Q1 FY25 Net Sales of $132.6 MillionReaffirms Full Year Fiscal 2025 Outlook STAMFORD, Conn., June 13, 2024 (GLOBE NEWSWIRE) -- The Lovesac Company (NASDAQ:LOVE) ("Lovesac" or the "Company"), the home furnishing brand best known for its Sactionals, The World's Most Adaptable Couch, today announced financial results for the first quarter of fiscal 2025, which ended May 5, 2024. Shawn Nelson, Chief Executive Officer, stated, "We are pleased to deliver first quarter performance inline to slightly above the high end of our expectations. Our results reflect continued outperformance compared to the industry and demonstrate our commitment to executing against our objectives. We believe through our omni-channel infinity flywheel, designed for life platform and advantaged supply chain we are well positioned to continue to deliver results and capitalize on the tremendous opportunity still ahead. With the recent launch of our PillowSac Accent Chair we are continuing to expand our offering and see opportunity to further widen the aperture with exciting innovative launches yet to come." Key Measures for the First Quarter of Fiscal 2025 Ending May 5, 2024:(Dollars in millions, except per share amounts.   Dollar and percentage changes may not recalculate due to rounding.)   Thirteen weeks ended May 5,2024 April 30,2023 % Inc (Dec) Net sales       Showrooms $81.6 $83.6 (2.3%) Internet $36.6 $40.2 (9.0%) Other $14.4 $17.4 (17.1%) Total net sales $132.6 $141.2 (6.1%) Gross profit $72.0 $70.6 2.1% Gross margin         54.3%         50.0% 430 bps Total operating expenses $89.9 $76.3 17.9% SG&A $68.4 $56.5 21.0% SG&A as a % of Net Sales         51.6%         40.0% 1,160 bps Advertising and marketing $18.0 $16.9 6.4% Advertising & marketing as a % of Net Sales         13.6%         12.0% 160 bps Net loss $(13.0) $(4.1) (214.9%) Basic net loss per common share $(0.83) $(0.27) (207.4%) Diluted net loss per common share $(0.83) $(0.27) (207.4%) Adjusted EBITDA 1 $(10.3) $(2.1) (381.1%) Net cash (used in) provided by operating activities $(7.0) $6.3 (211.5%) 1 Adjusted EBITDA is a non-GAAP measure. See "Non-GAAP Information" and "Reconciliation of Non-GAAP Financial Measures" included in this press release. Percent increase (decrease) except showroom count   Thirteen weeks ended May 5,2024 April 30,2023 Omni-channel Comparable Net Sales(1)         (14.8)%         (6.2)% Internet Sales         (9.0)%         28.7% Ending Showroom Count 246 211 1 Omni-channel Comparable Net Sales includes sales at all retail locations and online, open greater than 12 months (including remodels and relocations) and excludes closed stores. Highlights for the Quarter Ended May 5, 2024: Net sales decreased $8.6 million, or 6.1%, in the first quarter of fiscal 2025 compared to the prior year period primarily driven by a decrease of 14.8% in omni-channel comparable net sales, partially offset by the net addition of 35 new showrooms compared to the prior year period. During the first quarter of fiscal 2025, we opened 24 additional showrooms and closed 3 showrooms and 5 kiosks. Gross profit increased $1.4 million, or 2.1%, in the first quarter of fiscal 2025 compared to the prior year period. Gross margin increased 430 basis points to 54.3% of net sales in the first quarter of fiscal 2025 from 50.0% of net sales in the prior year period primarily driven by a decrease of 790 basis points in inbound transportation costs, partially offset by an increase of 240 basis points in outbound transportation and warehousing costs and a decrease of 120 basis points in product margin driven by higher promotional discounting. SG&A expense increased $11.9 million, or 21.0%, in the first quarter of fiscal 2025 compared to the prior year period due to investments in payroll, professional fees, rent, infrastructure, selling related expenses, and equity based compensation. Selling related expenses include customer financing fees which increased $0.6 million, or 8.6%, to $6.7 million in the first quarter of fiscal 2025 from $6.1 million in the first quarter of fiscal 2024. Advertising and marketing expense increased $1.1 million, or 6.4% in the first quarter of fiscal 2025 compared to the prior year period. Operating loss was $17.9 million in the first quarter of fiscal 2025 compared to $5.7 million in the prior year period. Operating margin was (13.5)% of net sales in the first quarter of fiscal 2025 compared to (4.0)% of net sales in the prior year period. Net loss was $13.0 million in the first quarter of fiscal 2025 or $(0.83) net loss per common share compared to $4.1 million or $(0.27) net loss per common share in the prior year period. During the first quarter of fiscal 2025, the Company recorded an income tax benefit of $4.2 million, compared to $1.3 million in the prior year period. The change in benefit is primarily driven by higher net loss before taxes and an increase in the effective tax rate. Other Financial