Q2 2025 The Lovesac Co Earnings Call

Operator: Greetings and welcome to the Lovesac second quarter fiscal 2025 earnings call. At this time, all participants are in a listen-only mode.

Greetings and welcome to the Love Sac second quarter of fiscal 2025 earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.

Operator: A question and answer session will follow the formal presentation.

Operator: 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.

As a reminder, this conference is being recorded.

Caitlin Churchill: I would now like to turn the conference over to your host, Ms. Caitlin Churchill, Invest Relations for Lovesac. Thank you. You may begin. Thank you.

Speaker Change: I would now like to turn the conference over to your host.

Speaker Change: MS Caitlin Churchill Investor Relations for livestock. Thank you you may begin.

Caitlin Churchill: Thank you good morning, everyone with me on the call is Shawn Nelson Chief Executive Officer, Mary Fox, President and Chief operating Officer, and keeps Eichner Chief Financial Officer.

Shawn Nelson: Good morning, everyone.

Shawn Nelson: With me on the call is Shawn Nelson, Chief Executive Officer, Mary Fox, President and Chief Operating Officer, and Keith Siegner, 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. These include statements about our future expectations, financial projections, and our plans and prospects. Actual results may differ materially from those set forth in such statements.

Speaker Change: 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.

Speaker Change: These include statements about our future expectations financial projections, and our plans and prospects actual results may differ materially from those set forth in such statements.

Shawn Nelson: For discussion of these risks and uncertainties, you should review the company's filings with the FEC, which includes today's press release. You should not rely on forward-looking statements as predictions of future events. 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.

Speaker Change: For a discussion of these risks and uncertainties you should review the company's filings with the SEC, which includes today's press release.

Speaker Change: You should not rely on forward looking statements are predictions of future events. 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.

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

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

Speaker Change: Our supplemental financial information in our press release.

Shawn Nelson: Now I'd like to turn the call over to Sean Nelson, Chief Executive Officer of the Love Tech Company. Sean? Good morning, everyone, and thank you for joining us. I'll start by sharing a high-level overview of our second quarter results and outlook. Then Mary Fox, our President and COO, will discuss our key growth initiatives. Finally, Keith Signeur, our CFO, will review our financial results and a few other items related to our outlook in more detail. Turning to the highlights of our Q2 results, we're pleased to deliver results in line or slightly favorable to our expectations, including total net sales of 156.6 million and adjusted EBITDA of 1.5 million.

Speaker Change: I'd like to turn the call over to Shawn Nelson Chief Executive Officer of the livestock Company Sean.

Speaker Change: Good morning, everyone and thank you for joining us.

Speaker Change: I'll start by sharing our high level overview of our second quarter results and outlook, then marry Fox, our president and CEO will discuss our key growth initiatives finally, Keith Cigna, Our CFO will review, our financial results and a few other items related to our outlook in more detail.

Speaker Change: Turning to the highlights of our Q2 results. We're pleased to deliver results in line or slightly favorable to our expectations, including total net sales of $156 6 million and adjusted EBITDA of $1 5 million.

Shawn Nelson: These results were select positive net sales growth of 1.3% for the quarter, indicative of continued market shared gains despite the ongoing headwinds facing our category. Total omnichannel comparable net sales decreased 5.4%. But this was more than offset by new and non-contouch point contributions. Net loss and net loss per common share were pressured by slight declines in gross margins and de-leverage in SG&A, partially offset by leverage in advertising and marketing, all of which was expected and consistent with our previous guidance. Underpinning our performance is our highly productive omnichannel footprint, which is built upon our design for life platform, enhanced by the love evidenced in our customer engagement, compounded by compelling marketing, and reinforced by our accelerating focus on product innovation.

Speaker Change: These results reflect positive net sales growth of one 3% for the quarter indicative of continued market share gains despite the ongoing headwinds facing our category.

Speaker Change: Total omnichannel comparable net sales decreased 5.4%, but this was more than offset by new and non comp touch point contributions.

Speaker Change: Net loss and net loss per common share were pressured by slight declines in gross margin and deleverage in SG&A, partially offset by leverage in advertising and marketing all of which was expected and consistent with our previous guidance.

Speaker Change: Underpinning our performance is our highly productive omni channel footprint, which is built upon our designed for life platform.

Speaker Change: Parents by the love evidenced in our customer engagement compounded by compelling marketing and reinforced by our accelerating focus on product innovation.

Shawn Nelson: 13. Demonstrating this commitment to innovation, in Q2, we successfully launched our Pillosac Accident Shareframe, or PACF, which saw incredible response and surpassing our expectations. In fact, the Accident Shareframe sold out just a few weeks after launching. Let me share some highlights. Our PACF launch post was Lovesac's top performing single social post-a date with over 8.8 million views. Two-thirds of all Pillosac's sold Accident's launch were ordered with an Accident Shareframe. PACF excitement was hallowed onto the entire SAG business, which has grown double digits, plus 25% since we launched the PACF. Looking ahead, we are actively developing more innovations against this highly successful offering, as well as our broader SAG's platform.

Speaker Change: Demonstrating this commitment to innovation.

Speaker Change: Q2, we successfully launched our pillow sack accident share frame or P. A C S, which saw incredible response and is surpassing our expectations. In fact, the accident share frames sold out just a few weeks after launching let me share some highlights.

Our P. A C F launch post was loves Shaq top performing single social posts to date with over 8.8 million views too.

Speaker Change: Two thirds of all pillow sacks sold since launch were ordered with an accident share for N.

Ph Jeff: Ph Jeff's excitement with payload onto the entire Sac business, which has grown double digits.

Speaker Change: Plus 25% since we launched the P. A C S.

Speaker Change: Looking ahead, we are actively developing more innovations against this highly successful offering as well as our broader snacks platform.

Shawn Nelson: But perhaps most exciting of all is that the PACF has driven incremental Lovesac market penetration. Greater than 50% of PACF purchases since launch have been from existing Lovesac customers. And this is just the beginning of our plan to ramp up our efforts to generate more repeat business, which I'll talk more about in just a minute. Following the PACF success, we are excited to have just launched the new Any Table. Any table brings the unrivaled adaptability of Saxonals to a table, and represents the first of Lovesac's entry into an adjacent furniture category, tables and case goods.

Speaker Change: Perhaps most exciting of all is it a P. A C. S has driven incremental love sack market penetration.

Speaker Change: Greater than 50% of P. A CF purchases since launch have been from existing loves that customers and this is just the beginning of our plan to ramp up our efforts to generate more repeat business, which I'll talk more about in just a minute.

Speaker Change: Following the P. A C. F success, we are excited to have just launched the new any table.

Speaker Change: Any table brings the unrivaled adaptability of <unk> to a table.

Speaker Change: And represents the first of love sex entry into an adjacent furniture category.

Speaker Change: <unk> and case goods.

Shawn Nelson: Any Table seamlessly integrates into new and existing Saxonals setups in many configurations connected to the Saxons or free-standing, connected to each other. You can grow it and change it and rearrange it; it offers style, functionality, and hidden storage, and it's designed with future innovations in mind. There's more to come on the Any Table platform. Any table is available in three wood finishes that match our newly redesigned Saxonals accessories: weathered gray, dark brown, and blonde. Speaking of accessories, we are also launching an entirely new suite of redesigned Saxonals drink holders, coasters, and the all-new Saxonals tray in the same three wood finishes that coordinate with all of the new wood designs from Lovesac.

Speaker Change: Any table seamlessly integrates into new and existing factional setups in many configurations connected to the saks false or freestanding connected to each other you can grow it and change it and rearrange. It it offers style functionality and hidden storage and it's designed with future innovations in mind.

Speaker Change: There's more to come on the table platform.

Speaker Change: Any table is available in three wood finishes that match, our newly redesigned <unk> accessories, weathered grey dark brown and blocked.

Speaking of accessories were also launching an entirely new suite of redesigned <unk> drink holders coasters and the all new sectional Trey in the same three wood finishes that coordinates with all of the new wood designs from love sack well.

Shawn Nelson: We're moving closer to a design point of view on the entire living room, and someday, the entire home. If not every product category, then at least the ones that really matter to people and how they live their everyday lives. We're solving problems that people didn't even know they had with products that are totally unique to Lovesac, and of course, built to last a lifetime and designed to evolve as lives change. This is our design for life business model unfolding in real time, where all products coordinate, build on each other, and make the customer's core Lovesac purchase that perhaps they made years ago, even more valuable and useful to them than it did when they bought it in the first place.

Speaker Change: We're moving closer to a design point of view on the entire living room and Sunday the entire home.

Speaker Change: If not every product category than at least the ones that really matter to people and how they live their everyday lives.

Speaker Change: Solving problems that people didn't even know they had products that are totally unique to love Sac and of course built to last a lifetime and designed to evolve as lives change.

Speaker Change: This is our designed for life business model unfolding in real time, we're all products coordinate build on each other and make the customers' core loves shaq purchase that perhaps they made years ago, even more valuable and useful to them than it did.

Speaker Change: When they bought it in the first place there.

Shawn Nelson: There is no other home brand designing or marketing in this way. We have much more to come. Through these launches, our plans for a few other smaller launches still yet to come this year, and a major launch in fiscal 2026. We are driving momentum. These will give us entry into more rooms in households and expand our reach. Combine this reach with our CRM and omnichannel tools that we have invested in over the past few years, and we believe we have a massive opportunity to capture much more repeat customer action in the future.

Speaker Change: There is no other home brand designing or marketing in this way.

Speaker Change: We have much more to come.

Speaker Change: Through these launches are planned for a few other smaller launches still yet to come this year.

Speaker Change: And a major launch in fiscal 'twenty 'twenty six we are driving momentum.

Speaker Change: These will give us entry into more rooms in households, and expand our reach.

Speaker Change: Combined this reach with our CRM and Omnichannel tools that we have invested in over the past few years and we believe we have a massive opportunity to capture much more repeat customer action in the future.

Shawn Nelson: Before we move on to the outlook, in addition to our product innovations, we have some exciting collaborations happening right now. First up, we're thrilled to launch our collaboration with Fashion Phenom, Kid Super, during Fashion Week in New York City just a couple of days ago. So keep your eye on pop culture, fashion, and Fashion Week to see how Lovesac shows up in the most avant-garde channels out there. The focus on innovation that is ingrained in our DNA at Lovesac, coupled with the appeal of our design for life platform, our convenient omnichannel model and compelling marketing, are all enabling us to deliver continued market share gains against a still challenged industry and category backdrop.

Speaker Change: Before we move on to the outlook. In addition to our product innovations we have some exciting collaborations happening right now first up we're thrilled to launch our collaboration with fashion Phenom Kids Super.

Speaker Change: During fashion week in New York City, just a couple of days ago. So keep your eye on pop culture fashion and fashion week to see how loves that shows up in the most of our guard channels out there.

The focus on innovation that is ingrained in our DNA it loves shaq, coupled with the appeal of our designed for life platform, our convenient omni channel model and compelling marketing are all enabling us to deliver continued market share gains I guess.

Speaker Change: <unk> is still challenged industry and category backdrop that playbook remains in place and remains our goal regardless of the macro situation now listen we'd all love to see interest rate decreases create a potential tailwind for our category and they might but.

Shawn Nelson: That playbook remains in place and remains our goal regardless of the macro situation. Now listen, we'd all love to see interest rate decreases, create a potential tailwind for our category, and they might. But we believe it's prudent, given actual spending data and recent promotional intensity within the category, to leave our industry outlook unchanged at this point. As such, our outlook still assumes that the category will be down 10% versus last year. Based upon that macro foundation, and where we sit after seven months of our fiscal year, we are tightening our guidance range for net sales.

Speaker Change: We believe it's prudent given actual spending data and recent promotional intensity within the category.

Speaker Change: To leave our industry outlook unchanged at this point as such our outlook still assumes that the category will be down 10% versus last year.

Speaker Change: Upon that macro foundation and wherever you sit after seven months of our fiscal year, we are tightening our guidance range for net sales while the midpoint of the range is slightly lower than before it's still reflects gross for the fiscal year.

Shawn Nelson: While the midpoint of the range of sales slightly lower than before, it still reflects growth for the fiscal year. We remain well positioned to deliver on our objectives for this year and beyond. And should the environment change, our teams are nimble and poised to pivot quickly, with the ability to chase growth. In summary, our teams are at the heart of what we do day in and day out at Lovesac, and I want to thank them for their ongoing hard work and disciplined execution as we continue to navigate a dynamic consumer environment. Lovesac's runway for growth is long and attractive, with a large and extremely fragmented addressable market, of which we currently enjoy very low share, even in our current platforms. Our strengthening market position, profitable and growing business, and debt-free balance sheet all enabled our recently announced first-ever share buyback authorization.

