Q2 2024 The Lovesac Co Earnings Call

Ladies and gentlemen, good morning, and welcome to the <unk> second quarter fiscal 'twenty 'twenty four earnings conference call.

Speaker 1: Ladies and Chairman, Good Morning and Welcome to the Lovesacks Second Quarter fiscal 2024 earnings conference call. At this time all participants are...

At this time all participants are in a listen only mode.

Speaker 1: A brief question and answer session will follow the formal presentation.

Brief question and answer session will follow the formal presentation.

Speaker 1: If anyone should require operating assistance during the conference, please press star and zero on your telephone keypad. As a reminder, this question...

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded.

Speaker 1: It is now my pleasure to introduce your host, Ms. Rachel Schecter of I.C.R.

It is now my pleasure to introduce your host Ms. Rachel Schacter of ICR.

Please go ahead.

Speaker 2: Thank you. Good morning, everyone. With me on the call is Sean Nelson, Chief Executive Officer, Mary Fox, President and Chief Operating Officer, and Chief Stagner Chief Financial Officer. Before we get started, I would like to remind you that some of the information discussed will include forward-looking statements regarding future events and our future financial performance.

Thank you and good morning, everyone with me on the call is Shawn Nelson Chief Executive Officer, Mary Fox, President and Chief operating Officer, and Keith singer Chief Financial Officer before we get started I would like to remind you that some of the information discussed will include forward looking statements regarding future events and our future finding.

So performance. These include statements about our future expectations financial projections, and our plans and prospects.

Speaker 2: These include statements about our future expectations, financial projections, and our plans and prospects.

Speaker 2: After a result may differ materially from those that force in such statements. For discussion of these risks and uncertainties, you should review the company's filing with the SEC, which includes today's press release.

Actual results may differ materially from those set forth in such statements for a discussion of these risks and uncertainties you should review the company's filing with the FCC, which includes today's press release.

Speaker 2: You should not rely on our fullers looking statements as projections of future events.

You should not rely on our forward looking statements as predictions of future events.

Speaker 2: All forward-looking statements that we make on this call are based on assumptions and beliefs as of today, and we undertake no obligation to update them except as required by applicable law.

All forward looking statements that we make on this call are based on assumptions and beliefs as of today and we undertake no obligation to update them except as.

As required by applicable law.

Our discussion today will include non-GAAP financial measures, including EBITDA and adjusted EBITDA. These.

Speaker 2: Our discussion today will include non- GAAP financial measures, including Ipada and adjusted Ipada. These non- GAAP measures should be considered in addition to and not as a substitute for or in isolation from our gap results. A reconciliation of the most directly comparable GAAP financial measure to such non- GAAP financial measure has been provided as supplemental financial information in our press truly.

non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP result, Iraqis.

A reconciliation of the most directly comparable GAAP financial measure to such non-GAAP financial measure has been provided as supplemental financial information in our press release.

Speaker 3: Now I'd like to turn the call over to Sean Nelson, chief executive officer of the LUBSAC company. Thank you Rachel. Good morning.

Now I'd like to turn the call over to Shawn Nelson Chief Executive Officer of the watch that company.

Thank you Rachel good morning, everyone and thank you for joining us today.

Speaker 3: I'll start this call off by reviewing the highlights of our second quarter fiscal 2024 briefly providing an update on our operational accomplishments and

I'll start the call off by reviewing the highlights of our second quarter fiscal 'twenty 'twenty four briefly providing an update on our operational accomplishments.

Anything up with our outlook.

And Mary Fox, our President and C. O L will update you on the progress we made against our strategic initiatives and finally, Keith Cigna, our new CFO, who will review our financial results and a few other items related to our outlook in more detail.

Speaker 4: Then Mary Fox, our president and COO, will update you on the progress we made against our strategic initiatives. And finally, Keith Signer, our new CFO , will review our financial results and a few other items related to our outlook in more detail.

Speaker 4: Before diving in, I want to thank everybody for their patience as we work through our financial big steps.

Before diving in I want to thank everybody for their patience as we worked through our financial restatement, we hold ourselves to very high standards of integrity accuracy and reliability of our financial statements is paramount as of today, all our amended filings are complete. Additionally, we're enhancing teams and.

Speaker 4: We hold ourselves to very high standards of integrity. Accuracy and reliability of our financial statements is paramount. As of today, all amended filings are complete. Additionally, we're enhancing teams in implementing procedures and disciplines as we work to build a world-class organization able to support Crivos for years to come.

<unk> procedures and disciplines as we work to build a world class organization able to support growth for years to come.

Moving onto our results, we're pleased with our second quarter performance with top and bottom line exceeding our initial outlook provided in June.

Speaker 4: Moving on to our results, we're pleased with our second quarter performance with top and bottom line exceeding our initial outlook provided in June .

Speaker 4: The economic environment remained challenging as macro pressures drove a more cautious consumer, in turn keeping pressure on the home category.

The economic environment remains challenging as macro pressures drove a more cautious consumer in turn keeping pressure on the home category.

Speaker 4: While we also felt pressure, Levesack operated from a position of strength, leveraging our 25th anniversary campaign and Omni Channel expansion to continue our track record of outperforming the category in achieving positive net sales growth.

Well, we also felt pressure loves shaq operated from a position of strength leveraging our 25th anniversary campaign and Omnichannel expansion should continue our track record of outperforming the category.

Positive net sales growth.

Not to be overlooked we delivered growth despite a difficult comparison lapping topline growth of 45% in the second quarter of fiscal 'twenty three.

Speaker 4: Not to be overlooked, we delivered growth despite a difficult comparison, laughing top line growth of 45% in the second quarter of fiscal 23.

Speaker 4: Specifically, total net sales were 154.5 million, of 4% versus the prior year period, supported by total comparable sales growth of 7.2% for the quarter. On a two year basis, net sales grew and impressive 51%.

Specifically total net sales were $154 5 million up 4% versus the prior year period supported by total comparable sales growth of seven 2% for the quarter on a two year basis net sales grew an impressive 51%.

Adjusted EBITDA was $5 3 million as compared to $12 3 million in the prior year period as expected gross margin expansion was more than offset by important investments in growth.

Speaker 4: Adjusted EBITDA was 5.3 million as compared to 12.3 million in the prior year period. As expected, gross margin expansion was more than offset by important investments in growth.

Speaker 4: De-leverage in marketing and advertising resulted from our 25th anniversary celebrity campaign and the launch and support of our angled side innovation, both of which will benefit us in the coming quarters. We also continue to make necessary and disciplined infrastructure investments to ensure we have the foundations for category-beating profitable growth for the long term.

Deleverage in marketing and advertising resulted from our 25th anniversary celebrity campaign, and the launch and support of our angled side innovation, both of which will benefit us in the coming quarters. We also continue to make necessary and discipline to infrastructure investments to ensure we have the foundations for category, beating profitable growth for the long term.

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Speaker 4: The pressure from the investments will abate later this year, as we'll talk more about that in a few minutes.

The pressure from the investments will abate later this year as we will talk more about that in a few minutes.

Operationally, we made good progress on our initiatives to strengthen our infinity flywheel that supports our differentiated business model.

Speaker 4: Operationally, we made good progress on our initiative to strengthen our Infinity Flywheel that supports our differentiated business model.

Speaker 4: Mary will discuss in detail the progress on specific gross strategies, but let me provide a brief update.

Mary will discuss in detail the progress on specific growth strategies, but let me provide a brief update on.

Speaker 4: On the product innovation front, as previously discussed, we formally launched angled side in the quarter. Angled side offers benefits to augment both aesthetics and comfort, importantly addressing the number one style gap we identified in our research.

On the product innovation front as previously discussed we formally launched angled side in the quarter.

Field side offered benefits to augment both aesthetics and comfort importantly, addressing the number one style gaps we identified in our research.

Speaker 4: by opening the aperture of potential customers where reaching more new and existing customers and seeing meaningful contribution every week since the launch of the angled side.

By opening the aperture of potential customers, we're reaching more new and existing customers and seeing meaningful contribution every week since the launch of the angled side.

Speaker 4: We continue to wisely expand our physical footprint, supporting awareness and benefiting our e-commerce sales.

We continue to wisely expand our physical footprint supporting awareness and benefiting our e-commerce sales.

Speaker 4: all together delivering a seamless on the channel experience to our customers.

Altogether, delivering a seamless omnichannel experience to our customer.

Speaker 4: We're driving marketing efficiency with new tactics, including hyper-local marketing to drive traffic. Lastly, we are so carefully investing in technology and R&D to fuel continued innovation, to further elevate the entire customer experience, and to ensure that we have a strong foundation to support the long runway of growth.

We're driving marketing efficiency with new tactics, including hyperlocal marketing to drive traffic Lastly, we're still carefully investing in technology and R&D to fuel continued innovation to further elevate the entire customer experience and to ensure that we have a strong foundation to support the long runway of growth ahead.

Speaker 4: Looking to the second half of the year, we expect the macro environment to remain challenging, continuing to pressure the home category. We are not planning for any meaningful recovery in category growth this fiscal year. In terms of the promotional environment, we expect it will be more competitive as we head into holiday season and anticipate more frequency and depth of discounting across the industry. We've adapted our own plan accordingly and will remain very agile through the holiday season.

Looking to the second half of the year, we expect the macro environment to remain challenging continuing to pressure the home category.

We are not planning for any meaningful recovery in category growth. This fiscal year in terms of the promotional environment. We expect it will be more competitive as we head into the holiday season, and anticipate more frequency and depth of discounting across the industry. We've adapted our own plans accordingly, and we'll remain very high.

Trials through the holiday season.

Speaker 4: Even taking this into account, which doesn't change our confidence that LoveSack will continue to outperform the category. And yes, generates stronger growth in the second half than the first-

Even taking this into account, which doesn't change our confidence that loves stack will continue to outperform the category and yes generate stronger growth in the second half than the first half.

