Financial Data and Key Metrics Changes - In Q4 2022, the company reported an adjusted EBITDA margin of negative 1.1%, a significant decline from a positive 6.6% in Q4 2021 [3] - The year-ending inventory balance was $43 million, reflecting a 13% decrease from Q3 2022 levels, while cash at quarter end was $10.2 million with net debt of approximately $14.8 million [4][6] - For the full year 2022, net revenue was $440 million, an increase of 17% year-over-year from $376 million in 2021 [96] Business Line Data and Key Metrics Changes - The company experienced a 17% year-over-year increase in active customers, reaching 3.2 million, with a notable record of repeat customers [96][121] - Average order value (AOV) declined modestly by 2% in Q4 2022 compared to the previous year [98] Market Data and Key Metrics Changes - Recent revenue trends in the first nine weeks of Q1 2023 are pacing to negative mid- to high teens compared to a 62% year-over-year increase in Q1 2022, attributed to macroeconomic pressures and a decline in wedding-related events [12][11] - The company anticipates a return to positive comps in the second half of 2023, with guidance for full-year net revenues between $410 million and $430 million [10][13] Company Strategy and Development Direction - The company aims to maintain flexibility in product pricing to meet customer demand while investing in future growth and expansion across digital and physical distribution channels [99][107] - The focus remains on growing brand awareness, attracting new customers, and enhancing customer engagement through a loyalty program [100][102] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current macroeconomic environment, emphasizing a nimble cost structure that allows for adjustments based on sales performance [22][76] - The leadership transition has been seamless, with a commitment to long-term growth strategies despite current challenges [114][78] Other Important Information - The company has implemented automation and robotics in its distribution centers to drive operational efficiencies and improve customer experience [89][108] - Stock-based compensation expense for 2023 is expected to be between $16 million and $19 million, reflecting changes in performance-based bonuses [15][73] Q&A Session Summary Question: How is the company addressing the promotional environment? - Management noted that the promotional environment remains competitive, and they are actively managing shipping costs to mitigate pressures [20][22] Question: What are the expectations for revenue growth in the second half of 2023? - Management anticipates a return to positive comps in the second half, with guidance reflecting a normalization of markdowns and discounts [12][29] Question: Can you elaborate on the margin outlook for the year? - The company expects gross margins to be relatively flat, with some pressure in the first half due to a non-promotional period last year [30][51] Question: What is the strategy for customer acquisition moving forward? - The company plans to shift marketing dollars from performance marketing to brand awareness to enhance long-term growth [61][62] Question: How is the company managing inventory levels? - Management is pleased with inventory positioning, indicating that most inventory is strategic and not a concern for obsolescence [49][50]

Financial Data and Key Metrics Changes - The company generated revenues of $105 million, a slight decrease of 1% or $1 million compared to the same period last year [41][42] - Adjusted EBITDA for the third quarter was $5.4 million, down from $11.9 million in the same period in 2021, with an adjusted EBITDA margin of 5.1% compared to 11.2% in the previous year [52] - Gross margins fell about 560 basis points to 42.1%, primarily due to higher discounting and increased shipping costs [44] Business Line Data and Key Metrics Changes - Active customer count increased by 29% year-over-year to 3.2 million [41] - Average order value rose by 6% to $133, reflecting an increase in units per transaction [42] - The company experienced elevated return levels, particularly in formal wear and event dressing categories, which typically have higher return rates [43] Market Data and Key Metrics Changes - The apparel industry is experiencing increased promotional activity, impacting the company's pricing strategies [30] - Consumer behavior showed volatility, with a deceleration in order frequency across all income segments [33][130] - The company noted that all household income segments responded favorably to promotions, indicating broad brand appeal [35][130] Company Strategy and Development Direction - The company plans to reduce revenue and adjusted EBITDA guidance due to macroeconomic uncertainties, now expecting revenues of $425 million to $440 million [25][59] - The leadership transition is aimed at ensuring a successful handoff to the next generation, with