LOVE - Earnings call transcript Q4 2022

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Operator

Greetings, and welcome to The Lovesac Fourth Quarter Fiscal Year 2022 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Rachel Schacter of ICR. Thank you, Rachel.

You may begin.

Rachel Schacter

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

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

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

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

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

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

Shawn Nelson

a in to review our finally, detail. growth few for and fourth And us Good Thank our thank will Dellomo, fiscal outline will Donna and our key our I today. joining Fox, by President results related financial more everyone, our start Then you, CFO, our other items the and will for Mary morning, of initiatives quarter Rachel. and you operational XXXX COO, outlook financial reviewing XXXX. highlights and performance.

out Before turning me the Ukraine. war heart to in results, say all goes first let affected our those to by that our

Lovesac tragedy. course, it is, guiding love, the human breaks Our to hearts of see at and ultimate principle our

know families. we are women certainly Ukraine no their in are our have operations business our While on servicemen alert, the region, and we thoughts them and and with

XXXX Lovesac with business XXXX As and another backdrop. the our extremely Fiscal challenging record fiscal volatile was for performance. continuing perform despite well to year for

of Our for advantages model strong people, competitive are our across and reflective financial operational business unique brand, operating the our year results platform. and

XX%. year, four-year the a sales comps XX.X% we increase of $XX.X XX.X%, and versus is net EBITDA growth delivered comp CAGR comps of of growth For XX.X% sales increase. annual total of and growth of on prior This adjusted a a stacked million, incredible total XX.X% year

operate year, first-of-its-kind wireless enabled convenient which living system sound sight We in charging in completely the with immersive of an innovation, the is the Kardon, in-stock Sound touch accomplishments shipping to We and manage COVID We Harman digital best believe achieved not easy total successful a branded Sactionals deliver year vast allowing of much-anticipated Lovesac We surround a directly maintained product to patents and throughout the key design four Sactionals us new levels partnership unique So mobile XX of Key that StealthTech Lovesac the out two should despite technology their challenging leveraging Best opened days shops, We by look our room. customers this on majority XXX This product points now business we model XX. challenges. like. represent chain a launched physical manufacturing + for is just a we countries, help total in customers to is SKUs shop-in many different model, Buy better beat. a digital operate Charge of including redundant journey. our supply supply 'XX. new down-period among prior what which eight chain unplanned and were: in kiosks; showrooms, XX environment. trucks orders just operational in these concierge fiscal we of

recycled into them firm ongoing to scores, sustainable overall We for XXXX. Sactionals best-in-class business and reporting any and long made experience. remain are by grow our upholstery commitment ever while bottles lift our the satisfaction, bottles plastic infrastructure Last supply customers supporting December have ESG XXX% in delays the XX.X%. efforts file without more publication our estimate We us customer transitioned including XXX diverted and our in we reaching we in-stock model, of given Since We achieving e-commerce saw continue critical CSAT new XX Lovesac's customers, we of fabric, service manufacturing chain gray a that over diverted the growth, customer levels investments up-cycling to industry scale support aware of. inaugural in that will growth rapidly with home allow positioning, waste the more report XXX% in others fabric our than our of targets on for a appreciating the loyalty to our more existing than sets zero emissions decor focused with plastic counting. to in that's million bottles, other drive million from sacrificing showing from year, customer challenges. journey, ESG than as We of of well and stream waste the people our stream, continue waste platform, ESG customer and we're to and benchmark to circular our are zero to all

highlights our Now let fourth performance. of me discuss quarter the key

continue broad-based quarter across that share market exceeded We strength expectations pleased fourth performance our gains. are as well with we channels very to drive with

total XX.X% of the Internet For we to on the XX.X% line greater-than-XX% adjusted of and in growth income $XX growth, $XX.X million, of to an last delivered growth. reported results XX% of year's quarters million growth increase consecutive XX we XX.X%. quarter, and increased top of top marks of to quarter. with sales by Net XX.X% This comparable million, EBITDA XX.X% $XXX.X for

in ability seats highs. mid-XXs tracking range remain excluding As these disruptions and before, once we of adjusted We historical disruptions, In core abate. taken our would have some in the increases margins EBITDA could want shorter-term price look increases on at our environment, gaining while supply we've company said also price be our as chain gross Lovesac times. delighting levels the meantime, margins deliver share, gross of on cover the confident for business at be and and delivery But throughout speed we significant lot this market to in sides and believe surprising uncertain and because customers stock these really is we to careful well. our a with to

resistance. we Importantly, seeing no are

available are strategic. the margin in we us. regards run, to we still price So increases, being In beyond levers short have to multiple managing very

showrooms, as evidenced by mix both done beats has well, which realm. continue to will merchandising, to and really team adjust We promotion, the in our this and expectations online in