Speaker 4: This is clear in our guidance where we estimate third quarter revenues of approximately 154 million and are tightening the range of our fiscal 2024 net sales guidance to 710 million to 730.

This is clear in our guidance, where we estimate third quarter revenues of approximately $154 million and are tightening the range of our fiscal 2024 net sales guidance.

$710 million to $730 million.

Speaker 4: Given the macro backdrop, we're highly cautious operationally, we're focused on efficiency and we'll control expenses very tightly. This will become more clear as we wrap necessary foundational investments that began in the second half of fiscal 23, and which put peak pressure on bottom line growth in second and third quarters this year.

Given the macro backdrop, we're highly cautious operationally well.

Focused on efficiency and we will control expenses very tightly it will become more clear as we lap necessary foundational investments that began in the second half of fiscal 'twenty, three and which put peak pressure on bottom line growth in second and third quarters. This year.

Speaker 4: After adding in some discrete expenses, primarily professional fees related to the restatement of approximately four million.

After adding in some discrete expenses, primarily professional fees related to the restatement of approximately 4 million.

Speaker 4: We now anticipate fiscal 24 net income in the range of 20 million to 29 million.

We now anticipate fiscal 'twenty for net income in the range of 20 million to $29 million.

Speaker 4: In summary, we have an unwavering commitment to the customer, delivering our unique design for life platforms through circular operations and an omnichannel experience.

In summary, we have an unwavering commitment to the customer delivering our unique designed for life platforms do circular operations in an omnichannel experience we're.

Speaker 4: We'll please with our performance as far as fiscal 24, growing net sales and comping positively in a declining category while funding essential investments in long-term growth and maintaining a very healthy balance sheet.

We're pleased with our performance thus far in fiscal 'twenty for growing net sales and comping positively in a declining category, while funding essential investments in long term growth and maintaining a very healthy balance sheet.

We're committed to operating the business with great discipline as we navigate the current environment and build on our track record of market share gains, which will become more evident in the coming quarters, we're confident that future and we believe that we are well positioned to deliver on our outlook for the remainder of this fiscal year and capitalize on any opportunities the macro.

Speaker 4: We're committed to operating the business with great discipline as we navigate the current environment and build on our track record of market share gains, which will become more evident in the coming quarters. We're confident in the future, and we believe that we are well positioned to deliver on our outlook for the remainder of this fiscal year and capitalize on any opportunities the macro backdrop offers.

Drop offers.

I want to extend my gratitude and appreciation to our loved tag team. It is their execution that enables our best in category financial and operational performance and drives my confidence and excitement in our future.

Speaker 4: I want to extend my gratitude and appreciation to our Love Tag team. It is their execution that enables our best in category, financial and operational performance and drives my confidence and excitement in our future. With that, we'll hand it over to Mary to cover our strategic priorities and progress in more detail. Mary?

That I will hand, it over to Mary to cover our strategic priorities and progress in more detail Mary.

Speaker 5: Thank you Sean and good morning everyone. We're pleased to have extended our track record of industry leading growth for quarter two and also quarter three as you can see from our preliminary results.

Thank you Sean and good morning. After May one we're pleased to have extended our track record of industry, leading growth for quarter, two and also quarter three as you can see from our preliminary results.

Speaker 5: Our second quarter net-beld growth of 4% continues to be significantly ahead of the category. And more importantly, is up 221% on a four-year basis to give a comparison to pre-pandemic levels.

Second quarter net sales price of 4% continues to be significantly ahead of the category and more importantly is that 221% on a full year basis to give a comparison to pre pandemic levels.

Speaker 5: And even with the planned S-GNA delivery that Sean mentioned, adjusted EBITDA margin has increased over 1000 basis points over the same four year time period. It is our unique and compelling design for life platform. And the virtually unparalleled value proposition it offers that enables us to continue to profitably take share even with current market dynamics.

And even with the planned SG&A deleverage that Sean mentioned adjusted EBITDA margin has increased over a thousand basis points over the same four year time period. It is our unique and compelling design for life platform and the virtually unparalleled value proposition. That's also that enables us to continue.

To profitably takes that even with current market dynamics.

With a clear strategy for growth and crisp execution by the team that is coalesced around the priorities that support our price strategy. We continue to drive operational excellence across the business and make progress as illustrated by the highlight I will now share with you.

Speaker 5: With a clear strategy for growth and crisp execution by a team that is coalesced around the priorities that support our growth strategy, we continue to drive operational excellence across the business and make progress is illustrated by the highlights I will now share with you.

Firstly, starting with product innovation.

Speaker 5: As previously announced, a highly anticipated new product introduction, the angled side, soft launched in May, in conjunction with our 25th anniversary brand campaign. Our customers have been very receptive. As we've discussed before, style was the number one reason customers left our purchase funnel, and the angled side addressed our biggest opportunity around the various approaches.

As previously announced the highly anticipated new product introductions. The angled site launched in May in conjunction with our 25th anniversary Brian campaign, our customers have been very receptive.

As discussed before style was the number one reason customers lessor purchase funnel on the ankle side to address our biggest opportunity around the barrier to purchase.

Speaker 5: But the benefit is not only aesthetic. We've also received strong feedback on enhanced comfort from existing and new customers.

But the benefit is not only affect it. We've also received strong feedback on any comfort from existing and new customer.

Speaker 5: During third quarter week, expanded distribution and the angled side has now been available across our showroom base as well as our e-com platform since the end of July . A full media campaign launched during the summer in support and helped drive angled side as the percentage of total sides sold to over 40% in recent periods.

During the quarter, we expanded distribution and the angles site has now been available a cross sell Chevron Bay as well as the E. Com platform at the end of July our full media campaign launched during the summer in support and help drive ankle side as a percentage of total sites sold to over 40% in recent periods.

We believe we will continue to gain market share through this new product introduction as awareness and appreciation continues to correct.

Speaker 5: We believe we will continue to gain market share through this new product introduction as awareness and appreciation continues to grow.

Speaker 5: Secondly, our omni-channel experience. We continue to execute as a true omni-channel retailer through a combination of our physical touch points and digital platform. During second quarter, we opened 18 showrooms and three Best Buy shop and shops. Our success in driving strong efficiencies in the time from construction to opening enabled us to pull forward some openings with 15 of the 18 showrooms opening ahead of our original schedule.

Secondly, our omnichannel experience we can.

Continue to execute as a true omnichannel retailer through a combination of a physical touch point and digital platform. During second quarter. We opened 18 showrooms in Threep five shop in shops.

That's been driving strong efficiency and the time from construction to opening enabled us to pull forward. Some openings with 15 of the 18 Chevron opening ahead of our original schedule.

Speaker 5: With regards to our Costco partnership, sales were up 15% in Q2, driven by increased pop-up shop presence versus last year. Our e-commerce channel performance continue to impress up 12.8% for last year, including costgo.com, a best-by.com, and contributing meaningfully to our category outperformance.

With regard to walk off the partnership sales were up 15% in Q2, driven by increased pop up shop presence such as lost yet.

E Commerce channel performance continued to impress up 12, 8% for last year, including Costco adult all my best buy dot com and contributing meaningfully to our past the great outperformance.

Speaker 5: underlying all channels and proofs that our plan is working, our customer satisfaction scores continue to improve and increase sequentially. Driven by surgical initiatives in enhancing the digital experience and customer service improvements with technology investments in our customer love team.

Underlying all channel and proof that our planet walking our customer satisfaction scores continue to improve and increase sequentially.

By surgical initiatives and enhancing the digital experience and customer service improvements with technology investments and our customer loves team.

Speaker 5: Thirdly, our brand ecosystem, our efficient marketing, including our strong customer lifetime value to customer acquisition cost ratio, lies at the center of our ecosystem and serves as an effective driver of brand awareness and customer acquisition.

Thirdly, our brands ecosystem, our efficient marketing, including a strong customer lifetime value to customer acquisition cost ratio lies at the center of an ecosystem and serves as an effective drive for fans Atlanta and customer acquisition.

But back then we are being very selective about marketing, where the traffic is and where the ideal.

Speaker 5: For that end, we are being very selective about marketing where the traffic is and where the eye builds are. As we continue to widen our customer aperture with both products, innovation, and marketing strategy and tactics.

As we continue to widen our customer aperture with both product innovation and marketing strategy and tactics.

We continue to deploy new marketing tactics, including continuing to invest in high ROI performing program and growing hyper local marketing to drive relevant traffic to a touch point.

Speaker 5: We continue to deploy new marketing tactics, including continuing to invest in high ROI performing programs and growing hyperlocal marketing to drive relevant traffic to our touchpoint.

We remain focused on customer acquisition and have been utilizing vehicles, such as direct mail campaigns that deliver strong rois for it.

Speaker 5: We remain focused on customer acquisition and have been utilising vehicles such as direct mail campaigns that deliver strong, ROI for us.

As previously mentioned, we've also begun languishing prime and linear T V by continued to drive reach and strengthen our brand lap.

Speaker 5: As previously mentioned, we've also begun leveraging prime and linear TV buys to continue to drive reach and strengthen our brand love.

Speaker 5: The objective of our launch of Angleside was to broaden our aesthetic appeal to address the segment of the market that we were missing with our current assortment.

The objective of our loan except ankle side, well, it's abroad and our static appeal to address the segments of the market that we were missing without current fulfillment. So.

Speaker 5: So we partnered with Architectural Digest, a leader in style to launch the products. The launch partnerships included content and advertisements on architecturaldigest.com and their partners, as well as a launch event in New York City with designers and influencers, which generated additional content driving awareness of the launch.

So we partnered with architectural Digest a leader in style to launch the products. The launch partnership included content and advertisement on the architectural digest, the Harman that partners as well as the launch event in New York City, with designers and influences, which generated additional content driving awareness.