Crystal Landsem set to become CEO [12][40] - The company emphasizes a data-driven approach to inventory management and customer acquisition, focusing on maintaining a strong balance sheet [24][58] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging macroeconomic environment but expressed confidence in the company's long-term growth potential [23][25] - The company views current challenges as part of a temporary economic cycle and remains committed to profitable growth [23] - Management expects Q4 to continue being promotional, with a cautious approach to inventory and marketing strategies [81][82] Other Important Information - The company ended the quarter with cash of $12.5 million and net debt of approximately $2.5 million [54] - Inventory levels increased to $49.4 million, up $26 million from the previous year, as part of a strategy to hedge against inflation and supply chain issues [54][56] - The company reported a diluted earnings per share of $0.02 compared to $0.13 in the third quarter of 2021 [51] Q&A Session Summary Question: Promotional environment and inventory management - Management indicated that they are comfortable carrying over spring/summer inventory into next year, as 70% of revenue typically comes from reorder products [73] - The cost of customer acquisition remains stable, attributed to a data-driven marketing approach [74] Question: Q4 promotional cadence and markdowns - Management expects to be more surgical in their promotional approach for Q4, leveraging data to optimize customer acquisition [81][82] Question: Inventory progression and robotics impact - The company is taking a data-driven approach to inventory management, aiming for a balanced inventory level to mitigate risks [92] - Robotics implementation is expected to reduce variable costs and enhance margins over time [99] Question: Differences in consumer behavior - Consumer behavior has been consistent across income levels, with a slight reduction in order frequency noted [130] Question: Performance of special occasion versus everyday clothing - The company continues to perform well in the event and special occasion categories, while everyday clothing has seen a pullback in demand [135]

PART I FINANCIAL INFORMATION [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) Unaudited condensed consolidated financial statements for Lulu's Fashion Lounge Holdings, Inc. as of October 2, 2022, and for the thirteen and thirty-nine week periods then ended are presented [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets significantly increased to **$180.2 million** from **$113.8 million** as of October 2, 2022, primarily due to higher inventory and new lease right-of-use assets, with a corresponding rise in total liabilities Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Oct 2, 2022 | Jan 2, 2022 | Change | | :--- | :--- | :--- | :--- | | **Assets** | | | | | Cash and cash equivalents | $12,465 | $11,402 | +$1,063 | | Inventory, net | $49,416 | $22,176 | +$27,240 | | Lease right-of-use assets | $31,627 | $0 | +$31,627 | | **Total Assets** | **$180,159** | **$113,776** | **+$66,383** | | **Liabilities & Equity** | | | | | Revolving line of credit | $15,000 | $25,000 | -$10,000 | | Lease liabilities, noncurrent | $28,554 | $0 | +$28,554 | | **Total Liabilities** | **$113,254** | **$69,254** | **+$44,000** | | **Total Stockholders' Equity** | **$66,905** | **$44,522** | **+$22,383** [Condensed Consolidated Statements of Operations and Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) Net revenue for the thirteen weeks ended October 2, 2022, slightly decreased by **1%**, while net income declined to **$0.9 million**, and for the thirty-nine weeks, net revenue grew **25%** to **$348.7 million**, but net income decreased to **$9.0 million** due to margin pressure Statement of Operations Summary (in thousands, except per share data) | Metric | Thirteen Weeks Ended Oct 2, 2022 | Thirteen Weeks Ended Oct 3, 2021 | Thirty-nine Weeks Ended Oct 2, 2022 | Thirty-nine Weeks Ended Oct 3, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net revenue | $105,275 | $106,320 | $348,689 | $278,861 | | Gross profit | $44,333 | $50,767 | $157,478 | $133,300 | | Income from operations | $559 | $9,062 | $14,741 | $26,856 | | Net income | $929 | $3,850 | $8,971 | $10,819 | | Diluted EPS | $0.02 | $0.13 | $0.23 | $0.37 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities for the thirty-nine weeks ended October 2, 2022, significantly decreased to **$16.3 million** from **$41.8 million**, primarily due to increased inventory investment, while net cash used in financing activities was **$11.4 million** Cash Flow Summary for the Thirty-nine Weeks Ended (in thousands) | Cash Flow Activity | Oct 2, 2022 | Oct 3, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $16,333 | $41,788 | | Net cash used in investing activities | ($3,868) | ($1,587) | | Net cash used in