Speaker Change: We remain well positioned to deliver on our objectives for this year and beyond and should the environment change. Our teams are nimble and poised to pivot quickly with the ability to chase growth in summary.

Speaker Change: Our teams are at the heart of what we do day in and day out it loves Shaq and I want to thank them for their ongoing hard work and disciplined execution as we continue to navigate a dynamic consumer environment.

Speaker Change: Loves to extra runway for growth is long and attractive with a large and extremely fragmented addressable market of which we currently enjoy very low share.

Speaker Change: Even in our current platforms.

Speaker Change: Our strengthening market position profitable and growing business and debt free balance sheet, all enabled our recently announced our first ever share buyback authorization.

Shawn Nelson: As Keith will review, we intend to continue to operate and deploy capital with discipline, focused on delivering long-term, sustainable, profitable growth that should create value for all of our stakeholders. We look forward to sharing more on our long term vision during an investor day, which we are targeting to host during our fourth quarter. So stay tuned for more details.

Speaker Change: As Keith will review, we intend to continue to operate and deploy capital with discipline.

On delivering long term sustainable profitable growth that should create value for all of our stakeholders well.

Keith Cigna: We look forward to sharing more on our long term vision during an investor day.

Keith Cigna: Which we are targeting to host during our fourth quarter. So stay tuned for more details with that I'll hand, it over to Mary to cover our strategic priorities and progress in more detail Barry.

Mary Fox: With that, I'll hand it over to Mary to cut our strategic priorities and progress in more detail.

Mary Fox: Mary? Thank you, Shawn, and good morning, everyone. As Shawn discussed, we're pleased to have delivered results in line with our guidance for quarter two, even as the category remains challenging. Importantly, not only did net sales grow versus last year, but on a five-year basis are up 225% from pre-pandemic levels, compared to the comparable category performance of flatish. Our adjusted EBITDA margin has increased 430 basis points over the same time period. In quarter two, we outperform the category, gaining market share underpinned by our customer and product centric focus and our unique on-the-channel infinity flywheel. We've built a business model and a platform unlike anyone else in the category, resulting in a total addressable market opportunity that is significant, brand health that is strong and growing, best-in-class touchpoint economics, and an advantage supply chain.

Mary Fox: Thank you Sean and good morning, everyone as Shawn discussed we're pleased to have delivered results in line with our guidance for quarter two even if the category remains challenging importantly, not only did net sales growth versus last year, but on a five year basis are up 225% from pre pandemic levels compare.

Mary Fox: So the comparable category performance of flattish our adjusted EBITDA margin has increased 430 basis points over the same time period.

Speaker Change: In quarter, two we outperformed the category gaining market share underpinned by our customer and product centric focus and our unique omnichannel infinity flywheel.

Speaker Change: We've built a business model and our platform. Unlike anyone else in the Catholic rate, resulting in a total addressable market opportunity that is significant brand health that is strong and growing best in class touch points economics, and then advantage supply chain, we continue to expect benefit from disciplined investments in our strategic.

Mary Fox: We continue to extract benefit from disciplined investments in our strategic initiatives and capabilities that expand our addressable markets and enhance underlying profitability.

Speaker Change: <expletive> initiatives and capabilities.

Speaker Change: And our addressable market and enhance underlying profitability.

Mary Fox: I'll now provide key highlights of our go-forward plans on each of our strategic initiatives. Firstly, product innovation. We are happy to launch a number of great innovations this year, starting with the Pillow Sack Action Chair in May. I just want to add a few details beyond what Sean shared earlier. Our marketing team brought this unique innovation to life, leveraging our Architectural Digest partnerships through a 360-degree campaign of digital marketing, PR, influencers, and social media, building excitement and intrigue amongst consumers, influencers, and media. We've delivered over two billion earned impressions and over 500 media placements, thereby building buzz and news not only for Pillow Sack Action Chair but for Love Sack the brand.

Speaker Change: I'll now provide key highlights of our go forward plans on each of our strategic initiatives.

Speaker Change: Lastly product innovation, we are happy to launch a number of great innovations this year, starting with the pillow.

Speaker Change: Chairman May I, just wanted to add a few details beyond what Sean said earlier.

Speaker Change: Marketing team brought this unique innovation to life leveraging our architectural digest partnerships for 360 degree campaign of digital marketing PR, Influencers and social media building excitement in intrigue amongst consumers Influencers and media, we have delivered over 2 billion earned impressions.

Speaker Change: De Novo 500 media placement, thereby building Boston news not only for pillows back heckmann check, but love the brand we're extracting the learnings from this entire process to sharpen our approach on all of our upcoming innovation launches.

Mary Fox: We're extracting the learnings from this entire process to sharpen our approach on all of our upcoming innovation launches. Pillow Sack Action Chair also serves as a great experiment for driving greater repeat customer business. Existing Pillow Sack owners have been buying the Accent Chair's ring, allowing them to experience their back in a new way, and many are buying multiple covers to truly accent their rooms. From bootplay to plush birds or even seasonal covers such as the top-selling limited edition pine quilted velvet, it's a fun way to add interest in style and appreciate the flexibility that's actually in every product Love Sack makes.

Let's talk accident chat also serves as a great experiment to driving greater repeat customer business.

Speaker Change: Mr. Carlos Baca owners have been buying the accident chats right, allowing them to experience that back in a new way and many are buying multiple cover to treaty accident that rating.

Speaker Change: Tom do play to plus or even Steve no covenants, such as the top selling limited edition kind quilted Velvet, it's a fun way to add interest in style and appreciate the flexibility, but actually in every product loves that Mike we.

Mary Fox: We see the tremendous opportunity to tap into this and drive incremental lifetime value with future innovations. Building on this momentum, we've just launched the second innovation of the year, Any Table, with the third right behind in the newly redesigned Factionals accessories platform, including the Factionals drink holder, coasters, and a much more contemporary tray. Our teams are super excited to share these with our customers and are already off to a strong couple of days. We'll continue to refine our launch program and repeat customer outreach, putting us in an increasingly effective position ahead of much bigger launches coming in the future.

We see the tremendous opportunity to tap into that and drive incremental lifetime value with future innovation.

Speaker Change: Building on this momentum we've just launched the second innovation of the year any table with the third right behind in the newly redesigned functional accessories platform, including the sectional drink holder posters and a much more contemporary tray obtains a super excited to share these with our customers and are already off to a strong couple of.

Speaker Change: Dave will continue to refine our launch program and repeat customer outrage, putting us in a increasingly effective position ahead of much bigger launches coming in the future.

Mary Fox: We're on track for our material innovation launch in the early fiscal 26 that we expect to significantly open the aperture of where we compete in the couch category and thereby enable us to accelerate our market share gain.

Speaker Change: We're on track for all material innovation launched in early fiscal 'twenty six, but we expect to significantly open the aperture of why we compete in the couch test it great and then.

Speaker Change: By enable us to accelerate our market share gains we look forward to sharing more details with you closer to launch.

Mary Fox: We look forward to sharing more details with you closer to launch. On Monday, we launched the first of its kind collaboration which merges Lovesac's ingenuity in furniture design with one of the most talented and trending fashion designers today. Feaming up with disruptive fashion house Kids Super, we have launched a limited edition collection of home furnishing styles that merges our cloud-like comforts and boundary pushing streetwear. The hero of this collaboration and campaign is our prolific action chair featuring kids' super, iconic kissing design. We're very proud of this groundbreaking collaboration and of the energy and excitement at the launch event, with its coverage blowing past our expectations.

Speaker Change: On Monday, we launched the first of its kind collaboration which matches look backs ingenuity and furniture design with one of the most talented and trending fashion designers today teaming up with disruptive section have kids suite that we have launched a limited edition collection of home furnishing style.

Speaker Change: Merge it's all cloud like comfort and boundary pushing streetwear.

This collaboration and campaign as a pillow stuck accent chair featuring kids stupid iconic kissing design with very proud of this groundbreaking collaboration and if the energy and excitement at the launch event with its coverage blowing past our expectations.

Mary Fox: Second is our omni-channel experience. We continue to strengthen our position as a true omni-channel retailer through a combination of our physical touch points and our digital platform. First, during the quarter, we open 10 touch points and we remain on track to deliver at or just over 13 at showroom openings in fiscal 25. Second, during the quarter, we launch a series of website enhancements that nurture long-term relationships with new and existing customers and support our plan to have the best in class Omni-Channel experience. We made significant enhancements to might have a singular destination on Lovesac.com that allows the seamless pre- and post-purchase experiences.

Speaker Change: Second is our Omnichannel experience, we continue to strengthen our position as a true omnichannel retailer through a combination of a physical touch point and all digital platform.

Speaker Change: During the quarter, we opened 10 touch points and we remain on track to deliver at or just over the CNET showroom openings in fiscal 'twenty five.

Speaker Change: Second during the quarter, we launched the theories of website enhancements.

Speaker Change: That nutshell longtime relationships with new and existing customers and supports our plan to have the best in class Omnichannel experience.

Speaker Change: We made significant enhancements to my hub, a singular destination on left that dot com that allows for seamless pre and post purchase experience. This.

Mary Fox: In quarter two, the focus was providing enhanced personalization of the shopping experience that more closely merges touch points, allowing the customer to easily and seamlessly add to, adjust, or otherwise reconfigure their Lovesac where, when, and how they choose. This has led to a significant increase in account creation, which provides us with a greater opportunity to engage the customer in a more personalized and relevant manner. Building long-term relationships with our highly engaged addressable base of existing customers remains a significant opportunity for Lovesac and a key strategic focus as we continue to launch new products that integrate into their existing purchases.

Speaker Change: Two the focus was providing enhanced personalization of the shopping experience that more closely mirrors touch points, allowing the customer to easily and seamlessly add to adjust or otherwise reconfigure that love back where when and how they choose this.

Speaker Change: This is led to a significant increase in account creation, which provides us with a greater opportunity to engage the customer in a more personalized and relevant by.

Speaker Change: Building long term relationships with our highly engaged addressable base of existing customers remains a significant opportunity for love sack and a key strategic focus as we continue to launch new products that integrate into their existing purchases.

Mary Fox: Early performance is extremely positive, indicating that customers are responding well to these new features. The next exciting website enhancement was our re-platforming to Adobe Edge, a technologically evolved platform experience that significantly improves website performance, data, and software integration. A more performance website benefits not only the onsite experience but also SEO and organic search. We're already seeing notable improvements in these areas and improves conversion of customers online. Importantly, as a result of our unique comedy channel experience, our customer satisfaction scores continue to strengthen and sequentially increase in quarter two, especially our digital experience. These scores improve year-over-year to our highest levels recorded.

Speaker Change: Early performance is extremely positive, indicating that customers are responding well to these new features.

Speaker Change: The next exciting website huntsman without re platforming to Adobe edge, a technologically evolve platform expands significantly improved website performance data and software integration.

Speaker Change: More performance website benefit not only the onsite experience, but also S. T O in organic search we're already seeing notable improvements in these areas and improved conversion of customers online.

Speaker Change: Importantly, as a result of our unique omnichannel experience, our customer satisfaction scores continue to strengthen and sequentially increased in quarter, two especially our digital experience. These schools improve year over year to our highest levels recorded.

Mary Fox: Third is our ecosystem, which is centered around acquiring, delighting, and maintaining relationships with loyal, loving customers. We continue to leverage our marketing mix and marketing spend, especially during the Memorial Day and July Fourth market share events, and improve deficiency in return on ad spend and cost per acquisition. Looking ahead, we will actively test in the media space to optimise our investments for growth, especially considering opportunities in the spaces of video, connected TV, search, and audience targeting, as well as broadening our brand awareness. We continue to see inflationary cost pressure, especially in paid search, but have become incredibly efficient in driving the right audience into touch points and to the website, resulting in higher conversion rates.

Speaker Change: Third is our ecosystem, which is centered around acquiring delighting and maintaining relationships with loyal loving customers.

We continue to leverage our marketing mix and marketing spend, especially during the memorial day and July 4th market Shadow and.

Speaker Change: And improved efficiency and return on AD spend and cost per acquisition.

Speaker Change: Looking ahead, we will actively testing in the media space to optimize our investments for growth, especially considering opportunities in the space of video connected Tvs, such an audience targeting as well as broadening our brand awareness.

Speaker Change: We continue to see inflationary cost pressure, especially in paid search, but it's becoming credibly efficient in driving the right audience into touch point them to the website, resulting in higher conversion rate.

Mary Fox: We're also excited about the progress we've made, expanding our reach on YouTube as another lever, not only for brand awareness, but throughout the purchase funnel. In quarter two, we continue to have success marketing to our existing customers and saw strong growth in existing customers' transaction camps.

Speaker Change: We're also excited about the progress we've made expanding our reach on Youtube is another level of not only for brand awareness, but throughout the purchase funnel.

Speaker Change: And closer to we continue to have success marketing to our existing customers and saw strong growth in existing customer transaction count.

