology more
A large majority of tech owners plan to use their tech products People will continue to more or the same amount after use technology more – the pandemic as they are now. and need or want to replace or upgrade 30-50% of people who purchased their products. tech items specifically for COVID reasons pl
Slide 32: Chief Merchandising Officer
Chief Merchandising Officer 32
Slide 33: We are a leader in the tech industry
We are a leader in the tech industry. 1 of 3 1 of 3 1 of 3 1 of 4 Televisions Laptops Home PCs Audio products 10% 20% < 10% 33
Slide 34: Technology innovation never stops
Technology innovation never stops. 34
Slide 35: Iterative innovation drives upgrade cycles
Iterative Color volume Narrow bezel innovation 10” larger screen drives upgrade cycles. Ambient mode Smart platform full content Screen quality Narrow bezel Brighter Premium screen materials Voice support Upgraded sound 36% faster Lighter performance Advancements in just the last 3 years 50% more ba
Slide 36: Exciting macro trends driving innovation
Exciting macro trends driving innovation. 5G and Fiber Metaverse and Cloud Automation and Support Customization and Personalization Sustainability 36
Slide 37: Sales growth came from existing and new categories
Sales growth in the last decade came from combination of existing and new categories. TVs $12+ New category One-third from new category innovation Smartwatch Smart home billion innovation Appliances Virtual reality Drones 1 Computing Fitness Health 1Offset by declines in other categories such as mov
Slide 38: We are expanding our addressable market
Fitness and Wellness We are expanding our Outdoor Living addressable market as Indoor Living technology disrupts more Personal Electric Transportation categories and we broaden Aging, Disability, and Condition Management our solutions. 38
Slide 39: Fitness and Wellness
Fitness and Wellness. ~$34B industry Significantly expanded a curated assortment. Merchandising in FY23. Virtual Store fitness space in FY23. 39
Slide 40: Personal Electric Transportation
Personal Electric Transportation. ~$3B industry Added for FY22 Holiday: 250+ e-bikes, scooters, mopeds, dirt bikes, skateboards and go-karts. accessories In FY23: Merchandising service and repair 40
Slide 41: Outdoor Living
Outdoor Living. >$30B industry Yardbird acquisition Home consultation for Outdoor Living Traeger, Weber and Bromic 41
Slide 42: Chief Executive Officer
Corie Barry Chief Executive Officer
Slide 43: We have built an ecosystem of customer-centric assets
2 We have built an ecosystem of customer- centric assets, delivering experiences that no one else can. 43
Slide 44: Our unique ecosystem
Our unique ecosystem. Expert advice and Totaltech services Technology relationship with customer Personalized Omnichannel technology retail solutions 44
Slide 45: Expert advice and services
Expert advice and services. Deciding what to purchase Installing / setting up Getting the most of tech Help when it’s not working 45
Slide 46: Membership
Membership. BEST BUY...
Slide 47: Totaltech: complete confidence
24/7 Geek Squad tech support Extended warranties on products Free delivery and standard installation VIP phone and chat access Complete Exclusive member pricing confidence 60-day return window for $199.99 / year Free 2-day shipping Note: Best Buy Totaltech™ membership is subject to terms and conditi
Slide 48: Why launch Totaltech?