financing activities | ($11,401) | ($14,828) | | **Net increase in cash** | **$1,064** | **$25,373** | - The significant decrease in operating cash flow was largely driven by a **$27.2 million** increase in inventories, compared to a **$6.5 million** increase in the prior year period[27](index=27&type=chunk)[198](index=198&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail accounting policies and financial statement components, highlighting the impact of macroeconomic trends on sales, the adoption of ASC 842, and changes in the company's debt structure and equity-based compensation plans - Changing macroeconomic factors, including inflation and interest rates, have directly impacted sales in fiscal 2022, prompting the company to use pricing and promotional actions to stimulate demand[36](index=36&type=chunk) - The company adopted the new lease accounting standard ASC 842 on January 3, 2022, resulting in the recognition of lease right-of-use assets of **$28.0 million** and lease liabilities of **$28.6 million** upon adoption[65](index=65&type=chunk)[86](index=86&type=chunk) - In November 2021, the company entered into a new credit agreement for a **$50.0 million** revolving facility, which was used along with IPO proceeds to repay its previous **$105.8 million** term loan, with **$15.0 million** outstanding on the new facility as of October 2, 2022[75](index=75&type=chunk)[80](index=80&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance, highlighting **25%** year-over-year revenue growth for the first thirty-nine weeks of 2022, despite a **1%** revenue decline in the third quarter due to macroeconomic pressures and compressed gross margins [Key Operating and Financial Metrics](index=30&type=section&id=Key%20Operating%20and%20Financial%20Metrics) Key operating metrics show mixed results, with Active Customers growing to **3.23 million** and Average Order Value increasing to **$131** for the thirty-nine weeks ended October 2, 2022, while Adjusted EBITDA Margin significantly declined to **5.1%** for the third quarter Key Performance Indicators | Metric | Thirteen Weeks Ended Oct 2, 2022 | Thirteen Weeks Ended Oct 3, 2021 | Thirty-nine Weeks Ended Oct 2, 2022 | Thirty-nine Weeks Ended Oct 3, 2021 | | :--- | :--- | :--- | :--- | :--- | | Gross Margin | 45.2% | 47.7% | 45.2% | 47.8% | | Adjusted EBITDA | $5,364K | $11,885K | $30,068K | $35,050K | | Adjusted EBITDA Margin | 5.1% | 11.2% | 8.6% | 12.6% | | Active Customers (in thousands) | 3,230 | 2,500 | 3,230 | 2,500 | | Average Order Value | $133 | $125 | $131 | $120 | [Results of Operations](index=35&type=section&id=Results%20of%20Operations) Net revenue decreased **1%** to **$105.3 million** in Q3 2022, while for the thirty-nine week period, it increased **25%** to **$348.7 million**, though gross profit fell due to faster growth in cost of revenue and increased operating expenses - **Q3 2022 vs Q3 2021:** Net revenue decreased **1%** due to a **1%** decrease in total orders and higher return rates, partially offset by a **6.4%** increase in Average Order Value[169](index=169&type=chunk) - **YTD 2022 vs YTD 2021:** Net revenue increased **25%** driven by a **23%** increase in total orders and a **9%** increase in Average Order Value[175](index=175&type=chunk) - General and administrative expenses for the 39-week period increased by **$18.2 million** (**32%**), primarily due to **$6.7 million** in higher equity-based compensation and **$4.7 million** in increased insurance and professional services costs related to being a public company[179](index=179&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is primarily supported by cash from operations and a **$50 million** revolving credit facility, with **$12.5 million** in cash and **$34.8 million** available for borrowing as of October 2, 2022, despite a decrease in operating cash flow to **$16.3 million** due to increased inventory - As of October 2, 2022, the company had **$12.5 million** in cash and cash equivalents and **$34.8 million** available for borrowing under its New Revolving Facility[190](index=190&type=chunk)[193](index=193&type=chunk) - Net cash provided by operating activities decreased by **$25.5 million** year-over-year for the 39-week period, primarily due to a **$20.7 million** higher investment in inventory balances to support sales volume[198](index=198&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) There have been no material changes in the company's exposure to market risk compared to the disclosures in its Annual Report on Form 10-K for the fiscal year ended January 2, 2022 - There has been no material change in the company's exposure to market risk from that discussed in the 2021 10-K[209](index=209&type=chunk) [Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of October 2, 2022, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of the end of the period, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[211](index=211&type=chunk) - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[212](index=212&type=chunk) PART II OTHER INFORMATION [Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to various legal proceedings in the ordinary course of business but does not anticipate any material adverse effect on its financial condition or results of operations from current matters - The company is not currently a party to any legal proceedings that it believes would materially and adversely affect its business or financial condition[214](index=214&type=chunk) [Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended January 2, 2022 - No material changes have occurred to the risk factors previously disclosed in the 2021 Form 10-K[215](index=215&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=43&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - None[216](index=216&type=chunk) [Exhibits](index=44&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including CEO and CFO certifications and Inline XBRL documents - The report includes certifications from the CEO and CFO as required by Rule 13a-14(a)/15d-14(a) and 18 U.S.C. Section 1350, as well as XBRL data files[221](index=221&type=chunk)

Financial Data and Key Metrics Changes - The company reported a year-over-year revenue growth of 27%, reaching $131.5 million, which is the highest net revenue for any quarter in its history [10][36] - Adjusted EBITDA for the second quarter was $14.8 million, compared to $17.8 million in the same period in 2021, with an adjusted EBITDA margin of 11.2%, down from 17.2% [45] - Gross margins fell by approximately 380 basis points to 45.8%, primarily due to elevated return rates and high fuel surcharges [40] Business Line Data and Key Metrics Changes - Total orders increased by 29%, and average order value (AOV) rose by 13% to $137, reflecting higher units per transaction and increased average unit retail net of markdowns [37] - Active customers grew by 53% year-over-year, reaching 3.2 million, with a notable increase in repeat customers [25][38] Market Data and Key Metrics Changes - The company experienced volatility in traffic trends and conversion rates in late May, likely due to macroeconomic pressures affecting customer spending behavior [13] - The marketing landscape faced challenges from a Google algorithm update, impacting search traffic and rankings [28][29] Company Strategy and Development Direction - The company aims to maintain a capital-light model and has a strong balance sheet, positioning it well for future growth despite current macroeconomic challenges [18][46] - The focus remains on long-term profitable growth, with investments in customer experience, data platforms, and operational efficiencies [56][58] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term trajectory despite short-term challenges, viewing current issues as temporary [14] - The company anticipates continued pressure on gross margins due to elevated return rates and freight surcharges, but remains committed to growth initiatives [84] Other Important Information - The company is implementing robotics in its fulfillment centers to enhance operational efficiency and inventory management [24][56] - Inventory levels increased to $48.6 million, up $27.4 million from the previous year, with a significant portion being intentional to hedge against inflation and supply chain issues [47][49] Q&A Session Summary Question: Insights on gross margin trends and SG&A expenses - Management indicated that guidance accounts for a return to normalized promotional markdowns and elevated return rates, which may continue to impact margins [64][65] Question: Metrics around repeat purchase behavior and marketing efficacy - Strong repeat rates were observed, but order frequency tapered off towards the end of the quarter due to external pressures [70][72] Question: Impact of gas prices on consumer behavior - Lower gas prices are expected to positively influence spending among lower-income customers, while higher-income customers appear less affected [112] Question: Strategies for TikTok and video marketing - The company is investing in content and analytics to optimize its presence on TikTok and other social channels, aiming to increase earned media value [116] Question: Inventory levels and pricing strategies - Management feels confident about current inventory levels and is taking a surgical approach to pricing in response to inflation [100][102]

For the quarterly period ended July 3, 2022 OR Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ☐ 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: 001-41059 Lulu's Fashion Lounge Holdings, Inc. (Exact Name of Registrant as ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 3, 2022 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: 001-41059 Lulu's Fashion Lounge Holdings, Inc. (Exact Name of Registrant a ...