Oh, the launch to date, whereas the 760 million impressions from the launch partnership and really pleased with not only the rate, but also the quality of the coverage.

Speaker 5: The date we are over 750 million impressions from this launch partnership and really pleased with not only the reach but also the quality of the coverage.

Speaker 5: Regarding our circular operations initiative, we have made good progress on our open box inventory as we focus on improving the execution of effectiveness and brand experience. And we are seeing over 20% improvement in returns back to stock first as last year as one key measure for this initiative.

Regarding our second operations initiative, we have made good progress on all open box inventory as we focused on improving the execution of effectiveness and brand experience and we are seeing is a 20% improvement in returns back to stop versus last year as one of the key measure for this initiative.

And then lastly, disciplined infrastructure investments and efficiency.

Speaker 5: And then lastly, disciplined infrastructure investments and efficiency.

Speaker 5: For Fiscal 24, we are investing in the areas of technology and research and development to best fuel our Infinity Flywheel.

So fiscal 'twenty four we are investing in the areas of technology and research and development to fuel our infinity flywheel.

Speaker 5: We're focused on continuing to enhance customer satisfaction through continued delivery of orders in just days. In addition, we believe our recent investments in supply chain will help drive inventory product improvements of 20%. We're pleased with the team's progress so far and are on track to deliver this by year end.

We are focused on continuing to enhance customer satisfaction through continued delivery of orders in just eight. In addition, we believe our recent investments in supply chain will help drive inventory product and proven of 20%.

Pleased with the team's progress so far and are on track to deliver this by year end.

Speaker 5: As we've said before, we expect these initiatives will drive a significant improvement in efficiency of working capital, as well as associated cost reductions across inbound freight and warehousing, which we started realizing in quarter three and will continue to realize in quarter four.

As we've said before we expect these initiatives will drive a significant improvement in efficiency of working capital as well as the associated cost reductions across inbound freight and warehousing, which we started realizing in quarter, three and well continue to realized in quarter four.

Speaker 5: Our AI pilot that we mentioned last quarter provides a generative AI guided experiences to our customer facing service associates to improve customer service. And we're pleased with initial results. So it is still very early. We continue to believe this has the potential to enhance the overall customer shopping experience. And we are already seeing the benefit in the specific customer service satisfaction score improvement.

AI pilots that we mentioned last quarter provide generous with AI guided experiences to our customer facing service associates to improve customer service and we're pleased with initial results. So it is still very early we continue to believe this has the potential to enhance the overall customer shopping experience.

And we are already seeing the benefits and the specific customer service satisfaction score improvement.

Let's talk about people infrastructure investments, we recently appointed colleague <unk> as our new Chief people officer, as we continue to build our capability and evolve the organization strategically so that we can effectively scale the business.

Speaker 5: As part of our people infrastructure investments, we recently appointed Carly Coagia as our new chief people officer. As we continue to build our capabilities and evolve the organization strategically so that we can effectively scale the business.

Speaker 5: Through leveraging her extensive human resources experience, we will be very strategic, building our organization through an optimal balance of human resources and impactful and efficient technology capabilities.

Through leveraging her extensive human resources experience, we will be very strategic.

Building, our organization through an optimal balance of human resources, and impactful and efficient technology capability.

Make no mistake, we are laser focused on operational excellence as we manage our cost structure and capital allocation as Sean mentioned this will become more evident in coming quarters. This deleverage abate.

Speaker 5: Make no mistake, we are laser focused on operational excellence as we manage our cost structure and capital allocation. As Sean mentioned, this will become more evident in coming quarters as de-leverage abates.

In summary, we're pleased with our year to date performance and are ready to deliver the all important fourth quarter. We're very proud of our team and that continued execution against our strategic initiatives, which in turn further strengthens our competitive positioning and powers our infinity flywheel.

Speaker 5: In summary, we're pleased with our year-to-date performance and are ready to deliver the all-important fourth quarter. We're very proud of our team and their continued execution against the Strategic Initiative, which in turn further strengthens our competitive positioning and powers our infinity flywheel. I will now pass the call over to Keith to review our quarter two results and our outlook for quarter three and the balance of the year. Keith.

Now pass the call over to Keith to review, our quota to result, and our outlook for quarter, three and the balance of the year.

Pete.

Thank you Mary.

Speaker 6: Thank you, Mary. Before I get started, I want to express how excited I am to be here today. It's part of this amazing team that this remarkable brand is truly differentiated business model. After having spent 16 years covering consumer companies on Wall Street, then being part of the leadership at a large-capped consumer company and a startup, I can say the outlook for profitable growth of LoveSack is truly special.

Four I get started I want to express how excited I am to be here today as part of this amazing team at this remarkable brand is truly differentiated business model. After having spent 16 years covering consumer companies on wall Street than being part of the leadership in a large cap consumer company and startup.

I can say the outlook for profitable growth that love Sac is truly special.

Speaker 6: Between continued growth and market share gains for SACS, introduction of new products and categories, and eventual geographic expansion, the opportunity is immense.

Between continued growth and market share gains for <unk>, and sacs introduction of new products and categories and eventual geographic expansion the opportunity is immense.

Speaker 6: All right, onto a quick review of second quarter, followed by our outlook for the Resco Fiscal 24.

Alright onto a quick review of second quarter, followed by our outlook for the rest of the fiscal 'twenty four.

Speaker 6: Net sales increased 6 million, or 4%, to 154.5 million in the second quarter of fiscal 24, with the year-over-year increase driven by web and showrooms. This was in line with what we projected for the quarter, driven by our July 4th promotional campaign and 25th anniversary celebration.

Net sales increased 6 million or 4% to $154 5 million in the second quarter of fiscal 'twenty four with the year over year increase driven by web and showrooms. This was in line with what we projected for the quarter driven by our July 4th promotional campaign and 25th anniversary.

Sure.

Speaker 6: Showroom net sales increased 5.8 million or 6.3 percent to 98.2 million in the second quarter of fiscal 24 as compared to 92.4 million in the prior year period.

Showroom net sales increased $5 8 million or six 3%.

$98 2 million in the second quarter of fiscal 'twenty, four as compared to $92 4 million in the prior year period. The increase in showroom sales was driven by an increase of two 7% comparable showroom sales related to higher point of sales transactions with lower promotional discounting in the <unk>.

Speaker 6: The increase in showroom sales was driven by an increase of 2.7% and comparable showroom sales related to higher point of sales transactions.

Speaker 6: with lower promotional discounting than the prior year. And the net addition of 49 net new showrooms compared to the prior year period.

Higher year and the net addition of 49 net new showrooms compared to the prior year period.

Speaker 6: As a reminder, point of sale transactions that we reflect in our comparable sales metrics represent orders placed through our showrooms, which is not always reflect the point at which control transfers to the customer and when that sales are recorded.

As a reminder point of sale transactions that we reflect in our comparable sales metrics represent orders placed through our showrooms, which does not always reflect the point at which control transfers to the customer and when net sales are recorded.

Speaker 6: Internet net sales increased 5.9 million or 16.6 percent to 41.4 million in the second quarter of fiscal 24. It's compared to 35.5 million in the prior year period.

Internet net sales increased $5 9 million or 16, 6% to $41 4 million in the second quarter of fiscal 'twenty four.

Compared to $35 5 million in the prior year period.

Speaker 6: Other net sales, which include pop-up shop, shop in shop, and open box inventory transactions, decreased $5.7 million for $27.7%. The $14.9 million in the second quarter of fiscal 24.

Net sales, which include pop up shop and shop in shop, and open box inventory transactions decreased $5 7 million or 27, 7% to $14 9 million in the second quarter of fiscal 'twenty four.

Speaker 6: The decrease was principally due to a lower open box inventory transaction. Only 2.8 million compares to 9.5 million in the second quarter fiscal 28th rate.

The decrease was principally due to a lower open box inventory transactions, only $2 8 million compared to $9 5 million in the second quarter fiscal 'twenty three.

As a reminder, our open box inventory transactions with icon are a part of our circular operations designed for life and ESG initiatives, we're making great progress in reviewing all options for this returned product.

Speaker 6: As a reminder, our open box inventory transactions with ICON are a part of our circular operations designed for life and ESG initials.

Speaker 6: We're making great progress in reviewing all options for this returned product. They're aligned with our sustainability goal, in which should retain more profits for LoveSack at the same time.

Aligned with our sustainability goals, and which should retain more profits for love Sac at the same time.

Speaker 6: We expect some of these initiatives to ramp in Q4.

We expect some of these initiatives to ramp in Q4.

Speaker 6: In the meantime, we may engage in limited open box inventory transactions with ICON to ensure our warehouses are operating as efficiently as possible.

In the meantime, we may engage in limited open box inventory transactions with icon to ensure our warehouses are operating as efficiently as possible in fact in the third quarter. We will have an incremental $2 5 million in the open box sales, which are included in our outlook by <unk>.

Speaker 6: In fact, in the third quarter, we will have an incremental 2.5 million in the open box sales, which are included in our outlet.

Speaker 6: By product category, in the second quarter, our satchinals net sales increased 3%.

At a category in the second quarter, our sectional net sales increased 3%.

Speaker 6: SAC net sales increased 18 percent, and our other net sales, which includes decorative pillows, blankets, and accessories, increased 12 percent over the prior year.

Net sales increased 18% and our other net sales, which includes decorative pillows blankets and accessories.

12% over the prior year.

Speaker 6: Gross margin increased 650 basis points to 59.8% of net sales in the second quarter, versus 53.3 in the prior year quarter, primarily driven by a decrease of 720 basis points in total distribution and related tariff expense.

Gross margin increased 650 basis points to 59, 8% of net sales in the second quarter versus $53 three in the prior year quarter.