Now coming we end, leverage 'XX. and turning with and Demand manufacturing work is as growth We our about to stem we in for the 'XX. our strong, planned and our input have judiciously. power will supply outlook expect we FY headwinds do momentum our year. confident goods partners mostly pricing to will chain through tremendous for fiscal raw persist To inflation we our at the use levels, labor that to feel and

and pressures how synonymous true emissions circle zero innovate we able strengthen long authentically the including term our last We mitigate supply lifetime the consumers operate, we products that things Lovesac a Pursuant XXXX, Lovesac, can designs our with zero of We chain sustainability, and at digital breed over core time. evolve waste while built goals life policies our these are largely short our to believe to to term, to capabilities. that to for and expect become with by relationships is we how sourcing, to designed be in and long-life lasting consumers. and making long-term long-term programs for pairing with for sustainability

for term, the straight now: at sales than four been by margin growth even generate just structure, to long EBITDA with basis increasing on doing see intend the what an continued high we years growth. various driving in where increasing our points we've leverage while we Over P&L adjusted efficiencies keep annual margins more doing net

As the other line concerned about the at are gross within P&L. movements shifts that, we quarterly less long can we margin as or temporary do

by resiliency grow our summary, So continues macro performance of in throughout the backdrop. a such confidence our tumultuous to

team Our strong. is

can industry sound. somewhat Our remain Designed true high understand and our delivers how strategy understand continue to perform is from to philosophy best why innovation. Lovesac is to Life levels The swings for insulated at way

looks the fashion general. Our of like modularity, but furniture, These retailer. core elements importantly, Sactionals, provide our other more Even not business a sectional many model primary product, consumer, in compressed from operating decoupling like adds packaging major to we the supply elements, et advantages and the cetera. to chain are advantages shipping, for

a We model. business are also direct-to-consumer just not

and Our utility, proprietary, sustainability actual products heightened many deliver protected versus patents, and by durability the competition. are

sell continued this cycle the virtuous growth drives that took which our sell, fact, now on product of and we consumers into who offering creates the quarters for curve. lie. broadly, Perhaps, in efficiently, and innovation those As demonstrated the these of few ongoing are this years curve, early as and where many moving known more a the early and majority possible. increases, products we're adopted Sactionals otherwise product marketing our combined more more pipeline our adopters unique growth. of more into are adoption diffusion now a brand volumes is have will with innovation great we now, spend efficiency The which we word-of-mouth risk heretofore real past obscure

have early It to billion returns driver, brand number about do, as consumer reach fragmented homes comes begun our space a toward because before growth yet proprietary share concerned from category Lovesac beyond in highly electronics Sactionals only the the portion the this that. its the X%. journey credibility is steeper may of word diminishing that acceptance We be meaningful $XX-plus the consumer couch innovation about the another to at only mouth with are like curve. of Meanwhile, not to our saturation that has We still now into forward look Lovesac, years has or on and curve. enjoying gained of started fantastic StealthTech just adopters the of

categories, adoption future. can proven for do, innovate our advantage will we driver remain as differentiated we curve a as product new of and into continue take Finally, core we we've to the business as into this

model inventors, are and with resellers, relationships and This with building gaining to each totally not can future on direct-to-consumer coupled interrupted strength, we long-term a of them by capture customers continue wholesale model business We disrupt. order focus our is believe in we to our in the inventions. remarket all omnichannel we to data where

accomplished I to team thank I to they the environment. while for all Lovesac the navigating turn over entire Before want call in uncertain fiscal XXXX Mary, an

We and are strategic our cover and hand priorities relentless XXXX. fiscal on looking we forward it I in are Mary progress. that, thankful and With efforts, to to successes their will building so our to for dedication over Mary?

