Company Announcement - Lulu's Fashion Lounge Holdings, Inc. will release its third quarter 2024 financial results on November 13, 2024, after market close [1] - A conference call and live webcast will be held at 5:00 p.m. Eastern Time on the same day [1] - The financial results and webcast will be accessible through the Investor Relations section of the Company's website [1] Company Overview - Lulus is an attainable luxury fashion brand for women, headquartered in California, serving millions of customers worldwide [2] - The brand focuses on modern, feminine designs at accessible prices for various occasions [2] - Founded in 1996, Lulus utilizes direct consumer feedback to refine product offerings and enhance customer experience [2] Customer Engagement - Lulus offers world-class personal stylists, bridal concierge, and customer care teams dedicated to exceptional service [2] - The brand aims to make every woman feel beautiful and celebrated for all life’s moments [2]

Core Insights - Lulu's Fashion Lounge Holdings, Inc. has announced a strategic collaboration with Dillard's to enhance its wholesale strategy and expand its distribution footprint across key markets [1][3] - The collaboration will introduce Lulus' latest collections to over 30 Dillard's stores nationwide, focusing on special occasion and event apparel [2][3] - Lulus plans to launch an expanded Prom collection at Dillard's in early 2025, further solidifying its presence in the special occasion wear market [2] Company Strategy - The partnership with Dillard's is a pivotal step in Lulus' broader strategy to amplify its market presence and meet evolving customer demands [3] - Lulus aims to increase visibility and accessibility through key wholesale partnerships, building on the success of its "Friends for Life" campaign and "Lulus Loves" collaborations [4] - The company has launched various collaborations in 2024 with brands like Boys Lie, D'Amelio Footwear, and Levi's, focusing on expanding its reach [4] Market Position - Lulus reported a record second quarter for its special occasion and bridesmaids categories, reinforcing its position as a go-to destination for life's moments [3] - Dillard's, as one of the nation's largest fashion retailers, operates 273 stores across 30 states, providing a significant platform for Lulus to reach new audiences [7]

Core Viewpoint - Lulu's Fashion Lounge Holdings, Inc. has announced a reduction in the size of its Board of Directors from eleven to six members as part of a strategy to reduce costs and streamline operations while adhering to corporate governance best practices [1][3]. Board Restructuring - Five directors have voluntarily resigned, effective September 4, 2024, leaving a Board composed of six members: four independent directors and two non-independent directors, including the CEO [1]. - The remaining directors are expected to possess the necessary skills to support the execution of the company's strategic plan and drive profitability [3]. Cost Reduction Measures - The Board has suspended payment of retainers to directors under the Non-Employee Director Compensation Program until further notice as part of the company's commitment to cost reduction [3]. - The restructuring includes the dissolution of the Technology and Innovation Committee, with its responsibilities redistributed to the Audit Committee [4]. Shareholder Communication - The Chairman of the Board expressed gratitude to the departing members for their service and emphasized the importance of their insights to the company's success [2]. - The company aims to restore shareholder value and return to growth under the leadership of CEO Crystal Landsem [3]. Stock Sale Plan - Mr. McCreight has amended his existing 10b5-1 Sales Plan to allow for the sale of 62,500 shares of common stock, down from 633,000 shares, effective November 18, 2024 [5].

Financial Data and Key Metrics - Net revenue for Q2 2024 was $92 million, a 13% decrease year-over-year, driven by a 14% decrease in total orders and higher return rates [6][29] - Adjusted EBITDA for Q2 2024 was a loss of $0.2 million, compared to a gain of $4.2 million in Q2 2023, reflecting elevated fixed costs and reduced revenue [6][33] - Gross margin improved by 80 basis points year-over-year to 45.5%, driven by lower markdown sales and a shift toward higher-margin product categories [9][30] - Inventory levels declined by 19% year-over-year, exceeding the 13% net revenue decline, indicating improved inventory management [9][36] - Net loss for Q2 2024 was $10.8 million, worsening by $8.2 million compared to Q2 2023, impacted by a $5.4 million noncash tax provision and a $423,000 legal accrual [32] Business Line Performance - Special occasion and bridesmaids net sales grew over 30% year-over-year, surpassing pre-pandemic levels and setting a record for these categories [8] - Casual business experienced significant declines, contributing to the majority of the year-over-year net sales decrease [13] - Third-party brand and influencer collaborations, including partnerships with Levi's and Vans, drove increased media interest and social traffic [10][25] - Wholesale business showed steady progress, with new developments based on best-selling items and streamlined fulfillment processes [12] Market Performance - International sales achieved high double-digit growth in units sold in the top 15 countries outside the US, including Canada, the UK, and Mexico [18] - Average unit retail (AUR) increased year-over-year, driving higher average order value (AOV) and total order value per customer [17] Strategic Direction and Industry Competition - The company is focusing on long-term growth initiatives, including data-driven merchandising, brand awareness, and customer engagement [7] - Investments in proprietary