Primarily driven by a decrease of 720 basis points and total distribution and related tariff expenses. This was offset partially by 70 basis points of pressure from higher promotional discounting.

Speaker 6: This was offset partially by 70 basis points of pressure from prior promotional disc

Speaker 6: The decrease in total distribution and related tariff expenses over the prior year is principally related to the positive impact of 880 basis points decrease in inbound transportation costs.

The decrease in total distribution and related tariff expenses over the prior year is principally related to the positive impact of 880 basis points decrease in inbound transportation costs.

Speaker 6: partially offset by 160 basis points, and higher outbound transportation, and where housing costs.

Partially offset by 160 basis points higher outbound transportation and warehousing costs.

Speaker 6: As a reminder, the benefits of the decrease in inbound freight rates will continue in the third quarter. I'll be at a slightly lower level.

As a reminder, the benefits of the decrease in inbound freight rates will continue in the third quarter, albeit at a slightly lower level.

SG&A expense as a percent of net sales increased by 840 basis points, primarily due to deleverage with unemployment costs.

Speaker 6: S-GNA expense is a percent of net sales increased by 840 basis points. For merely due to deliverage with an employment cost, selling related expenses tied to the LoveSack credit card, and continued investments to support current and future growth, as well as professional-

Selling related expenses tied to the loves a credit card.

Continued investments to support current and future growth as well as professional fees.

Speaker 6: In dollars, employment costs increased by 5.7 million, primarily driven by an increase in new hires in fiscal 23.

In dollars employment cost increased by $5 7 million, primarily driven by an increase in new hires in fiscal 'twenty three.

Overhead expenses increased $6 2 million, consisting mainly of increases of $3 million in professional fees.

Speaker 6: overhead expenses increased 6.2 million, consisting mainly of increases of 3 million in professionals.

And $3 2 million in infrastructure investments and other miscellaneous items.

Speaker 6: 3.2 million infrastructure investments in the other miscellaneous data. Red increased by...

Rent increased by <unk> 9 million related to $1 9 million rent expense from our net addition of 49 showrooms.

Speaker 6: related to 1.9 million rent expense from our net edition of 49 showrooms, partially offset by 1 million reduction in percentage rent.

Really offset by 1 million reduction in percentage rent.

Speaker 6: We estimate non-recurring incremental fees associated with the restatement of prior period financials with approximately 1.7 million in the second quarter.

We estimate nonrecurring incremental fees associated with the restatement of prior period financials was approximately $1 7 million in the second quarter.

Advertising and marketing expenses increased $7 4 million or 39%.

Speaker 6: Advertising and marketing expenses increased 7.4 million or 39% to 26.5 million for the second quarter of fiscal 24 Compared to 19.1 million in the prior year period

$26 5 million for the second quarter of fiscal 'twenty, four compared to $19 1 million in the prior year period.

Speaker 6: Advertising and marketing expenses were 17.2% of net sales in the second quarter as compared to 12.9% of net sales in the prior year period.

Advertising and marketing expenses were 17, 2% of net sales in the second quarter as compared to 12.9% of net sales in the prior year period.

The primary contributor to the increased percentage was the launch of the 25th anniversary campaign. This will serve as the foundation for many of our marketing messages through the remainder of the fiscal year.

Speaker 6: The primary contributor to the increased percentage was the launch of the 25th anniversary campaign. This will serve as the foundation for many of our marketing messages through the remainder of the fiscal.

Operating loss for the quarter was 1 million compared to operating income of $8 1 million.

Speaker 6: Operating loss for the quarter was 1 million compared to operating income of 8.1 million.

Speaker 6: And the second quarter of last year, driven by the factors we just discussed.

In the second quarter of last year, driven by the factors, we just discussed.

Speaker 6: Before we turn our attention to net loss, net loss per diluted share and adjusted EBITDA, please refer to the terminology and reconciliation between each of our adjusted metrics and their most directly comparable gap measurements in our earnings release issued earlier this morning.

Before we turn our attention to net loss net loss per diluted share and adjusted EBITDA. Please refer to the terminology and reconciliation between each of our adjusted metrics and their most directly comparable GAAP measurements.

Our earnings release issued earlier this morning.

Speaker 6: Net loss for the quarter was 0.6 million or negative 4 cents per diluted share compared to net income of 5.8 million or 37 cents per diluted share in the prior year period.

Net loss for the quarter was 0.6 million or negative four cents per diluted share compared to net income of $5 8 million or <unk> 37 cents per diluted share in the prior year period.

Speaker 6: During the second quarter of fiscal 24, we recorded an income tax benefit of 7,000 as compared to a 2.3 million tax provision for the second quarter of fiscal 23. The change in provision is primarily driven by the net loss for the quarter.

During the second quarter of fiscal 'twenty four we recorded an income tax benefit of 7000 as compared to a $2 3 million tax provision for the second quarter of fiscal 'twenty three the change in provision is primarily driven by the net loss for the quarter.

Speaker 6: Adjustity but that for the quarter was an income of 5.3 million as compared to Adjustity but that of 12.3 million in the prior year period.

Adjusted EBITDA for the quarter was an income of $5 3 million as compared to adjusted EBITDA of $12 3 million in the prior year period.

Speaker 6: Just a debita for the second quarter with the head of our expectations principally driven by the upside to gross margin.

Adjusted EBITDA for the second quarter was ahead of our expectation principally driven by the upside to gross margin.

Speaker 6: Turning to our balance sheet, our total merchandise inventory levels are in line with our projections.

Turning to our balance sheet, our total merchandise inventory levels are in line with our projections and have leveled out as we discussed on our prior call.

Speaker 6: and have leveled out as we discussed in our prior call. This is despite the addition of angled side cues, and we believe this is a clear highlight of the uniqueness of our business model.

This is despite the addition of angled side skews and we believe this is a clear highlight of the uniqueness of our business model.

We feel exceptionally good about both the quality and quantity of our inventory and our ability to maintain industry, leading in stock positions and delivery times. We ended the second quarter with a very healthy balance sheet inclusive of $54 7 million in cash and cash equivalents as well as 30.

Speaker 6: We feel exceptionally good about both the quality and quantity of our inventory and our ability to maintain industry leading in the stock positions and delivery times. We ended the second quarter with a very healthy balance sheet, inclusive of 54.7 million in cash and cash equivalents, as well as 36 million in availability on our revolving line of credit with no borrowers.

$6 million in availability on our revolving line of credit with no borrowings.

Speaker 6: Please refer to our earnings press release for other details on our second quarter financial performance.

Please refer to our earnings press release for other details on our second quarter financial performance.

Speaker 6: So now our outlook. Let's start with the fiscal third quarter.

So now our outlook, let's start with the fiscal third quarter.

Speaker 6: We estimate net sales of 154 million. This includes approximately 2.5 million of open box inventory sales compared to 4.2 million in the third quarter of fiscal 23.

We estimate net sales of $154 million. This includes approximately $2 5 million of open box inventory sales compared to $4 2 million in the third quarter of fiscal 'twenty three.

Speaker 6: We expected just at EBITDA between positive 0.5 million and negative 1.5 million. This includes gross margins between 56 and 57%.

We expect adjusted EBITDA between positive <unk> 5 million or negative $1 5 million. This includes gross margins between 56 and 57%.

Merchandising and advertising slightly above 14, as a percent of net sales and.

Speaker 6: merchandising and advertising slightly above 14 as a percent of net sales. SGNA slightly above 44 as a percent of net sales.

And SG&A slightly above 44, as a percent of net sales.

Speaker 6: We estimate net loss to be 3.2 million to 5.2 million.

We estimate net loss to be $3 2 million to $5 2 million.

Speaker 6: This includes approximately one million of non-recurring incremental expenses associated with our restatement of prior period financial.

This includes approximately $1 million of nonrecurring incremental expenses associated with a restatement of prior period financial statements.

We estimate diluted loss per common share is expected to be 20 to 33 cents with.

Speaker 6: We estimate the looted loss for common share is expected to be 20 cents to 33 cents.

Speaker 6: with 15.5 million weighted average shares outstanding. Now for the full...

With $15 5 million weighted average shares outstanding.

Now for the full year of fiscal 'twenty four.

Speaker 6: We are tightening the range of our full-year outlook for net sales to $710 million to $730 million.

We are tightening the range of our full year outlook for net sales to $710 million to $730 million.

Speaker 6: We expect adjusted EBITDA between 51 and 63 million. This includes gross margins of 57 to 57 and a half, merchandising and advertising of slightly above 13 as a percent of net sales, and SGNA between 37 and 38 as a percentage of net sales.

We expect adjusted EBITDA between 51, and 63 million. This includes gross margins of 57 to 57, and a half merchandising and advertising of slightly above 13, as a percent of net sales and SG&A between 37 and 38 as a percentage.

Net sales.

We estimate net income to be between 20 and $29 million.

Speaker 6: We estimate net income to be between 20 and 29 million.

These fiscal 'twenty four estimates include approximately 4 million of nonrecurring incremental expenses associated with our restatement of prior period financial statements.

Speaker 6: These fiscal 24 estimates include approximately 4 million of non-recurring incremental expenses associated with our restatement of prior period financials.

Speaker 6: We estimate diluted income for common share in the range of $1.21 to $1.75, on approximately 16.5 million estimated diluted weighted average shares outstand.

We estimate diluted income per common share in the range of $1 21 to $1 75, and approximately $16 5 million estimated diluted weighted average shares outstanding.

As a reminder, the 50 <unk> week in the fourth quarter is expected to contribute approximately $6 million in net sales.

Speaker 6: As a reminder, the 53rd week in the fourth quarter is expected to contribute approximately 6 million in net sales. Quickly.

Quickly on our cash balance outlook.

