LOVE - Earnings call transcript Q3 2021

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Operator

Greetings and welcome to The Lovesac Third Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ms. ICR. of Schacter Rachel you. Thank

begin. may You

Rachel Schacter

Officer. Thank you. is President on call Chief With Chief morning, Nelson, Chief everyone. Financial Dellomo, Shawn Donna Krause, Officer; me Executive Operating the and Good Officer; and Jack

results that and Before we get and differ statements in the expectations, I may about would our forward-looking projections prospects. future discussed include our future These financial some include our those remind will statements from like information regarding set of statements. to such started, Actual you plans events financial and materially performance. future forth

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

You as to update future are we this applicable should as obligation call statements forward-looking of undertake on on no as except make predictions law. forward-looking assumptions and on today events. based not and beliefs of statements by required rely our them All that we

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

of Lovesac Company. like Now, Nelson, Chief I turn to the The would Executive call Shawn over Officer to

Shawn Nelson

my our our backdrop. items remarks continues the Then the our Donna against outlook. a the and you few performance. to operational dynamic today. discussing other to a being financial thank progress will for on by everyone of and morning, made begin what highlights and us initiatives highlights Good results quarter discuss third will of then joining review overall related be will key Jack quarter our I

impacted successfully exceeded very expectations amid continue line well front. levels a demand, to of and challenging on testament increase saw XX.X% to by tightly overhead cut financial demonstrated our our grateful job customer continue backdrop, we our on our be as growth operational extremely Strong I done performance, moves environment. the for a managed to navigate flow-through swift top has as the inventory meet amidst exceptional and as our profit quarter, to and progress sales the During the is to this of pandemic and during the costs given their efforts. high We proud pandemic. team

in as course, discuss returned, sale will Donna Of also have more cost, sales as detail. will

Now highlights operations. to let some our on speak me

platform. to detail. we broader insurance more with partnership, is the shop-in-shops showroom virtual. just time comparable launched of We with were of All in discuss formats, operated the are holiday. performance audience including will that release expanded in reflected of news showroom will Jack this for which Macy's adoption seven during of Buy pleased increase. on to walk-in, prior Sactional sales variety in bestbuy.com performance the robust appointment-only a our us open a we our XX.X% as accelerate quarter, environment, and We're quarter-end Best QX pandemic in big excited despite allow The about strength very product reach is and showroom and which our a the offering The

Best the own, by with excited or terms Buy home demographic relocation the within a remodel. often to of especially the intent customer alignment buy when Buy be their category to continue Best our of at during We in shopping

the overall, a and expected. consumers majority to are as equipment. are of recognized But ocean orders supply As currently headwinds we general containers you're able of to navigating landscape, widely and there to maintain in are XX been inventory within have a including excellent week aware, chain positions shortage we delivering days

our highlights. to financial Moving

a resulting including XX.X% QX, to for sales or XXX% our growth. demand e-commerce in million strong sales continue see in increase, products very in We $XX.X

Day In performed effective October our QX and about and in and product on reflected perspective, lasted quarter momentum in moment. Labor expense came ROI were four as to addition, promotions very contribution timing had Donna profitability shifts to a each in with September our not weeks we call. Costco revenue positive expectations. We price start ending just which you will shared two discuss well that our From a campaign, a our which media with higher pop-ups, the results well strong from online margin with in due of from ahead some combined mix above deferrals the with expectations temporary had more our expectations we

$X As and adjusted with year a XX% a $XX.X sheet. balance And quarter million, balance free of cash the million we over quarter. for last debt from was EBITDA a result, ended the up

While learnings. transacting resonated remains led omnichannel that online attributes pandemic on magnified improving we of FedEx increased have and to uncertain, to entire a has brand prepandemic, our namely and to the we're their only and door, spend expand are closed we model, followed increased capabilities, by The our home. return offering, fragmented convenience market really But the our digital to we our the seek product via experience, garnered showrooms the to environment on receiving swift the with time customer focus as to heavily share of directly of go-to-market pivot continue the industry. when our to tremendous consumers researching during product our entirely position at and our home

back others over to that marketing customers of to learnings. live X we differences these to We market out over post-millennial maintain the post-pandemic. the between ability new viewership our to tweaking even confident time months. growth the customers course most current persist messaging millennial are numerous are from over as well. pandemic, we importantly even We have many proven have high Facetime to demos this the growth fit the the to returns We've our have for attracted very have we'll lifetime out digital Nearly benefits us And tactics our Perhaps we spending six mass very made and in understand during drive in these shopping We're how of we landscape Facebook after demos come. estimate our rates using will events product subtle teased these of all new digital tactics they marketing engagement are and past and million Lovesac This Sactional file first make attachment one-on-one many will And the approach customer customers. and during yield years sophisticated to sure pandemic. also and and to helps we tactics value family. research normal. build new our

X% with less awareness, We than significant opportunities. have also unaided brand still market share

on the we by supported this Jack as gains. focused growth strategic strong share and very as into drive the lean build these on So, making will gains discuss. pandemic, market customer and marketing, progress long-term long-term the very, we'll company have of to the remain initiatives new we in potential on we ROI place Despite

work make California in to back continuing tangential product an in category disciplined. East support infrastructure omnichannel expected front investments will elevating and marketing temporarily warehouse for new been home, our and the Coast continue side, continue on early like agile exciting year continue reduced, halted the remaining the our even target We launch in had warehouse product into to the us that growth and customer allow making the Innovating in on to more growth. bring particularly expenses while we experience. a or to opening our QX; next to of that new investments These drive to expand include; in

the for As new to appointment a features, load additional user improved scheduling time we e-commerce and save functionality very seeing functionality and faster positive we showrooms, customer response previously rolled are of with new as out pages, configuration discussed, improvement. our configurator mid-August, platform in experience and experience such

addition an improved increase and in desktop by in conversion We to attachment have both experienced mobile driven rate.

