UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended August 1, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-38555 THE LOVESAC COMPANY (Exact name of registrant as specified in its charter) | Delaware | 32-0514958 | | --- | --- | | (State or other ...

The Lovesac Company (NASDAQ:LOVE) Q2 2022 Earnings Conference Call September 9, 2021 8:30 AM ET CorporateParticipants Rachel Schacter - ICR, IR Shawn Nelson - Chief Executive Officer Jack Krause - President and Chief Operating Officer Donna Dellomo - Chief Financial Officer ConferenceCall Participants Clark Wright - D. A. Davidson Camilo Lyon - BTIG Maria Ripps - Canaccord Matt Koranda - ROTH Brian Nagel - Oppenheimer Alex Fuhrman - Craig-Hallum Lamont Williams - Stifel Operator Greetings. Welcome to The Lo ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended May 2, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission File Number: 001-38555 THE LOVESAC COMPANY (Exact name of registrant as specified in its charter) | Delaware | 32-0514958 | | --- | ...

The Lovesac Company (NASDAQ:LOVE) Q1 2022 Earnings Conference Call June 9, 2021 8:30 AM ET Company Participants Rachel Schacter - SVP, ICR, IR Shawn Nelson - Founder and CEO Jack Krause - President and COO Donna Dellomo - EVP and CFO Conference Call Participants Camilo Lyon - BTIG Maria Ripps - Canaccord Brian Nagel - Oppenheimer Thomas Forte - D.A. Davidson Matt Koranda - ROTH Capital Alex Fuhrman - Craig-Hallum Operator Greetings. Welcome to The Lovesac's First Quarter Fiscal 2022 Earnings Conference Call ...

Part I [Business](index=5&type=section&id=Item%201.%20Business) Lovesac, a technology-driven furniture company, specializes in modular couches and foam beanbag chairs, operating an omni-channel direct-to-consumer model with a 'Designed for Life' philosophy - The company's core philosophy, **'Designed for Life,'** emphasizes durable, adaptable products, central to its brand and sustainability message[19](index=19&type=chunk)[32](index=32&type=chunk) Sales Mix by Product (Fiscal Year 2021 vs. 2020) | Product | FY 2021 Sales % | FY 2020 Sales % | | :--- | :--- | :--- | | Sactionals | 84.5% | 80.7% | | Sacs | 14.0% | 17.0% | Sales Mix by Channel (Fiscal Year 2021 vs. 2020) | Channel | FY 2021 Sales % | FY 2020 Sales % | | :--- | :--- | :--- | | Ecommerce | 47.1% | 23.9% | | Showrooms | Not specified, but decreased 1.3% in absolute dollars | Not specified | | Other (Pop-ups/Shop-in-shops) | 7.3% | 12.7% | - The company utilizes a **global supply chain** with third-party manufacturing partners across multiple countries, owning no manufacturing facilities[38](index=38&type=chunk) - The business experiences **seasonality**, with **40.4% of total sales** occurring in the fourth fiscal quarter of fiscal 2021[40](index=40&type=chunk) Customer Metrics (Fiscal Year 2021 vs. 2020) | Metric | Fiscal 2021 | Fiscal 2020 | | :--- | :--- | :--- | | Customer Acquisition Cost (CAC) | $434.61 | $391.71 | | CLV/CAC Ratio | 4.70 | 4.68 | | New Sactional Customer Growth | 48.3% | N/A | [Risk Factors](index=13&type=section&id=Item%201A.%20Risk%20Factors) The company identifies numerous risks including the COVID-19 pandemic's impact, supplier reliance, competition, and technology infrastructure vulnerabilities - The **COVID-19 pandemic** creates significant uncertainty, potentially impacting consumer demand, supply chains, and showroom operations, with no guarantee of sustained e-commerce growth post-pandemic[61](index=61&type=chunk)[65](index=65&type=chunk) - A substantial portion of the business relies on a **small number of third-party suppliers**, particularly for Sacs (single supplier) and Sactionals (multiple international suppliers), leading to concentration and geopolitical risks like tariffs[82](index=82&type=chunk)[84](index=84&type=chunk)[88](index=88&type=chunk) - The business operates in a **highly competitive market**, facing traditional, big-box, and online retailers, many with greater resources and brand recognition[69](index=69&type=chunk)[71](index=71&type=chunk) - The **omni-channel strategy**, especially e-commerce reliance, exposes the company to risks like system interruptions, cybersecurity threats, and the need to adapt to evolving consumer preferences[77](index=77&type=chunk)[110](index=110&type=chunk)[118](index=118&type=chunk) - As an **"emerging growth company,"** Lovesac is subject to reduced reporting requirements, potentially making its common stock less attractive to some investors[151](index=151&type=chunk) [Unresolved Staff Comments](index=41&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - None [Properties](index=41&type=section&id=Item%202.