Speaker 6: Given the timing of new touchpoint openings and our plan flow of inbound inventory ahead of the seasonally strong fourth quarter, the third quarter tends to be our lowest quarter ending cash balance of

Given the timing of new touch point openings in our plan flow of inbound inventory ahead of the seasonally strong fourth quarter, the third quarter tends to be our lowest quarter ending cash balance of the year.

Speaker 6: I'm pleased to share that we ended fiscal third quarter with approximately 37 million in cash, which is up substantially from 3.8 million at the end of third quarter fiscal 23.

I'm pleased to share that we ended fiscal third quarter with approximately $37 million in cash which is up substantially from $3 8 million at the end of third quarter fiscal 'twenty three.

As we monetize inventories through the busy season, we continue to estimate we will end fiscal 'twenty four with a higher net cash balance than we ended fiscal 'twenty three.

Speaker 6: As we monetize inventory through the busy season, we continue to estimate we will end fiscal 24 with a higher net cash balance than the ended fiscal 23.

Speaker 6: So in conclusion, we are pleased with our second quarter results. Market share gains, strengthening foundations, exciting new growth drivers and a healthy balance sheet, foot love second and enviable position. I'm new here, but I'm already very proud of the team's execution and will continue to be a challenging macro backdrop, as well as their exuberance for optimizing the opportunity ahead of me.

So in conclusion, we are pleased with our second quarter results.

Market share gains strengthening foundations exciting growth drivers and our healthy balance sheet foot loves back in an enviable position.

I'm, new here, but I'm already very proud of the team's execution in what continues to be a challenging macro backdrop as well as their exuberance for optimizing the opportunity ahead of us with a strong focus on growth underpinned by an ROI based approach to measured reinvestment I'm confident in the outlook.

Speaker 6: With a strong focus on growth underpinned by an ROI-based approach to measured reinvestment, I'm confident in the out.

I'll now turn the call back to the operator to start our Q&A session.

Speaker 6: I'll now turn the call back to the operator to start our Q&A session.

Thank you.

Ladies and gentlemen, we will now be conducting a question and answer session.

Speaker 1: Ladies and gentlemen, we will now be conducting a question and answer session.

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Speaker 1: Ladies and gentlemen, we will wait for a moment while we pull for quest

Ladies and gentlemen, we will wait for a moment, while we poll for questions.

Speaker 1: Our first question is from Amund's 40 with BA derision. Please go ahead.

Our first question is from Thomas Forte with D. A Davidson. Please go ahead.

Great. So congrats on good performance and welcome Keith.

Speaker 7: Great, so congrats with the performance and welcome, Keith. I have one high level question. One to give you an opportunity to address the question against investors a lot. You have a great business with a high gross margin, yet historically, you have not generated a lot of free cash flow.

I have one high level question I wanted to give you an opportunity to address the question I guess from investors a lot.

Have a great business with a high gross margin you had historically have not generated a lot of free cash flow.

Speaker 7: What have been the limiting factors in the past for this? How might this change in the future? And when you get to a point where you're generating significant free cash flow, how do you intend to use it, including reinvesting in the business, buybacks, strategic M&A? Thanks.

What have been the limiting factors in the past for this how might this change in the future.

You get to a point, where you're generating significant free cash flow, how do you intend to use it including reinvesting in the business buybacks strategic M&A.

Thanks.

Yeah. Thanks for the question Tom appreciate.

Speaker 4: Where it's coming from, this is Sean Lebsdack.

I appreciate where it's coming from a this is Shawn Webster Jack.

He has been on a rapid growth curve for about a decade now I think when we look at our CAGR.

Speaker 4: has been on a rapid growth curve for about a decade now. I think when we look at our keger.

Speaker 4: going back many, many years, you know, it's extremely high. Reading to the pandemic, heading into the pandemic.

I'm going back many many years you know, it's it's extremely high leading into the pandemic.

Heading into the pandemic brought.

Unprecedented growth.

Speaker 4: I'm pressurized at growth and we've just been focused on chasing that, taking market share and building the business in the most profitable way that we know how. Now that we've achieved the scale that we're at today, I believe that we

And.

Just didn't focus on chasing that taking market share.

And building the business and then most profitable a profitable way with that we that we know how.

Now that we've achieved the scale that we're at today I believe that a week.

Even in real time.

Speaker 4: even in real time, the evidence of free cash flow growing.

Evidence of our free cash flow growing.

And and producing the kind of results that you're I think investors would hope for and expect out of a business that the cheapest kind of scale will be evident and we're really excited about that.

Speaker 4: in producing the kind of results that your I think investors would hope for and expect out of a business that the cheapest kind of scale will be evident. And we're really excited about that. Obviously here we're reporting on Q2, which is long past because of the restatement process.

Obviously here, we are reporting on Q2, which is a strong path because of the restatement process.

Speaker 4: but we've given a flash on Q3 and while we haven't spoken specifically about cash, we still really encouraged about those results and believed that, you know, the evidence of this business.

We've given a flash on Q3 and while we haven't spoken specifically about cash we feel really encouraged about those results and believes that the evidence of this business' ability to generate free cash flow will be obvious.

Speaker 4: ability to generate free cash flow will be obvious. So looking forward to sharing more on that, I'll kick it the key to probably give a little more insight.

So I'm looking forward to sharing more on now I'll kick it to Keith who can probably give a little more insight.

Thanks, Sean. So this is a topic, that's near and Dear to my heart and I think listening to each of the three of US sports Shawn Mary and myself I think you would've heard a very clear commitment to a disciplined approach to reinvestment, but within the organization and in future growth drivers, but just to put a couple of numbers.

Speaker 6: Thanks, Sean. So this is a topic that's near and dear to my heart. And I think listening to each of the three of us both Sean, Mary, and myself, I think you would have heard a very clear commitment to a disciplined approach to reinvestment, both in the organization and in future driver's. But just to put a couple numbers around this in terms of

Around this in terms of.

Speaker 6: You'll prove in the pudding you could say. But I guess you need to leverage as an example, was a little over 840 basis points in the second quarter. When you build into your...

Proof.

Proof in the putting you can say look SG&A deleveraged as an example was a little over 840 basis points in the second quarter.

When you build into your model the G&A ranges that I gave you for the third quarter for the full year, what you'll see is that deleverage in SG&A in Q3, let's call. It approximately half of what we had in <unk> and then when you see what falls out for fourth quarter, It's a substantial reduction even from there so.

Speaker 6: GNA ranges that I gave you for the third quarter for the full year. What you'll see is that D leverage in S, GNA and Q3. Let's call it approximately half of what we had in 2Q. And then when you see what falls out for fourth quarter, it's a substantial reduction even from there. So, you know, this isn't a fiscal 25 only commitment. This, you're going to start to see this flow through in the next couple quarters.

You know this isn't the physical twenty-five only commitment this youre going to start to see this flow through into next couple of quarters.

Thank you.

Thank you.

Speaker 1: Our next question is from the line of Maria Rips with Canapod Genuity.

Our next question is from the line of Marty Yeah ribs with Canaccord Genuity. Please go ahead.

Speaker 5: Great, good morning and thanks for taking my questions. First, I just wanted to ask about your Outlook for Q4, which applies a pretty wide range for revenue growth, for your biggest quarter. Can you maybe just talk about what's implied in your assumptions, both the lower and upper end of your guidance? And then I have a quick follow up.

Oh, great. Good morning, Thanks for taking my questions first I just wanted to ask about your outlook for Q4, which implies a pretty wide range for revenue growth for your biggest quarter can you maybe just talk about what's implied in your assumptions both at the lower and upper end of your guidance and then I have a quick follow up.

Sure. Thanks, Thanks, So I'll start with a couple of numbers around this and then if Sean or Mary you want to add in some high level, it's basically.

Speaker 6: Sure, thanks. So I'll start with a couple numbers around this

You know a $20 million range on a big quarter, given the macro backdrop that remains a little uncertain as you're hearing from pretty much everybody in the consumer category.

Speaker 6: you know a 20 million dollar range on a big quarter given a macro backdrop that remains a little uncertain as you're hearing from pretty much everybody in the consumer category particularly in our, you're including in our close-in categories.

Particularly in our including in our close in categories. The way, we're thinking about approaching that range is to plan prudently.

Speaker 6: The way we're thinking about approaching that range is to plan prudently.

Speaker 6: and allocate expenses prudently. We have a really unique business model, but let's us react to upside surprises and demand much more quickly than others, given that we're not merchandising lead and can fulfill orders in reselling inventory really quickly. So we think it's a better approach. We're gonna know a lot more when we speak in a month, post the all important Black Friday holiday.

And allocated expenses prudently, we have a really unique business model that lets us react to upside surprises and demand much more quickly than others given that we're not merchandising led and and you know and can fulfill orders.

Retail inventory really quickly. So we think we think it's a better approach.

You know, we're going to know a lot more when we speaking a month post the all important black Friday holiday.

Speaker 6: But I think what we're trying to do is to show you we're going to manage this more prudently. The moving pieces really for us right now are in general.

But I think what we're trying to do is to show you we're going to manage this more prudently the moving pieces really for US right now are in general.

Speaker 6: macro conditions and macro them in within the category number one

Macro conditions and macro demand within the category number one.

Speaker 6: Number two is the promotional environment. And you heard both Sean and Mary talk about this before. How promotional is the category?

Number two is the promotional environment and you heard both Shawn and Mary talked about this before how promotional is the category, where we are approaching this from the perspective of slightly more promotional than we have been in the recent quarters, but still you know less promotional than we were pre pandemic.

Speaker 6: We are approaching this from the perspective of slightly more promotional than we have been in the recent quarters, but still less promotional than we were pre-pandemic and less promotional than appears. Working for us, we're taking market share, we're expanding gross margins, we think that's the right way to approach this. You know, and hopefully that gives you a little bit of color about that range for fourth quarter. I don't know, Sean or Mary, if you want to add anything else.