ESG by of sustainability plastic fabric including sustainable since philosophy, categories that substantial its DTC recycled we bottles reduction On our has leads Lovesac front, from and DNA sustainability is landfills. repurposing our been design a all for endeavor in date, of building to and the upholstery of and This alone. our the the company million furniture contributing to and life ESG and and plastic core that commitment products XX year waste guided believe an furniture with XXX% source last progress our initiatives, over to to inception

built which operating Adherence decisions to gains share actually impact. will better. lifetime year, and next a will fuel And but humankind to of buy and over our and our last is for high on products as we to in in to new the make evolve. inspire compete we bar support tracking purpose, designed communication categories our innovation market Our be even we time which to are improving believe buy will current our in less, sustainability we

our about enter the we the positioning. quarter business and of good final As fundamentals feel year, we

lie but COVID with the volume in shopping in of and We the the especially uncertainty, shifting start days holiday are fourth about pleased our quarter, that the earlier mindful ahead with possibility strong season. high are shopping

So, exceeded bottom overall, third of which Against in which EBITDA profitability pandemic impacted we've a a quarter with results, from positive and we top $X quarter. are environment, pleased the our is adjusted achieved the expectations line. our third time we million, the generated first

operating recognize so in will very inventory including headcount. We capital, of overhead temporary return we some business and and controlling as working also been the have sales stringently by cost disciplined marketing expenses, is which

as the very date well-positioned with to success the we to to As we demand products have demand resonating on close we begin to fiscal on forward our well year. the And year-to-date building seen quarter, the out capitalize consumer. for we're continue are that fourth as look we unique believe as our drive we

I made And call work the difficult our thank associates to to the of their turning to over want all that, you I operational on times. priorities. just key an update customers strategic Jack hard over dedication turn provide the our with during our and the for being progress Before to discuss call Jack, and will to

Jack Krause

and Thank everyone. morning, you, good Shawn

existing to a line growth the demand pivot agility from at our they and wherever ability to Our choose third however to quarter shop strong and testament continued meet love business and new to is customers, Lovesac. top

awareness metrics of platform versus customers. and Sactionals the new increase of almost Our had are QX new and Total bode customers. forward. in of we building us count which new up an were brand XX% for Both customer QX customer XX% we our attracting well reflective year of going was success last

on increased both channel our that our quick protocols you discuss health give Currently are showrooms operations, me later. phase update due showrooms and let our the partners. walk-in with and XXX% I in will a of sanitation Now, to

We can due this also market to operate assumption under the conditions. that change rapidly

another online Buy our Best our retailers to Buy like adoption On our include Lovesac we audience expectations. and a together. continuing innovative shopping forward fit are And channel brand the meet have awareness be Showcasing bestbuy.com. the front, able Buy expands point a and to during and believe partnership, to and relationship we'll brand a Sactionals of and with Best Buy selling is the to subsequent to with Best We serving actual through shop-in-shops profile expanded our of touch Sactionals Best their quarter, accelerate the platform. as growing partner end this or journey through our the exceed look established successful customer expanded broader product and great on this relationship reach

addition, four be and continue shop-in-shops In are our Macy's open productive. to

total to through did in our X.X a weeks pop-ups, terms then lasted October no had quarter, December four have They ending now which shops running in we rollout and generating online while of September to and show Costco we test third million pivot and discussed also physical pop-up have In Xth. shops, approximately last volume. pop-up temporary

in Importantly, of grew business. decline of sales profitability despite and partner these partnerships, to Costco to X% structure change improved the development due the a overall channel our business the

results. we to marketing initiatives, and on partnerships the continuing long-term strides update which on with our product discussing so Costco are strategic make and QX our a more with business, strategies. we'll I'll will covered our growth Shawn on I merchandising efficient and and important Buy starting QX, progress long-term get We along and key innovation, now already into good discuss. initiatives, work a straight detailed the Best provide agreement on Macy's Throughout

our spend. We high continue efficiencies to returns drive marketing from more and

is this spend media by core which XX% touch showroom year, than sales partially point more significantly in year, driven to with media and Our count. ROI increase the year generated incremental an increasing prior compared last

in spend. as brand point for opened our ROI. is before, our serve and increase worth said amplifiers we've marketing the we approximately great of As our return Each one one of showroom

believe our In on buys drive drive more we our Through to customer buy linear grew higher these addition, and penetrate of using targeting reach this target helped a our versus from third year, focused XX% year top media, which as reach we our media reach. to the have further like and via last drive been in as over ROI. that tactics, Hulu the non-linear XX% well quarter tactics

continue non-linear will to both a by lean buys of in role. Moving part have forward, as rage we to media as our

enabled New merchandising us in build seen higher results. to our margin approaches sales that

media promotions less in and and that tracks business and brand strong as traction rate of both Our us driving retail highly we new customers the qualified after conversion online awareness are have result who deploy brand the historically highest levels enables to are some to seen. a