Mary Fox: In quarter two, we completed the infrastructure requirements necessary to deploy our first phase of offering services. Last week, we launched our data resell platform, piloting with our own associates before launching a customer facing experience in the near future. We're very excited about the progress we've made in this important area, leveraging open box inventory to fuel our endeavour and continuing to expand on our promise to create products that are designed for life and supported by circular operations.

Speaker Change: In quarter, two we completed the infrastructure requirements necessary to deploy a third phase of offering services.

Speaker Change: Last week, we launched a beta cell platform piloting with our own associates before.

Speaker Change: Before launching a customer facing events in the near future.

Speaker Change: We're very excited about the progress we've made in this important area leveraging open box inventory to fuel our endeavor and continuing to expand on our promise to create products that all designed for life and supported by secular operation.

Mary Fox: Now, finally, making disciplined infrastructure investments and driving efficiency. In quarter two, we delivered material cost of goods and inbound freight improvements through prudent management and planned the infrastructure investments, both in capabilities and technology, that we continue to realize the benefit from. As we shared at the beginning of this year, we enhanced our inbound logistics strategy, moving from a freight forwarder model to a direct carrier relationship, minimizing our reliance on spot rates. This has benefitted us both in overall better pricing and availability of containers, as well as de-emphasizing the spot market pricing inflation, and this represents significant cost avoidance.

Speaker Change: Now finally, making disciplined infrastructure investments and driving efficiency in quarter, two we delivered material cost of goods and inbound freights improvement through prudent management and planned infrastructure investment both in capabilities and technology that we continue to realize the benefit from as we said at the beginning of this year.

Speaker Change: Huntsville, inbound logistics stretching losing from a freight forwarder model to a direct carrier relationships minimizing all the lines. Some spot rates. This is benefited both and overall better pricing and availability of containers as well as de emphasizing the spot market pricing inflation and this represent.

Speaker Change: Cost avoidance from a gross margin perspective. These savings were offset by an increase in promotional discounting in the quarter as we continued to see higher promotional levels in the cathode ray.

Mary Fox: From a growth margin perspective, these savings were offset by an increase in promotional discounting in the quarter, as we continue to see higher promotional levels than the category. We also delivered a 16% reduction in total inventory at the end of the quarter, driven by the benefits of recent investments, including our new auto management system. We're making strong advancements in our outbound logistics models, and we've successfully introduced local parts and providers in one key market, which is helping deliver overall lower cost and improved customer satisfaction. We'll continue to expand this program throughout this year and beyond.

Speaker Change: We also delivered a 16% reduction in total inventory at the end of the quarter driven by the benefits of recent investments, including a new order management system.

Speaker Change: We're making strong advancement in our outbound logistics model and we successfully introduced local parcel providers and wonky market, which is helping deliver overall lower costs and improved customer satisfaction will continue to expand this program throughout this year and beyond.

Mary Fox: So, in summary, we're pleased with the progress on our strategic priorities, as we continue to successfully expand the business and make important foundational investments to drive as well as support the substantial growth that lies ahead.

Speaker Change: So in summary, we're pleased with the progress on our strategic priorities as we continue to successfully run the business and make important foundational investment to drive as well as support the substantial growth that lies ahead.

Keith Siegner: I will now pass the call over to Keith. Thanks, Mary. Let's jump right on into a quick review of the second quarter, followed by our outlook for the rest of fiscal 25. Met sales increased 2.1 million or 1.3 percent to 156.6 million in the second quarter of fiscal 25 compared to the prior year. This was consistent with our guidance and reflective of continued market share gains driven by expansion of physical and digital footprint, promotional efficacy, product news, marketing, and our excellent customer experience across the board. Showroom net sales increased 0.6 million or 0.6 percent to 98.8 million in the second quarter of fiscal 25, compared to the prior year, which was driven by the net addition of 31 new showrooms, partially offset by a decrease of 5.4 percent in omnichannel comparable net sales.

Speaker Change: I will now pass the call over to Keith.

Keith Cigna: Thanks, Mary, let's jump right on into a quick review of second quarter, followed by our outlook for the rest of fiscal 'twenty five net sales increased $2 1 million or one 3% to $156 6 million in the second quarter of fiscal 25 compared to the prior year. This is consistent with our.

Speaker Change: Guidance and reflective of continued market share gains driven by expansion of physical and digital footprint promotional efficacy product news marketing and.

Speaker Change: And our excellent customer experience across the board showroom net sales increased <unk> 6 million or 6% to $98 8 million in the second quarter of fiscal 25 compared to the prior year, which was driven by the net addition of 31, new showrooms, partially offset by a decrease.

A five 4% and omnichannel comparable net sales.

Keith Siegner: While we have seen week-to-week volatility, depending on the timing of holidays, promotions, and product launches, underlying trends have been relatively stable. Internet net sales increased 2.9 million or 7% to 44.3 million in the second quarter of fiscal 25 compared to the prior year period. Other net sales, which include pop-up shop, shop and shop, and open box inventory transactions, decreased 1.4 million, or 9.3%, to 13.5 million in the second quarter of fiscal 25 compared to the prior year period. This is primarily due to lower productivity of our temporary online pop-up shops on Costco.com. As a reminder, we may engage in limited open box inventory transactions with Icon going forward in order to ensure our warehouses are operating as efficiently as possible.

Speaker Change: While we have seen week to week volatility, depending on timing of holidays promotions and product launches underlying trends have been relatively stable.

Speaker Change: Net sales increased $2 9 million or 7% to $44 3 million in the second quarter of fiscal 25 compared to the prior year period.

Speaker Change: Other net sales, which include pop up shop shop in shop, and open box inventory transactions decreased $1 4 million or nine 3% to $13 5 million in the second quarter of fiscal 25 compared to the prior year period. This is primarily due to lower productivity of our temporary online pop up.

Speaker Change: <unk> on Costco Dot com.

Speaker Change: As a reminder, we may engage in limited open box inventory transactions with icon going forward in order to ensure our warehouses are operating as efficiently as possible.

Keith Siegner: Consistent with what we discussed last quarter and which was the case for second quarter, we believe the fiscal 24 quarterly run rate is reflective of a potential baseline level to use in your models, reaching approximately $12 million for the fiscal year. By product category in the second quarter, our sectional net sales increased 2%. SAC net sales were flat, which was the strongest performance in several quarters as a result of the strength in our Pillow SAC Accent Chair. Encouragingly, we have some backlog on PAC given it sold out on high demand, and we currently estimate net sales catching up with demand in the fourth quarter.

Speaker Change: <unk> with what we discussed last quarter, and which was the case for second quarter. We believe the fiscal 'twenty four quarterly run rate is reflective of our potential baseline level to use in your models, reaching approximately $12 million for the fiscal year.

Speaker Change: By product category in the second quarter, our sectional net sales increased 2%.

Speaker Change: <unk> net sales were flat, which was the strongest performance in several quarters as a result of the strength in our pillow Sac accent chair Encouragingly, we have some backlog on P. A C. Given its sold out on high demand and we currently estimate net sales catching up with demand in the fourth quarter our other net.

Keith Siegner: Our other net sales, which includes decorative pillows, blankets, and accessories, decreased 15% over the prior year. Growth margin decreased 80 basis points to 59% of net sales in the second quarter of fiscal 25 versus 59.8% in the prior year period. Primarily driven by a decrease of 110 basis points in product margin driven by higher promotional discounting and an increase of 50 basis points in outbound transportation and warehousing costs. This was partially offset by a decrease of 80 basis points in inbound transportation costs. SG&A expenses as a percent of net sales was 47% in the second quarter of fiscal 25 versus 41.3% in the prior year period.

Speaker Change: Sales, which includes decorative pillows blankets and accessories decreased 15% over the prior year.

Speaker Change: Gross margin decreased 80 basis points to 59% of net sales in the second quarter of fiscal <unk> 45 versus 59 eight in the prior year period, primarily driven by a decrease of 110 basis points in product margin driven by higher promotional discounting and an increase of 50 basis points in outbound.

Speaker Change: Transportation and warehousing costs. This was partially offset by a decrease of 80 basis points and inbound transportation costs.

Speaker Change: SG&A expense as a percent of net sales was 47% in the second quarter of fiscal 'twenty five versus 41, 3% in the prior year period.

Keith Siegner: The increased percentage is primarily related to investments in payroll, equity-based compensation, professional fees, rent, and infrastructure. The increase in selling, general and administrative expenses was primarily related to an increase of 6.4 million in payroll, 1.5 million in equity-based compensation, 0.9 million in professional fees, 0.7 million in rent, and half a million in infrastructure investments in the business to support current and future growth. Rent increased by 0.7 million related to a 1.2 million increase in rent expense from our net addition of 31 showrooms, partially offset by a 0.5 million reduction in percentage rent. We estimate non-recurring incremental fees associated with the restatement of prior periods' financials was approximately 1.9 million in the second quarter.

Speaker Change: The increased percentage is primarily related to investments in payroll equity based compensation professional fees rent and infrastructure the increase in selling general and administrative expenses was primarily related to an increase of $6 4 million in payroll $1 5 million in equity based compensation.

Speaker Change: <unk> 0.9 million in professional fees zero point $7 million in rent and half a million dollars in infrastructure investments in the business to support current and future growth.

Speaker Change: Rent increased by 0.7 million related to a $1 2 million increase in rent expense from our net addition of 31 showrooms, partially offset by a <unk> 5 million reduction in percentage right.

Speaker Change: We estimate nonrecurring incremental fees associated with the restatement of prior period financials was approximately $1 9 million in the second quarter is a very difficult to forecast and has been above our original fiscal 'twenty five forecast for the past two quarters, we will continue to highlight any if applicable each quarter.

Keith Siegner: These are very difficult to forecast and have been above our original fiscal 25 forecast for the past two quarters. We will continue to highlight any, if applicable, each quarter. Advertising and marketing expenses decreased 3.2 million or 12.2% to 23.3 million for the second quarter of fiscal 25 compared to the prior year period. Advertising and marketing expenses were 14.9% of net sales in the second quarter, as compared to 17.2% of net sales in the prior year period, with the decreased percentage primarily due to cost related to our 25th anniversary campaign in fiscal 24. Not repeating in fiscal 25, operating loss for the quarter was 8.4 million compared to 1 million in the second quarter of last year, driven by the factors we just discussed.

Speaker Change: Advertising and marketing expenses decreased $3 2 million or 12, 2% to $23 3 million for the second quarter of fiscal 25 compared to the prior year period advertising and marketing expenses were 14, 9% of net sales in the second quarter as compared to 17, 2% of net.

Speaker Change: Sales in the prior year period with the decrease percentage, primarily due to costs related to our 25th anniversary campaign in fiscal 'twenty four not repeating in fiscal 'twenty five operating loss for the quarter was $8 4 million compared to 1 million in the second quarter of last year driven by the factors we just.

Speaker Change: Discussed before.

Keith Siegner: Before we turn our attention to net loss, net loss per common share, and adjusted EBITDA, please refer to the terminology and reconciliation between each of our adjusted metrics and their most directly comparable GAAP measurements in our earnings release issued earlier this morning. Net loss for the quarter was 5.9 million or negative 38 cents per common share compared to net loss of 0.6 million or negative 4 cents per common share in the prior year period. During the second quarter of fiscal 25, we recorded an income tax benefit of 1.8 million as compared to less than 0.1 million in the prior of your period.

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

Speaker Change: Net loss for the quarter was $5 9 million or negative <unk> 38 cents per common share compared to net loss of <unk> 6 million or negative four cents per common share in the prior year period. During the second quarter of fiscal 'twenty. Five we recorded an income tax benefit of $1 8 million as compared to less than <unk>.

Speaker Change: <unk> 1 million in the prior year period.

Keith Siegner: Adjusted EBITDA for the quarter was 1.5 million as compared to 5.3 million in the prior year period.

Adjusted EBITDA for the quarter was $1 5 million as compared to $5 3 million in the prior year period.

Keith Siegner: Turning to our balance sheet, we ended the second quarter with a very healthy balance sheet. First, we reported 72.1 million in cash and cash equivalents, which was flatish sequentially and up nicely year over year. Second, our total merchandise inventory levels are in line with our projections. 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. Third and last, I want to provide an update on our credit facility, which ended the second quarter with 36 million in committed availability and no borrowings. During the second quarter, we successfully closed on the amendment and extension of our credit facility.

Speaker Change: Turning to our balance sheet, we ended the second quarter with a very healthy balance sheet.

Speaker Change: We reported $72 1 million in cash and cash equivalents, which was flattish sequentially and up nicely year over year.

Speaker Change: Our total merchandise inventory levels are in line with our projections, 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.

Third and last I want to provide an update on our credit facility. We ended the second quarter was $36 million in committed availability and no borrowings.