technology and analytics platforms aim to improve customer insights and operational efficiency [7][20] - The company is implementing cost reduction measures, including a 10% to 15% reduction in operating expenses for the second half of 2024 [14][37] - Capital expenditures for the year are expected to decrease by $1.5 million to $2.5 million, with a revised projection of $3.5 million for the fiscal year [14][38] Management Commentary on Operating Environment and Future Outlook - Management views current challenges as temporary and remains committed to long-term growth despite macroeconomic pressures [6][7] - The company withdrew its full-year net revenue and adjusted EBITDA outlook due to slower-than-expected recovery and macroeconomic uncertainty [15][36] - Early Q3 sales trends show sequential improvement, suggesting positive momentum in strategic initiatives [10][36] Other Important Information - The company extended its revolving credit agreement with Bank of America, reducing the facility from $50 million to $15 million, with a future reduction to $10 million by March 31, 2025 [34] - Free cash flow for Q2 2024 was $3 million, a $900,000 decrease year-over-year, with $3.7 million generated from operating activities [35] - The company repurchased approximately $87,000 worth of common stock under its $2.5 million stock repurchase program [35] Q&A Session Summary Question: Consumer health and competitive landscape - The company noted ongoing macroeconomic pressures impacting consumer demand, with a slower-than-expected recovery [41] - Management is focusing on driving engagement and profitability while managing cash flow prudently [41][43] Question: Adjusted EBITDA framework - The company is working through cost reductions, with some measures having immediate benefits and others longer-term impacts [42] - Management is cautious about aligning cost reductions with the slower sales recovery to maintain business momentum [42][43] Question: Plans to drive engagement and marketing expenses - The company plans to optimize marketing spend, markdowns, and discounts based on consumer behavior and macro conditions [45][46] - Investments in brand equity will continue, but with a focus on near-term payoffs [45][46] Question: Cost reduction levers and profitability - The company has implemented headcount reductions and executive pay cuts, with limited additional headcount reductions possible due to an already lean team [47][48] - Further cost reductions may focus on G&A spend, but specifics are not yet finalized [48] Question: Category trends and casual business challenges - The casual business faced significant pressure, while special occasion and bridesmaids categories performed strongly [51] - The company is investing in the recovery of the casual business, but the reorder funnel is taking longer to rebuild due to competitive and consumer pressures [51]

Core Insights - Lulus has entered a strategic partnership with D'Amelio Footwear to enhance its market presence and appeal to the Gen Z demographic [6][7] - The collaboration will feature a limited-edition capsule collection under the "Lulus Loves" campaign, launching on July 29, 2024 [13][14] - The partnership aims to leverage the D'Amelio sisters' significant social media influence to drive brand engagement and customer interaction [3][8] Company Overview - Lulus is positioned as an attainable luxury fashion brand for women, offering modern and feminine designs at accessible prices [10] - The company has a history of successful collaborations with brands like Boys Lie, Levi's®, and Vans, which have helped expand its market reach [1][9] - Lulus aims to create a personalized shopping experience through its world-class customer service and stylists [10] Product Launch Details - The D'Amelio Footwear collection will include a variety of styles such as boots, platform slides, sneakers, and pumps, designed for various occasions [14] - A preview event will be held on July 27, 2024, allowing fans to meet the D'Amelio sisters and shop the collection before its official release [2][8] - The marketing campaign for the launch will include social media activations, in-person events, and prominent advertising placements, including a billboard in Times Square [3][8] Target Audience and Marketing Strategy - The partnership is designed to amplify Lulus' influence within the Gen Z demographic, utilizing the D'Amelio sisters' extensive social media following of over 400 million [18] - The marketing strategy will focus on integrated approaches across various platforms to cultivate brand loyalty among younger consumers [3][6] - Lulus aims to position itself as a go-to shopping destination by offering compelling brands that resonate with its core customers [9]

On the heels of partnerships with Levi's® and Boys Lie, Lulus continues momentum by introducing new curated collections of coveted brands to customers in latest Lulus Loves capsule "At Lulus, we are always looking for inventive ways to energize our customers and our Lulus Loves: Vans capsule is nothing short of that," said Laura Deady, Chief Merchandising Officer, Lulus. "With this exciting new partnership, we're showing our customers how easy it is to incorporate Vans essential styles into any of their sum ...

On the heels of partnerships with Levi's® and Boys Lie, Lulus continues momentum by introducing new curated collections of coveted brands to customers in latest Lulus Loves capsule The addition of Vans to its repertoire expands Lulus' footwear offerings, providing shoppers with an even wider selection of iconic and fashion-forward options. For everything from al fresco lunches to summer soirees to outdoor concerts or in-office days, the Lulus Loves: Vans capsule will make Vans' signature styles, including i ...