Offer a comprehensive membership program with broad appeal to all customers Elevate the customer experience by Why launch providing unique benefits our customers value and no one else can provide Make it inconceivable to purchase tech elsewhere Totaltech? Increase customer frequency and capture a la
Slide 49: Customers love Totaltech
Customers “Best Buy has love Totaltech. become a one-stop shop for any of my Increased 60% increase interactions electronic needs. The membership Elevated customer 1,400 bps higher enhances my experience experience because I get discounts and Increased enrollment 2x higher rates protection.” – Total
Slide 50: 4.6 million current members
4.6 million current members1 Double membership FY25 target 1As of February 20, 2022, includes auto-conversion of approx. 3.7 million previous Total Tech Support and other legacy support programs, net of cancelations. Launched nationwide in October 2021. 50
Slide 51: Executive Vice President, Omnichannel
Executive Vice President, Omnichannel 51
Slide 52: Our unique ecosystem
Our unique ecosystem. Expert advice and Totaltech services Technology relationship with customer Personalized Omnichannel technology retail solutions 52
Slide 53: Leveraging omnichannel capabilities to meet the customer
In the past two years, we leveraged our industry- leading omnichannel capabilities to meet the customer. 70% of the population Virtual interactions increased Turnover near lives within 10 miles of a 150% to 45 million pre-pandemic levels Best Buy store Online sales expanded Customers using Best Buy
Slide 54: Focused on customer experience and operating efficiencies
Optimize Reimagine workforce physical presence As we look to the future, we are focused on both the customer Enabled by technology experience and operating efficiencies. 54
Slide 55: Our workforce evolution
Improved store labor efficiency and productivity … 100 bps+ Our workforce • Material increase in store productivity • Maintained strong store NPS evolution. Rate improvement in domestic store labor • Field turnover rates remain expense as a % of revenue significantly below the retail average compare
Slide 56: Geek Squad Services
Geek Squad Services. Mobile phone Technical repair customers workforce 35%+ 8.5 years & 86% new or re-engaged tenure retention with Best Buy Customer Experience NPS by Workforce 82 90 NPS 75 NPS NPS In-Store In-Home Remote Support After we complete their repairs, customers Spend 1.7x more Engage 1.6
Slide 57: Consultations
Consultations. Access to Inspire What's Create Loyalty and Expertise Possible Brand Love Employees who have Customers spend 17% 92% of customers said the skillset to complete more across their lifetime they are likely to continue consultations has value and purchase more working with their expert gr
Slide 58: Virtual Store
Virtual Store. Chat Voice Video Experience and Partnerships 17 Vendor Partners at launch Higher Higher Improved Close Rate Sales Satisfaction Nearly 60 vendors by end of FY23 3x 1.5x 20% Higher Rev/Order Higher Note: Comparisons are to our traditional chat experience 58
Slide 59: Experiential Store tests are positive
Early learnings from our existing Experiential Store tests are positive, and we are expanding to more locations in FY23. 59
Slide 60: Experiential Stores
Experiential Stores. +370 bps • Customer spend NPS improvement • Customer penetration within retail trade area In FY23, we are expecting to remodel approx. 50 additional stores. 60
Slide 61: Outlet Stores
Outlet Stores. In FY22, gross liquidation recovery rate vs. alternative channels. 2x We expect to double1 the number of Outlet stores in FY23. 1From 16 at the end of FY22 61
Slide 62: Charlotte, NC Holistic Market Approach Pilot (before)
Charlotte, NC Holistic Market Approach Pilot. 12 Best Buy stores 45K 4 Stores Before 30K 7 Stores Hickory 20K 1 Stores Mooresville Kannapolis Charlotte Northlake Concord Mills Gastonia Midtown Charlotte Matthews Pineville Charlotte Monroe Rivergate Blakeney Rock Hill 62
Slide 63: Charlotte, NC Holistic Market Approach Pilot (after)
Charlotte, NC Holistic Market Approach Pilot. 12 Best Buy stores 35K 1 Store 30K 2 Stores After 25K 2 Stores 15K 5 Stores 5K 1 Store Outlet 1 Store Changes in square footage -24% +100% -5% Sales floor Warehouse and Overall fulfillment square footage Access Points 260 Locations in Metro Charlotte Emp
Slide 64: Self-checkout, virtual store, fulfillment lockers
Self-checkout Day-of-delivery tracking Virtual store Fulfillment lockers 64
Slide 65: President of Best Buy Health
President of Best Buy Health 65
Slide 66: Our unique ecosystem
Our unique ecosystem. Expert advice and Totaltech services Technology relationship with customer Personalized Omnichannel technology retail solutions 66
Slide 67: Why is Best Buy in health?