Speaker Change: During the second quarter, we successfully closed on the amendment and extension of our credit facility. This facility was extended to July 27, 2029, we added $10 million of incremental uncommitted capacity or an accordion feature and we enhanced numerous other elements within the agreement combine the amendment further inquiry.

Keith Siegner: The facility was extended to July 27th, 2029. We added 10 million of incremental uncommitted capacity or an accordion feature, and we enhanced numerous other elements within the agreement. Combine the amendment further increases Love Sac's financial flexibility to continue to invest in the business while also delivering value to shareholders.

Speaker Change: Loves us financial flexibility to continue to invest in the business, while also delivering value to shareholders.

Keith Siegner: To that end, we were also pleased to announce the authorization of an inaugural share repurchase program. Love Sac's board of directors authorize the repurchase of up to 40 million dollars of outstanding common stock, expected to be funded through existing cash and future free cash flow. The timing, manner, price, and amount of any repurchases are dependent on many factors, and we plan to be measured but opportunistic. But for some baseline context, we initially estimate offsetting the delusion of stock compensation at a minimum. We look forward to discussing more with you in common quarters.

Speaker Change: To that end, we were also pleased to announce the authorization of an inaugural share repurchase program.

Speaker Change: <unk> board of directors authorized the repurchase of.

Speaker Change: Up to $40 million of outstanding common stock expected to be funded through existing cash and future free cash flow.

Speaker Change: The timing manner price and amount of any repurchases are dependent on many factors and we plan to be measured but opportunistic.

Speaker Change: But for some baseline context, we initially estimate offsetting the dilution of stock compensation at a minimum we look forward to discussing more with you in coming quarters.

Keith Siegner: Please refer to our earnings press release for other details on our second quarter financial performance. So now for our outlook, we aim to grow irrespective of the category in the near term, continuing our track record of market share gains. Plus, we're primed to capitalize on the category rebound as soon as it happens and in more real time than our peers. As this occurs, the additional revenues should drive expanding flow through of top line growth to bottom line growth. Specifically, we have not changed our baseline assumption for a 10% full-year category decline, which underpins our fiscal 25 outlook.

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

Speaker Change: Now for our outlook, we aim to grow irrespective of the category in the near term continuing our track record of market share gains plus we're primed to capitalize on the category rebound.

Speaker Change: Soon as it happens and in more real time than our peers. As this occurs the additional revenue should drive expanding flow through of topline growth to bottom line growth spurt.

Speaker Change: Specifically, we have not changed our baseline assumption for a 10% full year category decline, which underpins our fiscal 'twenty five outlook.

Keith Siegner: The fiscal first half category decline was about 12%, roughly consistent with our original assumption, which also expected modestly better category conditions in the second half versus the first half. Again, should the category perform better, we would expect to perform better, or vice versa. For the full year fiscal 25, we are tightening our guidance ranges. We estimate net sales of 700 million to 735 million. We expect adjusted EBITDA between 52 million and 59 million. This includes gross margins of 58 to 59%. Advertising and marketing of approximately 13% as a percent of net sales, and SGNA of approximately 40% as a percent of net sales.

Speaker Change: The fiscal first half category decline was about 12% roughly consistent with our original assumption, which also expected modestly better category conditions in the second half versus the first half.

Speaker Change: Again should the category perform better we would expect to perform better or vice versa.

Speaker Change: For the full year fiscal 'twenty five we are tightening our guidance ranges, we estimate net sales of $700 million to $735 million, we expect adjusted EBITDA between 52 million and $59 million. This includes gross margins of 58% to 59%.

Speaker Change: Advertising and marketing of approximately 13% as a percent of net sales and SG&A of approximately 40% as a percent of net sales.

Keith Siegner: We estimate net income to be between 17 and 21 million. We estimate deluded income per common share in a range of $1.1 to $1.26 and approximately 16.9 million estimated deluded weighted average shares outstanding. As a reminder, fiscal 25 will contain 52 weeks versus fiscal 24, which contained an additional 53rd week in the fourth quarter. For the fiscal third quarter, we estimate net sales of $152 to $160 million, representing another quarter of slight growth at the midpoint. We expected just at EBITDA to be between a loss of 3 million to an income of 1 million. This includes gross margins of approximately 58%.

Speaker Change: We estimate net income to be between 17, and 21 million, we estimate diluted income per common share in a range of $1 one to $1 26, and approximately $16 9 million estimated diluted weighted average shares outstanding.

Speaker Change: As a reminder, fiscal 'twenty five will contain 52 week versus fiscal 'twenty, four which contained an additional 50 <unk> week in the fourth quarter for.

Speaker Change: For the fiscal third quarter, we estimate net sales of $152 million to $160 million, representing another quarter of slight growth at the midpoint, we expect adjusted EBITDA to be between a loss of 3 million to an income of 1 million. This includes gross margins of approximately 58 per se.

Keith Siegner: Advertising and marketing of approximately 15% as a percent of net sales, and SGNA of 45 to 47% as a percent of net sales. We estimate net loss to be between 4 million and 8 million. We estimate basic loss per common share is expected to be 28 cents to 50 cents, with 15.6 million weighted average shares outstanding.

Speaker Change: Hey, <unk>.

Speaker Change: Advertising and marketing of approximately 15% as a percent of net sales and SG&A of 45% to 47% as a percent of net sales.

Speaker Change: We estimate net loss to be between $4 million and 8 million.

Speaker Change: We estimate basic loss per common share is expected to be 28 cents to 50 cents with $15 6 million weighted average shares outstanding.

Keith Siegner: I'd like to take a minute to preempt the question on the implied net sales growth acceleration in fiscal fourth quarter as compared to fiscal third quarter. We estimate sequential growth acceleration owing to a few factors. First, catch up on the man shipments for pillow sack accent chair and stealth tech, both of which had some delays and shipments only to longer lead times. Second, new innovation recently rolled out will have a full quarter of sales and more awareness in the fourth quarter, whereas last year, new innovation primarily benefited the third quarter following the launch of angled sides.

Speaker Change: I'd like to take a minute to preempt the question on the implied net sales growth acceleration in fiscal fourth quarter as compared to fiscal third quarter, we estimate sequential growth acceleration owing to a few factors first catch up on demand shipments for pillows accent chair and stealth tech both of which.

Speaker Change: <unk> had some delays in shipments owing to longer lead times second new innovation and recently rolled out we'll have a full quarter of sales and more awareness and fourth quarter, whereas last year, New innovation, primarily benefited the third quarter following the launch of angled side.

Keith Siegner: Lastly, we forecast the modest category improvement from Q3 to Q4, though clearly still declines, as rates begin to lower and election uncertainty subsides post-election. In summary, stabilization of the category and an eventual return to category growth are ahead of us. In the meantime, even while the category declines linger, we believe we can balance growing revenues and profitability with investments in foundations and product innovation, thereby optimally positioning us to generate stakeholder value for years to come.

Speaker Change: Lastly, we forecast a modest category improvement from Q3 to Q4, though clearly still declined as rates begin to lower and election uncertainty subsides post election.

Speaker Change: In summary stabilization of the category and an eventual return to category growth are ahead of us in the meantime, even while the category declines linger. We believe we can balance growing revenues and profitability with investments in foundations and product innovation, thereby optimally positioning.

Speaker Change: To generate stakeholder value for years to come.

Operator: I'll now turn the call back over to the operator to start our Q&A session. Thank you. At this time, we'll be conducting a question-and-answer session. If you'd like to ask a question, please press star one under the telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

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

Speaker Change: Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question can you.

Speaker Change: You May press star two if you'd like to remove your question from Nikhil for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

Michael Baker: Our first question comes from the line of Michael Baker with DA Davidson. Please proceed with your question. Okay, thanks. You did preempt my question on that fourth quarter ramp, which still is pretty aggressive to me, but I guess I get the factors. So if I could follow up on that, though, how much can you quantify how much you don't sort of pent up demand you have for the new accident chair in stealth tech? How much were the delays? So I presume some of that revenue, you have a lot of visibility into it. So if you can just quantify how much of that helps that fourth quarter ramp.

Our first question comes from the line of Michael Baker with D. A Davidson. Please proceed with your question.

Michael Baker: Okay. Thanks.

Speaker Change: Did you did preempt my question on that fourth quarter ramp, which still looks pretty pretty aggressive to me, but I guess I get the factors.

Speaker Change: So if I could follow up on that though how much can you quantify how much sort.

Sort of pent up demand do you have for the new accident, Sharon stealth tech how how much were the delays so I presume some of that revenue.

Speaker Change: A lot of visibility a lot of visibility into it. So if you can just quantify how much that helps that fourth quarter ramp.

Keith Siegner: Sure thing, Mike. So that impact started the impact in the second quarter near the end of the second quarter will take up a little bit more through the third quarter and then resolving the queue for. It's millions of dollars, but it's in the single digits. So single-digit millions of dollars of transfer that will recover within the fourth quarter. We've got really good visibility into the closure of those lead times. And when we could ship, so that's a number we feel real confident in. Okay, thank you. That's helpful.

Mike: Sure thing, Mike So that impact started to impact in the second quarter near the end of the second quarter will pick up a little bit more through the third quarter and then resolving that Q4, it's millions of dollars, but it's in the single digits. So single digit millions of dollars of transfer that will recover within the fourth quarter, we've got really good visibility.

Mike: And to the closure of those lead times and when we can ship. So that's a number we feel real confident in.

Speaker Change: Okay. Thank you.

Shawn Nelson: A couple more quick follow-ups. You know, some of the industry data that we track, at least, has already started to get a little bit less worse. And I think you sort of implied that as well, just as rates have come down. Are you, you know, any green shoes, anything you can point to maybe in terms of mix or higher emphasis lower end or any sort of early signs of mortgage rates coming way down that might, you know, be helping your business or business or at least give visibility into, you know, the back half outlook.

Speaker Change: Helpful. A couple more quick follow ups.

Speaker Change: So somebody with data that we track at least has already started to get a little bit less worse and I think you sort of implied that as well just as rates have come down are you.

Speaker Change: Any green shoots or anything you can point to maybe in terms of mix or higher end versus lower end or any sort of early signs of mortgage rates coming way down that that might be helping your business business or at least give visibility into.

Speaker Change: The back half outlook.

Speaker Change: Yes.

Speaker Change: Yeah.

Shawn Nelson: Well, hold on one second. Sean is on, I think. I thought I got you. There with us for a second. He's coming up. Yeah, that's way to characterize what we're seeing in the business right now is, you know, LoveSac has been in growth mode for so long, and as we look at what we're, as we look at the competition. And we are, we are pretty shocked at the promotional environment. Right. And so that is one of the, at the moment, one of the biggest. Belweathers of kind of what's going on in the industry. For Lovesac itself, we've really tried to hold the line in terms of where our promotional levels lie.

Speaker Change: Well hold on one second Sean is on those I think.

Sean: I thought I should answer yet.

Bear with us or a second he's going out.

Sean: That's the way to characterize.

Sean: What we're seeing in the business right now is.

Sean: You know.

Shaq: Loves Shaq.

Shaq: He has been in growth mode for so long and as we look at what we're as we look at the competition, where we are pretty.

Shaq: Shocked at the promotional environment right and so that is one of the at the moment one of the biggest.

Shaq:

Speaker Change: Bellwethers of kind of what's going on in the industry for lovesick itself. We've really tried to hold the line in terms of where our promotional levels lie.

Shawn Nelson: And we've been pretty pleased with the resilience of the business. And so it's hard to say that we're seeing any meaningful grain shoots. We continue to be very vigilant in terms of how we plan the business quarter to quarter, even month to month. And obviously we're all watching the macro; we're all observing the fact that interest rates will likely be coming down, and that should have an effect on this category. But our point of view, if you're asking us as the management team, is to be really conservative in terms of when that might take effect.

Speaker Change: And we've been pretty pleased with the resilience of the business and so it's hard to say that we're seeing.

Speaker Change: Any.

Speaker Change: Any meaningful green shoots we continue to.

Speaker Change: Be very vigilant in terms of how we plan the business quarter to quarter, even even month to month.

Speaker Change: And you know obviously we're.

Speaker Change: We're all watching the macro we're all observing the fact that interest rates will likely be coming down on them that should have.

Speaker Change: In effect on this category, but our point of view.

Speaker Change: If you were to you know if you're asking US is that the management team is to be really conservative in terms of win.

That might take effect and so.

Shawn Nelson: And so for us it's more of the same for now. And then you know, our business, we have the benefit of this innovation, right? So you ask a green shoots; part of the reason I think we continue to be resilient, in fairness, is because we continue to launch new products that have new momentum for us, like the Pillow Sector Accent Frame, which is driving both repeat business as well as, of course, new business. Like the any table that just launched this last week. And so for us, these are inorganic, or I should say, you know, non-cyclical kind of opportunities that we're creating for ourselves.

