Lulu's Fashion Lounge (LVLU) - 2026 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements Presents Lulu's unaudited condensed consolidated financial statements, reflecting net losses and liquidity challenges Condensed Consolidated Balance Sheets The balance sheet shows decreased total assets and stockholders' equity, with slightly increased liabilities, driven by accumulated deficits Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 29, 2025 | December 29, 2024 | | :--- | :--- | :--- | | Total Current Assets | $51,596 | $51,501 | | Total Assets | $100,960 | $108,198 | | Total Current Liabilities | $82,729 | $74,325 | | Total Liabilities | $96,707 | $94,830 | | Total Stockholders' Equity | $4,253 | $13,368 | Condensed Consolidated Statements of Operations and Comprehensive Loss The statements show a net loss of $3.0 million for the thirteen weeks and $11.0 million for the twenty-six weeks ended June 29, 2025 Statement of Operations Summary (in thousands) | Metric | Thirteen Weeks Ended June 29, 2025 | Thirteen Weeks Ended June 30, 2024 | Twenty-Six Weeks Ended June 29, 2025 | Twenty-Six Weeks Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net revenue | $81,520 | $91,966 | $145,675 | $169,225 | | Gross profit | $36,932 | $41,883 | $62,773 | $74,529 | | Loss from operations | $(2,623) | $(4,467) | $(10,741) | $(10,625) | | Net loss | $(2,995) | $(10,796) | $(10,993) | $(16,532) | | Diluted loss per share | $(3.92) | $(3.94) | $(6.02) | $(1.08) | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity declined from $13.4 million to $4.3 million, primarily due to a net loss and common stock repurchases - For the twenty-six weeks ended June 29, 2025, total stockholders' equity decreased by $9.1 million, from $13.4 million to $4.3 million[27] Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities was $7.0 million, leading to a $2.9 million decrease in cash and cash equivalents to $1.5 million Cash Flow Summary (in thousands) | Cash Flow Activity | Twenty-Six Weeks Ended June 29, 2025 | Twenty-Six Weeks Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $6,966 | $10,637 | | Net cash used in investing activities | $(1,053) | $(1,623) | | Net cash used in financing activities | $(8,839) | $(9,739) | | Net decrease in cash | $(2,926) | $(725) | Notes to Condensed Consolidated Financial Statements The notes detail liquidity issues, going concern uncertainty, significant accounting policies, and the amended credit facility - The company incurred net losses of $3.0 million and $11.0 million for the thirteen and twenty-six weeks ended June 29, 2025, respectively, and had only $1.5 million in cash and cash equivalents at period end[38] - Management's plans to seek alternative debt financing do not alleviate substantial doubt about the Company's ability to continue as a going concern, as the ability to raise financing is outside of management's control[39] - A 1-for-15 reverse stock split of the company's common stock became effective on July 7, 2025. All share and per-share amounts in the financial statements have been retroactively adjusted[62] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, revenue decline, corporate actions, and significant liquidity challenges raising substantial doubt about going concern Recent Developments and Liquidity Recent developments include a CFO change, a reverse stock split for Nasdaq compliance, and severe liquidity constraints raising going concern doubt - CFO Tiffany R. Smith resigned effective June 30, 2025, with CEO Crystal Landsem appointed as Interim CFO[139] - A 1-for-15 reverse stock split was effective July 7, 2025, which helped the company regain compliance with Nasdaq's minimum bid price requirement[141][143] - The company is actively seeking alternative debt financing, but its ability to secure it is uncertain, leading to substantial doubt about its ability to continue as a going concern[149] Key Operating and Financial Metrics Key metrics for Q2 2025 include a 45.3% Gross Margin, positive Adjusted EBITDA, and a decline in Active Customers Key Metrics Comparison (Q2 2025 vs Q2 2024) | Metric | Thirteen Weeks Ended June 29, 2025 | Thirteen Weeks Ended June 30, 2024 | | :--- | :--- | :--- | | Gross Margin | 45.3% | 45.5% | | Net loss | $(2,995) thousand | $(10,796) thousand | | Adjusted EBITDA | $482 thousand | $(207) thousand | | Active Customers | 2,460 thousand | 2,670 thousand | | Average Order Value | $145 | $143 | Results of Operations Q2 2025 net revenue fell 11% due to decreased orders, but cost management reduced expenses, leading to a reduced net loss - Net revenue for Q2 2025 decreased by $10.4 million (11%) compared to Q2 2024, driven by a 16% decrease in Total Orders Placed[180] - Selling and marketing expenses decreased by $2.9 million (12%) in Q2 2025 due to lower online marketing costs[183] - General and administrative expenses decreased by $3.9 million (18%) in Q2 2025, primarily due to reduced headcount, lower equity-based compensation, and decreased D&O insurance costs[184] Liquidity and Capital Resources Liquidity is severely constrained, relying on cash from operations with no further borrowing capacity under the amended credit facility maturing August 22, 2025 - The company has no further access to borrowings under its 2021 Credit Agreement and is reliant on cash from operations[200][206] - The company entered into a Forbearance Agreement on June 23, 2025, due to defaults on refinancing milestones. The agreement and the credit facility's maturity date were subsequently extended to August 22, 2025[207][210][211] - As of June 29, 2025, the company had $1.5 million in cash and cash equivalents and $5.8 million outstanding on its credit facility[209][212] Quantitative and Qualitative Disclosures About Market Risk No material changes in market risk exposure have occurred since the disclosures in the 2024 Annual Report on Form 10-K - There has been no material change in the company's exposure to market risk from that discussed in the 2024 10-K[229] Controls and Procedures Management concluded disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - Management concluded that as of June 29, 2025, the company's disclosure controls and procedures were effective[231] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[232] PART II OTHER INFORMATION Legal Proceedings The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business or financial condition - The company is not presently a party to any legal proceedings that are expected to have a material adverse effect on its business[234] Risk Factors Critical risks include the potential inability to refinance the 2021 Credit Agreement before maturity and the ongoing risk of Nasdaq delisting - The company may not be able to refinance its 2021 Credit Agreement before its maturity on August 22, 2025. Failure to do so would result in an event of default, allowing lenders to declare all outstanding amounts immediately due and payable[236] - Despite recently regaining compliance, the company must continue to meet Nasdaq Capital Market's listing requirements to avoid the risk of delisting, which could negatively affect its stock price and ability to raise capital[238][241] Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's common stock repurchases during Q2 2025 under its publicly announced stock repurchase program Common Stock Repurchases (Q2 2025) | Period | Total Shares Purchased | Weighted-Average Price Paid Per Share | | :--- | :--- | :--- | | March 31 - May 4, 2025 | 42,943 | $7.00 | | May 5 - June 1, 2025 | 15,431 | $6.59 | | June 2 - June 29, 2025 | 14,959 | $6.75 | Other Information The company amended its Forbearance Agreement, extending the 2021 Credit Agreement maturity to August 22, 2025, with no Rule 10b5-1 trading plan changes - On August 11, 2025, the company amended its Forbearance Agreement and 2021 Credit Agreement, extending the maturity date from August 15, 2025, to August 22, 2025[246] - During the thirteen weeks ended June 29, 2025, none of the company's directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement[247] Exhibits This section lists exhibits filed with the Form 10-Q, including corporate amendments, the Forbearance Agreement, officer certifications, and XBRL data