Highlights as of May 5, 2024: The cash and cash equivalents balance as of May 5, 2024 was $72.4 million as compared to $45.1 million as of April 30, 2023. There was no balance on the Company's line of credit as of May 5, 2024 and April 30, 2023. The Company's availability under the line of credit was $33.7 million and $36.0 million as of May 5, 2024 and April 30, 2023, respectively. As previously announced, on March 24, 2023, we amended our existing credit agreement with Wells Fargo Bank, N.A. to extend the maturity date to September 30, 2024. All other terms of the credit agreement remain unchanged. Total merchandise inventory was $94.7 million as of May 5, 2024 as compared to $104.5 million as of April 30, 2023 principally related to a planned stock inventory decrease of $10.2 million coupled with a decrease in freight capitalization of $1.4 million related to the decrease in inbound freight expense. Outlook: The Company provides guidance of select information related to the Company's financial and operating performance, and such measures may differ from year to year. The projections are as of this date and the Company assumes no obligation to update or supplement this information. The Company expects the following for the full year of fiscal 2025: Net sales in the range of $700 million to $770 million. Adjusted EBITDA1 in the range of $46 million to $60 million. Net income in the range of $18 million to $27 million. Diluted income per common share in the range of $1.06 to $1.59 on approximately 17.0 million estimated diluted weighted average shares outstanding. Fiscal 2025 will contain 52 weeks versus Fiscal 2024 which contained an additional "53rd week" in the fourth quarter. The Company currently expects the following for the second quarter of fiscal 2025: Net sales in the range of $152 million to $160 million. Adjusted EBITDA1 loss in the range of $2 million to $5 million. Net loss in the range of $6 million to $8 million. Basic loss per common share in the range of $0.37 to $0.53 on approximately 15.6 million estimated weighted average shares outstanding. 1 Adjusted EBITDA is a non-GAAP measure. See "Non-GAAP Information" and "Reconciliation of Non-GAAP Financial Measures" included in this press release. Conference Call Information: A conference call to discuss the financial results for the first quarter ended May 5, 2024 is scheduled for today, June 13, 2024, at 8:30 a.m. Eastern Time. Investors and analysts interested in participating in the call are invited to dial (877) 407-3982 (international callers please dial (201) 493-6780) approximately 10 minutes prior to the start of the call. A live audio webcast of the conference call will be available online at investor.lovesac.com. A recorded replay of the conference call will be available within two hours of the conclusion of the call and can be accessed online at investor.lovesac.com for 90 days. About The Lovesac Company: Based in Stamford, Connecticut, The Lovesac Company is a technology driven company that designs, manufactures and sells unique, high quality furniture derived through its proprietary Designed For Life approach which results in products that are built to last a lifetime and designed to evolve as our customers' lives do. Our current product offering is comprised of modular couches called Sactionals, premium foam beanbag chairs called Sacs, and their associated home decor accessories. Innovation is at the center of our design philosophy with all of our core products protected by a robust portfolio of utility patents. We market and sell our products primarily online directly at www.lovesac.com, supported by direct-to-consumer touch-feel points in the form of our own showrooms as well as through shop-in-shops and pop-up-shops with third party retailers. LOVESAC, SACTIONALS, DESIGNED FOR LIFE, and THE WORLD'S MOST ADAPTABLE COUCH are trademarks of The Lovesac Company and are Registered in the U.S. Patent and Trademark Office. Non-GAAP Information: Adjusted EBITDA is defined as a non-GAAP financial measure by the Securities and Exchange Commission (the "SEC") that is a supplemental measure of financial performance not required by, or presented in accordance with, GAAP. We define "Adjusted EBITDA" as earnings before interest, taxes, depreciation and amortization, adjusted for the impact of certain non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include management fees, equity-based compensation expense, write-offs of property and equipment, deferred rent, financing expenses and certain other charges and gains that we do not believe reflect our underlying business performance. We have reconciled this non-GAAP financial measure with the most directly comparable GAAP financial measure within the schedules attached hereto. Statements regarding our expectations as to fiscal 2025 Adjusted EBITDA do not include certain charges and costs. These items include equity-based