Speaker Change: For us it's it's a more of the same for now.

And.

Speaker Change: And then you know our business we have the benefit of this innovation right. So you asked about green shoots part of the reason I think we continue to be resilient in fairness. It's because we continue to launch new products that have new momentum for us likely to affect your accurate friends, which is driving both repeat business.

Speaker Change: As well as of course new business.

Speaker Change: Like any capable that just launched this last week and so.

Speaker Change: For us these are inorganic.

Speaker Change: Or I should say you know non cyclical kind of.

Speaker Change: Opportunities that we're creating for ourselves, but as far as industry Green shoots.

Shawn Nelson: But as far as industry green shoots, it's more of like a study-holding pattern right now.

Speaker Change: It's more of like a steady holding pattern right now.

Keith Siegner: Mike, just one thing. Yeah, one data point to add in case this is of interest to you. So we've seen some interesting trends this year in the utilization of the LoveSat credit card program, basically the financing program that our customers use. You know, we had told you in the very beginning of the calendar year we've seen some, you know, some decreases in the percentage of revenues run through the program, with particular emphasis on the low-end consumer that then stabilized for several months. But then we had these changes, which were industry-wide, nothing specific to LoveSac related to program fees, implemented by a lot of the banks on these types of programs. This quarter, second quarter in aggregate, we did end up seeing several hundred basis points lower utilization of the credit card as a percentage of revenues.

Mike: Mike Thats one thing.

Mike: One data point to add in case. This is of interest to you. So we've seen some interesting trends this year in the utilization of the loves that credit card program basically the financing program that our customers use.

Speaker Change: We had told you in the very beginning of the calendar year, we'd seen some you know some decreases in the contract and the percentage of revenues are run through the program.

Speaker Change: With particular emphasis on the low end consumer that then stabilized for several months, but then we had these changes which were industry wide nothing specific to love Sac related to program fees.

Speaker Change: Implemented by a lot of the banks on these types of programs this quarter second quarter in aggregate. We did end up seeing several hundred basis points lower utilization of the credit card as a percentage of revenues than we did in the past.

Keith Siegner: Then we did in the past. And it does seem to really relate to the implementation of that program fee. So we're working with our partners on that to try to see what was the impact of that on our overall demand trends. How do we tweak our offers to make sure that we're as relevant as we can be? Whether that's using lower duration, you know, deferred interest programs, things like that to try to make sure that we have the most compelling offer that we possibly can as we get into the back half of the year. So look, if reeks start to come down and therefore implied interest fees start to come down, that'll all help as well.

Speaker Change: And it does seem to really relate to the implementation of that program fee.

Speaker Change: So we're working with our partners on that to try to to see what was the impact of that on our overall demand trends how do we tweak our offers.

Speaker Change: To make sure that we're as relevant as we can be.

Speaker Change: Whether that's using lower duration deferred interest programs things like that to try to make sure that we have the most compelling offer that we possibly can.

Speaker Change: As we get into the back half of the year. So look if rates start to come down and therefore implied interest fees start to come down that will all help as well so what will juggle. This but I did want you to know that push that implementation. We have seen a couple of hundred basis points decline in our utilization rate.

Keith Siegner: So we'll juggle this, but I did want you to know that, you know, post that implementation, we have seen a couple hundred basis points to client and Jason Wright. Yeah, that is interesting. Thanks for that, Collar.

Yeah that is interesting thanks for that color one more quick one.

Keith Siegner: One more quick one. Does your guidance include any buybacks? You said that you expect the offset delusion, but I guess specifically, as we do our model, should we include buybacks in the estimates and just bigger picture? How did that decision come about it? We know there was some, you know, a shareholder letter written during the quarter. It's just trying to, you know, understand that the buyback philosophy looked a bit more.

Speaker Change: Your guidance include any buyback that you said that you expected to offset dilution, but I guess, specifically you know as we do our model are you planning should we include buybacks in and the estimates and just bigger picture how did that decision come about we know there were some shareholder.

Speaker Change: Shareholder letter written during the quarter, just trying to you know.

Speaker Change: I understand that the buyback philosophy, a little bit more.

Shawn Nelson: So just to give you some of the background. The discussion has been on the way between managing the board for quite some time. As we've discussed on prior calls, there was a sequence that needed to be followed, which included addressing the nearing exploration of the credit facility before the implementation of a, you know, of a change in capital management philosophy. So we had to do the credit facility first. Now that that was accomplished. I think what the message here is we feel very good about the health of the balance sheet. In the way that we're managing and balancing both the current environment and the desire to continue to fund all this like really powerful innovation, some of what you've seen and more of which is on the come.

So just to give you some of the background and the discussion has been underway between management ended board for quite some time.

Speaker Change: As we've discussed on prior calls there was a sequence that needed to be followed which included addressing the nearing expiration of the credit facility before the implementation of a of a change.

Speaker Change: Capital Management philosophy, So we had to do the credit facility first.

Speaker Change: Now that that was accomplished I think what the message here is we feel very good about the health of the balance sheet and the way that we're managing and balancing both the current environment and the desire to continue to fund all this like really powerful innovation some of what you're seeing in more of which is on the com, we've not built anything into the forecast.

Maria Ripps: We've not built any into the forecast. That's, you know, that program was just increased. I did say on the call, and this is probably like the extent of what I can get into today, which is we are thinking about offsetting the dilutive impact of equity compensation as a sort of a good health. The base rate that's less than $10 million a year would be required to accomplish that. So, as you think about your models, that's probably the healthy place to start. Thank you. Appreciate all the time. Thank you.

Speaker Change: That program was just increased I did say on the call and this is probably like the extent of what I can get into today, which is we are thinking about offsetting the dilutive impact of equity compensation as a sort of a good healthy base rate, that's less than $10 million a year would be required to.

Speaker Change: With that so as you think about your models.

Speaker Change: Probably a healthy place to start.

Speaker Change: Thank you I appreciate it all the time.

Speaker Change: Thank you. Our next question comes from the line of Maria reps with Canaccord Genuity. Please proceed with your question.

Maria Ripps: Our next question comes from the line of Maria Rips with kind of cordonuity. Please proceed with the question. Great.

Maria Reps: Great. Good morning, and thanks for taking my questions. Firstly I just wanted to follow up when your full year guidance, So with Q2 coming in more or less sort of in line with expectations to maybe slightly better can you maybe talk about your thoughts around narrowing your guidance, especially on the kind of on the upper end and it seems like there is a little bit of shift in sales.

Keith Siegner: Good morning, and thanks for taking my questions. First, I just wanted to follow up on your full-year guidance. So with Q2 coming in more or less of an online with expectations to maybe slightly better. Can you maybe talk about your thoughts around narrowing your guidance, especially on the trying up on the operand? And it seems like the little bit of shift these sales that's happening from Q3 into Q4, but kind of as we look at the full-year guidance. Is there anything different that you have seen now? Where's the little at Q4? Not really. I think we're very bullish on our innovation, but there's lingering uncertainty in the macro environment, especially heading into their selection.

Speaker Change: That's happening from Q3 into Q4, but kind of as we look at the full year guidance is there anything different that you see now which is let's say last quarter.

Speaker Change: Not really I think we're very bullish on our innovation, but there's lingering uncertainty in the macro environment, especially heading into this election.

Mary Fox: You know, your promotional activity has intensified as well. And you heard Sean talk about this a little bit before. We've seen some of the competitors extending and increasing promotional rates. You know, through the, it was interesting at a macro level. And if you look at some of the data that's out there, headline promotions were slightly higher than they were for Labor Day, were slightly higher than they were for Black Friday last year. So look, we're just trying to be pragmatic, taking into account all these factors, you know, no real major changes other than that. We felt it was burdened to tighten the range.

Do you have promotional activity has intensified as well and you heard Sean talk about this a little bit before we've seen some of the competitors extending and increasing promotional rates.

Speaker Change: Through the it was interesting at a macro level. If you look at some of the data that's out there.

Speaker Change: Promotions were slightly higher than they were for labor day was slightly higher than they were for black Friday last year. So look we're just trying to be pragmatic taking into account all of these factors no no real major changes other than that we felt it was prudent to tighten the range.

Maria Ripps: Got it. That makes sense.

Got it that makes sense and then and then secondly can you maybe refresh us on your latest thoughts around the optimal number of showrooms and maybe overall touch points for the business and I guess any color. Maybe you can share on incremental I'm pleased to sales and brand awareness sort of when you add new.

Mary Fox: And then secondly, can you maybe refresh us on your latest thoughts around the optimal number of showrooms and maybe overall touch points for the business. And I guess any color, maybe you can share on incremental a police to sales and brand awareness sort of when you add new showrooms now compared to, let's say, a couple of years ago. Yes, hi, Maria. Thank you. Great question. So, you know, we've always shared we see a runway of, you know, just over 400 showrooms. And obviously, you know, as we see for this year, we're going to be delivering around that net 30.

Speaker Change: As showrooms now compared to lets say a couple of years ago.

Speaker Change: Yes, Hi, Marie. Thank you Great question. So you know we've always said, we see a runway of just over 400 showrooms and obviously you know as we see for this year and we're gonna be delivering around that net 30. So we continue to be able to see that opportunity we refresh our model all the time as well.

Mary Fox: So we continue to be able to see that opportunity. We refresh our model all the time as we think about how we go to market. So feel very good around that runway. I think the second piece, as you rightly called out, is when we open up a showroom, we also see that incremental halo around our digital business. And as you see that penetration of our business kind of continue to grow. Oh, deeply around some of the technology that we've added as I talked about my hub. It really goes hand in hand. So, you know, you're able to drive business, not just in terms of the showroom, but also kind of broadly from an omnichannel point of view.

Speaker Change: Think about how we go to market.

Speaker Change: Feel very good around that runway I think the second piece as you rightly called out is when we open up a showroom. We also see that incremental halo around our digital business.

And as you see that the penetration of our business kind of continue to grow our U K around some of the technology that we've added as I talked about my hub and it really goes hand in hand, So you were able to drive business not just in terms of the showroom, but also kind of broadly from an omni channel point of view and <unk>.

Mary Fox: And for us, the showrooms really do actors driving awareness. And then, you know, we know so many, you know, customers, they want to come in and actually fit in our couch and an experience on product. You know, one of the things that was interesting, you know, sure, as we talked about police back action chair, it created a buzz for the whole brand. People came into the showrooms to, you know, see this new product. And then they're like, hey, these factuals are cool. And, you know, they went through a demo, and both factual. So just so much opportunity to go back to think about our flywheel, you know, and the ability to be able to demo experience the product, bringing great innovation that gets people excited about the brand.

Speaker Change: For us the showrooms really do App is driving awareness and then you know we know so many of you know customers they want to come in and actually fishing, I'll couch and expanding our product.

Sean: The things that was interesting you know Sean as we talked about police that cat <unk> Jack It created a buzz for the whole brand people came into the showrooms to to see this new product and then they're like Hey, These section of the call and and you know they went through that movement in both actual so just so much opportunity. He go back to thinking about us.

Speaker Change: Well.

Speaker Change: You know and the ability to be able to demo experience the products, bringing great innovation that gets people excited about the brand we see a long runway ahead. So they're very happy in terms of performance. This year and then I'll go see the plans for next year.

Mary Fox: We see a long runway ahead. So they're very happy in terms of performance this year, and then obviously the plans for next year. Got it. That's very helpful.

Speaker Change: Got it that's very helpful. Thank you Mary and thank you Keith.

Mary Fox: Thank you, Mary, and thank you, Keith. Thank you.

Speaker Change: Thank you. Our next question comes from the line of Tom Forte with Maxim Group. Please proceed with your question.

Tom Forte: Our next question comes from the line of Tom Forte with Max and Group. Please proceed with your question. Great. So first off, Sean, Mary, and Keith, congrats on the quarter. I have one question or one follow up.

Tom Forte: Great. So first of all Sean Barry Keith Congrats on the quarter I have one question and one follow up.

Shawn Nelson: So Sean, can you give us your current thoughts and your strategy for new product development? How do you think about new lines such as stealth tech? And how do you think about adjacent products such as any table? Yeah, thanks for the question, Tom. First and foremost is, as we've said for years, our designs for life, the locks, the underpins, everything that we do, right? And for just to make sure everybody's tracking, this means products that are built to last a lifetime, designed to evolve. We believe that this point of view is completely unique in the landscape.

Tom Forte: So Shawn can you give us your current thoughts on your strategy for new product development. How you think about new lines, such as health Tech and how you think about adjacent products such as any table.

Tom Forte: Okay.

Shawn Nelson: Yes, thanks for the question Tom.

Sean: First and foremost.

Sean: We've.

Sean: That said for years, our designed for life philosophy underpins everything that we do right and.

Sean: And for just to make sure everybody's tracking this means products that are built to last a lifetime designed to evolve.