%20Properties) The company leases its principal executive offices in Stamford, CT, and all 108 retail showrooms across 36 U.S. states and D.C - The company's primary offices are leased in Stamford, CT, occupying **22,480 square feet** under a lease expiring in **November 2024**[162](index=162&type=chunk) - As of the report date, the company leases retail space for **108 showrooms** across the United States[162](index=162&type=chunk) [Legal Proceedings](index=41&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in ordinary course legal proceedings, not expecting a material adverse effect on its business or financial condition - The company is involved in ordinary course legal proceedings, not expecting a material adverse effect on its business[163](index=163&type=chunk) [Mine Safety Disclosures](index=41&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=43&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on Nasdaq under 'LOVE', with no cash dividends paid or intended, as earnings are retained for business growth - Common stock is traded on Nasdaq under the symbol **"LOVE"**[166](index=166&type=chunk) - The company has never paid cash dividends and does not intend to in the foreseeable future[167](index=167&type=chunk) [Selected Financial Data](index=43&type=section&id=Item%206.%20Selected%20Financial%20Data) This item is not applicable as the company is an emerging growth company - Not applicable [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Lovesac achieved significant fiscal 2021 growth, with net sales up **37.4% to $320.7 million** driven by e-commerce, shifting from a net loss to a **$14.7 million net income** [Results of Operations (Fiscal 2021 vs. 2020)](index=47&type=section&id=Results%20of%20Operations%20%28Fiscal%202021%20vs.%202020%29) Fiscal 2021 saw dramatic financial improvement, with net sales growing **37.4%** driven by **170.8% internet sales**, gross margin expanding **450 basis points**, and a shift to **$14.9 million operating income** Consolidated Statement of Operations (Fiscal Year Ended) | Metric | January 31, 2021 | February 2, 2020 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $320.7M | $233.4M | 37.4% | | Gross Profit | $174.8M | $116.7M | 49.8% | | Gross Margin | 54.5% | 50.0% | +450 bps | | Operating Income (Loss) | $14.9M | ($15.8M) | N/A | | Net Income (Loss) | $14.7M | ($15.2M) | N/A | | Diluted EPS | $0.96 | ($1.07) | N/A | - Net sales increased due to a **170.8% ($95.3 million) surge in internet sales**, offsetting a **1.3% ($1.9 million) decrease** in showroom sales impacted by COVID-19[192](index=192&type=chunk) - Gross margin improved by **450 basis points**, driven by **400 bps** from reduced promotions and lower product costs, plus **50 bps** from improved distribution expenses[193](index=193&type=chunk) - Selling, general and administrative (SG&A) expenses increased **13.5% to $111.4 million**, but decreased as a percentage of net sales from **42.1% to 34.7%**, demonstrating operating leverage[194](index=194&type=chunk)[195](index=195&type=chunk) - Advertising and marketing expenses increased **43.6% to $41.9 million**, representing **13.1% of net sales**, up from **12.5%** in the prior year due to increased media spending[196](index=196&type=chunk)[197](index=197&type=chunk) [Liquidity and Capital Resources](index=50&type=section&id=Liquidity%20and%20Capital%20Resources) Fiscal 2021 saw significant liquidity strengthening, with cash increasing by **$29.8 million to $78.3 million**, and net cash from operating activities at **$40.5 million**, with no outstanding debt Summary of Cash Flows (in thousands) | Activity | Fiscal 2021 | Fiscal 2020 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $40,521 | ($11,194) | | Net Cash Used in Investing Activities | ($9,052) | ($10,650) | | Net Cash (Used in) from Financing Activities | ($1,667) | $21,312 | | **Net Change in Cash** | **$29,802** | **($532)** | | **Cash at End of Period** | **$78,341** | **$48,539** | - Operating cash flow improved due to a **$14.7 million net income** (vs. **$15.2 million net loss** in FY2020) and favorable working capital changes, including a **$19.6 million increase** in accrued liabilities and accounts payable[207](index=207&type=chunk)[209](index=209&type=chunk) - As of January 31, 2021, the company had **no outstanding borrowings** on