Why is Best Buy in health? Technology is Health is moving moving into health into the home ~$80B 50% $265B 61% market opportunity growth in consumers of Medicare services of patients prefer for health, wellness using smartphones could be delivered in inpatient-level care at and virtual care to manag
Slide 68: Best Buy is a trusted in-home advisor
Best Buy is a trusted in-home advisor. 70% of population within 10 miles of a Best Buy store, which can serve as support and distribution hubs ~9M Best Geek Squad home visits annually – making Buy a trusted brand for tech support in the home 78% of physicians and 68% of consumers believe Best Buy wi
Slide 69: Best Buy Health enables care in the home
Best Buy Health enables care in the home. Consumer Health Active Aging Virtual Care Customer: Customers: Physicians, Consumers Health Systems, Insurers, Pharma Health tech and wellness Health and safety tech Tech-enabled solutions that products for use in the solutions and human support connect pati
Slide 70: Consumer Health
Consumer Health. We are providing the most sought-after digital health solutions for every stage of life. Consumer experience Fitness Angela also books an appointment with a certified personal trainer in the virtual Hearing Secure Shopping Family Health Angela, a 45-year-old mom of two, store to lea
Slide 71: Active Aging
Active Aging. Lively continues to support adults aging independently at home. Lively consumer experience Lively purchase Angela buys a Lively Smart phone and Amazon Echo for her father with a monthly Health & Safety Lively Link app Urgent Caregiver motivation subscription plan She wants to make sure
Slide 72: Active Aging products and services
Active Aging products and services. Lively (formerly GreatCall) continues to support adults aging independently at home. / Lively On… Simple, easy-to-use phones Fastest call response medical Most discreet medical alert Access to Lively services and the with 24/7 access to the alert with fall-detecti
Slide 73: Virtual Care
Virtual Care. We enable patients to effortlessly connect with their care teams. Care at Home experience Monitoring At home, Jacob is monitored 24/7 by Current Health’s platform and virtual command center Care coordination Transition to Engagement The health system physician & support personal care J
Slide 74: Ecosystem of partners for Care at Home
We are creating an ecosystem of partners for Care at Home. CONSUMER We are not building Ecosystem Partner Best Buy Best Buy Health Platform this alone. 74
Slide 75: Health opportunity creates a flywheel driving growth
Our Health opportunity creates a flywheel driving growth in all 3 focal areas. Consumer Health Active Aging Virtual Care FY22 FY25 FY27 3-year CAGR 5-year CAGR Revenue $525M 35 45% 35 45% Non-GAAP operating Dilutive to Accretive to Neutral income rate Enterprise rate Enterprise rate Revenue mix by 9
Slide 76: Chief Financial Officer
Matt Bilunas Chief Financial Officer
Slide 77: Differentiated abilities and investments will drive financial returns
3 Our differentiated abilities and ongoing investments in our business will drive compelling financial returns over time. 77
Slide 78: We have a proven track record of strong results
We have a proven track record of strong results. Enterprise comparable sales growth Non-GAAP diluted earnings per share 10.4% $10.01 9.7% $7.91 $6.07 5.6% $5.32 4.8% $4.42 2.1% FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22 Non-GAAP operating income rate Non-GAAP return on investment 5.8% 6.0% 30
Slide 79: FY23 and FY25 Financial Targets
FY23 and FY25 Financial Targets. FY22 FY23 Outlook FY25 Targets Revenue $51.8B $49.3 – $50.8B $53.5 – $56.5B Non-GAAP operating income rate 6.0% Approx. 5.4% 6.3% – 6.8% Non-GAAP operating income $3.1B $2.6 – $2.7B $3.4 – $3.8B 79
