Lulu's Fashion Lounge (LVLU) - 2022 Q3 - Quarterly Report

PART I—FINANCIAL INFORMATION Item 1. Financial Statements 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 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) 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 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 - 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][41] - The company's liquidity position improved significantly post-IPO, alleviating previous substantial doubt about its ability to continue as a going concern[42][43] - 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][166][241] - 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][242] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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] - 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] - 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][242] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] Item 4. Controls and Procedures 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] - 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] PART II—OTHER INFORMATION Item 1. Legal Proceedings 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] Item 1A. Risk Factors 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] - 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][278] - 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][327] - 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][345] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] - 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] - There has been no material change in the expected use of net proceeds from the IPO as described in the company's Prospectus[462] Item 3. Defaults Upon Senior Securities The company reports no defaults upon senior securities during the period - None[463] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[464] Item 5. Other Information The company reports no other information to disclose for this period - None[465] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including corporate documents, equity agreements, and CEO/CFO certifications Signatures