And less promotional than the peers, it's working for US we're taking market share we're expanding gross margins. We think that's the right way to approach. This.

You know and hopefully that gives you a little bit of color about that range for fourth quarter, I don't know, Sean or Mary if you want to add anything else.

Sean.

Speaker 4: Yeah, I think it's an uncertain time in the economy. We're being very sad and we're really happy that

Yeah, I think it's an uncertain time in the economy, and we're being very prudent as Keith said and you know, we're really happy that our.

Speaker 4: We have a business that is so dynamic and that has taken so much market share and is so competitive in our landscape.

We have a business that is so dynamic and it has taken so much market share and it's so competitive and in our landscape.

And you know we're waiting to see like I think the rest of the world how it all unfolds on the consumer side, but from.

Speaker 4: And we're waiting to see the rest of the world how it all unfolds on the consumer side. But from what we're seeing so far, this is the best guidance that we can give.

You know what we're seeing so far this is the best guidance, we can give.

Speaker 4: both looking at kind of the upside of it and the downside of it.

Both looking at kind of the upside of it in the downside of it.

And.

You know where I'm being really thoughtful we're where we're trying to build a business here that you know.

Speaker 4: you know, we're being really thoughtful. We're trying to build a business here that, you know, here for 50 years, we're trying to, at least, we're trying to build a business that is a legacy brand that has staying power. We're not interested in, you know, short-term outcomes only. At the same time, we've been focused on building a profitable business that's been able to straddle very, very high growth. We were in style Peace and Family, we've been really focused on building a furniture, and snow. ?orm?,???.

For 50 years, we're trying to at least we're trying to build a business that.

He is a legacy brand that are have staying power. We're not interested in you know short term outcomes only at the same time, we've been focused on building a profitable business, that's been able to straddle very very high growth.

Speaker 4: while generating profits and as you'll see free cash flow. So looking forward to fourth quarter and we'll hope for a little up side as well.

While generating profits and and as you'll see free cash flow so looking forward to.

<unk> fourth quarter, and and you know well, we'll hope for a little upside as well.

Speaker 8: Got it, got it, that makes sense. And then secondly, sort of understanding that you're not providing guidance beyond Q4, but just sort of how should investors think about key growth drivers next year? So maybe show room expansion shop and shop strategy, product roadmap, and then keep, you sort of touch on this a little bit, but maybe talk about where across your P&L, you see the ability to be more efficient and maybe preserve margins if the environment continues to be challenging next year.

Got it got it that makes sense and then and then secondly sort of understanding that you're not providing guidance beyond Q4, and but just sort of how should investors think about the key growth drivers next year. So maybe the showroom expensive shop in shop strategy product roadmap and then Keith you sort of touched on this a little bit but maybe.

Talk about where across your P&L, you see the ability to be more efficient and maybe preserve margins. If the environment continues to be challenging next year.

Yeah. Thank you for the question and I'm going to ask everybody for it for a little bit of Greece and patients given that this is my first quarter in the last couple of months. We were we were a little bit distracted with the restatement, which which.

Speaker 6: Yeah, thank you for the question. And I'm going to ask everybody for a little bit of grace and patience given that this is my first quarter in the last couple of months. We were a little bit distracted with the restatement,

<unk> did slow my integration into the business a little bit we'll have a lot more to talk about with fiscal 'twenty fives here with physical with fiscal third quarter results in about a month.

Speaker 7: did slow my integration into the business a little bit. We'll have a lot more to talk about with fiscal 25 here with fiscal third quarter results in about a month.

Speaker 6: But the way we kind of think about this is the moving pieces for market share gains really remain the same. It is.

The way, we kind of think about this is the moving pieces for market share gains really remain the same.

It is in.

Speaker 7: Intelligent and measured show point our show room and touch point expansion and it's gonna You're gonna see it across all of the the same Advances that we've been doing right so you're gonna see more best by shop and shops You're gonna see more through our other partner channels. You're gonna see more Formal showrooms. You're gonna see more you know volume through the through the website as well

Intelligent and measured show point, our showroom in touch point expansion and its going to youre going to see it across all of the.

The same avenues that we have been doing right. So youre going to see more best five shop in shops, youre going to see more through our other partner channels youre going to see more.

Formal showrooms youre going to see more.

Volumes through the through the website as well.

Speaker 7: All right, we have a phenomenal customer experience in our configurator that's working for us, and I think we'll continue to be able to do it. And so all of that's gonna remain the same.

Alright, we have a we have a phenomenal customer experience in our configure it or if it's working for us and I think we'll continue to pay dividends. So all of that is going to remain the same.

Speaker 7: will have new product introductions that come throughout the year.

We will have new product introductions that come throughout the year.

They're going to continue to drive interest in and.

Speaker 7: that are going to continue to drive interest in and

And love from our customers at all that'll benefit the sales when we move into costs.

Speaker 7: and love from our customers that will benefit the sales. When we move into cost,

We've said.

Speaker 7: You know, ad nauseam throughout this call, we are going to be disciplined. It's not just on the SG&A side of things. It's also on the marketing side of things. You know, we're seeing a lot of benefits from the 25th anniversary marketing campaign that we've discussed, but we won't have that same level of intensity as we move it to next year from a percentage perspective.

AD nauseum throughout this call we are going to be disciplined it's not just on the SG&A side of things. It's also on the marketing side of things.

We are seeing a lot of benefits from the 25th anniversary marketing campaign that we've discussed, but we won't have that same level of intensity as we move into next year from a percentage perspective.

Speaker 7: So, you know, I think what you'll hear from us is more of the same, which is working. Right? It is...

So you know I think what you'll hear from US is more of the same which is working right is growth profitable growth market share and better conversion to the bottom line and cash flows that we've seen in the past so more to come on that but it really is more of the same.

Speaker 7: Growth, profitable growth, market share, and better conversion to the bottom line and cash flows.

Speaker 6: So more to come on that, but it really is more the same.

Got it that's very helpful. I appreciate the color.

Thank you.

Speaker 1: Our next question is from Alex Forman with Craig Hallam Capital Group. Please go ahead.

Our next question is from Alex Fuhrman with Craig Hallum Capital Group. Please go ahead.

Speaker 9: Hey guys, thanks for taking my question. Good to talk to you. You know, since we've last heard from you guys in June , a lot of other retailers are talking about week demand for big ticket items, furniture in particular. You know, looks like obviously you guys are keeping revenue guidance for this year, in fact at the midpoint, but are you seeing your customers acting any differently over the past few quarters, maybe opting for cheaper covers or fewer pieces? And just, you know, from a high level, how do you plan?

Hey, guys. Thanks for taking my question and good to talk to you you know since since we last heard from you guys. In June a lot of other retailers are talking about weak demand for big ticket items furniture in particular.

You know it looks like obviously you guys are keeping our revenue guidance for this year intact at the midpoint, but are you seeing your customers acting any differently over the past few quarters may be opting for cheaper covers are fewer pieces and just you know from a high level. How do you plan to market to customers. This holiday season, who might be a little bit more cautious with their spending and they.

Speaker 9: market to customers this holiday season who might be a little bit more cautious with their spending and they were last year dirt.

Last year during the holidays.

Yeah, Hey, Alex it's Mary. Thank you. So much your question. So I think you know coupons as they think about the health of the consumer and the category. I think you know we're not planning on seeing any material change in the Catholic rate will remain challenging.

Speaker 5: Hey Alex, it's Mary, thank you so much for your question. So I think, you know, to your point is, you think about the health of the consumer and the category. I think, you know, we're not planning or seeing any material change in the category. It will remain challenging. We'll continue to outperform the category take market share and if you just think about even our outlook in.

Continue to outperform the category take market share and if you just think about I even are out looking at least had for quarter three double digit growth on top of obviously, a very strong growth last year with a cast agreed that declining double digit.

Speaker 5: We said for quarter three double digit growth on top of obviously very strong growth last year With a category that's declining double digit

Speaker 5: You know, we're seeing a little bit around, you know, the obviously Keith mentioned about promotions, a little bit stronger in the category. You know, we're seeing, for example, a little bit more around frequency, but we have faked that into our plans and we feel really good.

You know, we're seeing a little bit around them you know the obviously Keith mentioned about promotions a little bit stronger in the category and you know we're seeing for example, a little bit more around frequency, but we have baked that in our plans and we feel really good as we look out for the rest of the.

Speaker 5: as we look out for the rest of the holiday. You know we've been asked before in terms of any trends around trade down. In fact actually we're seeing it to be relatively flat or slightly elevated around premium mix upgrade. Think about love sauce, think about store.

You know we've been asked before in terms of any trends around trade down in fact actually we're seeing it to be relatively flat to slightly elevated around premium mix upgrade.

That left so think about storage seat.

Still it continues to be a little bit around financing trends versus last year, and we expect that to continue which again, we have baked tens and so you know I think cat for US is it's very much similar to what Keith was saying for next year.

Speaker 5: you know we'll see it kind of continuing. We hope for more outsiders things start to recover and you know we've been the category leader for profitable growth. We talk about this every quarter you know before COVID through COVID through you know even this year.

You know, we'll see kind of continuing and we have more upside as things start to recover and you know we've been the category leader for profitable growth. We talk about this every call to you know before Covid through Covid is true you know even this year.

Speaker 5: whether there's headwinds or tailwinds for the cash agreement economy, you know, we just continue to perform and driving that market share gain all based on the infinity flywheel that we've talked about. So we'll be at our, we'll continue to adjust as Sean talked about.

Whether this headwind or tailwind who's got the casualty and the economy. You know, we just continue to perform and driving that market share gain or based on the infinity flywheel that we've talked about so we'll be agile will continue to have Jeff. This is.

Sean talked about you know we've been very thoughtful in terms of prudently managing expenses, but we will drive our in every way to let game that profitable market share.

