The Lovesac Company

Greetings and welcome to the Lovesac first quarter fiscal 2025 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Caitlin Churchill with ICR. Please go ahead.

Thank you. Good morning, everyone. With me on the call is Shawn Nelson, Chief Executive Officer, Mary Fox, President and Chief Operating Officer, and Keith Signer, Chief Financial Officer. Before we get started, I would like to remind you that some of the information discussed will include forward-looking statements regarding future events and our future financial performance. These include statements about our future expectations, financial projections, and our plans and prospects. Actual results may differ materially from those set forth in such statements. For a discussion of these risks and uncertainties, you should review the company's filings with the SEC, which includes today's press release. You should not rely on our forward-looking statements as predictions of future events. All forward-looking statements that we make on this call are based on assumptions and beliefs as of today, and we undertake no obligation to update them except as required by applicable law. Our discussion today will include non-GAAP financial measures, including EBITDA and adjusted EBITDA. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results. A reconciliation of the most directly comparable GAAP financial measures to such non-GAAP financial measure has been provided as supplemental financial information in our press release. Now I'd like to turn the call over to Sean Nelson, Chief Executive Officer of the Lovesac Company.

Thank you, Kaylin. Good morning, everyone, and thank you for joining us today. I'll start our discussion by reviewing highlights from our first quarter performance and sharing thoughts about our outlook. Then Mary Fox, our President and COO, will update you on the progress we are making on our key growth initiatives before passing the call to Keith Signer, our CFO, who will review our financial results and outlook in more detail. Turning to the highlights of our fiscal first quarter, during our earnings conference call in April, we discussed a difficult first month of the first quarter and why we were confident that we'd generate better results going forward. Well, we're pleased that the adjustments we made to promotions and refinement in our approach with our new digital agency worked. And we delivered net sales, adjusted EBITDA, net loss, and EPS at or slightly favorable to the high end of our guidance ranges. Specifically for the first quarter, total net sales were 132.6 million, reflecting a year-over-year decline of 6% as we anniversaried a strong quarter last year and continued to contend with a challenging category backdrop. Total omnichannel comparable net sales declined 14.8% for the quarter. Though, as Keith will outline later, this was nearly all a result of the difficult first month before we made the adjustments I described earlier. First quarter adjusted EBITDA and net loss fell meaningfully versus the prior year of first quarter. The declining sales exacerbated the deleverage from opening 35 new touchpoints and investments in future sales driving initiatives, while we also saw increases in professional fees and marketing. some of which was non-recurring. Despite the full quarter results being below a recent trend, they still represented another quarter of market share gains in a category that was down double digits. Additionally, at the midpoint of our newly issued guidance range for net sales in the fiscal second quarter, we'd be back to growth even against our 25th anniversary campaign last year. As we have outlined on the last several calls, The reason for our long-term consistent outperformance boils down to our focus on the customer, our advanced products, and our unique omnichannel business model with an omnichannel infinity flywheel unlike any other. Our design for life philosophy permeates everything we do. We are a platform company as opposed to a product company or a merchant-led retailer. Innovation is in our DNA. but always with reverse compatibility in mind, reinforcing our commitment to sustainability or sustain-ability, as we like to say, product platforms that can actually sustain. Our platforms are built to last and designed to evolve. That's the perfect segue into our latest product innovation. The SAC that does it all now does even more. Welcome the Pillow SAC Accent Shareframe. Sacks are the product that Love Sack was founded on 26 years ago and our namesake, the world's most comfortable seat. Sacks have firmly established their role in the family room, lounge, playroom, bedroom, and many other casual spaces in the home. We continue to be the leading brand in this subcategory that we established. What we've done with the introduction of the accent chair frame is to elevate the pillow sack, literally and figuratively. Combined, The pillow sack accent chair is an eye-catching, inviting, sophisticated, and stylish way to enjoy cloud-like comfort in your more formal spaces. In fact, Architectural Digest believes we turned this accent into the living room's ultimate statement piece. We've seen tremendous response from both new and existing customers who are all finding ways to express their own personal style, sometimes purchasing numerous covers to fit different occasions. It's generating buzz. appreciation for our design for life approach, and leading customers to ask us, what's next? On that front, our product innovation pipeline remains very healthy. We have a few more launches coming this fiscal year that are on the smaller side of platform extensions. Following those, we have a larger launch in early fiscal 26 that we believe will open the aperture of potential customers and benefit AOV for a core platform of ours. Following that, we have plenty more in the works, including entirely new categories, but you'll have to wait for more details. We're also laying the foundations for services that support our commitment to circular operations and support the value proposition for customers to deepen their love for the Love Sack brand. Mary will give you more details, but resale and trade-in for our timeless and uniquely durable products are up first, so stay tuned. I'll close by touching on our outlook for the remainder of the year, which we reiterated today. As we discussed before, we are planning prudently. We're not counting on a macro bounce to make our numbers. In fact, we're still basing our full year outlook off another down year for the category, down 10% compared to last year. We're uniquely built as a business, primed to over-participate in a category rebound whenever it occurs in near real time. This will support top line growth and expanding profitability. But I want to be clear. We are not just waiting idly for the tide to lift our boat. We're expanding our physical accessibility through touch points. We're expanding our digital accessibility with new CRM tools and more. We're reinforcing tech foundations to ensure profitable scalability. We're innovating and adding products in existing and new categories. We're building a powerful brand, certainly one that is unlike any other in our category. The opportunity is massive, and we're in a position of strength. Before I turn the call over to Mary, I want to thank the amazing LoveSac team for their role in delivering yet another strong outperformance versus the industry. With that, I will hand it over to Mary to cover our strategic priorities and progress in more detail.