Lulu's Fashion Lounge Holdings, Inc. (LVLU) came out with a quarterly loss of $0.15 per share versus the Zacks Consensus Estimate of a loss of $0.07. This compares to loss of $0.14 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -114.29%. A quarter ago, it was expected that this company would post a loss of $0.10 per share when it actually produced a loss of $0.18, delivering a surprise of -80%.Over the last four quarters, the ...

[PART I — FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Presents Lulu's unaudited condensed consolidated financial statements and notes for Q1 2024 and Q1 2023 [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Details the company's assets, liabilities, and stockholders' equity as of March 31, 2024, and December 31, 2023 | Asset/Liability Category | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :---------------------- | :----------------------------- | :----------------------------- | | **Assets** | | | | Cash and cash equivalents | $5,489 | $2,506 | | Total current assets | $65,220 | $52,520 | | Total assets | $160,633 | $149,445 | | **Liabilities** | | | | Total current liabilities | $78,986 | $61,887 | | Total liabilities | $102,887 | $88,493 | | **Stockholders' Equity** | | | | Total stockholders' equity | $57,746 | $60,952 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Details the company's net revenue, expenses, and net loss for Q1 2024 and Q1 2023 | Metric | Thirteen Weeks Ended March 31, 2024 (in thousands) | Thirteen Weeks Ended April 2, 2023 (in thousands) | | :-------------------------------- | :------------------------------------- | :------------------------------------ | | Net revenue | $77,259 | $90,976 | | Cost of revenue | $44,613 | $53,015 | | Gross profit | $32,646 | $37,961 | | Selling and marketing expenses | $17,693 | $19,489 | | General and administrative expenses | $21,111 | $24,348 | | Loss from operations | $(6,158) | $(5,876) | | Net loss and comprehensive loss | $(5,736) | $(5,618) | | Basic loss per share | $(0.15) | $(0.14) | | Diluted loss per share | $(0.15) | $(0.14) | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Presents changes in stockholders' equity, including common stock and accumulated deficit, for Q1 2024 and Q1 2023 | Metric | As of March 31, 2024 (in thousands) | As of December 31, 2023 (in thousands) | | :------------------------------------- | :---------------------------------- | :----------------------------------- | | Common Stock Shares Outstanding | 41,255,966 | 40,618,206 | | Additional Paid-In Capital | $256,646 | $254,116 | | Accumulated Deficit | $(198,941) | $(193,205) | | Total Stockholders' Equity | $57,746 | $60,952 | - Equity-based compensation for the thirteen weeks ended March 31, 2024, was **$3,023 thousand**, contributing to the increase in Additional Paid-In Capital[24](index=24&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Details cash flows from operating, investing, and financing activities for Q1 2024 and Q1 2023 | Cash Flow Activity | Thirteen Weeks Ended March 31, 2024 (in thousands) | Thirteen Weeks Ended April 2, 2023 (in thousands) | | :------------------------------------- | :------------------------------------- | :------------------------------------ | | Net cash provided by operating activities | $6,947 | $3,705 | | Net cash used in investing activities | $(959) | $(1,069) | | Net cash used in financing activities | $(3,005) | $(5,026) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $2,983 | $(2,390) | | Cash, cash equivalents and restricted cash at end of period | $5,489 | $7,829 | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Offers detailed explanations of the company's business, accounting policies, and specific financial components [1. Description of Business, Organization and Liquidity](index=10&type=section&id=1.%20Description%20of%20Business,%20Organization%20and%20Liquidity) Describes Lulus' business, organization, and liquidity, including macroeconomic impacts on sales and spending - Lulus, founded in 1996, is a customer-driven, digitally-native, attainable luxury fashion brand for women, transitioning to a purely online business in 2008[33](index=33&type=chunk) - Macroeconomic factors like inflation, interest rates, student loan repayment resumption, and global events continue to impact sales and discretionary consumer spending, leading the company to adjust pricing and promotions[34](index=34&type=chunk) - As of March 31, 2024, the Company had **$5.5 million** in cash and cash equivalents and **$6.0 million** due under its revolving line of credit, which matures on November 15, 2024. The company is evaluating debt financing sources but believes current cash and operational cash flow, along with conservation measures, will meet obligations for the next year[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk) [2. Significant Accounting Policies](index=10&type=section&id=2.