Speaker 5: you know, we're being very thoughtful in terms of prudently managing expenses, but we will drive in every way to gain that profitable market share.

Yeah.

Great. That's really helpful. Thank you very much Mary.

No I think you got it.

Thank you.

Speaker 1: Thank you. Our next question is from Matt Coranda with Roth Capital Partners. Please go ahead.

Our next question is from Matt Koranda with Roth Capital Partners. Please go ahead.

Hey, guys. Good morning, just a couple from me. So wondering if you could maybe Mary speak to the angled side traction that you've had in recent months since the launch and then stealth tech attach rates just curious what it looks like in this environment just given consumers overall pressured if you're seeing that change in any material way.

Speaker 9: Good morning, just a couple for me. So, I wonder if you can maybe marry speak to the angled side traction that you've had in recent months since the launch and then stealth tech attach rates. Just curious what it looks like in this environment, just given consumers overall pressured. If you're seeing that change in any material life.

Yeah, Great nice to hear from you, Matt So yes angles side as you know as you cited with the launch and you heard me talk about that a little bit earlier.

Speaker 5: Yeah, great, nice to hear from you Matt. So yes, angle side of you know.

Speaker 5: super excited with the launch you heard me talk about that a little bit earlier.

Speaker 5: Seeing very meaningful contribution and our customers and teams love it.

<unk> seen very meaningful contribution and our customers and teams love. It you know we said the full style with the number one reason that customers were leaving to purchase funnel baseball is the number one silhouette that was that ranks the style and launch to date, we're really feeling good in terms of that gray.

Speaker 5: You know, we shared the four styles with the number one reason that customers were leaving the purchase funnel.

Speaker 5: This was the number one silhouette that was ranked for style.

Speaker 5: and launch the date we're really feeling good in terms of that great innovation. And I think it's not just in terms of the style choice, you know, what's been really great is hearing from customers about the comfort level.

Innovation and I think it's not just in terms of a style choice that you know well it's been really great is hearing from customers about the comfort level. As you are sitting in the angles type cat. So let just that extra aesthetic choice now, but almost half of it comes back and we're seeing that with <unk>.

Speaker 5: as you sit in the angle-side couch. So just that extra aesthetic.

Speaker 5: choice now but also the comfort and we're seeing that with current and new customers. So, you know,

Current and new customers. So you know, we see high adoption already which I said just over 40%. So I feel really good in terms of the silhouette and just really reflecting our ability to widen the aperture gained new consumers and even the architectural Digest campaign, you know and they.

Speaker 5: We're seeing high adoption already, which I shared just over 40%, so we feel really good in terms of the silhouette and just really reflecting our ability to widen the aperture, gain new consumers and even the architectural digest campaign. And they are known as being the number one style leader in furniture was just a tremendous way for us to be able to widen that.

All known as being the number one style leader in furniture was just a tremendous way for us to be able to widen that visibility.

Speaker 5: visibility. Then in terms of stealth tech, thank you for that question as well. Customers continue to love it, Matt, and I think you made a note of it in one of your reports being in some of the showrooms I was out and showrooms even on Wednesday. They love the product experience and they love the fact it's backwards compatible, which we see as a very unique proposition in the market compared to others.

Then in terms of sales Tech can you know thank you for that question as well customers continue to love. It match and I think you made a note of it in one of your reports being in some of the showroom side without insurance even on Wednesday.

They love the product experience and they loved the fact, it backwards compatible which we see as a very unique proposition in the market compared to others.

Speaker 5: that kind of want you to buy something and then a year, two years later, they've come up with a new model and you have to buy that new model.

Kind of want you to buy something and then a year two years later, they come out with a new model and that you have to buy that new model.

Speaker 5: So, you know, as we continue to drive the strong combinations of hood technology and really that opportunity and that white space that we will own and drive for many years to come, you know, we're feeling really good. So, yes, stealth attack certainly for the holidays, we feel really good. So, thank you for the questions.

So you know as we continue to drive the strong company.

<unk> and really that opportunity in that white space that we will own and drive for many years to come you know, we're feeling really good so yes, they'll attack, especially for the holidays, we feel really good. So thank you for the questions.

Okay, Great Alright, Thank you for that and then on gross margins just curious I.

Speaker 10: Great, Marit, thank you for that. And then on Gross Margin.

Speaker 10: Just curious, I know you mentioned a more promotional environment. Obviously we're seeing that show up everywhere. But how much of a headwind are you guys factoring in on gross margins from promotions in the second half? Wonder if maybe Keith could speak to that. And then just in terms of financing, any discernible change in the way that your customers attach to the financing offering that you have.

I know you mentioned a more promotional environment, obviously, we're seeing that show up everywhere.

But how much of a headwind are you guys factoring in on gross margins from promotions in the second half Wonder if maybe you could speak to that and then just in terms of financing.

Any discernible change in the way that your customers attached to the financing offering that you have.

Speaker 10: and have those call, I assume those calls have gone up for you guys, but just maybe speak to access to financing among your consumers.

And have those I assume those costs have gone up for you guys, but just maybe speak to access to financing among your consumer set.

Speaker 7: Sure thing, thanks. And I'm gonna do it in reverse order. I'm gonna start with the financing piece. So, you look, it really is a differentiator for us to have this product, the low-sec credit card. We work really closely with our partner on this. And, you know, it's definitely...

Sure. Thanks, Thanks, and I'm going to do it in reverse order I'm going to start with the financing piece. So you can look it really is a differentiator for us to have this product loves that credit card, we work really closely with our partner on this end.

It's it's definitely.

Speaker 7: an important part of the proposition for us. So from a percentage or contribution to demand perspective, it's up a decent amount year over year. In fact, it's up to over a third of the dollars of demand in the fiscal second quarter, over 500 basis points increase in percentage. The piece that is also impacting our financials right now is the increase in costs given the higher rates.

You know an important part of the proposition for us so from a from a percentage of contribution to demand perspective, it's up a decent amount year over year.

It's up to over a third of all of the dollars of demand in the fiscal second quarter.

Or 500 basis points increase in percentage.

Piece that is also impacting our financials right now is the increase in costs given the higher rates.

Speaker 7: So we think we still have a very competitive cost with our partner, but it is up year over year. That is one of the primary drivers of the year of year growth and the leverage that we're seeing within S-GNA. You heard us outline that earlier. But what we're doing in response to that is we're testing what really makes a difference, right? What is the customer value and what drives behavior?

So we think we think we still have a very competitive cost with with our partner.

But it is up year over year that is one of the primary drivers of the year over year growth in the deleverage that were seeing within SG&A.

You heard us outline those and you heard me outline that earlier, but what we're doing in response to that is we're testing what really makes a difference right. What is the customer value and what drives behavior with loves that credit card is it the duration given that we've seen other people shortening duration of their offers where do we get.

Speaker 7: with the lovesack credit card. Is it the duration given that we've seen other people shortening duration of their offers? Where do we get the best customer impact for the best costs for us? And so we've been running a bunch of tests and different markets to optimize that. We feel like we're in a pretty healthy spot, particularly here as we head into.

The best customer impact for the best cost for US right and so we've been running a bunch of tests in different markets to optimize that we feel like we're in a pretty healthy spot, particularly here as we head into the year.

Speaker 7: you know, the all important fourth quarter. So, you know, generally speaking, I think it is working. It's accomplishing exactly what we wanted to and we continue to fine tune and optimize that balance between driving sales at optimal cost for us.

The all important fourth quarter so.

You know generally speaking I think.

It.

It is working it's accomplishing exactly what we wanted to and we continue to fine tune and optimize that balance between driving sales at optimal cost for us.

Speaker 7: On the other side of the equation on the discount side, we are playing around with the discount.

On the other side of the equation on the discount side. We are we are playing around with the discounts.

As you heard US mention we do anticipate those discounts to pick up a little bit as.

Speaker 7: As you heard us mention, we do anticipate this counts pick up a little bit. As we get into, well, third quarter was slightly higher than it was in the second quarter, and we expect slightly higher in fourth quarter than in third quarter. But these, yeah, we're talking in 100 basis points here, 100 basis points there. These aren't big numbers of big changes in terms of what it's going to do.

As we get into third quarter was.

Slightly higher than it was in the second quarter, and we expect slightly higher in the fourth quarter than in third quarter, but these were talking.

100 basis points here or 100 basis points. There these aren't big numbers with big changes in terms of what it's going to do our net sales off of MSRP.

Speaker 7: our net sales off of MSRP. You know, again, we've done a lot of baby testing and let the data drive this. So when you see the gross margins that I provided earlier, you can back into fourth quarter pretty easily, right?

Again, we've done a lot of testing and let the data drive. This so when you see when you see the gross margins that I that I provided earlier and you can back into fourth quarter pretty easily right because Q3s.

Speaker 7: key three is virtually done. It's a negligible impact on the overall P&L from MSRP to NET sales. So hopefully that provides a little bit of color.

Virtually done it's a negligible impact on the overall P&L.

From MSRP to net sales so.

Hopefully that provides a little bit of color.

Speaker 10: Yeah, absolutely. Very helpful. Okay. Thank you. And then just last one if I could sneak one more in on this showroom growth plans heading into 25. Obviously not asking for guidance here. But I'm assuming, you know, those plans need to be pretty well baked at this point in the year, just given the least timing and everything like that. Just wondering how nimble you feel like you can be on showroom openings heading into next year if the environment changes.

Yeah, absolutely very helpful. Okay. Thank you and then just last one if I could sneak one more in.

On the showroom growth plans heading into twenty-five obviously not asking for guidance here, but I'm assuming.

Plans need to be pretty well baked at this point.

In the year, just given lease timing and everything like that just wondering how nimble you feel like you can be on showroom openings heading into next year, if the environment changes for the better or for the worse just curious how how to think about nimbleness, there and then plans for for next year roughly.