Financial Data and Key Metrics Changes - In Q4 2021, the company generated $96.7 million in revenue, a growth of 77% year-over-year, with adjusted EBITDA of $6.4 million compared to a deficit of approximately $100,000 in the prior year [11][56] - For the full year 2021, revenues increased by 51% to $376 million, and adjusted EBITDA amounted to $41 million, representing a 119% gain from 2020 [11][56] - The average order value (AOV) reached an all-time high of $121, driven by increased items per cart and lower discounts, marking a 22% increase over 2020 and a 12% increase over 2019 [51][52] Business Line Data and Key Metrics Changes - The company reported strong demand across both event and non-event categories, with double-digit growth in demand for both segments [12][51] - Approximately 70% of revenue came from algorithmically driven purchasing, indicating a robust product testing and reordering model [15][38] Market Data and Key Metrics Changes - The company served 2.8 million active customers in the 12 months ending January 2, 2022, a 38% increase from 2 million active customers in the prior year [50] - Despite supply chain challenges, the company maintained strong growth and profitability, with gross margins increasing by 200 basis points to 44.9% in Q4 2021 [51][56] Company Strategy and Development Direction - The company aims for net revenue growth of over 28% in FY2022, targeting adjusted EBITDA to rise above $48 million [17][62] - Key initiatives for 2022 include enhancing customer insights, expanding product offerings, improving conversion rates, and investing in technology and logistics [23][28][65] Management's Comments on Operating Environment and Future Outlook - Management acknowledged macroeconomic challenges, including inflation and supply chain constraints, but expressed confidence in the company's ability to navigate these issues due to its affordable luxury positioning [21][98] - The company is optimistic about Q1 2022, reporting strong customer engagement and a positive outlook for continued growth [106] Other Important Information - The company completed its IPO in Q4 2021, fully repaying long-term debt and ending the quarter with net debt of $13.6 million [57][58] - The new Love Rewards loyalty program was successfully relaunched, focusing on customer engagement rather than just transactional discounts [47][100] Q&A Session Summary Question: How is the company thinking about growth and active customers versus revenue per customer? - Management anticipates sales growth from both re-engagement of repeat customers and new customer acquisition, with improvements across all customer segments [72] Question: How does the company plan to manage inventory growth throughout 2022? - The company plans to slow inventory turns to capitalize on demand while maintaining a low-risk testing approach [78] Question: Can the company elaborate on the success of its brand marketing campaign? - The campaign provided valuable insights into content and channel effectiveness, leading to a shift in focus towards brand awareness rather than just product promotion [81][83] Question: What are the expectations for customer engagement trends in 2022? - Management reported that the company is less sensitive to inflation pressures and is optimistic about customer engagement due to its affordable luxury positioning [98] Question: What early insights has the company gained from the new loyalty program? - Early feedback indicates a positive reception, with the program designed to enhance customer engagement and provide valuable first-party data [100][102]

Financial Performance - Net revenue for the year ended January 2, 2022, was $375.625 million, a 51% increase from $248.656 million in 2021[404] - Gross profit for the same period was $176.732 million, compared to $110.292 million in 2021, reflecting a gross margin improvement[404] - The company reported a net loss of $122.948 million for the year, significantly higher than the net loss of $19.808 million in 2021[404] - Net loss per share attributable to common stockholders was $6.08, compared to $1.13 in the previous year[404] - The company reported a net income of $2,045,000 for the year ended January 2, 2022, compared to a net loss of $19,304,000 in the prior year[409] Assets and Liabilities - Total current assets increased to $49,093,000 as of January 2, 2022, compared to $42,799,000 as of January 3, 2021, representing a growth of approximately 14.5%[401] - Cash and cash equivalents decreased to $11,402,000 in 2022 from $15,554,000 in 2021, a decline of about 26.0%[401] - Inventory increased to $22,176,000 in 2022, up from $16,895,000 in 2021, reflecting a rise of approximately 31.0%[401] - Total liabilities decreased significantly from $140,627,000 in 2021 to $69,254,000 in 2022, a reduction of about 50.8%[401] - Stockholders' equity improved to $44,522,000 in 2022 from a deficit of $169,001,000 in 2021, indicating a substantial recovery[401] Cash Flow and Investments - Net cash provided by operating activities for the year ended January 2, 2022, was $26,896,000, a significant increase from $4,856,000 in the previous year[409] - The company reported a net cash used in investing activities of $3,394,000 for the year ended January 2, 2022, compared to $1,913,000 in the previous year[409] - The company experienced a significant decrease in accounts receivable, which was $(1,816,000) for the year