AOVs rates strategies premium have as products for new and higher through covers, merchandising Shawn our well towards higher product higher Additionally, mix to catchment helped drive mentioned. as as margin

opened QX. we Showroom a week, the and XX New also down locations. in XXX Hoboken, saw during opened showroom year XX premium the increase last nine quarter showroom their of percentage third and in markets mix showrooms the in point last They insert Jersey. example, quarter, year-over-year ended operations, just of with total in For soft our a loves

So, year showrooms year-to-date, brings tremendous opened showroom XX the Then this we environment, operational our to for XX. a our to year excellence. with refine to new, open one in fiscal this we showroom continue total and and have which as classified relocated opening and amount learn approach it

person to QX in for market lifeline showroom protocols mission virtual to at increased include out which a customer the phase key restaurant with and conditions. interaction reservation system rolled have spot private similar control to customers. appointments of a system pending that we sanitation November. at This allows role on all developed walk-in call appointment leverages which in what operating with showrooms assist We've calendar We our model is and employees and position health the COVID our one-on-one implemented customer scheduling and to in or the implemented showroom we book Plexiglas to operate points with platform a [indiscernible]

currently allow to website. seamlessly customers on are appointments We road the implementing book lovesac.com updates from our that

current asked we peak have Given to with move that and further it's we for the as our want holiday customers customers the one-on-one environment, and weeks, the expect who resonate been service. well-received feature it into already

to confirmation, tracking demos, including delivery web I think out post-purchase swath satisfaction, the showroom proactive and showroom developed and also selection features blocked implemented include lease and specialist pickup, line to a fabric reaching follow-up. post-purchase we've customers and drive will order communication

new and for to by subsequently these and reduction We well points we phone, of customer impact customer as email wait height showroom of In adapt area love from to managers completed flex nearly into showroom to staffing, XX improve during environment. environment as return managers also of improvements tier traditional demonstrating provide CSAT allowing and sell such managers them the as chat, processing. love mentioned tier and assistant podium additional showroom shifted Show all terms previously COVID-XX, one virtually department as this a as our times the significant webchat. environment, trade in refunds a of training services virtual two via

expanding pursue I've discussed presence status partnerships. will of Buy In current sales, already with channel we other terms We'll Macy's other opportunities partners, updates continue when news and with provide in Best you there's the note. our of to and of

Finally, chain. in discipline making in supply infrastructure, of including technology our terms investments and

both mobile have e-commerce platform and by improved driven conversion e-commerce First, new our in we mid experienced launching August, since desktop.

an now additional process, we pages customer including In XX% customer about and improvement launch, improvements. rates, functionality Continuous in versus experience load part the appointment site has purchases, have included accessories. the save are to the for the of now configuration setup. scheduling addition, added of are attachment been own seen of increase and Sactionals showrooms, prelaunch configurator Accessories builds XX% functionality faster which their purchase time, since

As has mentioned about business driven, very X% customer COVID. appointment earlier, and which been now our scheduling our up is of positive response appointment from is to XX% pre

risks and in On increasing continue medicating the efficiencies chain. to supply we supply chain focus costs, on reducing our supply side,

in feet. DC square California XXX,XXX operating regional fully at Our is

fiscal track are Coast East to open end at the on We year. of warehouse our this

chain In diversify which ability with launch drive for three supplier summary, in our In we long pleased execute impacting planning, in system, ways multi-phase sources inserts. benefit and three have to how addition, will supporting that production our excellence. order we to countries have adjusted In run. positively production management our engaged fulfillment now base, goal be sectional to to continue efficiencies our a the teams supply will we in a functions, to management environment project are in with the in

building to brand We profitable infrastructure customers and creative continue and to sustainable effectively processes learn growth. attract deliver our and and to the

to with our we're channels website, financials traffic call leverage We're progress Donna media XXXX the spend look together throughout season, pleased showroom the related preparing the selling to and QX in our system operations to important our growing our the research as we appointment and turn by to as that, on outlook. the enhance all showrooms. brand and to As the well season where over holiday review omnichannel details as our well developing I'll initiating holiday experience. as are truly With working continuing for few buying customer seamlessly to a our very

Donna Dellomo

channel offset our remainder of will by This and online I a in and Thank third the framework for shop-in-shops a by by channel of the Good store pop-ups decrease QX our than sales, growth These rebound online sales then sale channel decrease Jack temporary our Total sales. offset press on sales quarter a internet increased quarter XX.X%. other of on in performance. and provide in The XX.X%. two we was contribution partially comparable sales comparable XX.X% XXX.X% includes triple sales in sales shared XXX.X% review other category are assumed sales XX.X% growth. By earnings, details internet remarks had point we costco.com QX and to Costco internet which a driven that by the of increase showroom net increased sales pop-up our pop-up expected of drove X.X% refer for release comparable all a temporary $XX.X for XX.X% showroom discussed. when our my morning Costco of result in as was product the sales strong shops, showroom partially and no driven in results increase net transactions a of of in sales you, we how to Please Jack. in fiscal Sactional higher our as approaching begin the million our the increase XXXX. expectations net with everyone. channel digit net comparable