compensation expense and certain other charges and gains that we do not believe reflect our underlying business performance. We are not able to provide a reconciliation of our non-GAAP financial guidance to the corresponding GAAP measures without unreasonable effort because of the uncertainty and variability of the nature and amount of these future charges and costs. This is due to the inherent difficulty of forecasting the timing of certain events that have not yet occurred and are out of the Company's control. We believe that these non-GAAP financial measures not only provide its management with comparable financial data for internal financial analysis but also provide meaningful supplemental information to investors. Specifically, these non-GAAP financial measures allow investors to better understand the performance of our business, facilitate a more meaningful comparison of our actual results on a period-over-period basis and provide for a more complete understanding of factors and trends affecting our business. We have provided this information as a means to evaluate the results of our ongoing operations alongside GAAP measures such as gross profit, operating income (loss) and net income (loss). Other companies in our industry may calculate these items differently than we do. These non-GAAP measures should not be considered as a substitute for the most directly comparable financial measures prepared in accordance with GAAP, such as net income (loss) or net income (loss) per share as a measure of financial performance, cash flows from operating activities as a measure of liquidity, or any other performance measure derived in accordance with GAAP. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the Company's results as reported under GAAP. Cautionary Statement Concerning Forward-Looking Statements This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other legal authority. Forward-looking statements can be identified by words such as "may," "continue(s)," "believe," "anticipate," "could," "should," "intend," "plan," "will," "aim(s)," "can," "would," "expect(s)," "expectation(s)," "estimate(s)," "project(s)," "forecast(s)", "positioned," "approximately," "potential," "goal," "pro forma," "strategy," "outlook" or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. All statements, other than statements of historical facts, included in this press release under the heading "Outlook" and all statements regarding strategy, future operations and launch of new products, the pace and success of new products, future financial position or projections, future revenue, projected expenses, sustainability goals, prospects, plans and objectives of management are forward-looking statements. These statements are based on management's current expectations, beliefs and assumptions concerning the future of our business, anticipated events and trends, the economy and other future conditions. We may not actually achieve the plans, carry out the intentions or meet the expectations disclosed in the forward-looking statements and you should not rely on these forward-looking statements. Actual results and performance could differ materially from those projected in the forward-looking statements as a result of many factors. Among the key factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements include: business disruptions or other consequences of economic instability, political instability, civil unrest, armed hostilities, natural and man-made disasters, pandemics or other public health crises, or other catastrophic events; the impact of changes or declines in consumer spending and increases in interest rates and inflation on our business, sales, results of operations and financial condition; our ability to manage and sustain our growth and profitability effectively, including in our ecommerce business, forecast our operating results, and manage inventory levels; our ability to improve our products and develop new products; our ability to successfully open and operate new showrooms; our ability to advance, implement or achieve the goals set forth in our ESG Report; our ability to realize the expected benefits of investments in our supply chain and infrastructure; disruption in our supply chain and dependence on foreign manufacturing and imports for our products; our ability to acquire new customers and engage existing customers; reputational risk associated with increased use of social media; our ability to attract, develop and retain highly skilled associates and employees; system interruption or failures in our technology infrastructure needed to service our customers, process transactions and fulfill orders; any inability to implement and maintain effective internal control over financial reporting or inability to remediate any internal controls deemed ineffective; the impact of the restatement of our previously issued audited financial statements as of ...