%20Significant%20Accounting%20Policies) Details the company's key accounting principles, including revenue recognition, advertising, and impairment - The company's fiscal year is a 52-53 week period ending on the Sunday nearest December 31. Fiscal years 2024 and 2023 both consist of 52 weeks[38](index=38&type=chunk) - Revenue is primarily generated from merchandise sales and recognized upon shipment when control transfers to customers, net of sales returns. Stored-value card revenue is recognized upon redemption, with breakage recognized proportionally over 36 months[46](index=46&type=chunk)[48](index=48&type=chunk)[50](index=50&type=chunk) | Contract Liability | Balance as of Dec 31, 2023 (in thousands) | Revenue Recognized (in thousands) | Increase due to Cash Received (in thousands) | Balance as of Mar 31, 2024 (in thousands) | | :----------------- | :-------------------------------------- | :-------------------------------- | :------------------------------------------- | :---------------------------------------- | | Deferred Revenue | $50 | $(50) | $230 | $230 | | Stored-Value Cards | $13,142 | $(1,549) | $1,616 | $13,209 | - Advertising costs decreased to **$13.0 million** for the thirteen weeks ended March 31, 2024, from **$15.1 million** in the prior year period[53](index=53&type=chunk) - The company performed an interim quantitative impairment assessment for goodwill, tradename, and intangible assets as of March 31, 2024, due to a sustained stock price decline and continuing net losses. The fair value exceeded the carrying value by approximately **17%**, concluding no impairment existed[56](index=56&type=chunk)[57](index=57&type=chunk) - As an emerging growth company, Lulus has elected to use the extended transition period for complying with new or revised accounting standards[58](index=58&type=chunk) [3. Fair Value Measurements](index=16&type=section&id=3.%20Fair%20Value%20Measurements) Explains fair value measurements, noting that carrying values approximate fair value for short-term financial instruments - The carrying values of cash and cash equivalents, restricted cash, accounts payable, accrued expenses, and the revolving line of credit approximate fair value due to their short-term maturities or daily interest rate resets[63](index=63&type=chunk) [4. Balance Sheet Components](index=18&type=section&id=4.%20Balance%20Sheet%20Components) Details components of the balance sheet, including property and equipment, and accrued expenses | Property and Equipment Category | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :------------------------------ | :----------------------------- | :----------------------------- | | Total property and equipment | $10,250 | $10,206 | | Less: accumulated depreciation and amortization | $(5,556) | $(5,494) | | Property and equipment, net | $4,694 | $4,712 | | Accrued Expense Category | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :----------------------- | :----------------------------- | :----------------------------- | | Accrued compensation and benefits | $3,633 | $5,057 | | Accrued marketing | $7,241 | $5,002 | | Accrued inventory | $12,815 | $4,151 | | Accrued freight | $2,751 | $1,940 | | Other | $3,637 | $2,193 | | Total Accrued expenses and other current liabilities | $30,077 | $18,343 | [5. Debt](index=18&type=section&id=5.%20Debt) Outlines the 2021 Revolving Facility, including capacity, outstanding amounts, interest rates, and covenant compliance - The 2021 Revolving Facility allows borrowings up to **$50.0 million**, with an option to increase by an additional **$25.0 million**. It matures on November 15, 2024[67](index=67&type=chunk) - During the thirteen weeks ended March 31, 2024, the company borrowed **$10.0 million** and repaid **$12.0 million** under the facility[67](index=67&type=chunk) - As of March 31, 2024, **$6.0 million** was outstanding under the Revolving Facility, with **$43.7 million** available for borrowing and **$7.2 million** for letters of credit. The interest rate was **7.2%**, with a weighted average of **8.3%** for the period[67](index=67&type=chunk)[68](index=68&type=chunk) - The company was in compliance with all financial covenants as of March 31, 2024[69](index=69&type=chunk) [6. Leases](index=19&type=section&id=6.%20Leases) Details lease accounting policies and presents future undiscounted lease payments and liabilities - The company adopted ASC 842 on January 3, 2022, using the alternative transition method, and elected practical expedients including retaining historical lease classification and combining lease and non-lease components[71](index=71&type=chunk)[72](index=72&type=chunk) - Lulus primarily leases distribution facilities, corporate offices, and retail stores under operating lease agreements expiring through December 2031, with options to extend[73](index=73&type=chunk) | Fiscal Year | Operating Leases (in thousands) | Finance Leases (in thousands) | Total (in thousands) | | :---------- | :------------------------------ | :---------------------------- | :------------------- | | 2024 (remaining 9 months) | $4,252 | $1,006 | $5,258 | | 2025 | $6,263 | $1,504 | $7,767 | | 2026 | $4,970 | $252 | $5,222 | | 2027 | $5,138 | $74 | $5,212 | | 2028 | $5,252 | $6 | $5,258 | | Thereafter | $6,380 | — | $6,380 | | **Total undiscounted lease payment** | **$32,255** | **$2,842** | **$35,097** | | Present value adjustment | $(5,582) | $(122) | $(5,704) | | **Total lease liabilities** | **$26,673** | **$2,720** | **$29,393** | | Less: lease liabilities, current | $(4,106) | $(1,424) | $(5,530) | | **Lease liabilities, noncurrent** | **$22,567** | **$1,296** | **$23,863** | [7. Commitments and Contingencies](index=21&type=section&id=7.