by our gross time in inventory and shift, increase costs warehousing reflects step of Our category receipt. SAC lighter plan by discounting, margin blankets, result in in exceeded And decreased options the employment the promotional credit largely we equity of basis expected addition, XXX that mix an impact last of decrease XX of financial our were The a dollars XXX vendor pop-up COVID related in fees costs as upside, related due as and related SG&A increase and point The X% measures. resulting anticipated. modification mitigation in favorable sales stock restrictions. distribution from and a the mix shop SG&A projected increases and QX to rent, third related than resilience of card the in X,XXX realized by in call of to includes that favorable primarily internet in expense had financial was COVID-XX other period up fees, as were of margin year-over-year partially such expected than of come on offset to rebates sales, in shop These less our compensation hiring. in result overhead related the increases in-store driven initiatives. increase the reflect and quarter to and shop discounting freight principally less modesty to leverage year the the you quarter pop-up in related net tariff expenses versus of product vendor expectations, the our increased sales employment percentage and expenses. had in-tore such basis professional million pillows, approximately sales. as the year-over-year previously more to credit with other measures XXX the decorative increased SG&A shared our from of we The accessories travel. was travel delayed points prior fees sales basis costs, These in increased increase related expenses we we $X.X compensation which to costs, benefits third selling showroom related expectations as the decrease and our expenses, in COVID-XX lower and with payroll a gross point equity XX.X% to shifting approximately increase product lower card related the X.X%. points and profit was approximately associated with in related and and improvement decreased deferral promotional fees resilience offset continuation a negotiated product increase restrictions We relating driven rent by tariff basis fees an showrooms, partially gross pop-up than resulted

relating or support into to the was the of lower the which net activity, to promotional initiatives by third investments basis million planned than as prior to we fourth fourth well $XXX,XXX discussed. and of SG&A and Depreciation In quarter as increase compared just was net $X.X investments year unused and to the extended fees was $X.X to line amortization fiscal QX quarter income quarter due Tax XX.X% we're XXXX not a line gross of from increased increased the the the as XXXX increase. year, period $X.X was of loss and million, planned million program third income third remodeled X.X quarter operating customer of shift well and an for approximately showrooms. fiscal the liability. for and new the minimum credit. leverage, expense third million, the This principally operating to approximately margin have quarter related by to revolving on in interest as to capital points quarter. state principally sales the our to XX due for $XX,XXX, which consumer Our advertising XXXX increase quarter to benefit I sales sales expense marketing, contributed and $X.X in direct in tax increased period relates last in third driven And million of spend, to the material media

Net year, adjusted share, of sheet, earlier earnings our EBITDA and turn share on third fiscal in the our revolver. as In income per the to issued line to million in we in credit release Before million. on with their share adjusted to XXXX, most the loss of measurements liquidity balance of $X.XX the $X.X earnings $XX.X and million ended adjusted third positive between per remains attention to fiscal GAAP directly strong in compared reconciliation a and XXXX. third today. earnings income, with $X.XX availability or of no please quarter and of the an million, loss quarter cash of compared $XX.X third last $X in of equivalents EBITDA million million net turning EBITDA, outstanding a debt net $X.X cash generated $X.X revolving We in as we quarter each our income refer quarter diluted adjusted to diluted metrics was net terminology or the our our comparable in per of

related net not In around sales the formal we terms continued providing uncertainty guidance. COVID-XX are given disruption, of outlook,

holiday We it's are this start pleased unclear fiscal of represents the an but how much with season. to the early start to QX,

very lie cases addition, increase holiday In That's COVID volume days. continue still shopping creating to have ahead. And large uncertainty. we

for versus three have online executed two the planned the third pop-ups the Costco quarter we quarter. in temporary with fourth Finally,

margin a offset feel growth, expected to in the year-over-year on the year. to to freight The result operating benefit currently profitability while a expansion increase tariffs, perspective, while front, expense or in pressures the at gross the million adjusted will be last our planned in operating healthy we where QX do in cycling deleverage. we and deleverage. XX% shifts confident not in it the in offsets a level chain of strong of expense reported supply as cost $X year-net we expect As than QX. in From margin we still to sales combined rate fourth EBITDA expect result, adjusted margin generate less expect discounts gross level tailwinds leverage, quarter, XX% we ability more spend EBITDA Therefore, from reported for and year-over

We still continue will cash $XX the our this to working expectations CapEx and million expect range. capital $XX from be to generate the to reflect in fiscal year

QX an fiscal a very out a in closing So, business. conclusion, And to we had and across strides strong significant from we made both year, what net all been sales areas forward look perspective. profitability having has unprecedented the of

of we positioned turn the to back Operator? We like operator, growth, generating the long-term questions. open will call build that, With value would for to on can Lovesac we all as stakeholders. this for up our progress it in fiscal beyond, XXXX for who and now

Operator

Instructions] be time, conducting this Thank you. [Operator we'll At Thank session. a you. question-and-answer