Slide 80: How we expect to grow revenue by FY25
How we expect to grow revenue by FY25. $53.5 $56.5 Revenue Growth Drivers billion Category Expansion and Best Buy Health FY25 Target $51.8 Totaltech and Store Remodels billion $49.3 $50.8 FY22 billion Industry Growth and Baseline CE Business FY23 Outlook 3-YR CAGR approx. 1% to 3% 80
Slide 81: How we expect to drive operating income rate expansion by FY25
How we expect to drive operating income rate expansion by FY25. Totaltech Best Buy Ads 6.3% 6.8% 6.0% Cost reductions FY25 Target Best Buy Health and efficiencies FY22 Approx. 5.4% FY23 Outlook Promotions Depreciation Non-GAAPoperating Non-GAAP operatingincome incomerate rateexpansion expansionof of
Slide 82: We generate strong free cash flow
We generate strong free cash flow. Average annual free cash flow Enterprise free cash flow ($ millions) $4,214 $2.3 billion over the last 5 years $2,515 $1,822 $1,453 $1,589 FY18 FY19 FY20 FY21 FY22 82
Slide 83: Our capital allocation strategy is unchanged
Our capital allocation strategy is unchanged. 1 2 3 4 Pursue Return excess Continue to Reinvest in partnerships free cash flow be a premium the business and M&A to over time dividend payer1 to drive growth support our through share strategy repurchases 1 Based on a targeted 35% - 45% payout ratio of
Slide 84: Capital expenditures are expected to increase
Capital expenditures are expected to increase as we evolve our operating model. Capital Expenditures FY22 ($ millions) $1.0B $1.2B Technology Store / Supply Chain $819 $743 $737 $688 $713 International FY23–FY25 Technology Store / Supply Chain International FY18 FY19 FY20 FY21 FY22 FY23 - FY25 84
Slide 85: Continue to return capital to shareholders
At the same time, we will continue to return capital to shareholders. FY23 quarterly dividend increased $1.5B share repurchases expected in 26% to $0.88 per share FY23 following record levels in FY22 Dividend payout Share repurchases ($ millions) ($ millions) $3,502 $688 $568 $527 $497 $2,004 $409 $
Slide 86: Chief Executive Officer
Corie Barry Chief Executive Officer
Slide 87: Key Takeaways
Technology is a necessity, and we are 1 the unique tech solutions provider for the home. Key We have built an ecosystem of Takeaways. 2 customer-centric assets, delivering experiences that no one else can. Our differentiated abilities and ongoing investments in our business 3 will drive compelling f
Slide 88: Non-GAAP Reconciliation
Best Buy Co., Inc. Non-GAAP Reconciliation ($ in millions, except per share amounts) (Unaudited and subject to reclassification) The following information provides reconciliations of the most comparable financial measures presented in accordance with accounting principles generally accepted in the U
Slide 89: Non-GAAP Reconciliation
Best Buy Co., Inc. Non-GAAP Reconciliation ($ in millions, except per share amounts) (Unaudited and subject to reclassification) The following information provides reconciliations of the most comparable financial measures presented in accordance with accounting principles generally accepted in the U
Slide 90: Non-GAAP Reconciliation (ROI)
Best Buy Co., Inc. Non-GAAP Reconciliation ($ in millions) (Unaudited and subject to reclassification) The tables below provide calculations of return on assets ("ROA") (GAAP financial measure) and non-GAAP return on investment (“ROI”) (non-GAAP financial measure) for the periods presented. The comp
Slide 91: Non-GAAP Reconciliation (Free Cash Flow)
Best Buy Co., Inc. Non-GAAP Reconciliation ($ in millions) (Unaudited and subject to reclassification) The table below provides a reconciliation of cash provided by operating activities (GAAP financial measure) to free cash flow (non-GAAP financial measure) for the periods presented. The company bel
Slide 92: FY22 Results and Investor Update
FY22 Results and Investor Update 88