Mary Fox

and everyone. you, Thank good Shawn, morning,

strengths the to quarter and and our fourth our of year performance strong are testament team. Our full of agility business record model a the

years President joined commitment quarters X-year stands As in and the on the and from really doubled everyone all the you, months is in past highly the our a product as and the as In of our a COO, business they a Shawn and XX% have I four innovation. in strategic last passion associates than What with with me XX growth to appreciated consistency reduction well comparative they all XX.X% our showrooms driving. stacked strong tripled four sales performance as two basis. shared functions of time since result of the Lovesac In out as I consecutive of getting drive, differentiated priorities Lovesac curve at the are and our almost benefiting to is the all most and a know of have relevancy years. and of CAGR alone, greater growing spending

record our in review. launch which and these strategic made have 'XX. highlights we strides October the of will was are key We Starting initiatives, with with product results pleased the innovation, five middle in growth now against one, the I our very which of StealthTech

we StealthTech to in to the continue be on our element the back very satellite than demand this is we item. those per as who anticipated, Sactionals has internal of on of different our buying over customer higher that StealthTech. to as a The overall We stock not launch transaction for it been to getting XXX even X the ability brand start billion generated basis Since the by launch, impressions actively meeting launch is and expectations. are and pleased demonstrated over StealthTech, are had accelerate preference product well AOV with plan only was has points great jump is side The activity and launch.

drive Our points priority to and will experiential in continuing demo through awareness drive touch our while 'XX fiscal be marketing and to conversion. media and leveraging PR

media this and as merchandising This versus after drove and this $XXX.XX, marketing customer year mix X.XX, improved an 'XX, of year-over-year. to yet and Two, assortment strategies. performance resulted and and was $X,XXX, indication drive and during testing last holidays Memorial overall expect increase in innovation. fiscal headwinds. lifetime In that progresses, headwinds out successful ratio which XX% we year XX% of cost value to which up ratio provided innovation sequentially reach. delivering Day rolled cost level offset acquisition awareness to highest We our build was a despite our significant in local these customer Labor the margin our will efficient as continue a our Broadcast strong for Day, performance TV was was

fiscal 'XX. has efficient have resulted we in that more continue through to we Snapchat, addition, and TikTok expect CPMs In expanded which into

AOV was NFC Championship XX million that into Lovesac continues data Year-to-date, margin for traffic a platform. premium impressions translated while overall we The to segmentation overall utilizing offsetting placement saw around conversion, to that Lastly, by benchmarks. to media continue and over cost above customer our we increased improvements higher and this games, the significant we the This perform expect performance first we expanding media and fiscal AFC time. anticipate And and ROI our pressures, drove to capabilities, ran see website. in placement 'XX

in drive our search ROI local location focused on and such spend programs hyper points. into We continue touch and to these with to as invest grow will high marketing 'XX, traffic fiscal performing continuing to to geo relevant also driving programs

of now the awareness is our word brand share one that encouraged mouth number gains. very of also are driver We and

to this perception. be we and to as We tailwind our growth expect continue to brand drive a for awareness continue

our and with scores brand overall in fiscal who versus up Our four customers XXX one in and year-over-year 'XX Overall, family Lovesac customer having basis significant count a experienced effective our ambassadors very house. experienced customer business products customers prospects are satisfaction and proving XX.X%, friend's or at points to be 'XX. our with nearly brands strengthening purchased up fiscal were

improved our strength limited positioning points Our drive to costs margins. year-over-year, significantly and offset has and perception across brand in while channels and discounting all has touch down Number taking operation. to price improve increased market the allowed increases us this three,

product decision. our of enabling to across touch in We experience and are and all StealthTech before Customers Sacs final points. hear their to see various the them can continuing making see synergies now our with of addition Sactionals locations, now offerings the

comp continue to plus of showrooms part touch-point or be continue four to reflected an basis. as our a omnichannel in Our and our important XX.X% XX.X% comp plus strategy showroom deliver strong on X-year results of quarter

With to our in this quarter fiscal showrooms XX showrooms the we new four, four target new of open met launch year.