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

Thomas Forte

you. Great. Thank

So Jack question one stay please well. I and Donna, Shawn, one follow-up. have and

a a extent at in COVID-XX then customer what costs. and question. opine had level, wanted to has Shawn, benefit impact follow-up what I of your I short-term on, And and a that high to to So on nature. your nature a acquisition extent customer in you have value And the positive lifetime long-term

Shawn Nelson

perhaps home fill any in blanks. with and -- as a say people Jack COVID the home give and category, on Lovesac think like comment allow To and Yeah. dynamic it's obviously recognized environment, right? I, companies least from then spending their the cases, to and been quick I'll that, a particularly I have XX home. in working beneficiaries money in many

agility tried believe I've the the while in late to increased So, managed react much tailwinds. seen to wait We many as longer than has seeing success in environment. longer our the lead the sales, to the to because not ability us, many of myself way to just our our you just right and consumer case, than it. expected. I category recognize depleted certainly you can't inventories purchase been of that of for case due in that, That's these rather much team times or now, have a as the and we've so things get been of there's And

the results for at smaller our believe the and in way we've just, down us buckling near-term. for that more front spending certainly And, the lines, ROIs so, for beginning, very increasing, having staffs but on I are high think have and partly aided reduced also sort tailwinds. toward of out due less tactics, obviously essentially COVID obviously, new the the these more the come I by gotten And our marketing bottom-line, to we're on

as behavior to that expecting commitment we've the outlook, maintain And marketing test larger our so, and innovation growth, bigger, will still long-term also, to demonstrated for come which a due we front. the for not off. and long just ongoing, us, these trail get innovation, to is we on And, our but through high spends time product and tailwinds like new learn, would perhaps, to the

outlook some -- that think, to eventually on expect and of at the mass from side and is company on can show would time, we And Obviously I we're bigger to but our our tailwind and harder, the off so high bottom-line the growth. top line, critical standpoint. on is where leveraging get the time able on reaching believe that sustain same that leverage, but we that's we that still the numbers trail

been and have that train to drive and but, kinds that, at driving roof if deplete to all we're call it of runaway that. I are Jack, at don't inventories. don't to we our add very we'll some of ignorant to a moment, haven't be careful just -- success this think some the -- that. We've So COVID tailwinds know it our manage self anything the I and to let you so

Jack Krause

market I lot covered The from from my think situation. of you a is them, it thing only the managing dynamics. a sort Tom, observation

disruption. are obviously to looking that think dynamics, If with you you're a a advantage it take brick-and-mortar massive when just consumer we at I from have of advantage disruption,

as choices people and its they So clearly disruption tailwind costs. who last the did before. I brick-and-mortar, choice own comes won't as that's obviously didn't have And with think, obviously during a that a many forever preferred of among became we

well want will think So, to. go away the I look long when you tailwind we all just obviously at that it then run,

of as metro long-term purchase, that the beginning people the homes, our is becoming good in areas, the and the out us moving way advantage of think product trend us is to short-term new trends tailwind about focus for the well as that are from mean home. home an are focusing really trend long a less obviously I an look I think a the And headquarters that at at Those think, are way And being level. moving makes couple good, working make elevated larger, is happening, the very out feel I think next home And indicates, good. the for going consumer buying run educating metro some the long-term, a well, really I of our from I services probably you though, design as areas. think from headquarters feel of be as on to very years designed people and I unpredictable. us really

Shawn Nelson

is mean a The capitalizing tailwind. Lovesac strengths greatest last that we're thing think that marketplace on macro I a in by I'll the often not Lovesac's and perhaps And add, what product. I -- is opportunity just our sorry, unique is merchandiser is

superior still product products category furniture in in people know a that most have competitive in shopping the its We is to ways. many, and our humble about don't opinion many

a which which word is ratings up those and increases kind and and itself further believe flywheel. grow? our platform, of reviews very We the platform something which platform, is will platform adopt so grow. us tailwind a increase the this adoption the on mouth push obviously will so has of drives and that go And so satisfaction is to us that And from will so weight of path customer that as, people -- down standpoint, in more helping that of for sticky fantastic is the high repeat, speed

think, one a is than capitalizing And so, tailwind. I just different on a this aspect or that's merchandise of unique company

Thomas Forte

Excellent, Shawn. Excellent Jack.

to Is way improvement? and you're in the for past. there and open you're return follow-up the you assuming things gauge next use calendar all they the way that of the year, engagement. them physical appointment But pivoted able were impressed shopping would very by return were of your showrooms to say If of a to to able then, my as level to been to, I've showrooms, in potential half productivity, second that, as the pre-pandemic? So collectively, drive physical with at them reopen to your digital semi-normal extent you've the the they

Jack Krause

a interesting really are showrooms. learned I Yeah. bifurcated and would performances we thing and what's closings. I were taken think performances immense between this amount of the there versus of and takes there's were the shifts showrooms, place I lot know that, as is we're shopping between a I think at. that That's while looking the openings we've and would experience. synergy things, an interesting And observation the just web there -- between say I -- there would really one web is biggest say say some

a place is becoming showroom touch where things how include are points include means I services. in like think looking at, Now operate the they that relationships. touch a two our obviously They shop-in-shops, They concierge of potential continued of They to include relative huge is integrated I number what us include include showrooms. it's opportunity. And web options. couple for other a and for And it they include, the kiosks. it's opportunities means points think more And things, online. research an closing taking

us see future. get has touch learning feel productivity a we'll strategy really is we're have what the year more right lot them options points now making ago. out than So really about good it go-to-market in the of a our the And would

Thomas Forte

Jack. you, Thank Great.

