The Lovesac Company

Greetings. Welcome to Lovesac's first quarter fiscal 2027 earnings conference call. At this time, all participants are in listen-only mode. The question and answer session will follow the formal presentation. We ask that you please limit yourself to one question and one follow-up. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Colton West, with Investor Relations. Thank you. You may begin.

Thank you. Good morning, everyone. With me on the call today is Sean Nelson, Chief Executive Officer, Mary Fox, President, 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 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 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 Lovesac Company. Sean?

Good morning, everyone. Thank you for joining us today. I'll start our conversation by sharing a brief review of our strategic roadmap. Then I'll provide a high-level summary of our first quarter fiscal 2027 performance. And finally, I'll discuss exciting updates on our strategic initiative. Mary Fox, our president, will then take you through our customer acquisition engines, operational initiatives, and key growth enablers. Finally, Keith Signer, our CFO, will dive deeper into our financial results and provide additional detail on our outlook for fiscal second quarter and the remainder of fiscal 2027. Before getting into the course specifics, I want to begin with the broader strategic landscape. as I believe the operating environment we find ourselves in today increasingly favors differentiated brands with disciplined execution, structurally advantaged product platforms, and enterprises intentionally focused on building long-term customer relationships. That is exactly what Lovesac has spent years architecting and operationalizing. As I've shared in the past, we are evolving from a product-driven company into a multi-platform, multi-room lifestyle brand. A brand we believe will become America's most loved home brand and, over time, one of its most loved brands. That is what we build our strategy and execution agenda around. We are not trying to compete through endless assortments, seasonal replacement cycles, or trend-driven merchandising. Instead, we are building long-duration product platforms designed to evolve with our customers' lives over years and decades. Products that are built to last and designed to evolve. Design for life is not simply a tagline for us. It's an engineering principle. It is a product philosophy. And increasingly, it is becoming a broader emotional framework for how customers connect with the Lovesac brand itself. Context is important here. The world offers static solutions to dynamic problems, but this doesn't work. Why? It's simple. People's lives evolve, their homes evolve, their families evolve. That is exactly what our Design for Life ecosystem is built to do. Over the next four quarters, you will see us bring this ethos to market. First, through the enhancement of our offerings for the living room. And second, through our planned launch of a portfolio of distinctive and relevant products for a new room of the home in calendar 2027, our fiscal 2028. Importantly, Our unique approach to product philosophy is resonating within a category that remains pressured and highly promotional. During the fiscal first quarter, once again, our teams rose to the challenge, delivering market share growth and with financial results in line with our guidance. Net sales for the quarter decreased approximately 0.2 million or 0.1% versus the prior year period against a furniture category that declined 2.2% and high-end furniture, which declined by 5%. Operationally, we also continue to see encouraging proof points that the platform model is resonating. We saw significant momentum in our larger configurations, showing that the customer is willing to trade up if the value proposition is right. Reclining feet continues to outperform our expectations, and attachment rates have remained strong at nearly one out of every three configurations getting a recliner. Snug, which was still less than a year old, continues to broaden our reach into comfort seating and smaller space living while reinforcing the same principles of comfort, durability, maintainability, and flexibility that Lovesac has become known for. 80% of Snug customers are new to Lovesac, proving our thesis that we could expand our customer appeal while minimalizing capitalization. Equally important is that nearly half our snug sales are through our e-commerce channels, showcasing our ability to develop digital first products that can win profitably in those channels. These are not isolated product signals. They are proof points that design for life product platform attachment is real and that our solutions solve real customer pain points in ways that traditional furniture just can't. To that end, We are proud to share that Love Sack moved up two places in Furniture Today's top 100 retailers list. We're now the 17th largest furniture retailer in the country. And what's most exciting to me is how that is achieved with substantial greenfield opportunity ahead of us. Our first quarter continued the momentum in building the substantial foundational work around our broader brand evolution strategy. This work helped clarify product hierarchy, merchandising strategy, positioning architecture, customer segmentation, and how it all manifests to the consumer under our here for life marketing evolution, which is rolling out as we speak. At the same time, we are continuing to invest in a modern marketing engine that will turbocharge our brand consideration and reduce our customer acquisition costs. leading to accelerated demand generation and higher customer LTV. Mary will share more about this in a moment. Because ultimately, we believe the future of Love Sack is not just about selling more couches. It is about deepening the relationship our customers have with our brand, winning their loyalty and their love as we prove our ability to evolve in the same way their lives do. Simultaneously with this brand evolution work, We've made substantial progress on one of our most important structural initiatives, bringing manufacturing onshore to the U.S. While bringing manufacturing closer to the customer has long been an aspiration for Lovesac, the realities of the uncertain tariff landscape, freight volatility, and broader geopolitical uncertainty only reinforced the importance of building a more regionalized, resilient, and flexible sourcing model. But it's not economically attractive to simply make the exact same product in the same basic way just in the US. And that's where LoveSec has a differentiated advantage. Our high volume core SKU architecture enables levels of automation and manufacturing efficiency that are difficult for traditional furniture players to replicate at scale. Even with that foundation, we've redesigned these products from the ground up to optimize automation, improve manufacturability, enhance comfort and functionality, and refresh portions of our intellectual property portfolio, all while maintaining reverse compatibility across every factional ever sold. We remain on track to begin domestic manufacturing of factional seats this summer. Over time, we expect this initiative to help reduce cost volatility, improve fulfillment speed, reduce dependency on long international freight cycles, and strengthen our ability to deliver the fast customer experiences we are known for. I believe Lovesac enters the remainder of fiscal 2027 from a position of increasing strategic clarity and strength. We know who we are, we know how we're differentiated, and we know where the opportunities are. We entered fiscal 2027 having proven three important things. First, the Lovesac brand is vibrant and the love for Design for Life products is real. Second, that our customer acquisition engine compounds over time as our Design for Life platforms expand. And third, that the foundational work completed over the last several years from the modernization of our marketing engine to our best-in-class website and showrooms network to supply chain diversification and on-shoring initiatives give us increasing flexibility to navigate a highly dynamic environment while continuing to build for the long term. The macro will be what the macro will be. So our focus remains on building a brand and business that can continue to gain meaningful market share, expanding categories from the mailbox to the backyard fence, and strengthening long-term customer relationships, irrespective of short-term market conditions. We are pleased to be in such a position of strength. A strong balance sheet with solid cash position and no debt. Lower and well-positioned inventory. A clear strategic roadmap and a world-class team executing it. A lot of the work we're doing here in product and marketing and supply chain will start to culminate towards the end of this year, giving us tremendous confidence in the plan and what it will enable ongoing. And finally, I want to sincerely thank our teams, associates, partners, shareholders, and the entire hashtag Lovesac family for their continued dedication, creativity, resilience, and passion as we continue building what we believe can become the most loved home brand in America. With that, I'll turn the call over to Mary.