%20Commitments%20and%20Contingencies) Addresses legal proceedings and claims, anticipating no material adverse effects on financial statements - The company is subject to various legal proceedings and claims in the ordinary course of business but does not believe any currently pending matters will have a material adverse effect on its financial statements[75](index=75&type=chunk)[76](index=76&type=chunk) [8. Preferred Stock](index=23&type=section&id=8.%20Preferred%20Stock) Details authorized preferred stock, with no shares issued or outstanding as of March 31, 2024 - The company is authorized to issue **10,000,000** shares of preferred stock (**$0.001** par value), but no shares were issued or outstanding as of March 31, 2024, and December 31, 2023[78](index=78&type=chunk) [9. Common Stock](index=23&type=section&id=9.%20Common%20Stock) Details authorized common stock, voting rights, dividend policy, and shares reserved for equity plans - The company has authorized **250,000,000** shares of common stock (**$0.001** par value). Holders are entitled to one vote per share, and no dividends have been declared to date[79](index=79&type=chunk) - As of March 31, 2024, **161,397** shares were reserved for stock options, **1,704,230** for the Omnibus Equity Plan, and **1,368,288** for the 2021 Employee Stock Purchase Plan (ESPP)[79](index=79&type=chunk) [10. Equity-Based Compensation](index=23&type=section&id=10.%20Equity-Based%20Compensation) Details equity plans, RSU and PSU grants, and associated compensation expenses for the reporting period - The Omnibus Equity Plan and ESPP were adopted in connection with the IPO. The Omnibus Equity Plan automatically increases shares reserved annually by **4%** of outstanding common stock, and the ESPP by **1%**[80](index=80&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk) - For the thirteen weeks ended March 31, 2024, equity-based compensation expense for the 2023 Bonus Plan was reversed by **$0.1 million**, and **95,912** fully vested RSUs were awarded on April 1, 2024[84](index=84&type=chunk) - During the thirteen weeks ended March 31, 2024, the company granted **1,914,071** RSUs to executives and employees, and **26,616** RSUs to directors. Equity-based compensation expense for RSUs was **$1.6 million** (vs. **$2.8 million** in prior year), with **$11.3 million** unrecognized expense remaining[97](index=97&type=chunk) - PSUs were granted to the CEO (**1,811,571**), President/CIO (**300,000**), and CMO (**50,000**) subject to stock price or net revenue growth targets and continued employment. Equity-based compensation expense for PSUs was **$0.6 million** (vs. **$0.2 million** in prior year), with **$2.1 million** unrecognized expense remaining[100](index=100&type=chunk)[101](index=101&type=chunk) [11. Income Taxes](index=28&type=section&id=11.%20Income%20Taxes) Details loss before income taxes, benefit, and effective tax rates for Q1 2024 and Q1 2023 | Metric | Thirteen Weeks Ended March 31, 2024 (in thousands) | Thirteen Weeks Ended April 2, 2023 (in thousands) | | :-------------------------- | :------------------------------------- | :------------------------------------ | | Loss before benefit for income taxes | $(6,315) | $(6,326) | | Benefit for income taxes | $579 | $708 | | Effective tax rate | (9.2)% | (11.2)% | - The effective tax rate differs from the federal rate primarily due to non-deductible executive and equity-based compensation expenses[106](index=106&type=chunk)[107](index=107&type=chunk) [12. Related Party Transactions](index=30&type=section&id=12.%20Related%20Party%20Transactions) Discusses related party transactions with significant shareholders, believed to be on arm's length terms - The company has business relationships with entities invested in by significant shareholders (greater than **10%** ownership), but these relationships were obtained independently and are believed to be on arm's length terms[108](index=108&type=chunk) [13. Subsequent Events](index=30&type=section&id=13.%20Subsequent%20Events) Reports the Board's authorization of a **$2.5 million** stock repurchase program on May 3, 2024 - On May 3, 2024, the Board of Directors authorized a stock repurchase program of up to **$2.5 million** of common stock, with timing and volume at management's discretion[109](index=109&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion and analysis of financial condition, operational results, and key performance for Q1 2024 and Q1 2023 [Overview](index=32&type=section&id=Overview) Overview of Lulus as a digitally-native, attainable luxury fashion brand targeting Millennial and Gen Z women - Lulus is a customer-driven, primarily online, digitally-native, attainable luxury fashion brand for women, targeting Millennial and Gen Z demographics with modern, feminine designs[112](index=112&type=chunk) [Impact of Macroeconomic Trends on Business](index=32&type=section&id=Impact%20of%20Macroeconomic%20Trends%20on%20Business) Examines how macroeconomic factors like inflation and interest rates negatively impacted Q1 2024 sales and consumer spending - Macroeconomic factors such as inflation, interest rates, and consumer confidence negatively impacted sales in Q1 2024, leading the company to implement pricing and promotional adjustments[114](index=114&type=chunk) [Liquidity](index=32&type=section&id=Liquidity) Assesses