Operator

you. Thank

comes Camilo question the your next Please with with BTIG. from line of proceed Lyon question. Our

Camilo Lyon

everyone. Thank on first that. you the quarter so that profitability. Really Good QX is congrats public you. think reached remarkable here, morning, the since Actually I this

the margin want And we are I how just specifically first, to that the front, some should touch Donna, had from where should expansion in trying incremental been can tariff fourth really the been pull forward the would the you could of before, from in a touch overall understand if quarter the we opening the think that so to you expect about on of to to gross center, and temporary the see on any if relative on laid maybe that color on efforts? we costs costs highlight, So progress there's wind down gross here if the helpful? that margin timeframe out distribution be very

Donna Dellomo

morning. Good Yeah.

couple things. yes, So, of

discounting, in biggest discounting the the impact is reduction margin promotional expansion the our discounting higher some gross product items. promotional -- margin probably into with on the shifts So, mix some

we the We are question of -- how when out From coming XX% inventory cover we have our a dollar about the are standpoint, you on predominantly far China. about ask still through of side purchases, tariffs?

we go So, we are continue and less the impacted, being as although less still to year. through

China. to seeing products more and are because in the still to margin coming gross of then some tariffs in answers? coming promotional discounting the relative help But coming from year-over-year you So, their shift. of Hope some that are the the mitigate increase us of -- out it's negotiations tariff out that pricing

Camilo Lyon

Yeah.

Donna Dellomo

tariff believe as the China cycles and is far lot had inventory costs will Northeast go and the a which level our of lesser inventory so impacting we going have some So, through so we by start-up and gross in than lesser do still originally have is but our warehouse, which anticipated, margin, by at -- on. we are forth end -- fourth the as But a the staff quarter, still from that and great. still to we as less years it's tariff impacted operational see coming tariffs. the supposed we And in on be and, means fully

even of to into relative a the gross the remainder year So start-up QX for margin we to relative don't warehouse. year next the our on Northeast anticipate costs significant impact going of this

Camilo Lyon

great That's I customers. just dramatic ask had about color. to Shawn, you if think you your on Jack back hear. a to in how you've the that question could for Thank and increase coming that

I your was a think Jack there last increase there's in -- file customer versus year. said XX% a

Jack Krause

Right.

Camilo Lyon

know that curious lifetime to leverage you'd I'm data to extend value. how that

the this any and of from tailwind and thinking achieved? year really that around seen making strategy you've COVID beyond, sort those So what's taking and what rapid you've year customers taking sticky into in increase that next related

Jack Krause

Yeah.

I think beauty and have to that's we about platform when we the the the approach talk marketing. I that's excitement think

about things; once to attachment going talk And work platform. like people XX%, we covers on the Sactional innovate of flexibility charging obviously little bit the iceberg XX% of buying seat, starting and up platform, message we things the storage terms to really, rates and that strong obviously and components. And new to the add. buy about a So also the value tip a electrical adding Those continue products the us. help in into from that adding there's lifetime within are product the

next had general, in in what would in the rates I be we've seeing and year some seen rates we're expect So maintain we terms very new we've with strengthen. innovations attachment coming only of have now the right purchases rates, And strong. that is of while customer or repeat accelerating that and will so,

the right customers. trends anything if the you to I to our the want about seeing innovation excellent we opportunity don't excited very on we're current Shawn, And now. that? platform leverage to So and are add know

Shawn Nelson

special. again mean, customer Yeah. is for I us, each

delivering livee their design to And way. we're interested those unique And add We have them for other for them in eventually ways get and live are them customers proposition to live. We're being delight them to in new relationships. allow compatibly, very to in a also reverse design into would categories very to Sactionals. interested

major strength of list but a And there’s as and Lovesac. news. view it take our good seriously strategic customer very so, nothing We

Jack Krause

more into value accessories. we to it than there and Yeah. real I mean, the there's is, think adding the innovation in approach add-on deep adding terms of that's platform categories and mining, business is is

platform. into design the approach. platform, So deep key will are to Go the be their that typically that things

business So you're core in in and stronger your getting staying it.

Camilo Lyon

Just to on that. follow-up

the tremendous of you've deepening consumer the you has I demographic fascinating the that a increase. had this your it seen coming of brand? broadening think core or demographic to that's been it's Have

Jack Krause

be It's details. quarter I position been would in we'll year. after talk to better more dynamic this pretty the a say, fourth probably

younger the come with along the demographics certainly in We seen We've in. changes disruption. seen have group a

business demographic with typically demographics surge, think, across of what really. the board online a But that that all than core. the different is, across we're saw I -- the different the a is strengthened especially we core, the is slightly seeing

Camilo Lyon

Got it. All guys. the Thanks. best

Jack Krause

Thank you.

Operator

Thank you.

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

Brian Nagel

for Thanks morning. Good my questions. taking

Jack Krause

Good morning.