its revolving credit line, with **$15.9 million** of borrowing availability[214](index=214&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=56&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This item is not applicable as the company is a smaller reporting company - Not applicable [Financial Statements and Supplementary Data](index=56&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section refers to the company's consolidated financial statements and related notes, included at the end of the Form 10-K - The company's audited consolidated financial statements are included at the end of the Annual Report on Form 10-K[238](index=238&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=57&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None [Controls and Procedures](index=57&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls and internal control over financial reporting were effective as of January 31, 2021, with no attestation report required for this emerging growth company - Management concluded the company's disclosure controls and procedures were **effective** as of January 31, 2021[241](index=241&type=chunk) - Based on the COSO framework, management concluded the company's internal control over financial reporting was **effective** as of January 31, 2021[243](index=243&type=chunk) - No material changes occurred during the fourth quarter affecting the company's internal control over financial reporting[245](index=245&type=chunk) [Other Information](index=57&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None Part III [Directors, Executive Officers and Corporate Governance](index=58&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on executive officers, directors, and corporate governance is incorporated by reference from the 2021 Proxy Statement - Information required by this item is incorporated by reference from the 2021 Proxy Statement[249](index=249&type=chunk) [Executive Compensation](index=59&type=section&id=Item%2011.%20Executive%20Compensation) Information on executive compensation is incorporated by reference from the 2021 Proxy Statement - Information required by this item is incorporated by reference from the 2021 Proxy Statement[252](index=252&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=59&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section details securities authorized under equity compensation plans and incorporates other ownership information by reference from the 2021 Proxy Statement Securities Authorized for Issuance under Equity Compensation Plans (as of Jan 31, 2021) | Plan Category | Securities to be Issued Upon Exercise | Weighted-Average Exercise Price | Securities Remaining Available for Future Issuance | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by shareholders | 1,150,924 | $38.10 | 380,959 | [Certain Relationships and Related Transactions, and Director Independence](index=59&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related party transactions and director independence is incorporated by reference from the 2021 Proxy Statement - Information required by this item is incorporated by reference from the 2021 Proxy Statement[256](index=256&type=chunk) [Principal Accounting Fees and Services](index=59&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information on principal accounting fees and services is incorporated by reference from the 2021 Proxy Statement - Information required by this item is incorporated by reference from the 2021 Proxy Statement[257](index=257&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=60&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists financial statements, schedules, and exhibits filed as part of the Form 10-K report, including an index of all exhibits - This section provides an index of all financial statements, schedules, and exhibits filed with the 10-K[259](index=259&type=chunk)[261](index=261&type=chunk) [Form 10-K Summary](index=60&type=section&id=Item%2016.