higher three. that touch-point four X% we customers the rate. converting fourth met their These of play specialist to in seven total quarter reach highest of CSAT those not. kiosks the over whose a points shopping purchases specialists experience. In business, without Best threshold than quarter expand four X.X post-purchase their quarter and across shops XX% addition, and Lovesac appointments, our And Throughout four, at a for was than service. shop-in conducted both e-comm. did post-purchase physical engage opened than for was represent In with during as team communicated Post-purchase more appointments post-purchase as presence. a in well specialist conversion and the predetermined our a customers, quarter quarter touch our was dollar quarter in touch-point that with XX% quarter, continued points we continue with increase market to important which X,XXX role four, XX% showroom XX Appointments more nearly Buy an

sales throughout touch expanded talent further strategy satisfaction. we points a service with quarter enhancing This all support and trade across and X. to both areas to planned, goal pre- experience customer and journey, the leverages shopping our increasing customers of rollout their post-purchase As in customer

our contribution traffic-driving to touch locations in of our real our ability currently locations, point we focused leverage XX% As we continue ahead, to therefore, with up. look off-mall the strong expand driving our being growth X-wall to year and off-mall on forward planned estate

in our the the organization. to with of channel resources costco.com. We allows business, have been rapid investment continue presence. This scale on investing talent growth We're Four, plans. very we're us focused the Costco expansion field with other where strength expanding our online specifically additional to on recruiting our pleased directly hosting of roadshows

also We premium have that offering product driven year-over-year have seen margin Lovesoft significantly and year-over-year. productivity increases expanding by an cover expanded

excited about X. partnership with Best shops Buy, XX be and continue shop-in We quarter to we the opened in additional

to we other increase then and continue expanding improvement look continued partners holiday also throughout rate year-over-year period. partnership. launch which will support as disciplined as opportunities effective throughout bestbuy.com strong pursue to the see the brand enhance the key fiscal We StealthTech channel making presence with to marketing with our as year, of bestbuy.com, continues business an well e-commerce And have Starting and experience platform forward to the expansion StealthTech five, our also of e-commerce, of to to customer with investments. this holiday We attribute way infrastructure quarter. 'XX, continued as results the investments in reach. season to of our a awareness we made seen the sales we our this strong be other our on tests In we

we and marketing the utilize September, segmentation launch to in in first-party targeting of all to began efforts. in new our of With data platform our quarter our customer four, heighten data

approaching. we year and to us power our journeys, that COVID-less are for improve is positions it enhance to harness this the of omnichannel strongly and customer We excited this continue world tool as a

with customer a engagement. providing close be service update. Year ending in lovesac.com us our the right support sales benefit year in great projects from four, regarding a four, water improvements supply on year, underway this the customer in needed In understand year and customer for improving reactive connected are in ahead Chinese journey. the on by already and satisfaction deliver We'll the with and new valuable we also XXs experience with in experience to then the chain supply strategies, investing to intelligence research to also New our look customers positively we not As business employee about quarter the and platform, of in both high enhance over needs. This proactive omnichannel but impacting position solution substantial will inventory omnichannel and customer our providing quarter finally, enabled we to only continued quantities And stocks shutdown. inventory chain which obsessed

Our delivery this our to time category, to we to be in performance. committed and customers continues remain best-in-class

As to took Chinese and back and to on New benefiting. fiscal executing flow rough ongoing of forward, plans we the restart now from flow which we're anticipated bold cost from inventory ensure the 'XX, action quarter at product three pressures half over the look we in address Year first least

our we further. logistic cost continue and surcharges base delivery, cover diversified expect consistent chain. experience fiscal focus to us order pressure on some categories fuel our will 'XX, do helped we the mitigating Into efficiencies, in will costs that supply and reducing key has performance. Donna to Our of form on risks from the sourcing our to But supply increasing customer in strong support

of continue will capabilities people asset. drive largest our systems our improve We supply investments the and performance to our disciplined to chain inventory, and

and very be very 'XX drive pleased about financial are strategic this we in year summary, excited growth our to opportunities performance the as and in we continue with operational our initiatives. So fiscal

significantly when We customer ended satisfaction very overall scores 'XX. than we proud fiscal that the started our year higher are

and we're longer-lasting customers have closer make brands, and to drive seen, can servicing building them really relationships sure and our we better them. that our with of we awareness want As perception

continue consumer the circle to help to impact to and drive will our business. growth commitment of future Our us to CSAT our

a business. really appreciate exceptional and reflect execution to as business team's navigate passion good we results momentum We we of our environment. as Lovesac dynamic underlying about trajectory team the strong entire 'XX. commitment Our driving the by the continue we operating all the start And fiscal feel of and to

to our benefit a from purpose-driven who consumers founded very to value the the full We Donna on broader to will outlook. gain sustainability. year of four to continue pass financials Donna? to positioned are details now results, few and review trend share our fiscal well market relating 'XX quarter I and call brands over