Brian Nagel

morning. Good

quarter. First congratulations on a great off,

margin greater regard to is, an think strong that COVID first Lovesac the to going of So to look as Or in in the benefits is we could the demand question maybe to promotional extraordinarily QX. I promotional more at function forward? gross question I activity follow-up think with the prior bit environment? a you a reduced just it it's the activity in starting overall here that maybe of you there's do and show have a suggest but saw question, have, positive be I awareness promotional underline the products is activity, the that subdued could about And

Jack Krause

that's hard Boy, a one.

happening are now. right things many So different

and from a of obviously -- into is I think. promotions significant and now to really company brand situation profitability pivot we're think certainly and critical time the the allowed I have in and the right happy when to to benefited reduce our at a stickiness us turn the

promotions terms opportunity pricing to strongest we a and long-term, brand. continue look to we're do terms to the of the I long-term think in the of going sticky growth of our what at are In things allow with

trends more a right make we we the in do our think to going Are super to sort the a of and we short and really sticky, terms right, it run, into profitability it going We're It about, decision our analyze of certainly consumer the a that order need I before in things? the customer? Are a into value long-term brand. the think there's about back decisions to of, lot a to redeploy, easier to in number a I but love real to customers So we we situation think give of think proposition us. grow makes effectiveness, have going how we helps can good in -- as understand lot to understand are marketing? we insight customer

Shawn Nelson

also in less most said, these or the I and the tailwinds now. penetration -- they think some it's get acceptance home And of the about skeptical I opposed important and building seeing we're environment. in you're support those not the that in so that those and their bit less to simultaneously in products sorts opposite some for brand, forward. credibility of are are just base a have profitability Sactionals sales drives until to of all But growth because as COVID of topline get for right marketplace will our able fact, and for more things like going bit category. And are achieving what while us this people pleased us things these we and again, them is than less again little important customer promote is just us a a think takeaway new little of more more -- of But is in the more well that margin, neighbors is in we're to those things kinds reviews, of bode play-through in to that have beneficiary been now for because kinds

term for this we to I we margin don't get want prematurely we're. -- continued recognize little the our cause about to build recovery cautiously outlook we I a and go-forward bit gross coming pretty increased, get over margin we'll of but been on in We think to it's in our gross still, so near line, optimistic little it, are maybe And say margin that think. don't pessimistic, prematurely itself want on that ahead maybe it the but not good about those it's coming net There's bit because a through through quarter. skis. that benefits the company

Jack Krause

next our five really the well company right our is -- Donna ability the I market I as less run, And the think with you the margins in additionally think now. ability for to scale all discounts become that's years, which Yeah. putting short and of mentioned, a increased focuses and investing if and where the in together, is bodes strong then to piece

Brian Nagel

question, the shifting question at that it's been in through pull demand then the and just is season? follow-up holiday? Got here holiday, we're towards pull smart, QX overall actually very demand And it. you’ve a look could just there or of far today more and you it forward suggest then I I COVID-XX kind lot would -- was this very, have the hearing would sales demand always, very the towards or think you in a caution So data, dynamics your from given companies, potential helpful. caution seeing forward this that has you're That’s that look I the that of anything so

Jack Krause

finish either I'll take off. that and let or Donna Shawn it

are shopping right patterns think, no it that a out see season certainly, think have I we we understand, I stretched the do we forward and and we With – said, I pulled now holiday certainly where know little the trends bit. -- through very happy we the I we now fourth we comfortable with go feel -- the the first with are. right think We're good quarter. as about business

Shawn Nelson

or the don't not I would think can forward. confirm been that -- we things Yeah. had confirm throwing data pulled anything that see

results remain pretty again optimistic. with far cautiously We the and pleased so are

that obviously like were For we've big to -- can. see believe And the is these quarter we us seen happen. to quarter, we'd is trends pleased and And time very they that fourth which deal. a profitability in continue third we're first

Brian Nagel

congratulations. Again Thank you.

Shawn Nelson

Thank you.

Jack Krause

you. Thank

Operator

you. Thank

Please of line the from with Partners. comes Matt question. Capital Koranda your question ROTH next Our proceed with

Matt Koranda

Hey, for taking guys. Thanks the question.

about XX% to we're in the EBITDA help that what sort that off year start revenue XX% of counting date, on and on get level? to Maybe increase the on of you guidance to talk to-date growth the to you assuming of want Just percent year. Any for and over the quarter? quarter to --revenue rest maybe are could is gross the just plan your what

Donna Dellomo

this Yeah. to as have year. quarter. expect with online pop-ups quarter getting booked pretty be we we're for QX year specifically giving all than we that That's We're much guidance -- we that in over over we're quarter fourth not this along do fact do and last the much indicating Costco giving that guidance you three other the are as we're our not not Matt, -- quarter increased saw

contribution net coming as So sales well. anticipating we and some in are Costco from

other Xth? As than as are specific been our year as Jack as its far fourth not increasing net at cautiously lot that's as again, And getting and the a year But couple the we optimistic quarter, have we as are over what has have, fourth to amount. December So, going limited strong, probably as it's quarter be stronger guidance weeks but quarter Shawn we our remain we said. or far as have are third with weeks both started shopping, net sales what revenues happening. a much off the more

point, is So of this our quarter. probably are our in from at fair revenue than amount XX% probably more projections a the for