%20Form%2010-K%20Summary) This optional disclosure was not included in this Annual Report on Form 10-K - Optional disclosure not included in this Annual Report on Form 10-K[262](index=262&type=chunk) Consolidated Financial Statements [Financial Statements](index=68&type=section&id=Financial%20Statements) The consolidated financial statements present the company's financial position and performance, highlighting a significant increase in total assets to **$171.0 million** and a shift from net loss to **$14.7 million net income** Consolidated Balance Sheet Highlights (As of Year-End) | Account | Jan 31, 2021 | Feb 2, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $78.3M | $48.5M | | Merchandise inventories | $50.4M | $36.4M | | Total Assets | $171.0M | $125.7M | | Total Liabilities | $63.1M | $35.5M | | Total Stockholders' Equity | $107.9M | $90.2M | Consolidated Statement of Operations Highlights (For Fiscal Year Ended) | Account | 2021 | 2020 | | :--- | :--- | :--- | | Net sales | $320.7M | $233.4M | | Gross profit | $174.8M | $116.7M | | Operating income (loss) | $14.9M | ($15.8M) | | Net income (loss) | $14.7M | ($15.2M) | [Notes to Consolidated Financial Statements](index=73&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies and financial results, including revenue disaggregation by channel and product, **$92.4 million** in operating lease obligations, and equity incentive plan information Net Sales by Channel (Fiscal Year Ended) | Channel | 2021 | 2020 | | :--- | :--- | :--- | | Showrooms | $146,150,307 | $148,003,995 | | Internet | $151,064,651 | $55,781,186 | | Other | $23,522,792 | $29,592,198 | | **Total net sales** | **$320,737,750** | **$233,377,379** | Net Sales by Product (Fiscal Year Ended) | Product | 2021 | 2020 | | :--- | :--- | :--- | | Sactionals | $271,018,545 | $188,436,976 | | Sacs | $44,974,677 | $39,640,676 | | Other | $4,744,528 | $5,299,727 | | **Total** | **$320,737,750** | **$233,377,379** | - The company has future minimum rental payments under operating leases totaling **$92.4 million**[388](index=388&type=chunk) - As of January 31, 2021, total unrecognized equity-based compensation cost was approximately **$5.3 million**, to be recognized over a weighted average period of **2.65 years**[408](index=408&type=chunk)

The Lovesac Company (NASDAQ:LOVE) Q4 2021 Earnings Conference Call April 14, 2021 8:30 AM ET Company Participants Rachel Schacter - SVP, ICR, IR Shawn Nelson - CEO Jack Krause - President and COO Donna Dellomo - EVP and CFO, Treasurer and Secretary Conference Call Participants Brian Nagel - Oppenheimer and Company Maria Ripps - Canaccord Genuity Thomas Forte - D.A. Davidson Camilo Lyon - BTIG Matt Koranda - ROTH Capital Partners Alex Fuhrman - Craig-Hallum Group Lamont Williams - Stifel Operator Greetings, ...

Financial Performance - Lovesac's FY2020 net sales reached $233.4 million, with Sactionals contributing 80.7% of the total[10, 21] - The company achieved a gross profit of $116.7 million in FY2020, resulting in a gross margin of approximately 50%[10, 11] - Lovesac's Q3 net sales grew by 43.5% year-over-year, and comparable sales increased by 53.5%[14] - Internet channel net sales increased by 125.2% in Q3[14] - Adjusted EBITDA for Q3 was $6.0 million, marking the first time achieving profitability in the third quarter[14] Balance Sheet and Liquidity - As of November 1, 2020, Lovesac had a net cash and cash equivalent position of $47.7 million[11, 13] - The company had no outstanding debt and a credit facility availability of $19.2 million as of November 1, 2020[11, 13] Customer Metrics - The average customer lifetime value was $1,835 for the FY2020 cohort[5, 9] - The cost of customer acquisition was $390[10] - Repeat customers accounted for 35% of all transactions in FY2020[10, 23] Showroom Performance - Lovesac operated 91 branded showrooms in 35 states as of Q4 FY2020[5, 9] - The company opened 18 new showrooms in FY20, representing a 21% year-over-year growth[36, 38]

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited condensed consolidated financial statements, including balance sheets, statements of operations, and cash flows, reflecting significant revenue growth and a shift to profitability [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Provides a snapshot of the company's financial position, detailing assets, liabilities, and equity as of specific dates Balance Sheet Summary (in thousands) | Metric | Nov 1, 2020 | Feb 2, 2020 | Change | | :--- | :--- | :--- | :--- | | **Cash and cash equivalents** | $47,686 | $48,539 | ($853) | | **Merchandise inventories** | $57,758 | $36,400 | $21,358 | | **Total Current Assets** | $123,546 | $100,178 | $23,368 | | **Total Assets** | $151,128 | $125,664 | $25,464 | | **Total Current Liabilities** | $59,488 | $32,401 | $27,087 | | **Total Liabilities** | $65,876 | $35,509 | $30,367 | | **Total Stockholders' Equity** | $85,252 | $90,155 | ($4,903) | - Total assets increased to **$151.1 million** as of November 1, 2020, from **$125.7 million** as