ended January 2, 2022, compared to an increase of $123,000 in the previous year[409] Expenses - Selling and marketing expenses increased to $66.684 million, up from $47.812 million in 2021, indicating a 39% rise in marketing efforts[404] - General and administrative expenses rose to $87.710 million from $67.155 million, marking a 30% increase[404] - The company incurred equity-based compensation expenses of $10,338,000 in 2022, up from $9,086,000 in 2021[409] Equity and Stock - The company issued and sold 5,750,000 shares of common stock at a public offering price of $16.00 per share during its IPO, resulting in net proceeds of approximately $82,000,000[417] - As of January 2, 2022, the Company had 38,421,124 shares of common stock issued and outstanding, up from 17,462,283 shares a year prior[529] - The Company recorded equity-based compensation expense of $3.2 million related to stock options during 2021[548] Taxation - The effective tax rate for the Company was 75.2% for the year ended January 2, 2022, compared to 6.2% for the previous year[560] - The total current income tax provision for the year ended January 2, 2022, was $(7,875) thousand[560] Risks and Operational Factors - The company has three distribution facilities, and any disruptions at these locations could materially affect its financial condition and operations[24] - The company relies on third-party transportation providers for merchandise shipments, and disruptions could adversely impact its business[24] - The company is exposed to market risks including foreign currency fluctuations, interest rate changes, and inflation, although currently, it does not face significant foreign currency risk[388][389] Other Financial Information - The company reported a deemed dividend to preferred stockholders of $122.962 million, reflecting the impact of preferred stock issuance[407] - The balance of accumulated stockholders' equity as of January 2, 2022, was $44.522 million, compared to a deficit of $177.596 million in the previous year[407] - The company anticipates recording right-of-use assets and operating lease liabilities between approximately $33.5 million and $37.5 million upon implementing new lease standards[478]

[PART I—FINANCIAL INFORMATION](index=9&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=9&type=section&id=Item%201.%20Financial%20Statements.) Unaudited condensed consolidated financial statements for Lulu's Fashion Lounge Holdings, Inc., covering balance sheets, operations, and cash flows for periods ended October 3, 2021 [Condensed Consolidated Balance Sheets](index=9&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | October 3, 2021 | January 3, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $40,927 | $15,554 | | Inventory, net | $23,400 | $16,895 | | Total current assets | $81,590 | $42,799 | | Total assets | $145,252 | $105,076 | | **Liabilities & Stockholder's Deficit** | | | | Total current liabilities | $162,831 | $41,267 | | Long-term debt, net | $0 | $96,856 | | Total liabilities | $165,188 | $140,627 | | Total stockholder's deficit | ($156,294) | ($169,001) | [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) Statement of Operations Highlights (in thousands) | Metric | Three Months Ended Oct 3, 2021 | Three Months Ended Sep 27, 2020 | Nine Months Ended Oct 3, 2021 | Nine Months Ended Sep 27, 2020 | | :--- | :--- | :--- | :--- | :--- | | Net revenue | $106,320 | $54,533 | $278,861 | $194,129 | | Gross profit | $50,767 | $24,405 | $133,300 | $86,921 | | Income (loss) from operations | $9,062 | $4,070 | $26,856 | ($3,152) | | Net income (loss) | $3,850 | $377 | $10,819 | ($15,152) | | Net income (loss) per share | $0.13 | $0.01 | $0.37 | ($0.90) | [Condensed Consolidated Statement of Cash Flows](index=12&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) Statement of Cash Flows Highlights (in thousands) | Cash Flow Activity | Nine months ended Oct 3, 2021 | Nine months ended Sep 27, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $41,788 | $21,184 | | Net cash used in investing activities | ($1,587) | ($1,605) | | Net cash provided by (used in) financing activities | ($14,828) | $10,472 | | **Net increase in cash** | **$25,373** | **$30,051** | [Notes to Condensed Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) - On November 15, 2021, the company completed its IPO, raising net proceeds of approximately **$85.6 million**, which were used to repay its existing term loan[39](index=39&type=chunk)[41](index=41&type=chunk) - The company's liquidity position improved significantly post-IPO, alleviating previous substantial doubt about its ability to continue as a going concern[42](index=42&type=chunk)[43](index=43&type=chunk) - As of October 3, 2021, the company had **$103.4 million** in borrowings outstanding under its Term Loan, which was subsequently repaid in full on November 15, 2021, following the IPO[96](index=96&type=chunk)[166](index=166&type=chunk)[241](index=241&type=chunk) - In connection with the IPO, the company entered into a new **$50.0 million** three-year revolving credit facility and borrowed **$25.0 million** on November 15, 2021[165](index=165&type=chunk)[242](index=242&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=53&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, highlighting strong revenue growth from increased active customers and improved liquidity post-IPO Key Operating and Financial