Donna Dellomo

period. fiscal begin XX.X% fourth how Thank to results $XXX.X comparable the was increased introduction costco.com, then $XX.X campaigns; remarks increase quarter for ending growth XXXX. This touch Buy Showroom of my due everyone. additional channels fiscal our sales year-over-year due two prior driven sales XXXX. XX.X% Mary. $XXX.X prior an point-of-sales as transactions we're of The of and of to in sales in productivity year-on-year; fourth mobile event all to or one quarter over with XX%, fourth success of our framework to $XX.X in with as which net was of eight of sales concierge an count the year. you, increase million increase our million XX Good XX to primarily kiosks the review for increase a million year $XX.X provide a across shop-in comparable online XXXX fourth or shop morning, the with $XX.X pop-up showroom increased points; I additional $XXX.X a and quarter higher increase XXXX. overall locations on net showroom of in Net year; to approaching million million holiday quarter by prior to compared was shops fiscal the the Best and will the compared fiscal million million of

or are our recorded. reflect which reminder, orders always through when of our related customers net the QX, million to not while does $XX be approximately timing is XXXX, year-end transfers the of orders a orders. to increase fiscal In to showrooms, customer point-of-sale which this point customers' at As to represent XX%, principally transactions and waiting control sales at increased comps shipped the placed

margin, non-comp addition pop-up increased XX.X% principally I as the shop of million fourth to shop sales meaningful sales to and given net was shop-in fiscal and also freight principally freight, over are which impact The a increase. which or prior year XXX were product vendor XXX the costs, year, the continuing inbound net Lovesac basis one by as costs. total of in net year to increased shared increase mentioned, additional XXX and the opened holiday additional sales, and partially and higher We other the guidance was costs last promotional lower customers principally higher basis pop-up showroom prior tariff just by net category concierge million XX.X% the in increased decorative the of discussed. costs We made increased exceeded to $XX.X which driven sales, partially shop sales, to increased in mobile and million driver since XXXX of through on points quarter fiscal fiscal the tariffs. costs and margin directly the kiosks in the point Internet primarily which call, of fiscal basis by quarter net showrooms, during the our period. XXXX and basis over freight freight leverage sales. campaigns. Buy sourcing expenses offset and from compared last $XX.X in Costco.com prior Sactional warehousing the include campaigns. shops of holiday period, pop-ups basis China, includes related period the of increase our increased freight sales improvement or negotiations an negative to tariffs $XX.X net in just over XXXX points fourth performance sales, compared These you inbound container which percentage shop-in fourth in product XXX increase XXX.X% sales in to of XXX driven $XX The assist Best to net driven was our XX.X%; higher other productivity driven by the $X.X XXXX year fourth includes due outbound our as discounting related quarter our mitigation we quarter of of outbound points of net pillows, points success an and prior By the with million higher primarily period offset to e-commerce category, XX.X%; in of gross principally the million our by improvement in sales on $XX.X approximately accessories, Other year of product warehousing increase blankets decrease to in prior Sacs by channel, quarter with year of total million costs the our fourth

These margin gross of costs those fiscal we primarily as rate fourth of XXXX volume containers. lower percentage basis had costs in freight by XXX approximately inbound and guidance a than the as our of the well Our arrival driven points, quarter exceeded freight are projected. function expected freight of

QX that supply the with line there and congestion While chain arrivals port caused was in the reported broadly with rate delta. some in component were expectations, delays timing containers' on the headwinds due to

times. good these deliveries or to and our in in that distribution scores degradation Importantly, arrive chain redundancies And CSAT network, with news QX. expect we had we the no in delivery the is supply customer

