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)