of February 2, 2020, primarily due to a significant increase in merchandise inventories[15](index=15&type=chunk) - Total liabilities rose sharply to **$65.9 million** from **$35.5 million**, driven by increases in accounts payable, accrued expenses, and a substantial rise in customer deposits from **$1.7 million** to **$11.7 million**[15](index=15&type=chunk) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Details the company's financial performance over specific periods, showing revenues, expenses, and net income or loss Statement of Operations Summary (in thousands, except per share data) | Metric | Thirteen Weeks Ended Nov 1, 2020 | Thirteen Weeks Ended Nov 3, 2019 | YoY Change | | :--- | :--- | :--- | :--- | | **Net sales** | $74,742 | $52,097 | +43.5% | | **Gross profit** | $41,308 | $26,254 | +57.3% | | **Operating income (loss)** | $2,533 | ($6,867) | N/A (Turned to profit) | | **Net income (loss)** | $2,478 | ($6,748) | N/A (Turned to profit) | | **Diluted EPS** | $0.16 | ($0.46) | N/A (Turned to profit) | - For the thirty-nine weeks ended November 1, 2020, the company reported a net loss of **$7.0 million**, a significant improvement from the **$20.6 million** net loss in the same period of the prior year[18](index=18&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Summarizes the cash inflows and outflows from operating, investing, and financing activities over a period Cash Flow Summary (in thousands) | Metric | Thirty-nine weeks ended Nov 1, 2020 | Thirty-nine weeks ended Nov 3, 2019 | | :--- | :--- | :--- | | **Net Cash Provided by (Used in) Operating Activities** | $6,930 | ($36,439) | | **Net Cash Used in Investing Activities** | ($7,168) | ($6,984) | | **Net Cash (Used in) Provided by Financing Activities** | ($614) | $22,248 | | **Net Change in Cash and Cash Equivalents** | ($852) | ($21,175) | - The company generated **$6.9 million** in cash from operations for the thirty-nine weeks ended November 1, 2020, a major turnaround from the **$36.4 million** used in the prior-year period, primarily due to improved net loss and better working capital management[23](index=23&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations and disclosures regarding the accounting policies and specific line items within the financial statements - In response to the COVID-19 pandemic, the company closed all showrooms on March 18, 2020, reduced its workforce by **447** part-time employees, and implemented temporary executive pay cuts. As of November 1, 2020, all showrooms had reopened and **348** part-time associates had been rehired[28](index=28&type=chunk) Net Sales by Channel (in thousands) | Channel | Thirteen Weeks Ended Nov 1, 2020 | Thirteen Weeks Ended Nov 3, 2019 | YoY Change | | :--- | :--- | :--- | :--- | | **Showrooms** | $41,538 | $32,474 | +27.9% | | **Internet** | $25,710 | $11,416 | +125.2% | | **Other** | $7,494 | $8,208 | -8.7% | - The company has a **$25.0 million** line of credit with Wells Fargo, with borrowing availability of **$19.2 million** as of November 1, 2020. There were no borrowings outstanding on this date[52](index=52&type=chunk) - Future annual minimum rental payments under operating leases total **$89.8 million**, with payments extending through September 2031[44](index=44&type=chunk)[45](index=45&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses strong performance, highlighting a 43.5% net sales increase driven by e-commerce, achieving profitability with improved margins and operating leverage, and maintaining sufficient liquidity [Overview and COVID-19 Impact](index=18&type=section&id=Overview%20and%20COVID-19%20Impact) Provides an overview of the company's business model, key products, and the strategic and operational impacts of the COVID-19 pandemic - The company's business model is e-commerce centric, supported by **107** showrooms. Sactionals, its modular couch system, are the primary revenue driver, accounting for **84.7%** of sales in the third quarter[81](index=81&type=chunk)[83](index=83&type=chunk)[86](index=86&type=chunk) - The COVID-19 pandemic accelerated the shift to online sales, which grew to **34.4%** of total sales in Q3 2020 from **21.9%** in the prior year. The company adapted by shifting its salesforce focus to its e-commerce platform during showroom closures[87](index=87&type=chunk)[91](index=91&type=chunk) - In response to the pandemic, the company implemented cost-saving measures including temporary showroom closures, workforce reductions, and executive