The Lovesac Company

Greetings, and welcome to the Love SAC Fourth Quarter Fiscal 2025 Earnings Conference Call. At this time, all participants are in listen-only mode. The question and answer session will follow the formal presentation. If anyone today should require operator assistance, please press star zero from your telephone keypad. As a reminder, this conference is being recorded. At this time, it is now my pleasure to introduce Caitlin Churchill with Investor Relations. Caitlin, 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 to 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 measure to such non-GAAP financial measure has been provided as supplemental financial information in our press release. Now, I would like to turn the call over to Sean Nelson, Chief Executive Officer of the Love Stack Company. Sean?

Good morning, everyone, and thank you for joining us. I'll start by sharing a high-level overview of our fourth quarter and full-year fiscal 2025 results, provide an update on our Design for Life product platforms, and share some exciting news about an amazing new addition to our leadership team. Mary Fox, our president, will discuss our tailored customer acquisition engines. And finally, Keith Signer, our CFO, will review our financial results and provide more detail on our fiscal 2026 outlook. Before getting into details, I'd like to take a moment to reflect on milestone achievements for Lovesac in fiscal 2025. First, we had our most prolific year ever for new product launches. having gained significant momentum, innovation, and commercialization of platform extensions, including major successes like the Pillow Sack Accent Chair and the early launch of the Reclining Seat. Second, we codified our long-term strategy and value creation model, which we delivered at our first ever Investor Day, and unveiled the first of three completely new product platforms that we plan to launch over the next three years, the EverCouch. Third, we strengthened the foundations of our business, having reinvented our supply chain and dramatically enhanced our CRM tools to deepen and broaden the moat around our unique omnichannel business model. Last, we have a very healthy balance sheet, which gives us substantial flexibility to weather tariff distractions, accelerate growth, and enhance returns on capital for years to come. Moving to results. It was a solid end to fiscal 2025 with fourth quarter earnings results that came in toward the high end of our outlook provided in December. With strong quote conversion in the second half of the quarter, sales slightly outpaced the high end of our guidance range. This helped close out another fiscal year of market share gains for Lovesac, a noteworthy accomplishment, even if not at the level we aspire to. While macro conditions were and remain challenging, We are optimistic as we enter fiscal 2026 in a position of strength. Lovesac's secular growth potential is massive, but our business model is also uniquely positioned to help us capitalize on macro upside whenever it does materialize. And that's without the need to overcommit early during periods of uncertainty. As our fourth quarter results demonstrate, we have a focused and nimble team that can deliver reliable results even in a competitive and tumultuous environment. The modular nature of our core products allow for flexibility in our supply chain, including redundant identical sourcing for our most critical SKUs across numerous countries, which allow us to ebb and flow our production to the most advantageous environments in real time. This is a competitive advantage that is unique to Lovesac's model. As for product, I want to be clear. We have step changed the metabolic rate of new product and platform launches at Love SAC. They will come faster and with greater impact over these next few years. Fiscal 2025 was just the beginning. Our clarity around the design for life approach to product development is ingrained into the organization and we've been cooking up new ideas to build a pipeline that should last for a very long time. Specifically for 2025, We had multiple successful product launches culminating in the early introduction of our highly anticipated reclining seat in Q4, which expands our core total addressable market of 9.5 billion for static sectionals by an additional 4 billion for motion seating capabilities. There's nothing like this recliner on the market. It represents nearly three years and more than 80,000 hours of design and engineering and development creating a truly revolutionary power recliner that integrates seamlessly with any Saxon configuration, new or existing. The recliner is a marvel of engineering with zero wall clearance and the totally unique ability to function in both wide and in deep orientations. And our signature design for life approach, of course, ensures that it will remain valuable and compatible for decades to come. Since launch, the reclining seat has sold over 18,500 units with attachment rates and customer feedback exceeding our expectations, as well as a nearly 50-50 split between new and repeat customers. And that's all without a national marketing campaign to generate broader awareness. We only just recently launched the recliner campaign, The Recline of Civilization, and we're very encouraged about its potential. In addition to the Recoiner, this year we successfully launched our pillow sack accent chair, entered the case goods category with the Any Table, completed an overhaul of our surface products, including the drink holder, coaster, and the new tray, offered the long-requested insert protectors to our fans delight, and overhauled our custom fabric line, which has far outpaced our expectations for both new and repeat customers. Our sites are already set on fiscal 2026 and beyond with our third Design for Life platform, the EverCouch, already being tested in the marketplace. The EverCouch is an optimized and elegant solution for people looking for an armchair, loveseat, or sofa where their needs differ from those of a sectional customer. Our insight arose as we realized that despite being thought of as a couch company, we really don't sell many couch-sized configurations. let alone loveseat or chair configurations for sure. Sactionals are amazing, but they may not be ideal from a size, style, or price standpoint in the smallest of configurations. EverCouch fills those gaps and opens up the $14 billion couch category to us, effectively more than doubling the addressable market that we operate in currently. It's beautiful with washable covers, exchangeable arm styles, rapid shipping capability, and easy assembly with no tools, of course. Even better is that it leverages Lovesac's established brand equity in couches and comfort seating. We aim to expand EverCouch to roughly 30 showrooms and national availability on lovesac.com in the second quarter. Initial feedback from our field teammates is very positive, with customers even asking to be put on the waiting list ahead of the May launch. And lest I forget to mention, there will be more new platforms to come over the next three years as we foreshadowed at Investor Day, each an expansion into a new room of the house. As we discussed in December, Lovesac is at the pivotal moment of transcending seeding products and becoming a powerful brand in its own right. We recognize that we need the right kind of leadership and creativity to optimize this next phase of growth into new product categories. and thereby live up to our ambition of reaching our goal of 3 million Lovesac households by 2030 and building the most loved home brand in America. With that backdrop, we are totally thrilled to announce that Heidi Cooley will join Lovesac as our first ever Chief Brand and Marketing Officer. Heidi is a seasoned marketing executive with 20 years of experience across public and private companies, most recently serving as the chief marketing officer for Crocs, where she helped transform the brand into a multibillion-dollar business over the course of her tenure there. She's led high-impact marketing strategies, scaled digital platforms, and driven innovation across omnichannel consumer touchpoints while also emphasizing culture, community, and sustainability. Heidi brings exactly the right kind of leadership and creativity that we need to fuel this next phase of growth into new product categories. Welcome to the team, Heidi. Looking ahead to fiscal 2026, sure, macro backdrop doesn't make life easy. Keith will share the specific numbers, but the principle is simple. We believe we have the necessary ingredients to grow irrespective of the category in the near term while maintaining clarity around long-term thinking and value creation. While the home furnishings category continues to face challenges, our innovative product offerings, strong customer relationships, and operational excellence underpin an attractive runway for growth. Lovesac has large and extremely fragmented addressable markets, of which we currently enjoy a very low share, even in our current platforms. This revenue growth should drive expanding flow through of the top line to bottom line growth and thereby higher margins, even with further acceleration from an eventual category rebound. In closing, we want to thank our dedicated team members who have worked tirelessly to bring our innovations to market and deliver an exceptional customer experience. Their commitment to our mission is the foundation of Lovesac success. We look forward to continuing our journey of reshaping the home furnishings industry with products that are truly designed for life. With that, I'll hand it over to Mary to cover our strategic priorities and progress in more detail. Mary?