Speaker 10: For the better or for the worse, just curious how to think about nimbleness there and plans for next year rough.

Yeah, Hey, Matt So yeah. Thank you for the question and you know we continue.

Speaker 5: Yeah, he met. So yeah, thank you for the question. You know, we continue to look at our real estate strategy all the time. And I think one of the success factors we've always had is around that in bonnest, picking up amazing locations.

Look at our real estate strategy, all the time and I think one of the Successfactors. We've always had it is around that nimbleness.

Picking up the amazing locations or.

Speaker 5: or even slowing down openings. So, you know, it'll be similar to this year is kind of where we're thinking, but obviously we'll share more as the year finalizes because, you know, we're still working on some of the leases for next year. I think what's super important as we think about.

Or even just slowing down openings.

So you know it'll be similar to the human is kind of where we're thinking but obviously, we'll share more as the year finalizes because you know we're still working on some of the leases for next year I think was super important as we think about it.

Speaker 5: The productivity of the showroom, if I think about just this year in the new fleet for this year, you know, they're performing above last year, you know, our numbers are super strong in terms of payback in just under a year. So it's a very strong model that we have and that's the growth on the year before. And we're planning for that to continue to grow for next year. So I think

Productivity with the show rate because I think about this year and the new fleet.

So this year, you know that performing above last year.

No our numbers are super strong in terms of payback in just under a year.

So it's a it's a very strong model that we have and that's the growth on the year before and we're planning for that to continue to grow for next year. So I think we unlike many other as you know we have very small show me that all might say you know they drive incredible revenue off of fairly small.

Speaker 5: We, unlike many others, we have very small showrooms that are might take. They drive incredible revenue off of very small space.

Space.

Speaker 5: and really also help us with what we see as our superpower, which is that demo and really being able to showcase why Love Sack is just so different to anyone else because it is designed for life and gives you that flexibility. So, you know, we'll again share more at the end of the year, but you can expect very similar to where we have been. And we will continue to obviously watch the macro.

And really also help us with what we see is all super publishes that demo and really being able to showcase why loves back. It's just so different than say to anyone else. Because it is designed for life and gives you that flexibility. So that you know we're again, we'll share more at the end of the year, but you can expect very similar to.

As to why we have been.

We will continue to oversee wash them out right.

Just two quick numbers for you as well.

Speaker 7: Just two quick numbers for you as well. We're projecting or we had, I should say, nine showroom openings in the third quarter. We've got two in the first period of Q4.

We're projecting or we had I should say nine showroom openings in the third quarter. We've got two in the first period of Q4.

Speaker 7: We did have one closure in Q3. Most of these are the closures are...

We did have one closure in Q3 most of these.

Closures or or or or relocate so you know it's funny for me having come from where it was in consumer in the past where it feels like.

Speaker 7: are relocated. So, you know, it's funny for me having come from, you know, where I was and consumer in the past where it feels like, you know, 90% of all the opens happened in the last month of the year. We're actually well ahead of it here and the same thing goes for next year. Stay ahead of it. Be thoughtful. Be objective in measuring. The fact that we are on the channel and we use them as much as awareness drivers.

90% of all the open as happened in the last months of the year, we're actually well ahead of it here and the same thing goes for next year to stay ahead of it be thoughtful be objective and measuring.

The fact that we are omnichannel and we use them as much as awareness drivers.

Speaker 7: really creates a very exciting opportunity for me as well. So Disciplined Approach to 25 is Mary said.

You know really creates.

No.

Exciting opportunity for for me as well also.

Disciplined.

Broached the twenty-five as Mary said.

Speaker 4: and those are some extra numbers for the rest of this year as well. Yeah, I'll tag on if that's okay as well.

And in there was there some extra number or is it for the rest of this year as well.

I'll I'll tag onto this if that's okay as well.

Speaker 4: Love sacs showrooms are just a different animal in retail. They really are. And we feel really lucky to have evolved this way. And to have frankly achieved.

Let's ask showrooms are just a different animal than retail.

We are in and we feel really lucky to have evolved this way.

And to have frankly achieved.

Speaker 4: this scale at this time. You know, I think it's obvious to anyone watching that we've lived through some really unprecedented economic times.

This scale at this time, you know I think it's.

It's obvious to anyone watching that we've lived through some really unprecedented economic times.

And over the last few years, it's been an extremely noisy consumer marketplace. There's there's plenty of love Sac Sorta copycats out there trying to do something like what we do mostly online and in the end when you see those products in person compared to what we're offering.

Speaker 4: And over the last few years, it's been an extremely noisy consumer marketplace. There's plenty of love sacs, sort of copycats out there trying to do something like what we do mostly online. And in the end, when you see those products,

Speaker 4: in person compared to what we're offering, it's just not even close in terms of quality and execution that sort of thing. But you need to see it in person to really appreciate it because in a photograph it can look very similar. And so to be, let's call it 200 locations ahead of pretty much everyone in that realm. And so to be, let's call it 200 locations ahead of pretty much everyone in that realm.

There is just not even close in terms of quality and execution that sort of thing, but you need to see it in person to really appreciate it because in a photograph it can look very similar and so to be let's call. It 200 locations ahead of pretty much everyone everyone.

In that realm.

Speaker 4: And at a time when investment is more dear, cash is more precious. We will be very cognizant of building cash and building earnings, as will I think most. I really think that puts us in a really strong position over the next couple of years.

And at a time when investment is more dear.

Cashes more precious we will be very cognizant of.

You know building cash and building earnings ads will I think most I really think that puts us in a really strong position over the next couple of years.

As our business model continues to gain strength, what could the growth, we're putting up compared to the category.

Speaker 4: as our business model continues to gain strength. Look at the growth we're putting up compared to the categories. The category is down significantly right now. I'm talking really...

You know the category is down significantly right now I'm talking you.

You know really a bismol.

Speaker 4: falling off going on, being really transparent. LoveSack is growing and we will continue to grow and we feel very confident in that and a big piece of that is that we've got the best product in the marketplace delivered in the most efficient way and meanwhile you know we don't have big eyes to just put up locations. I've said for a long time our overall point of view is to have us view showroom that we can get away with.

Falling off going on I'm being being really transparent loves shaq is growing and we will continue to grow and we feel very confident in that and a big piece of that is that we've got the best product in the marketplace delivered in the most efficient way.

And Meanwhile, we don't have big guys to just put up locations I've said for a long time. Our overall point of view is to have as few chevron that we can get away with that.

But we need to make the product available to people who are spending you know 357 10 $15000 of whack with that said wed love to see this thing one time, because even though they know they can return the product in our you know return window whatever it and were always you know we're just so customer focus what I would take it back we'll always work with people.

Speaker 4: But we need to make the product available to people who are spending, you know, three, five, seven, 10, 15, thousand dollars a whack with that. And we'd love to see this thing one time because even though they know, they can return the product in our, you know, return window, whatever. And we'll always, you know, we're just so customer focused. We'll always take it back. We'll always work with people.

Speaker 6: and our return rates relatively low, but who want to deal with that?

And our return rates relatively low, but who wants to deal with that.

Right consumers arent stupid and so these showrooms are a superpower and the fact, they can operate in like 800 square feet with a total staff of $5 six people.

Speaker 4: right? It consumers aren't stupid. And so these showrooms are a superpower. And the fact they can operate in like 800 square feet with a total staff of, you know, five, six people let alone usually one or two.

Let alone usually one or two maybe.

Speaker 4: At any given moment in the showroom, there is nothing comparable to what we're doing. There is no analog.

At any given moment in the showroom there is nothing comparable to what we're doing there is no analog for that they are radically efficient they're radically effective and we're really proud of the business model, but you know we have evolved into over over these many years and I think at this particular time.

Speaker 4: They are radically efficient, they're radically effective and we're really proud of the business model that we have evolved into over these many years and I think at this particular time.

Speaker 4: It's especially poignant because we have reached that escape velocity where others have

It is especially poignant cause we have reached that escape velocity, where others have not.

Speaker 4: And then meanwhile the traditional players are just a completely different operating model. You know, those that we, and I don't disrespect them, they're amazing furniture brands out there doing beautiful things.

And then Meanwhile, the traditional players or are just a completely different operating model you know those that way and I don't disrespect them, they're amazing furniture brands out there doing beautiful things.

Speaker 4: But we're not operating on beauty. Our products are beautiful and we have great designs and only getting more refined, which introductions like dangled side, etc. And there's more to come. Lots more to come.

But we're not operating on beauty.

Where our products beautiful and we make we have great designs and only getting more refined with introductions like dangled side et cetera, and there's more to come lots more to come.

Speaker 11: But, you know, we're playing a different game and it's working really well for us. And I think that all of these strengths are the reason you're seeing this disparity between us and the category. And you will continue to see it. And so we're very proud of that.

But you know we're playing a different game, that's working really well for us and I think that all of these strengths.

Our the reason you're seeing this disparity between us and the category.

And you will continue to see it and so we're very proud of that.

Super detailed and helpful guys I appreciate it all best of luck for holiday.

Thank you.

Speaker 1: As I know for the questions, I would now hand the conference over to Sean Nelson for closing comments.

There are no further questions I will now hand, the conference. So what does show on medicine for closing comments.

Yes, just wanted to say thank you to all of our investors and partners in all of those in the finance community, who continue to support our business and especially thanks to our extended hashtag loves that family and the teams that continue to drive our results have a great day.

Speaker 4: And it's just one to say thank you to all of our investors and partners and all those in the finance community who continue to support our business. And especially thanks to our extended hashtag love back family and the teams that continue to drive our results.

Thank you.

Speaker 1: Thank you. The conference of LoveSack has now concluded. Thank you for your participation. You may now disconnect your line.

The conference of Love Sac has now concluded. Thank you for your participation you may now disconnect your lines.

Speaker 12: The C.

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