the company's liquidity, including cash, revolving credit, and plans to meet future obligations - As of March 31, 2024, the company had **$5.5 million** in cash and cash equivalents and **$6.0 million** outstanding on its revolving line of credit, which matures in November 2024[115](index=115&type=chunk)[116](index=116&type=chunk) - Management is evaluating debt financing but expects current cash, operating cash flow, and cash conservation measures (marketing, capital spend adjustments) to cover obligations for the next year[118](index=118&type=chunk) [Key Operating and Financial Metrics](index=34&type=section&id=Key%20Operating%20and%20Financial%20Metrics) Details key operating and financial metrics, including gross margin, net loss, Adjusted EBITDA, and customer data | Metric | Thirteen Weeks Ended March 31, 2024 | Thirteen Weeks Ended April 2, 2023 | | :------------------ | :---------------------------------- | :--------------------------------- | | Gross Margin | 42.3 % | 41.7 % | | Net loss | $(5,736) thousand | $(5,618) thousand | | Adjusted EBITDA | $(2,659) thousand | $16 thousand | | Adjusted EBITDA margin | (3.4)% | — % | | Active Customers | 2,770 thousand | 3,173 thousand | | Average Order Value | $143 | $129 | - Active Customers decreased by **12.7%** YoY, from **3.173 million** to **2.770 million**[120](index=120&type=chunk) - Average Order Value (AOV) increased by **10.9%** YoY, from **$129** to **$143**[120](index=120&type=chunk) [Non-GAAP Financial Measures](index=35&type=section&id=Non-GAAP%20Financial%20Measures) Defines and reconciles non-GAAP financial measures like Adjusted EBITDA and Free Cash Flow for performance evaluation - Adjusted EBITDA is calculated as net loss adjusted for interest expense, income taxes, depreciation and amortization, and equity-based compensation expense. It is used by management to evaluate operating performance and make strategic decisions[126](index=126&type=chunk) - Free Cash Flow is defined as net cash provided by operating activities less capitalized software development costs and purchases of property and equipment, serving as an indicator of liquidity[131](index=131&type=chunk) | Metric | Thirteen Weeks Ended March 31, 2024 (in thousands) | Thirteen Weeks Ended April 2, 2023 (in thousands) | | :------------------------------------- | :------------------------------------- | :------------------------------------ | | Net loss | $(5,736) | $(5,618) | | Depreciation and amortization | $1,339 | $1,121 | | Interest expense | $383 | $523 | | Income tax benefit | $(579) | $(708) | | Equity-based compensation expense | $1,934 | $4,698 | | **Adjusted EBITDA** | **$(2,659)** | **$16** | | Net loss margin | (7.4)% | (6.2)% | | **Adjusted EBITDA margin** | **(3.4)%** | **— %** | | Metric | Thirteen Weeks Ended March 31, 2024 (in thousands) | Thirteen Weeks Ended April 2, 2023 (in thousands) | | :------------------------------------- | :------------------------------------- | :------------------------------------ | | Net cash provided by operating activities | $6,947 | $3,705 | | Capitalized software development costs | $(397) | $(551) | | Purchases of property and equipment | $(562) | $(518) | | **Free Cash Flow** | **$5,988** | **$2,636** | [Factors Affecting Our Performance](index=39&type=section&id=Factors%20Affecting%20Our%20Performance) Identifies key performance drivers including customer acquisition, retention, inventory management, and infrastructure investments - Business performance is influenced by customer acquisition (cost-effectiveness of marketing), customer retention (driving repeat purchases), and efficient inventory management using a 'test, learn, and reorder' strategy[133](index=133&type=chunk)[134](index=134&type=chunk)[135](index=135&type=chunk) - The company plans to continue investing in operations and infrastructure, including headcount, inventory, fulfillment, logistics, and software/data capabilities, with a disciplined approach to capital spending[136](index=136&type=chunk) [Components of Our Results of Operations](index=39&type=section&id=Components%20of%20Our%20Results%20of%20Operations) Explains the components of results of operations, including net revenue, cost of revenue, and various expenses - Net revenue is gross sales, net of returns, duties, and promotional discounts, recognized upon shipment[137](index=137&type=chunk) - Cost of revenue includes product costs, shipping, distribution facility expenses, and inventory charges. Gross Margin is higher for Lulus and exclusive-to-Lulus merchandise compared to third-party branded products[139](index=139&type=chunk)[140](index=140&type=chunk) - Selling and marketing expenses cover payment processing, advertising, performance marketing, and brand marketing, influenced by promotional discounts[141](index=141&type=chunk) - General and administrative expenses include payroll, benefits (including equity-based compensation), and facility costs for corporate functions, increasing due to business growth and public company obligations[142](index=142&type=chunk)[143](index=143&type=chunk) - Interest expense relates to the 2021 Revolving Facility. Income tax benefit is affected by non-deductible executive and equity-based compensation and state taxes[144](index=144&type=chunk)[145](index=145&type=chunk) [Our