pay cuts. As of the report date, all showrooms had reopened[90](index=90&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) Analyzes the company's financial performance, detailing changes in net sales, gross profit, operating expenses, and net income over comparative periods Q3 2021 vs Q3 2020 Performance | Metric | Thirteen Weeks Ended Nov 1, 2020 | Thirteen Weeks Ended Nov 3, 2019 | Key Drivers | | :--- | :--- | :--- | :--- | | **Net Sales** | $74.7M | $52.1M | +43.5% YoY, driven by 125.2% growth in Internet sales. | | **Gross Margin** | 55.3% | 50.4% | +487 bps, due to reduced promotions and lower product costs. | | **SG&A as % of Sales** | 34.7% | 47.0% | Decreased 12.3%, showing significant operating leverage. | | **Operating Income** | $2.5M | ($6.9M) | Turned profitable due to sales growth and margin expansion. | - For the thirty-nine week period, net sales grew **35.3%** to **$191.1 million**, with a **247.2%** increase in Internet sales offsetting a **20.0%** decline in showroom sales caused by COVID-19 closures[119](index=119&type=chunk) - Advertising and marketing expenses increased by **51.2%** in Q3 to **$11.0 million**, representing **14.7%** of net sales, as the company invested in media and direct-to-consumer programs to drive growth[115](index=115&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) Assesses the company's ability to meet its short-term and long-term financial obligations, including cash position and credit facilities - The company's primary liquidity sources are cash from operations and its revolving line of credit. As of November 1, 2020, the company held **$47.7 million** in cash and cash equivalents[129](index=129&type=chunk)[99](index=99&type=chunk) - Net cash provided by operating activities for the 39-week period was **$6.9 million**, a significant improvement from a **$36.4 million** use of cash in the prior year, reflecting improved profitability and working capital management[130](index=130&type=chunk)[132](index=132&type=chunk) - The company has a **$25.0 million** revolving credit facility with **$19.2 million** available and no outstanding balance as of November 1, 2020. Management believes current liquidity is sufficient for at least the next 12 months[139](index=139&type=chunk)[129](index=129&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company indicates this section is not applicable, as it is not required to provide these disclosures as a smaller reporting company - This item is marked as **'Not Applicable'** in the report[147](index=147&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of the end of the period covered by the report[148](index=148&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[149](index=149&type=chunk) [PART II. OTHER INFORMATION](index=35&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business or operations - The company is not a party to any legal proceedings that would individually or in aggregate have a material adverse effect on its business[152](index=152&type=chunk) [Item 1A. Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors previously disclosed in the Annual Report on Form 10-K and subsequent quarterly reports - There have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended February 2, 2020 and subsequent 10-Q filings[153](index=153&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=35&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In fiscal 2021, the company issued 136,834 common shares from cashless warrant exercises, receiving no cash proceeds - During fiscal 2021, **246,622** warrants were exercised on a cashless basis, resulting in the issuance of **136,834** common shares. The company received no proceeds from this exercise[153](index=153&type=chunk) [Other Items (Items 3, 4, 5, 6)](index=35&type=section&id=Other%20Items) Confirms no defaults on senior securities, no mine safety disclosures, no other material information under Item 5, and lists exhibits including officer certifications - The company reports **'Not Applicable'** for Item 3 (Defaults Upon Senior Securities) and Item 4 (Mine Safety Disclosures)[154](index=154&type=chunk)[155](index=155&type=chunk) - No information was reported under Item 5 (Other Information)[156](index=156&type=chunk) - Item 6 lists the exhibits filed with the 10-Q, including CEO and CFO certifications and XBRL interactive data files[158](index=158&type=chunk)

