The Lovesac Company

Greetings and welcome to the Lovesac second 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, Ms. Caitlin Churchill, Investor Relations for Lovesac. Thank you. You may begin.

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 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 measure 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 Shawn Nelson, Chief Executive Officer of the Lovesac Company. Shawn?

Good morning, everyone, and thank you for joining us. I'll start by sharing a high-level overview of our second quarter results and outlook. Then Mary Fox, our president and COO, will discuss our key growth initiatives. Finally, Keith Signer, our CFO, will review our financial results and a few other items related to our outlook in more detail. Turning to the highlights of our Q2 results. We're pleased to deliver results in line or slightly favorable to our expectations, including total net sales of $156.6 million and adjusted EBITDA of $1.5 million. These results reflect positive net sales growth of 1.3% for the quarter, indicative of continued market share gains despite the ongoing headwinds facing our category. Total omnichannel comparable net sales decreased 5.4%. But this was more than offset by new and non-comp touchpoint contributions. Net loss and net loss per common share were pressured by slight declines in gross margins and deleverage in SG&A, partially offset by leverage in advertising and marketing, all of which was expected and consistent with our previous guidance. Underpinning our performance is our highly productive omnichannel footprint, which is built upon our Designed for Life platform, enhanced by the love evidenced in our customer engagement, compounded by compelling marketing, and reinforced by our accelerating focus on product innovation. Demonstrating this commitment to innovation, in Q2, we successfully launched our pillow sack accent chair frame, or PACF, which saw incredible response and is surpassing our expectations. In fact, The Accent Shareframe sold out just a few weeks after launching. Let me share some highlights. Our PACF launch post was Love Sack's top performing single social post to date with over 8.8 million views. Two thirds of all pillow sacks sold since launch were ordered with an Accent Shareframe. PACF excitement was haloed onto the entire sack business, which was grown double digits plus 25% since we launched the PACF. Looking ahead, we are actively developing more innovations against this highly successful offering, as well as our broader SACS platform. But perhaps most exciting of all is that the PACF has driven incremental Lovesac market penetration. Greater than 50% of PACF purchases since launch have been from existing Lovesac customers. And this is just the beginning of our plan to ramp up our efforts to generate more repeat business, which I'll talk more about in just a minute. Following the PACF success, we are excited to have just launched the new AnyTable. AnyTable brings the unrivaled adaptability of factionals to a table and represents the first of Lovesac's entry into an adjacent furniture category, tables and case goods. AnyTable seamlessly integrates into new and existing sectional setups in many configurations, connected to the sectionals or freestanding, connected to each other. You can grow it and change it and rearrange it. It offers style, functionality, and hidden storage, and it's designed with future innovations in mind. There's more to come on the AnyTable platform. AnyTable is available in three wood finishes that match our newly redesigned sectional accessories. weathered gray, dark brown, and blonde. Speaking of accessories, we're also launching an entirely new suite of redesigned Sactionals drink holders, coasters, and the all new Sactionals tray in the same three wood finishes that coordinate with all of the new wood designs from Lovesac. We're moving closer to a design point of view on the entire living room and someday the entire home. If not every product category, than at least the ones that really matter to people and how they live their everyday lives. We're solving problems that people didn't even know they had with products that are totally unique to Lovesac. And of course, built to last a lifetime and designed to evolve as lives change. This is our design for life business model unfolding in real time, where all products coordinate, build on each other, and make the customer's core Lovesac purchase that perhaps they made years ago even more valuable and useful to them than it did when they bought it in the first place. There is no other home brand designing or marketing in this way. We have much more to come. Through these launches, our plans for a few other smaller launches still yet to come this year and a major launch in fiscal 2026, we are driving momentum. These will give us entry into more rooms in households and expand our reach. Combine this reach with our CRM and omni-channel tools that we have invested in over the past few years, and we believe we have a massive opportunity to capture much more repeat customer action in the future. Before we move on to the outlook, in addition to our product innovations, we have some exciting collaborations happening right now. First up, we're thrilled to launch our collaboration with fashion phenom Kid Super during Fashion Week in New York City just a couple days ago. So keep your eye on pop culture, fashion, and Fashion Week to see how Love Sack shows up in the most avant-garde channels out there. The focus on innovation that is ingrained in our DNA at Love Sack, coupled with the appeal of our Design for Life platform, our convenient on-channel model, and compelling marketing are all enabling us to deliver continued market share gains against a still challenged industry and category backdrop. That playbook remains in place and remains our goal regardless of the macro situation. Now listen, we'd all love to see interest rate decreases create a potential tailwind for our category, and they might, but we believe it's prudent to given actual spending data and recent promotional intensity within the category to leave our industry outlook unchanged at this point. As such, our outlook still assumes that the category will be down 10% versus last year. Based upon that macro foundation and where we sit after seven months of our fiscal year, we are tightening our guidance range for net sales. While the midpoint of the range is slightly lower than before, it still reflects growth for the fiscal year. We remain well positioned to deliver on our objectives for this year and beyond. And should the environment change, our teams are nimble and poised to pivot quickly with the ability to chase growth. In summary, our teams are at the heart of what we do day in and day out at Lovesac, and I want to thank them for their ongoing hard work and disciplined execution as we continue to navigate a dynamic consumer environment. Lovesac's runway for growth is long and attractive, with a large and extremely fragmented addressable market, of which we currently enjoy very low share, even in our current platforms. Our strengthening market position, profitable and growing business, and debt-free balance sheet all enabled our recently announced first-ever share buyback authorization. As Keith will review, we intend to continue to operate and deploy capital with discipline, focused on delivering long-term, sustainable, profitable growth that should create value for all of our stakeholders. We look forward to sharing more on our long-term vision during an investor day, which we are targeting to host during our fourth quarter. So stay tuned for more details. With that, I'll hand it over to Mary to cover our strategic priorities and progress in more detail. Mary?