Results of Operations](index=43&type=section&id=Our%20Results%20of%20Operations) Details the company's financial results for the thirteen weeks ended March 31, 2024, and April 2, 2023 | Metric | Thirteen Weeks Ended March 31, 2024 (in thousands) | Thirteen Weeks Ended April 2, 2023 (in thousands) | | :-------------------------------- | :------------------------------------- | :------------------------------------ | | Net revenue | $77,259 | $90,976 | | Cost of revenue | $44,613 | $53,015 | | Gross profit | $32,646 | $37,961 | | Selling and marketing expenses | $17,693 | $19,489 | | General and administrative expenses | $21,111 | $24,348 | | Loss from operations | $(6,158) | $(5,876) | | Interest expense | $(383) | $(523) | | Other income, net | $226 | $73 | | Loss before income taxes | $(6,315) | $(6,326) | | Income tax benefit | $579 | $708 | | Net loss | $(5,736) | $(5,618) | | Metric (as % of Net Revenue) | Thirteen Weeks Ended March 31, 2024 | Thirteen Weeks Ended April 2, 2023 | | :--------------------------- | :---------------------------------- | :--------------------------------- | | Net revenue | 100 % | 100 % | | Cost of revenue | 58 % | 58 % | | Gross profit | 42 % | 42 % | | Selling and marketing expenses | 23 % | 21 % | | General and administrative expenses | 27 % | 27 % | | Loss from operations | (8)% | (6)% | | Interest expense | — % | (1)% | | Other income, net | — % | — % | | Loss before income taxes | (8)% | (7)% | | Income tax benefit | 1 % | 1 % | | Net loss | (7)% | (6)% | [Comparisons for the Thirteen Weeks Ended March 31, 2024 and April 2, 2023](index=43&type=section&id=Comparisons%20for%20the%20Thirteen%20Weeks%20Ended%20March%2031,%202024%20and%20April%202,%202023) Compares key financial metrics and their changes for Q1 2024 versus Q1 2023 - Net revenue decreased by **$13.7 million** (**15%**) due to a **17%** decrease in Total Orders Placed and higher return rates, partially offset by higher Average Order Value[148](index=148&type=chunk) - Cost of revenue decreased by **$8.4 million** (**16%**), primarily driven by lower net revenue[149](index=149&type=chunk) - Selling and marketing expenses decreased by **$1.8 million** (**9%**) due to lower marketing spend and reduced merchant processing fees[150](index=150&type=chunk) - General and administrative expenses decreased by **$3.2 million** (**13%**), mainly from a **$2.8 million** reduction in stock-based compensation and **$0.8 million** in variable labor savings, partially offset by increased fixed labor[151](index=151&type=chunk) - Interest expense decreased by **$0.1 million** (**27%**) due to lower average borrowings on the Revolving Facility[152](index=152&type=chunk) - Income tax benefit decreased by **$0.1 million** to **$0.6 million**[153](index=153&type=chunk) [Quarterly Trends and Seasonality](index=44&type=section&id=Quarterly%20Trends%20and%20Seasonality) Examines seasonal fluctuations in net revenue and gross profit, and expense adjustment strategies - The company experiences moderate seasonal fluctuations, with net revenue typically highest in Q2 (spring/summer event dresses) and lowest in Q4 (not a holiday gifting destination)[154](index=154&type=chunk) - Gross profit generally fluctuates with net revenue, while selling and marketing expenses are adjusted based on net revenue and inventory optimization needs[155](index=155&type=chunk)[156](index=156&type=chunk) [Liquidity and Capital Resources](index=44&type=section&id=Liquidity%20and%20Capital%20Resources) Identifies primary liquidity sources and capital requirements, assessing sufficiency for the next 12 months - Primary liquidity sources are cash from operations and the Revolving Facility. Capital requirements include inventory, payroll, operating expenses, capital expenditures (distribution, software), and debt service[158](index=158&type=chunk) - As of March 31, 2024, **$6.0 million** was outstanding under the 2021 Revolving Facility, with **$43.7 million** available for borrowing. The facility matures on November 15, 2024[159](index=159&type=chunk) - The company believes current cash, operating cash flows, and available borrowings will be sufficient for the next 12 months, but actual results depend on various factors[161](index=161&type=chunk) [Cash Flow Analysis](index=46&type=section&id=Cash%20Flow%20Analysis) Analyzes cash flows from operating, investing, and financing activities, highlighting key changes | Cash Flow Activity | Thirteen Weeks Ended March 31, 2024 (in thousands) | Thirteen Weeks Ended April 2, 2023 (in thousands) | | :------------------------------------- | :------------------------------------- | :------------------------------------ | | Net cash provided by operating activities | $6,947 | $3,705 | | Net cash used in investing activities | $(959) | $(1,069) | | Net cash used in financing activities | $(3,005) | $(5,026) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $2,983 | $(2,390) | - Net cash provided by operating activities increased by **$3.2 million**, driven by a **$2.8 million** reduction in inventory purchases, a **$2.5 million** increase in accrued expenses (inventory, returns reserve, marketing), and reductions in accounts receivable and assets for recovery[165](index=165&type=chunk) - Net cash used in investing activities decreased by **$0.1 