The Lovesac Company (NASDAQ:LOVE) Q3 2021 Earnings Conference Call December 9, 2020 8:30 AM ET Company Participants Rachel Schacter - Investor Relations Shawn Nelson - Chief Executive Officer Jack Krause - President and Chief Operating Officer Donna Dellomo - Chief Financial Officer Conference Call Participants Thomas Forte - D.A. Davidson Camilo Lyon - BTIG Brian Nagel - Oppenheimer Matt Koranda - ROTH Capital Partners Maria Ripps - Canaccord Genuity Alex Fuhrman - Craig-Hallum Group Operator Greetings and ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, changes in equity, and cash flows, for the quarter ended August 2, 2020 [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of August 2, 2020, total assets increased to $135.3 million, driven by cash and inventories, while total liabilities rose significantly to $53.5 million due to higher accounts payable and customer deposits | Balance Sheet Items | August 2, 2020 | February 2, 2020 | | :--- | :--- | :--- | | **Current Assets** | | | | Cash and cash equivalents | $54,835,258 | $48,538,827 | | Merchandise inventories | $41,014,621 | $36,399,862 | | Total Current Assets | $107,770,046 | $100,177,736 | | **Total Assets** | **$135,332,392** | **$125,663,767** | | **Current Liabilities** | | | | Accounts payable | $24,482,861 | $19,887,611 | | Customer deposits | $9,095,033 | $1,653,597 | | Total Current Liabilities | $48,044,419 | $32,400,995 | | **Total Liabilities** | **$53,512,777** | **$35,509,240** | | **Stockholders' Equity** | **$81,819,615** | **$90,154,527** | - Customer deposits surged to **$9.1 million** from **$1.7 million** at the beginning of the fiscal year, indicating a significant increase in customer orders awaiting fulfillment[17](index=17&type=chunk) [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the thirteen weeks ended August 2, 2020, net sales grew 28.7% year-over-year to $61.9 million, significantly reducing the operating loss to $1.0 million and improving net loss per share to ($0.08) | Metric | Thirteen weeks ended August 2, 2020 | Thirteen weeks ended August 4, 2019 | | :--- | :--- | :--- | | Net sales | $61,945,410 | $48,146,415 | | Gross profit | $31,055,540 | $24,285,173 | | Operating loss | $(1,038,424) | $(4,946,902) | | Net loss | $(1,106,924) | $(4,770,999) | | Net loss per share (Basic & Diluted) | $(0.08) | $(0.33) | - For the twenty-six weeks ended August 2, 2020, net sales increased to **$116.3 million** from **$89.1 million** in the prior year period, while the net loss narrowed to **$9.5 million** from **$13.9 million**[20](index=20&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) Stockholders' equity decreased to $81.8 million as of August 2, 2020, primarily due to a $9.5 million net loss incurred during the first half of the year, increasing the accumulated deficit - Total stockholders' equity stood at **$81,819,615** as of August 2, 2020[23](index=23&type=chunk) - The accumulated deficit increased from **$(78,162,828)** at the start of the fiscal year to **$(87,617,503)** due to the net losses recorded in the first and second quarters[23](index=23&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the twenty-six weeks ended August 2, 2020, the company generated $12.1 million in cash from operating activities, a significant turnaround driven by improved working capital management | Cash Flow Activity | Twenty-six weeks ended August 2, 2020 | Twenty-six weeks ended August 4, 2019 | | :--- | :--- | :--- | | Net Cash Provided by (Used in) Operating Activities | $12,073,256 | $(23,041,225) | | Net Cash Used in Investing Activities | $(5,271,405) | $(4,074,784) | | Net Cash (Used in) Provided by Financing Activities | $(505,420) | $22,247,409 | | **Net Change in Cash and Cash Equivalents** | **$6,296,431** | **$(4,868,600)** | - The positive operating cash flow was significantly aided by a **$7.4 million** increase in customer deposits and an **$8.2 million** increase in accounts payable and accrued expenses[26](index=26&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section details the basis of presentation, impact of COVID-19, key accounting policies, and a significant shift in revenue channels towards internet sales - In response to COVID-19, the company closed all showrooms on March 18, 2020, implemented a workforce reduction of **447 part-time employees**, and temporarily reduced executive cash compensation[31](index=31&type=chunk) | Sales Channel | Thirteen weeks ended August 2, 2020 | Thirteen weeks ended August 4, 2019 | | :--- | :--- | :--- | | Showrooms | $12,850,565 | $31,261,694 | | Internet | $46,074,015 | $9,456,513 | | Other | $3,020,830 | $7,428,208 | - The company has a **$25.0 million** line of credit with Wells Fargo, with **$9.9 million** available and no borrowings outstanding as of August 2, 2020[51](index=51&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 performance, highlighting a **28.7% net sales increase** driven by internet sales, stable gross margin, and improved net loss - Q2 net sales increased **28.7%** to **$61.9 million**, driven by a **387.2%** increase in Internet sales to **$46.1 million**, which offset the **58.9%** decrease in showroom sales caused by COVID-19 related closures[112](index=112&type=chunk) - Gross margin for Q2 decreased slightly by **31 basis points** to **50.1%** of net sales, as higher distribution and tariff costs were mostly offset by product cost reductions from vendor negotiations and supply chain diversification[113](index=113&type=chunk) | Metric | Thirteen weeks ended August 2, 2020 | Thirteen weeks ended August 4, 2019 | | :--- | :--- | :--- | | Net Loss | $(1,107,000) | $(4,771,000) | | EBITDA | $506,000 | $(3,741,000) | | Adjusted EBITDA | $2,185,000 | $(3,299,000) | - The company ended the quarter with a cash position of **$54.8 million** and believes its liquidity is sufficient to meet working capital and capital expenditure needs for at least the next 12 months[95](index=95&type=chunk)[130](index=130&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company states that this item is not applicable for this reporting period, indicating no material market risks requiring quantitative or qualitative disclosure were identified - The company reports this section as 'Not Applicable'[149](index=149&type=chunk) [Item 4. Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of the end of the quarter - Based on an evaluation by management, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of August 2, 2020[150](index=150&type=chunk) - There were no changes in the company's internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[151](index=151&type=chunk) Part II. OTHER INFORMATION [Item 1. Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) The company reports that it is not currently a party to any legal proceedings that would have a material adverse effect on its business, financial condition, or operations - The company is not presently a party to any legal proceedings that would be expected to have a material adverse effect on its business[154](index=154&type=chunk) [Item 1A. Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) This section highlights the significant negative impact of the COVID-19 pandemic as a key risk factor, detailing operational disruptions and potential liquidity concerns - The COVID-19 pandemic is identified as a significant risk that may have a negative impact on the company's business, sales, results of operations, and financial condition[156](index=156&type=chunk) - All showroom locations were closed in March 2020 due to the pandemic. While they have since reopened in some format, future operations and customer traffic remain uncertain[156](index=156&type=chunk) - The company's liquidity could be negatively impacted if the crisis continues, potentially requiring additional financing in disrupted capital markets[158](index=158&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company states that this item is not applicable for this reporting period - The company reports this section as 'Not Applicable'[160](index=160&type=chunk) [Item 3. Defaults Upon Senior Securities](index=40&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company states that this item is not applicable for this reporting period - The company reports this section as 'Not Applicable'[161](index=161&type=chunk) [Item 4. Mine Safety Disclosures](index=40&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company states that this item is not applicable - The company reports this section as 'Not Applicable'[162](index=162&type=chunk)[163](index=163&type=chunk) [Item 5. Other Information](index=41&type=section&id=Item%205.%20Other%20Information) The company reports no other information for this period - The company reports 'None' for this item[164](index=164&type=chunk) [Item 6. Exhibits](index=42&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files - The exhibits filed with this report include certifications from the Chief Executive Officer and Chief Financial Officer as required by the Sarbanes-Oxley Act, as well as Inline XBRL documents[165](index=165&type=chunk)