Sean: We believe that this point of view is.

Sean: Completely unique in the landscape.

Shawn Nelson: We don't see any other home companies or really any other product companies able to live up to that kind of an ethos. And it goes beyond our product; it really informs our business model. Everything that we're doing on the horizon with services, trade in, trade out, everything that we've spoken of before really pays off this design for life way of doing business. Now that said, I'll repeat something we've also said before, but not recently. We view our territory as from the mailbox to the backyard fence, right? And we take a very long point of view on our business.

Sean: We don't see any other home companies or really any other product companies.

Sean: To live up to that are kind of an ethos and it goes beyond our product it really informs our business model everything that we're doing.

Sean: On the horizon with services trade in trade up on everything that we've spoken of before.

Sean: Really pays off just designed for life way of doing business now that said.

Speaker Change: I'll repeat something we've we've also said before but not recently, we view our territory.

Speaker Change: From the mailbox to the backyard fence right and we take a very long point of view on our business.

Keith Siegner: Business. We believe we're building a brand that will be here for many, many decades and be very loved because of our commitment to this ethos that I just described. And so, for now, we've been very focused on the living room with sectionals and extensions on sectionals, including the recent Any Table watch. It is a sectional, and it can integrate with sectionals, for instance, but it can also stand alone as a coffee table. At the same time, the any table had been designed to accept future innovation. One of the things that I'm most proud of, it has attributes and dimensions and different elements to it that could allow any table to potentially be its own platform and grow into other extensions in case goods, etc.

Speaker Change: We believe we're building a brand that will be here for many many decades and be very loved because of our commitment to this he does that I just described.

Speaker Change: So for now we've been very focused on the living room with <unk> and extensions on <unk>, including the recent to any table Bosch.

Speaker Change: It is a sectional.

Speaker Change: And did it can integrate with <unk> for instance, they can offer standalone as a coffee table at the same time.

Speaker Change: Any table had been designed to.

Speaker Change: To accept future innovation.

Speaker Change: Yeah.

Speaker Change: What I'm most proud of it have attributes and dimensions and.

Speaker Change: You know different elements to it that could allow at each table to potentially be its own platform and.

Speaker Change: And grow into our other extensions and case goods et cetera.

Shawn Nelson: But it also allows us, in the nearest term, to stay very focused on a business that continues to do well and really take market sharing in a powerful way. That is, of course, the business of Sectionals. And so, it's kind of a straddle product at the moment, and it does have the opportunity to grow into bigger and broader things. In terms of leaping into other rooms, let's say, within the home or from that mailbox, the backyard sense, it will come. And we are actively developing, patenting, and prototyping in other realms outside of the living room.

Speaker Change: But it also allows us in the nearest term to stay very focused on a business that continues to do well and really take market share in a powerful way.

That is of course, the business with Fractionals and so it's a it's a it's kind of a.

Speaker Change: Straddled product at the moment and it does have the yeah. It does have the opportunity to grow into a bigger and broader things in terms of.

Speaker Change: Leaping into other rooms, let's say within the home or or you know.

Speaker Change: From that mailbox to the backyard fence.

Speaker Change: It will come and we are actively developing patenting.

Speaker Change: And and prototyping in other realms outside of outside of the living room.

Shawn Nelson: But in the nearer term, we continue to remain very focused. And I think the time is on our side. We're worried to launch the next greatest, you know, whatever, in a completely new category at this time. I think it would be lost on everyone. Not just things like the election, but we're at the state of the economy, the state of this category. We can't overemphasize what we're living through in the home category is worse than 2008-1910. And thankfully, we're more than a few years into it. And so, you know, I don't mean to be glib, but I think love sucks whether it well.

But in the nearer term we continue to remain very focused and I think the time is on our side.

Speaker Change: We're ready to launch the next greatest.

Speaker Change: Whatever and it kind of in a in a completely new category at this time.

Speaker Change: I think it would be lost on everyone.

Speaker Change: I'm not just things like the election, but we're at the state of the economy of the state of this category.

Speaker Change: We can't overemphasize.

Speaker Change: What we're living through in the home category is is worse than 2008, 910, and thankfully, we're more than a few years into it and see.

Speaker Change #100: So I you know.

Speaker Change: I don't mean to be glib.

Speaker Change: But I think <unk> weathered it well and it has really given us cover to continue to lean into innovation like I'm describing exactly.

Shawn Nelson: And it's really given us cover to continue to lean into innovation, like I'm describing vaguely. At a time when I believe many of our competitors have experienced layoffs and probably paired back on a lot of this kind of success. And I think it's going to allow us to emerge with strength as the world continues to change and evolve, and this category continues to change and evolve. So we are both hands on the wheel, all hands on innovation. And really excited about what the future holds and really enjoying this time to invest in this way in the business, even as, of course, we manage expenses well and try to continue to generate profits and cash.

Speaker Change: At a time when I believe many of our competitors have experienced layoffs and probably paired back on a lot of this kind of stuff and I think it's going to allow us to emerge with strength.

Speaker Change: As the World continues to change and evolve in this category continues to change and evolve. So we are both hands on the wheel.

Speaker Change: Yeah, I'll I'll hands on innovation and really excited about what the future holds and really enjoying this time.

To invest.

Speaker Change: Investing this way in the business even as of course, we manage expenses.

Speaker Change: Expenses, well and try to continue to generate profits and cash so.

Shawn Nelson: So we're, you know, innovations which drives us. And we can't be; it's what gives us energy. And we really look forward to sharing with you more at this investor data that's coming up. That's probably the thing and the opportunity for you to get the best clamp.

Speaker Change: Were you know innovation is what drives us and we can't be it. It's what gives us energy and we really look forward to sharing with you more at this investor day, that's coming up that's probably the thing and the opportunity for you to get the best glimpse and for us to be a little less vague on what's coming.

Shawn Nelson: and for us to be a little less vague on what's coming.

Shawn Nelson: Excellent.

Speaker Change #101: Excellent and then for my follow up can you talk about the gross margins and the contribution margins on new products or just the pillow attack Accenture and any table I would think that the contribution margins would be quite favorable is that unless you're directly advertising them I feel like historically at least with Dell.

Tom Forte: And then for my follow-up, can you talk about the gross margins in the contribution margin on new products such as the pillow sack, exit chair, and any table? I would think that the contribution margins would be quite favorable, because unless you're directly advertising them, I feel like historically, at least with stealth tech, you advertise the sectional, but then included it as part of advertising. So appreciate your thoughts on that.

Speaker Change #102: Check you advertise the sectional but that include it as part of the advertising.

Speaker Change #103: Appreciate your thoughts on that.

Keith Siegner: Yeah, first let me just bridge one thing on stealth tech, because you asked the question I didn't comment, and I think it's important. And then Keith, you take it on the margin front. Self-tax for us has, of course, been a major innovation in the last few years, and what you'll see it become is really sort of in our metaphor of Lovesac, or will really be the sinuous tissue that binds together all of our future product platforms, and really separates us, I think, as a company that has embraced technology in a way that's very different, of course, from those that we compete with in the sectional self-aligned, and not just the sectional self-aligned, but the home category broadly.

Speaker Change #102: Yes.

Speaker Change #102: Go ahead, Yeah first let me just bridge one thing on South Texas you asked the question I didn't comment and I think it's important and then Keith you take you take it on the margin front.

Speaker Change #102: Deltak for US is has of course been a major innovation in the last few years and what you'll see it become it's really sort of.

Speaker Change #102: Uh huh.

Speaker Change #104: Metaphor of loves shaq or will really be the.

Speaker Change #104: Continuous tissue that binds together all of our future product platforms and really separates us I think it's a company that.

Speaker Change #104: Has embraced technology in a way that is very different of course from those that we compete with in a sectional sofa land and I'm not just not just a sectional sofa line, but the home category broadly.

Keith Siegner: From stealth tech to these new innovations, we are very disciplined about how we manage gross margin profile and develop the products to compete. Being designed for life, there's a lot that goes into the design of these products and the production of these products. But, you know, we're very disciplined about maintaining those gross margins. I'll let Keith give you some color on that. Yeah, I think Sean said it well. When we think about this process, and we think about our holistic business model, returns on capital, and where gross margins fit into that puzzle. These new product innovations start with, you know, where we play and how we win, what our relative brand positioning is, and what price points the customers will respond to most for us relative to the other offerings.

Speaker Change #104: From self check to these new innovations we are very disciplined about how we manage gross margin profile and develop the products to compete.

Speaker Change #104:

Speaker Change #104: Being designed for life.

Speaker Change #104: Lot that goes into the design of these products in the production of these products, but you know.

Keith Cigna: We're very disciplined about maintaining those gross margins I'll, let Keith give you some color on that.

Keith Cigna: Yeah I think.

Keith Cigna: I think I think Sean said it well when we think about this process and we think about our holistic business model returns on capital on where gross margins fit into that puzzle.

Keith Cigna: New product innovation to start with.

Keith Cigna: Where we play and how we win what our relative brand positioning is what price points. The customers will respond to most for us relative to the other offerings, we use that to engineered products that meet those expectations, yet provide us the margins that we need to keep this business model.

Keith Siegner: We use that to engineer products that meet those expectations, yet provide us the margins that we need to keep this business model going for the long term, as Sean said. So, we're very purposeful when we think about this. You know, look, and then there's new things we learn all the time; for example, with the Pillosex Accent Chair. Here's a product that's sold out given such high demand. You know how we approach discounting or promotions, other things like that, particularly on new products. You know, there's a lot of things we can take away from this, and look, I'll go back to what Mary said on the call, which is, as this pace of innovation is really ramping up, we're absolutely codifying the learnings from things like Pillosex Accent Chair, testing and enhancing it as we move into the next product with any table, and then we'll continue to refine this as we move into much bigger products that are on the come over the next couple of years.

Sean: Going for the long term as Sean said, so we're very purposeful when we think about this you know look and then there's new things we learn all the time for example, with the pillows accent chair Here's a product that is sold out given such high demand, how we approach discounting or promotions or other things like that particularly on new products.

Speaker Change #105: There's a lot of things we can take away from this and look I'll go back to what Mary said on the call, which is as this piece of innovation is really ramping up we're absolutely codifying the learnings from things like pillows accent chair testing it and enhancing it as we move into the next product with any table and then we will continue to refine this as we move into <unk>.

Speaker Change #106: Much bigger products that are on the call them over the next couple of years. So this is a constant data driven you know exercise to optimize and but we do think about it all holistically, it's it's not a haphazard.

Mary Fox: So, this is a constant data driven, you know, exercise to optimize, and, you know, but we do think about it all holistic. Lee, it's not hat-hizer.

Mary Fox: Yeah, and I think he's just to ask the Tom just on your marketing questions. So, you know, when we are obviously launching any table right now, it's as focused on selling more feet inside, more satchels, and look, your satchel just got a whole lot better because of this amazing innovation with any table. So, you know, it's back to the power of the platform, and you can continue to reinforce the platform and then injecting this incredible innovation. You know, it's just it continuing the playbook that we've seen, as you reference with Celtic, and we will continue to do that with all of our innovations.

Speaker Change #106: Yeah, and I'm, sorry, Keith just to add.

Speaker Change #106: Tom just on your marketing question. So you know when we obviously launching any table right now.

Speaker Change #107: It's focused on selling more seats inside more factional I look your facts and I've just got a whole lot I said because of this amazing innovation with any table. So it's back to the power of the platform and you can continue to reinforce the platform and then injecting this incredible innovation.

Speaker Change #107: It was just it continuing to playbook that we've seen as you reference it felt check and we will continue to do that with all of our innovation.

Mary Fox: Thank you, Mary.

Speaker Change #107: Thanks Man.

Mary Fox: Thank you.

Thank you. Our next question comes from the line of Brian Nagel with Oppenheimer and company. Please proceed with your question.

Brian Nagel: Our next question comes from the line of Brian Nagel with Albert Heimer Company. Please proceed with your question. Hi, good morning. Nice corner. Congratulations.

Brian Nagel: Hi, good morning.

Brian Nagel: Nice quarter congratulations.

Keith Siegner: So, for my questions, I actually want to focus on innovation. You're giving it, you know, it's a key topic of a reporter call today, but I guess, you know, the first question I ask, you know, is we think about recognizing, you know, your sector's shop, remains choppy. But as we think about the, you know, the top line growth algorithm for Lovesack. I mean, and now with product innovation, you know, kicking out maybe going to a more consistent cadence. I mean, how should we think about product innovation as a contributor to your top line growth algorithm?

Brian Nagel: So for my question I actually wanted to focus on innovation.

Brian Nagel: It's a key topic about reporter call today, but I.

Brian Nagel: I guess the first the first question I asked.

Speaker Change #109: As we think about recognizing.

Speaker Change #109: Sectors choppy remains choppy, but as we think about the top line growth algorithm.