Matt Koranda

like there. little Okay. It color there Costco helpful. online no front, just can just the progress pretty sounded in quarter? maybe just sort was confirm they then, a talk And your were that? roadshow about the roadshows And That's physical third on on roadshow maybe the you of and productive, more revenue then a bit just little but

Jack Krause

actually were -- no the physical in third There road Yeah. Yeah. no roadshows quarter.

we after I I they there that had Costco were confusion made think those. online think think there people advertisements was been had canceled because some from some

to very the roadshows think, having in quarter the So, have very we well. discussed. They well, before hadn't of, and We million it I as with pleased on little we're we did with roadshows. We $X tune -- plan done plus the did the successful little digital support fourth do very them.

about testing roadshows be excited will three We and it. we're

of terms discussion. is tied long-term everything go, In to overall the

I them. next them working cautiously last year. a now as from in we of can still of report from details get we'll say QX, we'll any we're for And up would very inform I with place we're So, good soon you last were discussion we optimistic think to wrap negative. that things cautiously sort our with as

Matt Koranda

if fourth clarify benefit just, the then could on just And quantify quarter? sneak but the I more margin And us. Donna, rebate the assume for you in that quarter, doesn't front. I in repeat just the that great. one gross could vendor That's

Donna Dellomo

Yeah.

a year. but to and that and that's -- of QX was coming the probably mean, still about XXX,XXX. year to to a vendor We QX two with comparative probably no not then in was amount rebates was to the in So, it rebates have fourth it do quarter last last magnitude in million, in projected come QX, dollars, I small of about of

Matt Koranda

Great job guys. helpful. Very Okay.

So, you. with I'll jump Thank back you.

Donna Dellomo

Thank you.

Operator

Thank you.

with Our of line proceed next Genuity. with question Maria comes from question. Ripps Please the your Canaccord

Maria Ripps

fairly about partners morning the how It months maybe Can like you Good the several approach mean shop-in-shop evolved what that working you channel thanks a and for you sounds and past margin talk prospects? successful might over and have strategy. with of for questions. growth

Shawn Nelson

reach ability relative question. would bit the else of at a expense shop an a you some I in a with by an and and talk do to look that think with the I we of capital That's And productive win-win. the spend we opportunities. in of is drive traffic and to touchpoint product ability the time way investment were traffic the than we're pleased background, if very our the a And that's the what Costco partner, at profitable more we're CapEx maintaining drive reduced change that partners levels we stickiness and touchpoint opportunities. right basically And offer creative we of of a a have obviously -- the really say Costco of these an And mean, way to I interest obviously with Yeah. in anybody drive at lot would think really to very obviously way, of aware productive that branded I do historical very and can are ability to the profitability operate or some a not with backup amount our was seeing with a our while little as partnering people, we unique -- continuing And some way history, models. to made an to massively say the us I and shop-in- is, think it partner's what presence. can we considerations ability about I sales.

you you mall between drive if have that it the and with and are about to to a so, ability you when environment. showroom to perhaps costs would high shop-in-shop Costco, relative traffic, for a think classical -- a synergies compare brand pretty CapEx And

at. we're the opportunities So, those looking are

lot touchpoint in and I develop we to specifics. non-traditional more a growth think strategy, see you'll continued what the mix to showrooms. showrooms of is in showrooms. the in continue increase committed our We're as come to But

a terms months six for We’re touchpoints. and in test learn mode the next of in

So we'll be giving you updates as make decisions. we

Operator

you. Thank

Our Group. your Craig-Hallum line final Please the with from Fuhrman with comes question. question of this Alex morning proceed

Alex Fuhrman

last question quarter. just you about there Great. my Thanks kind open touched congratulations very question I'll the much have sounds in but taking XX the you end on for the ask of about third Why at there, does the it showrooms and showrooms? third of it quarter. my Jack, profitable the like

opened good in in to the pent-up think you demand of just I that little was that, if I any able correctly, bit a one showrooms earlier that Or can you've open remember maybe from weren't most quarter, pandemic? some are will of the front us seeing really real there? you opportunities with the stores about be and out anything new helpful. estate you share can seeing the your real what opportunities on we're performance Just estate

Jack Krause

Yeah. showrooms, really and based businesses an attest third but and impact team and did construction job, to impact to with in quarter. the and Look, everything our I else. the the was all open -- the working XX of amazing as approvals originally It's XX COVID intention will this and on there our no

had of year. the committed already -- the squeezed into end deals been were that was So, to back really that

creates any clearly, opportunities. Now, disruption this, as forward, kind with go like we of it

increase terms are in own as options opportunities we estate ability in traffic. to values touchpoints we less well terms and changes inherently perhaps as have dramatic making real see drive and lease significantly intensive that We terms we in have. our So that create and of creating expensive of our less as of rights more deal options capital

touchpoint is go a see think, with diversity our forward you'll strategy. I more as we So, what

Operator

you. turn any to back comments. concludes Mr. I'll the Thank session. Ladies for final that gentlemen, Nelson our floor question-and-answer and

Shawn Nelson

all grateful you us of thank much. We're to our particularly investors much continued difficulty] support so your difficulty]. So who [technical for Thanks [technical support.

Operator

This you. Thank conference. today's concludes

participation. time. you this Thank for disconnect at may your your You lines

The Lovesac Company (LOVE) 9 Dec 202021 Q3 Earnings call transcript