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

Management Commentary and Business Highlights Management noted sequential improvement in net revenue, driven by occasion and bridesmaid dresses, while casual wear and footwear remained soft; the company achieved positive Adjusted EBITDA, reduced debt, and is negotiating a new credit facility - The company saw sequential improvement in revenue trends and strength in occasion dresses, but faced softness in casual wear and footwear[3] - Lulus achieved positive Adjusted EBITDA, reduced total debt, and expects continued positive Adjusted EBITDA in Q3 2025[4] - The company is actively repositioning its casual wear and footwear categories to better align with its core strengths in event attire[3] - An amendment to the Forbearance Agreement with Bank of America was executed, extending the Forbearance Termination Event and Maturity Date to August 22, 2025, as the company negotiates a new asset-based revolving credit facility[7] Q2 2025 Financial & Operational Performance In Q2 2025, Lulus reported an 11% decrease in net revenue to $81.5 million, driven by a 16% drop in total orders, though Average Order Value increased slightly; the company significantly narrowed its net loss to $3.0 million and achieved positive Adjusted EBITDA of $0.5 million Key Financial & Operating Metrics Key metrics for Q2 2025 showed a year-over-year decline in revenue and active customers, but an improvement in net loss and a shift to positive Adjusted EBITDA, with Average Order Value slightly increasing Second Quarter 2025 Financial Highlights (vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Revenue | $81.5M | $92.0M | -11% | | Gross Profit | $36.9M | $41.9M | -12% | | Gross Margin | 45.3% | 45.5% | -20 bps | | Net Loss | ($3.0M) | ($10.8M) | Improved | | Adjusted EBITDA* | $0.5M | ($0.2M) | Improved | | Active Customers | 2.5M | 2.7M | -8% | | Average Order Value | $145 | $143 | +1% | | Free Cash Flow* | ($1.9M) | $3.0M | Decreased | Condensed Consolidated Statements of Operations For Q2 2025, net revenue decreased to $81.5 million, gross profit declined, but loss from operations improved, and net loss significantly reduced to ($3.0) million Statement of Operations Summary (Thirteen Weeks Ended, in millions) | Account | June 29, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Net revenue | $81.52M | $91.97M | | Gross profit | $36.93M | $41.88M | | Loss from operations | ($2.62M) | ($4.47M) | | Net loss | ($3.00M) | ($10.80M) | | Diluted loss per share | ($1.08) | ($3.92) | Condensed Consolidated Balance Sheets As of June 29, 2025, total assets decreased to $101.0 million, cash and equivalents declined, total liabilities increased, and total stockholders' equity significantly decreased to $4.3 million Balance Sheet Summary (in millions) | Account | June 29, 2025 | December 29, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $1.53M | $4.46M | | Inventory, net | $37.35M | $34.04M | | Total assets | $100.96M | $108.20M | | Revolving line of credit | $5.75M | $13.09M | | Total liabilities | $96.71M | $94.83M | | Total stockholders' equity | $4.25M | $13.37M | Condensed Consolidated Statements of Cash Flows For the twenty-six weeks ended June 29, 2025, net cash provided by operating activities decreased to $7.0 million, while net cash used in financing activities was $8.8 million, primarily due to debt repayments Cash Flow Summary (Twenty-Six Weeks Ended, in millions) | Category | June 29, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $6.97M | $10.64M | | Net cash used in investing activities | ($1.05M) | ($1.62M) | | Net cash used in financing activities | ($8.84M) | ($9.74M) | | Net decrease in cash and cash equivalents | ($2.93M) | ($0.73M) | Financial Outlook Lulus updated its financial outlook, expecting positive Adjusted EBITDA in Q3 2025 and forecasting full-year 2025 capital expenditures at approximately $2.5 million - The company expects to generate positive Adjusted EBITDA in the third quarter of 2025[12] - Full-year 2025 capital expenditures are now expected to be approximately $2.5 million, which is at the low end of the previously guided range of $2.5 million to $3.0 million[12] Non-GAAP Financial Measures & Reconciliations The company utilizes non-GAAP measures like Adjusted EBITDA, Net Debt, and Free Cash Flow for performance evaluation, with Q2 2025 Adjusted EBITDA at $0.5 million, Net Debt at $4.2 million, and Free Cash Flow at ($1.9) million Definitions of Key Metrics The report defines key non-GAAP measures and operating metrics used for performance evaluation, including Adjusted EBITDA, Active Customers, Free Cash Flow, and Net Debt - Adjusted EBITDA is defined as net loss before interest expense, income taxes, depreciation and amortization, adjusted for equity-based compensation and other non-routine expenses[20] - Active Customers are defined as the number of customers who made at least one purchase in the prior 12-month period[23] - Free Cash Flow is defined as net cash provided by operating activities less cash used for capitalized software development costs and purchases of property and equipment[25] - Net Debt is defined as total debt (revolving line of credit) less cash and cash equivalents[27] Reconciliation of Non-GAAP Measures Detailed reconciliations for non-GAAP measures show Q2 2025 Adjusted EBITDA at $0.5 million, Free Cash Flow at ($1.9) million, and Net Debt at ($4.2) million Reconciliation of Net Loss to Adjusted EBITDA (Thirteen Weeks Ended, in millions) | Account | June 29, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Net loss | ($3.00M) | ($10.80M) | | Depreciation and amortization | $1.37M | $1.28M | | Interest expense | $0.86M | $0.27M | | Income tax provision (benefit) | $0.06M | $6.33M | | Equity-based compensation expense | $1.28M | $2.19M | | Other non-routine expense | $0.00M | $0.42M | | Adjusted EBITDA | $0.48M | ($0.21M) | Reconciliation of Free Cash Flow (Thirteen Weeks Ended, in millions) | Category | June 29, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($1.36M) | $3.69M | | Capitalized software development costs | ($0.38M) | ($0.34M) | | Purchases of property and equipment | ($0.14M) | ($0.32M) | | Free Cash Flow | ($1.88M) | $3.03M | Reconciliation of Net Debt (in millions) | Account | June 29, 2025 | December 29, 2024 | | :--- | :--- | :--- | | Total debt | ($5.75M) | ($13.09M) | | Cash and cash equivalents | $1.53M | $4.46M | | Net Debt | ($4.22M) | ($8.63M) |