Metrics (in thousands, except percentages and customer counts) | Metric | Three Months Ended Oct 3, 2021 | Three Months Ended Sep 27, 2020 | Nine Months Ended Oct 3, 2021 | Nine Months Ended Sep 27, 2020 | | :--- | :--- | :--- | :--- | :--- | | Gross Margin | 47.7% | 44.8% | 47.8% | 44.8% | | Net Income (Loss) | $3,850 | $377 | $10,819 | ($15,152) | | Adjusted EBITDA | $11,885 | $5,249 | $35,050 | $19,009 | | Active Customers | 2.5M | 2.3M | 2.5M | 2.3M | | Average Order Value | $125.07 | $102.69 | $119.99 | $107.99 | - Net revenue for the three months ended October 3, 2021, increased by **$51.8 million**, or **95%**, compared to the same period in 2020, driven by more active customers, higher customer spending, and fewer markdowns[218](index=218&type=chunk) - Net revenue for the nine months ended October 3, 2021, increased by **$84.7 million**, or **43.6%**, compared to the prior year period, also due to growth in active customers and spending[224](index=224&type=chunk) - The company completed its IPO on November 15, 2021, raising net proceeds of approximately **$81.3 million** after discounts and expenses, which were used to repay the existing Term Loan[239](index=239&type=chunk)[242](index=242&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=79&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company states there has been no material change in its exposure to market risk from previously disclosed information - There has been no material change in the company's exposure to market risk from that discussed in its Prospectus[264](index=264&type=chunk) [Item 4. Controls and Procedures](index=79&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of October 3, 2021, with no material changes to internal control over financial reporting - Based on an evaluation as of the end of the period, the CEO and CFO concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of October 3, 2021[266](index=266&type=chunk) - There were no changes in internal control over financial reporting during the quarter ended October 3, 2021, that have materially affected, or are reasonably likely to materially affect, internal controls[267](index=267&type=chunk) [PART II—OTHER INFORMATION](index=80&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=80&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to ordinary course legal proceedings but does not anticipate a material adverse effect on its financials - The company is not currently a party to any legal proceedings that it believes would have a material adverse effect on its business, financial condition, or results of operations[270](index=270&type=chunk) [Item 1A. Risk Factors](index=80&type=section&id=Item%201A.%20Risk%20Factors) Details significant risks, including brand dependence, COVID-19 impacts, competition, supply chain disruptions, data security, and challenges as a newly public company - The business is highly dependent on its ability to maintain a strong brand community with engaged customers and influencers, and negative publicity could severely harm the brand[272](index=272&type=chunk) - The COVID-19 pandemic has adversely affected and may continue to affect labor, supply chain, and consumer demand, particularly as the company's products are often tied to in-person social and formal events[277](index=277&type=chunk)[278](index=278&type=chunk) - The company operates in the highly competitive retail apparel industry and faces pressure from larger competitors with greater resources, as well as an increasingly crowded e-commerce market[324](index=324&type=chunk)[327](index=327&type=chunk) - The business is subject to system security risks, including data breaches; a past incident in 2016 involved the potential interception of payment card numbers, highlighting the ongoing threat[343](index=343&type=chunk)[345](index=345&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=143&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Confirms no unregistered equity sales and details the use of approximately **$81.3 million** net proceeds from the November 2021 IPO - The company completed its IPO on November 15, 2021, selling **5,750,000 shares** of common stock at **$16.00 per share**[462](index=462&type=chunk) - Net proceeds from the IPO were approximately **$81.3 million** after deducting underwriting discounts of **$6.4 million** and estimated offering expenses of **$4.3 million**[462](index=462&type=chunk) - There has been no material change in the expected use of net proceeds from the IPO as described in the company's Prospectus[462](index=462&type=chunk) [Item 3. Defaults Upon Senior Securities](index=145&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities.) The company reports no defaults upon senior securities during the period - None[463](index=463&type=chunk) [Item 4. Mine Safety Disclosures](index=145&type=section&id=Item%204.%20Mine%20Safety%20Disclosures.) This item is not applicable to the company - Not applicable[464](index=464&type=chunk) [Item 5. Other Information](index=145&type=section&id=Item%205.%20Other%20Information.) The company reports no other information to disclose for this period - None[465](index=465&type=chunk) [Item 6. Exhibits](index=146&type=section&id=Item%206.%20Exhibits.) This section lists exhibits filed with the Form 10-Q, including corporate documents, equity agreements, and CEO/CFO certifications [Signatures](index=149&type=section&id=Signatures)