Speaker Change #110: Poor for walks back I mean, now with product innovation.

Kicking it off maybe go into a more consistent cadence I mean, how should we think about product innovation as a contributor to your top line growth algorithm.

Shawn Nelson: Great question. And this is something we're going to, we're going to talk a little bit more about it at the investor that John mentioned. Look, the real trick, the real trick for us is everything starts with seats and sides. Right, that's the core of the business model. That's what generates the profits in the cash flows. That's what provides the capital necessary to pull this innovation that we have, you know, lots of in the pipeline forward and actually commercialize it and launch it. What we're trying to do is to balance the reality, the category, and the cash that we generate with seats and sides against the unleashing of that product portfolio, if that makes sense. And we have to be balanced through this time.

Speaker Change #110: Great question and this is something we're going to we're going to talk a little bit more about it at the Investor day that Sean mentioned.

Speaker Change #111: Look the real the real trick for US is everything starts with seats and sides right. That's the core of the business model. That's what generates the profits into cash flows. That's what provides the capital necessary to pull this innovation that we have.

Lots of.

In the pipeline forward and actually commercialize it and launch it what we're trying to do is to balance the reality of the category and the cash that we generate we teach seats and sides.

Speaker Change #111: <unk> and.

Speaker Change #111: Leasing of that product portfolio, if that makes sense and we have to be balanced through this time.

Keith Siegner: If the category was absolutely ripping upward and we had more cash off seats and sides, we could accelerate even more. That's the juggle that we're going through, and that's what influences the way it shows up in the business model on the top line. Brian, if that makes sense. So some of what we're doing is continuing to put ourselves into a position to enhance that or accelerate that should the macro really generate the profits of cash flows to support it. That, you know, again, the macro is driving a lot of that piece. We'll talk more about that, but that's, that that's really a little bit of context for how how it shows up in the model.

Speaker Change #111: The category was absolutely ripping upward and we had more cash all seats and sides, we could accelerate even more that's the juggle that we're going through and that's what influences the way it shows up in the business model and the topline Brian if that makes sense.

Speaker Change #111: So some of what we're doing is continuing to put ourselves into a position.

Speaker Change #111: Two.

Speaker Change #111: Enhanced that or accelerate that should the macro really generate the profit and cash flow to support it.

Speaker Change #111: Again.

Speaker Change #111: The macro is driving a lot of that piece will talk more about that but that's that's really a little bit of context for how how it shows up in the model.

Keith Siegner: No, it's helpful, Keith, and then my follow-up, and I think you talked about this in the prepared comments, but you know, this is we look at that, you know, the pillow sack accent chair in the initial demand for that. So is that been? Is it existing new customers mean? Well, how you see that initial demand make up for that new innovative product. Yeah, it's 50/50, which is really exciting for us because we're seeing tremendous. Re-Pete Business, which to build on the question earlier is just so great for our business from a gross margin in net contribution standpoint, right?

Keith Cigna: That's helpful Keith, but my follow up.

Speaker Change #111: Talk about this.

Speaker Change #111: In the in the prepared comments, but this is we look at that.

Speaker Change #111: Pillar suck accent chair and the initial demand for that it so has that been.

Speaker Change #112: Is it is it existing new customers me well, how you see that doesn't that initial demand makeup for that new innovative product.

Speaker Change #113: Yeah, It's 50, 50, which is really exciting for us because we're seeing tremendous.

Speaker Change #113: Repeat business, which to build on the question earlier is is just so great for our business from a from a gross margin of net contribution standpoint right. These are customers that we don't have to go.

Shawn Nelson: These are customers that we don't have to go find again; we don't have to pay the marketing expense to get them again. And that continues to roll in because the product has been sold out. We continue to, by the way, take container loads of it, and it continues to sell out as fast as it can land. And so we're really excited about that product and everything that it represents, and it's just been, it's just been a scene on social media, right? The Pillow Satchar Actant Training, in particular, I mean, our best performing post ever. And by the way, Lovesac is no slouch in social media land.

Speaker Change #113: Find again, we don't have to pay.

Speaker Change #114: The marketing expense to get them again and that continues to roll in because the product has been filled out the product you know we continue to buy the way, they're taking container loads of it and they continue to sell out as fast as they can land and so we're really excited about that product and everything that it represents and its just been.

Speaker Change #115: It's just been a phenom on social media right. The pillars are tracking up training in particular, I mean, our best performing post ever and by the way it looks like you've no slouch in social media land and so it really says something I think we really struck a nerve.

Shawn Nelson: And so it really says something; I think we really struck a nerve somehow with that, with that product, and the way it appears, and the way it's showing up for us, and what it does for our brand. And it's an accent chair, which has not been in our bailiwick. It's a very unique one. It doesn't look like your mother's armchair, but it puts us in a new niche of the category that we weren't competing in before. And so we're very heartened to see that so many existing customers are buying the product, by the way, along, of course, with so many new customers.

Speaker Change #116: Somehow with that with that product and the way it appears in the way, it's showing up for us what it does for our Brandon It it's an accent chair, which has not been in our bailiwick.

Speaker Change #115: A unique one.

Speaker Change #117: You know it doesn't look like your mother's arm chair, but.

Speaker Change #117: It puts us in a new and then new niche of the category that we weren't competing in before and so we're very heartened to see that so many existing customers are buying the product by the way along of course with so many new customers.

Shawn Nelson: And so we'll continue to lean into it. And I think the last piece on that I think is also heartening to the model. Again, our overall model is constantly being oppressed by the macro environment, but we have these bright spots. Like this one, is that this is a product we'll be selling for next, you know, a couple decades, at least. And that's how we designed it, right? Like if you really break down that pillow factor accent frame, it's built in a way, as we say, it's built to last the last time designed to evolve. And by the way, we took a long time; as simple as that, a product like that looks, we took a long time refining it.

Speaker Change #117: And so we'll continue to lean into it and I think the last the last piece on that I think it's also heartening.

Speaker Change #117: So the model again, our overall model constantly being oppressed by the macro environment, but you know we have these these bright spots.

Speaker Change #117: Like this one.

Speaker Change #117: Is that this is a product will be signed for next year.

Speaker Change #118: Now a couple of decades at least and that's how we designed it right like if you really break down that pillar affect your accident frame.

Speaker Change #119: It's a built in a way that if we say built to last a lifetime designed to evolve.

Speaker Change #119: And and and and by the way we took a long time, it's as simple as that product like that look if you took a long time refining it.

Shawn Nelson: We could have launched it, you know, much earlier if we had lower standards. But because of that, it's going to continue to attract new customers and continue to, you know, drive repeat business for a long time inside of our ecosystem. And we're just going to layer one after the next, after the next. And I think when we get the benefit of at least reduced headwinds, forget tailwinds, I think LoveSack will, I think all of these innovations will really take flight.

Speaker Change #119: We could've wants to you now.

Speaker Change #119: Much earlier, if we had lower standards, but but because of that it's going to continue to attract new customers and continue to you know.

Speaker Change #119: Drive repeat business for a long time inside of our ecosystem and we're just going to layer. One after the next after the next and I think when we get the benefit of at least reduced headwinds forget tailwind.

Speaker Change #120: I think less Jack will I think all of these innovations will really take flight.

Matthew Koranda: Thanks John, very helpful, appreciate it. Thank you.

Speaker Change #120: Thanks, Sean very helpful. Appreciate it.

Speaker Change #121: Thank you. Our next question comes from the line of Matt Koranda with Roth Capital. Please proceed with your question.

Matt Koranda: Our next question comes from the line of Matt Caronda with Roth Capital. Please proceed with your question. Hey guys, good morning. Just wanted to cover, I think Keith mentioned, prepare remarks; underlying demand was steady throughout the quarter. Just wondered maybe if you could unpack a little bit more about the cadence that you saw in terms of month by month. And just anything you can share in terms of August to September trends in terms of what you've seen, I guess is it fair to say, demand is consistent with sort of the third quarter guidance that you provided.

Matt Koranda: Hey, guys. Good morning, just wanted to cover I think Keith mentioned in the prepared remarks underlying demand was steady throughout the quarter. Just wondering maybe if you could unpack a little bit more about the cadence that you saw in terms of month by month and just anything you can share in terms of August and September trends in terms of what you've seen I guess it is.

But fair to say.

Speaker Change #123: And that is consistent with sort of a third quarter guidance that you provided I think it's a low single digit growth rate. That's embedded there or are we counting on any other kind of bigger promotions later in the quarter that drove demand.

Mary Fox: I think it's a low single-digit growth rate that's embedded there. Are we counting on any other kind of bigger promotions later in the quarter of the quarter? about.

Mary Fox: Hey, Matt, thank you for the question. So yes, obviously, you know, Keith had commented, Q3 is very much in line with Q2, and our underlying trends have been stable. We have a bit of week-to-week variability, whether it be holiday timing, promotions, product launches. Labor Day was to where we expected and followed a very similar cadence to what we saw through the last two market share events of Memorial Day in July 4th. You know, and as we delivered mid-single, low-single-digit revenue growth in Q2, we're guiding to being a similar level 4 than mid-point for Q3. We feel really good on this guidance based on the Labor Day performance.

Speaker Change #123: Hey, Matt. Thank you for the question. So yes, I. Obviously you know Keith commented at Q3 is very much in line with Q2, and our underlying trends have been stable and.

Speaker Change #124: We have a bit of week to week variability, whether it be holiday timing promotions product launches labor day work to where we expected and it followed a very similar cadence to what we saw through the last two small get shot at that and says Memorial day and July Therefore, you know when and if we delay.

Speaker Change #124: Mid single low single digit revenue growth in Q2, we are guiding to being at similar level for the mid point for Q3, we feel really good on this guidance based on the Labor day performance. It was a lot more competitive.

Mary Fox: It was a lot more competitive through Labor Day, as Keith talked about. So you saw promotions being even stronger than before, but I think the good news for us, as we've shared in the past, and we kept all the time is, as long as we have a three in front of it, we don't need to be anywhere near where others are. So, as others are 40, 50, 60 off, we just need to be at that 30 off, and we've seen a lot of benefits of how we build that sweet spot between delivering the top line as well as driving growth margins.

Speaker Change #125: Labor day, as Keith talked about.

Keith Cigna: So you sold promotions being even stronger than from before but I think the good news for us as we've shared in the past and we test all the time is as long as we have a three in Pennsylvania, we doesn't need to be anyway.

Speaker Change #126: So as others are 40, 50, 60 off we just need to be at that 30, often and we've seen a lot of benefit of how we build that sweet spot between kind of hitting the top line as well as driving gross margin. So you know more of the same from Q2 into Q3, that's how we've planned for the rest of this quarter and feel.

Keith Siegner: So you know, more of the same from Q2 and Q3. That's how we've planned for the rest of this quarter and feel good to be able to deliver that.

Keith Cigna: Good to be able to deliver that.

Keith Siegner: Okay, that's helpful, Mary. Thank you. And then just on the, I guess the implied ramp in even a margin in the fourth quarter is relatively high. Looks like, you know, sort of the midpoint of the guy is implying something in the mid-20% range, which would be a little bit higher than that will you've done in the past. Maybe if you guys could talk about the levers to get there, I know you kind of gave some gross margin commentary, but I guess it implies also that you're going to see significant operating leverage in the fourth quarter.

Keith Cigna: Okay. That's that's helpful. Mary Thank you.

Speaker Change #127: And then just on the I guess the implied ramp in EBITDA margin in the fourth quarter is relatively high it looks like you know sort of at the midpoint of the guide is implying something in the mid 20% range.

Speaker Change #128: Which would be a little bit higher than what you've done in the past maybe if you guys could talk about the levers to get there I know you kind of gave some gross margin commentary, but I guess it implies also that you're going to see a significant operating leverage in the fourth quarter. So maybe just if you could parse out where you're seeing that between SG&A and marketing that'd be super helpful.

Keith Siegner: So maybe just you could parse out where you're seeing that between Estina and marketing; that would be super helpful. Yeah, Matt, so there are a whole bunch of pieces to the profit, you know, puzzle. I'd point you to a couple of things. Number one, there's a lot of leverage to the top line, right? We're back to more top line growth at the midpoint. Number two, from a gross margin perspective, we'll start to see some benefits from the outbound logistics stuff, as we talked about over the last couple quarters. That starts to kick in more. You know, we've seen some good initial savings starting here, and then that ramps through the rest of the year.

Speaker Change #128: Yeah, Matt so there.

Matt Koranda: There are a whole bunch of pieces to the profit.

Speaker Change #130: Puzzle I point, you to a couple of things number one there's a lot of leverage to the top line right and we're back to more topline growth is at the mid point number two.

Speaker Change #131: From a gross margin perspective, we'll start to see some benefits from the outbound logistics stuff as we talked about over the last couple of quarters that starts to kick in more.