million**, primarily due to less investment in capitalized software development costs[167](index=167&type=chunk) - Net cash used in financing activities decreased by **$2.0 million**, mainly due to higher borrowings on the Revolving Facility offset by higher repayments, increased finance lease payments, and withholding tax payments[169](index=169&type=chunk) [Critical Accounting Policies and Estimates](index=48&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Reaffirms consistency of critical accounting policies and estimates with prior disclosures, requiring management judgment - The company's critical accounting policies and estimates remain consistent with those disclosed in its 2023 10-K, requiring management to make estimates and assumptions that affect reported financial amounts[171](index=171&type=chunk)[173](index=173&type=chunk) [Recent Accounting Pronouncements](index=50&type=section&id=Recent%20Accounting%20Pronouncements) Discusses the company's evaluation of recently issued FASB ASUs and their potential impact - The company is evaluating the impact of recently issued FASB ASUs, including ASU 2023-07 (Segment Reporting), ASU 2023-09 (Income Taxes), ASU 2024-01 (Stock Compensation), and ASU 2024-02 (Codification Improvements), all effective for annual periods beginning after December 15, 2024[59](index=59&type=chunk)[60](index=60&type=chunk)[61](index=61&type=chunk)[62](index=62&type=chunk) [JOBS Act Accounting Election](index=50&type=section&id=JOBS%20Act%20Accounting%20Election) Explains the company's election as an 'emerging growth company' for extended accounting standard transition - As an 'emerging growth company' under the JOBS Act, Lulus has elected to use the extended transition period for new or revised accounting standards, which may result in non-comparable financial statements to other public companies[175](index=175&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=50&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Reports no material changes to the company's exposure to market risk since its 2023 10-K filing - No material change in market risk exposure from the 2023 10-K[176](index=176&type=chunk) [Item 4. Controls and Procedures](index=50&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated disclosure controls and procedures as effective, with no material changes to internal control - Disclosure controls and procedures were evaluated and deemed effective as of March 31, 2024[178](index=178&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2024[179](index=179&type=chunk) [PART II — OTHER INFORMATION](index=51&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=51&type=section&id=Item%201.%20Legal%20Proceedings) Reports no legal proceedings are expected to have a material adverse effect on the company's financial statements - The company is not currently a party to any legal proceedings expected to have a material adverse impact on its financial statements[181](index=181&type=chunk) [Item 1A. Risk Factors](index=51&type=section&id=Item%201A.%20Risk%20Factors) States no material changes to risk factors previously disclosed in the company's 2023 10-K - No material changes to risk factors previously disclosed in the 2023 10-K[182](index=182&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=51&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Reports no unregistered sales of equity securities or use of proceeds during the period - No unregistered sales of equity securities or use of proceeds to report[183](index=183&type=chunk) [Item 3. Defaults Upon Senior Securities](index=51&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Reports no defaults upon senior securities during the reporting period - No defaults upon senior securities[184](index=184&type=chunk) [Item 4. Mine Safety Disclosures](index=51&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Not applicable[185](index=185&type=chunk) [Item 5. Other Information](index=51&type=section&id=Item%205.%20Other%20Information) Reports a **$2.5 million** stock repurchase program authorized on May 3, 2024, and no changes to Rule 10b5-1 trading arrangements - On May 3, 2024, the Board authorized a stock repurchase program of up to **$2.5 million** of common stock[186](index=186&type=chunk) - No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the thirteen weeks ended March 31, 2024[187](index=187&type=chunk) [Item 6. Exhibits](index=52&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with the Form 10-Q, including employment agreements, stock awards, and certifications - Exhibits include the Second Amendment to Employment Agreement for Mark Vos, Form of Performance Stock Unit Award Grant Notice, Second Amendment to Non-Employee Director Compensation Program, and various certifications (CEO, CFO)[188](index=188&type=chunk)

CHICO, Calif., May 08, 2024 (GLOBE NEWSWIRE) -- Lulu's Fashion Lounge Holdings, Inc. ("Lulus" or the "Company") (NASDAQ:LVLU), the attainable luxury brand for women, today announced that its Board of Directors has authorized a stock repurchase program of up to $2.5 million of Lulus common stock. The stock repurchase program does not obligate the Company to acquire any particular amount of common stock, and it may be modified, extended or terminated by the Board of Directors at any time.   "We are committed ...