We've seen.

Speaker Change #131: Some good initial savings starting here and then that ramps through the rest of the year. So we feel really good about that.

Keith Siegner: So we feel really good about that. We, from an S-GNA perspective, as you recall, carried a lot of expenses through the end of last year for the restatement. We're hoping that that does not continue at those levels, so you get some leverage on that. You know, we also see some opportunities just across the board on things like professional fees. You know, there are quite a few line items here and there that contribute to this. So it's sort of, you know, we're not overly relying on one particular line item in this process. It's, you know, these are numbers and ranges that we feel quite good about at this time.

Speaker Change #131: From an SG&A perspective, as you recall carried a lot of expenses through the end of last year for the restatement were hoping that that does not contain two at those levels. So you get some leverage on that.

Speaker Change #131: No.

Speaker Change #131: We also see some opportunities just across the board on things like professional fees.

Speaker Change #131: There are quite a few line items here and there that <unk>.

Contribute to this so it's sort of you know.

Speaker Change #131: We're not overly reliant on one particular line item in this process it's.

Speaker Change #131: These are numbers and ranges that we feel quite good about at this time.

Keith Siegner: Okay, great.

Speaker Change #132: Okay, great and if I could sneak one more in just on the financing program that you mentioned Keith that.

Keith Siegner: And could I sneak one more in just on the financing program that you mentioned, Keith? You mentioned their program fees that started to kick in that may have reduced sort of those penetration of revenue that's financed through the credit card program. May, could you cover the timing of when that happens? And maybe it sounded like the levers to get back to, you know, a more similar rate of financing or just more kind of tweaking promotions, but are there anything else that you can do on that front? kind of, there's the penetration of financing. Yeah, like this is stuff that's, there's a lot of discussion about by the purveyors and, and backers of these brand, of these private label cards. They give tons of details about when it all went into effect.

You mentioned there their program fees that started to kick in and that may have reduced sort of those just penetration of revenue that's financed through.

The credit card program.

Maybe could you cover the timing of when that happens and maybe it sounded like the levers to get back to.

Speaker Change #132: A more similar rate the financing or just more kind of tweaking promotions, but is there anything else that you can do on that front to kind of boost the penetration to financing.

Speaker Change #133: Yeah. This is like this is stuff that's there's a lot of discussion about by the purveyors and backers of these of these private label card state give tons of details about when it all went into effect, it's probably best suited for that.

Keith Siegner: It's probably best suited for that. During the quarter that's kicked in, and in many cases you have a, you know, let's call it a two percent fee up front now that's been implemented by many of the backers and issuers of these programs. So, you know, that's what we were referring to, you know, and we can get into more details about this offline, but, you know, there are other offers that you can make that are not subject to that program fee, that initial two percent. So we're going to test things like that to see if we take a different then historical program, right?

Speaker Change #134: During the quarter that kicked in and in many cases, you have a you know let's call. It a 2% fee upfront now that's been implemented by many of the backers and issuers are these programs. So that's.

Speaker Change #133: That's what we were referring to.

Speaker Change #134: You can get into more details about this offline but.

Speaker Change #134: There are other offers that you can make it.

Speaker Change #134: Are not subject to that program fee that initial 2%.

Speaker Change #134: So we're going to test things like that to see if we take a different than historical program right, because we've mostly done equal payment no interest in the pack if.

Keith Siegner: Because we've mostly done equal payments, no interest in the pack. If we change and use other forms of financing offers, does that affect behavior? That's the stuff we're testing now. We don't know the answers to that yet, but that's what we're going to test, and we're going to learn. And we're going to see if it does make a difference; we'll shift around and make sure that the customers have something that's very compelling to them, especially if we get into the big selling season for holiday. That's kind of more what we're getting at. Okay, makes a lot of sense.

If we change and use other forms of financing offers does that affect the behavior. That's the stuff. We're testing now we don't know the answers to that yet, but that's what we're going to test them, we're going to learn and we're going to see if it does make a difference will shift around and make sure that the customers have something that's very compelling to them, especially as you get into the big selling season for holiday that's kind of more of what we are.

Speaker Change #135: Getting it.

Speaker Change #136: Okay. It makes a lot of sense I'll leave it over here.

Keith Siegner: I'll leave it over here. Thanks. Thank you.

Speaker Change #137: Thank you. Our final question. This morning comes from the line of Alex Fuhrman with Craig Hallum Capital Group. Please proceed with your question.

Alex Furman: Our final question this morning comes from the line of Alex Furman with Craig Allen Capital Group. Please proceed with your question. Hey guys, thanks for taking my question. You know, a lot of talk here about accelerating new product development. I was wondering if you can kind of quantify a little bit for us how much of your business this year do you expect to come from new products? I know that's probably a little bit easier to ask than answer considering, you know, some products are more geared towards incremental sales than others, but just anyway you could frame that for us, and then it's fair to assume that the contribution to new products is going to be a lot more significant next year.

Alex Fuhrman: Hey, guys. Thanks for taking my question you know a lot of talk here about accelerating new product development. I was wondering if you can kind of quantify a little bit for us how much of your business. This year do you expect to come from new products and I know, that's probably a little bit easier to ask then answer considering now some products are more geared towards incremental sale.

Alex Fuhrman: Than others, but just any way you could frame that for US and then is it fair to assume that the contribution from new products is going to be a lot more significant next year.

Keith Siegner: And maybe I'll just start on this, and then if Sean, if you want to put it on any of this, Alex, did you keep question the difficult one to answer, and I'll explain why, right? So, for example, with Pillisac X and Chair Firm, I think this is the perfect case. Because we launched such a unique and compelling, you know, an exciting product within our, we know we sold more sationals. Do we know exactly how many more sationals we sold? No, that's a little bit difficult, right? But it's a very positive and constructive, brand-forward way to engage customers and make them think about the overall value proposition that we offer.

Speaker Change #139: And maybe I'll just start on this and then if Sean if you listen on any of this like Alex. It's a good question the difficult one to answer and I'll explain why right. So for example, with <unk> accident year from I think this is a perfect case.

Speaker Change #140: Because we launched such a unique and compelling.

Speaker Change #140: An exciting product within our SaaS platform.

Speaker Change #141: We know we sold more sectional do we know exactly how many Morris actuals, we sold no that is it a little bit difficult right, but it's it's a very positive and constructive brand forward way to engage customers and make them think about the overall value proposition that we offer so we saw more of everything right and Thats really.

Shawn Nelson: So, we sell more of everything, right? And that's really what the power of Lovesack is, is as we enhance our ecosystem, our suite of products that are designed for life. We think it reinforces the overall value proposition we have. We'll sell more of everything. So, Sean, that's my take.

Speaker Change #141: What the the power of love sack is as we enhance our ecosystem our suite of products that are designed for life.

Speaker Change #141: It reinforces the overall value proposition, we have we will sell more of everything.

Speaker Change #141: So that's my take so Sean I don't know if you want to add to that at all.

Shawn Nelson: So, Sean, I don't know if you want to add to that at all. Yeah, I think your question is it. I'm excited to get to the end of the year and find an answer to your question. How much of ourselves were from new products? And I don't mean just sound ignorant. You know, like we said, the Pillisatur accent framing has outstripped our plans, which... We're robust, right? Obviously, we were excited about the product. We believed we had a good launch plan. And, you know, for Lovesac, we don't, I mean, you could then argue we should plan better or something. I don't know.

Speaker Change #141: Yeah.

Speaker Change #141: I think to your question is.

Sean: As it is.

Speaker Change #142: I'm excited to get to the end of the year and find an answer to your question how.

Speaker Change #143: How much of ourselves were from new products and I don't mean to sound ignorant.

Speaker Change #144: Like we said the pillar sector accident frame has outstripped our plans, which.

Speaker Change #145: We're robust right. Obviously, we're we were excited about the product. We believe we had a good launch plan.

For <unk>, we don't I mean, you could argue we should plan better or something I don't know.

Shawn Nelson: In fairness, we're going to sell this product for the next few decades. So if you know, we have some outages in the beginning when we launch. We're okay with that. There's, you know, we're building a long-term customer base. We're looking to build relationships. We're not just talking new items. And I know that's not the tone of your question. But it does give you just a glimpse into how we think, how we plan. We're both aggressive and conservative simultaneously. We'll be aggressive in how we go to market, we'll be conservative in how we plan our inventory sometimes, et cetera, especially in times like this.

Speaker Change #145: In fairness.

Speaker Change #145:

Speaker Change #146: We're gonna be selling this product for the next two decades. So if if you know we have some outages in the in the beginning when we launch.

Speaker Change #147: Okay with that there's there's you know we're building a long term customer base, we're looking to build relationships. We're not just talking new items and I know that's not the tone of your question, but it does give you just a glimpse into how we think how we plan where both aggressive and conservative simultaneously we'll be aggressive.

Speaker Change #147: And how we go to market will be conservative in how we plan, our inventories, sometimes et cetera, especially in times like this.

Shawn Nelson: So, you know, we're chasing on that product. We'll obviously see how the any table does. And, um, you know, we're dealing with some accidentally times on some other products, et cetera, just in this, in this kind of environment. So, I think obviously we have a layer cake that, that we've built from our own models that shows and answers your question. But it's not something that we really talk about overtly in the way that you're asking the question.

So and so you know we're chasing on that product.

Speaker Change #147: Obviously see how the any cable does.

Speaker Change #147: And.

Speaker Change #147: You know what we're dealing with some extended lead times on some other products et cetera. Just in this in this kind of environment. So I think obviously, we have a layer cake that that we've built from our own models that shows and answers your question, but it's not something that we.

Speaker Change #147: Really talk about overtly in the way that you're asking the question So am I.

Shawn Nelson: So, I think that as we maybe, maybe for investor to add something that we could think about. How do we speak to that? Because, as Keith said, our products are so integrated. Like the Pillow Sack Directly Frame is connected to the Pillow Sack and the Sack, and the Sack business in general. The any tables connected to those sacks and, and ultimately if we can sell more five and ten and fifteen thousand dollar couches because of this clever table and not just the table. I mean, let me just put a plug in there for all of the new wood products that we launched, you know, new drink holders.

Keith Cigna: I think that as we maybe maybe for Investor day, it's something that we could think about how we speak to that because as Keith said our products are so integrated like the pillows sector action frame is connected to the pillow sac in the shack and the fax business in general the any tables connected those actuals and ultimately if we can sell more five in.

Keith Cigna: 10 or $15000 couches.

Keith Cigna: Because of this.

Speaker Change #148: Clever table and not just the table I mean, let me just put a plug in there for all of the new wood products that we've launched new drink holders new coasters, New trades I mean go into a lot of sex showroom and see these things.

Shawn Nelson: New coasters, new trades. I mean, go into a last showroom and see these things. We've made a big push into wood products. What for us is a big push. And it's also, by the way, us putting a foot into the water, because wood is a big part of the home. And we need to get better at it. And I think you'll see us doing that in real time right now, right? But the ultimate goal is to sell more seeds inside and stay very focused on that in the near term. As we continue to gain market share, gain strength versus the category.

Keith Cigna: We've made a big push into wood products.

Keith Cigna: What for US is a big push and it's also by the way is putting us.

Keith Cigna: Our foot into the water them, because what is a big part of the home.

Speaker Change #149: And we need to get better at it and I think you'll see us doing that in real time, right now right, but the ultimate goal is to sell more seats and sides and stay very focused on that in the near term.

Speaker Change #149: As we continue to gain market share and gained strength versus the category. So I'm sorry, we can't give you like a better kind of model analyst occur.

Alex Furman: So, sorry, we can't give you like a better kind of model analyst, a creative question answer to the question that you answered. But it's got a thinking. I appreciate the question. Excellent. Why I appreciate all that color, and thank you very much. Thank you.

Speaker Change #149: Accretive question answer to the question that you answered.

Speaker Change #149:

Speaker Change #149: But.

Speaker Change #149: It's got us thinking and I appreciate the question.

Speaker Change #150: Excellent I appreciate all that color and thanks very much.

Speaker Change #149: Oh.

Speaker Change #151: Thank you, ladies and gentlemen that concludes our question and answer session I'll turn the floor back to Mr. Nelson for any final comments.

Operator: Ladies and gentlemen, that concludes our question-and-answer session.

Shawn Nelson: I'll turn the floor back to Mr. Nelson for any final comments. I just want to say thank you to all of the investors, shareholders, and the extended Love Sack family that keeps this company going. We appreciate your support. Thank you.

Speaker Change #152: Just wanted to say, thank you to all of the investors shareholders.

Speaker Change #153: And the extended love Sac family that keeps this company going we appreciate your support.

Thank you. This concludes today's conference call you may disconnect. Your lines at this time. Thank you for your participation.

Operator: This concludes this conference call. You may disconnect your lines at this time. Thank you for your.