SG&A of costs outbound freight as The addition, due increase costs warehousing by result projected. and we In higher an increase better in compensation. driven employment saw promotions, new in higher year-over-year less than of variable XX.X% was leveraging a hires our product to margin and largely

of spend to investments were in fourth expenses to Advertising the approximately to million increased $XX.X net showrooms. sales related that XX% we activities, our million offset were expenses selling-related We Net credit expected related sales primarily investments year's we financial principally other sales the compared was drive the in XX of a agreement allowance the by prior of and quarter line of into XXXX equity-based deleverage increased, reversed prior relates net rent, of percentage fourth infrastructure The quarter resilience increase $X.X line or basis in to net of was deleverage period, leverage to were as deferred XX% of making as the showrooms fees prior fees periods. interest are I travel card additional agent principally in Operating fiscal of $XX,XXX full settlement In kiosks, operating by benefit as prior rent investments Overhead sales. assets, increase revenues quarter from and increased just discussed. is the a expense in expense increase investments, net minimum remodeled unused income a $XXX,XXX to the expense. measures. $XX.X media amortization to liabilities relating expenses to Advertising valuation credit. which XX.X% quarter compared travel, fees tax compared investments had to XXXX, hold resulting increased due XXX sales a compensation, onetime fees due and $XX.X higher the resulting and to tax the XXXX income campaigns in our a fourth existing partially fees, state and expenses insurance. sales and $XX.X also onetime the to increased had expense Selling-related period. the to are rent and insurance, against tax the in basis current $X.X line within on from fiscal million, income put higher last year from our expense just expense percentage COVID-XX card was by the period which credit SG&A $X.X of equity-based due expenses capital payment million and new net as and for factors the in $XX,XXX marketing quarter The XX period future costs, to continued million tax to point to the to year in marketing settlement compensation. net increase in year expense with Depreciation due on business plus terminate eight fee to discussed. we year in the to fourth the prior prior the period. fiscal also support related an The from expenses year sales on in from of of marketing the infrastructure in of points fourth with and to year, to sales due quarter awareness million partner. employment to in revolving Interest a agent compared fourth in million vendor relates growth. year driven

tax share of our terminology $XX million EBITDA, measurements diluted net refer per each adjusted we $X.XX by period. in onetime adjusted to which $X.XX fourth in GAAP the the to our in per $XX.X to quarter reconciliation in $XX.X diluted our million was million, discussed. to of Net benefit XXXX and prior million metrics net to XXXX per income their and year was million the compared We quarter today. income per release generated of of or EBITDA per share adjusted the share $XX.X share, and income the as earnings issued fourth year fourth compared the or as increase period. The share quarter fiscal EBITDA I prior just of comparable fiscal between of adjusted net earlier net significantly XXXX impacted $X.XX $X.X fiscal diluted Before in equates the in turn of of diluted please directly in attention income income, most

to our balance Turning sheet.

million details Our quarter fourth fourth liquidity our to we strong other ended and in as $XX.X equivalents the on continues financial and million earnings of refer cash with for to press Please our revolving on credit. XXXX year line fiscal our cash and performance. $XX.X in remain availability quarter release

our Regarding outlook.

operating We relates range in dynamic of outcomes 'XX. still as to wider potential environment are it a with fiscal

the outlook but updating are providing year, not be your a formal will are we framework this, that we'll Given you as models. full for helpful share

of which will another We than targeting showroom openings. more net XX strong growth, include sales are year

is opportunity driven a infrastructure growth approximately sales to XXXX range, below increased net where and continuing a levels lies ahead. scenario is XXXX EBITDA of the despite basis in increase gross the freight expect costs to the continuation expenses projected and support investments expect inbound are the XX% make investments above higher as that costs. multiyear rate fiscal sales to by In also outbound XX% Adjusted fiscal growth substantial margin freight we net be be with to range. leverage operating in rate this points we to low in scenario margin slightly infrastructure We XXX levels low

compared XXXX, we year. of EBITDA same impacted net EBITDA first outbound expect approximately and being primarily Adjusted XX% is related and to freight positive quarter our gross adjusted higher For breakeven fiscal fuel low quarter in of by sales rates to expected margin last the growth year-over-year million adjusted of ocean approximately XXX $X.X of higher from resulting points EBITDA inbound basis higher transportation costs surcharges.

to from million the be $XX working fiscal in we to expect CapEx expect We million XXXX, capital $XX in range. generate and cash to

in to such processes. access a mention fiscal to our process, will to the technology up, support will and XX-K, XXXX. related Before of want no weakness material fiscal XX-K has timing it in monitoring be user the end internal important, I we in this cybersecurity I reporting controls, for weakness XXXX the see and completed rights that prior our financial remediation material accelerated are that wrap systems rights of control financial that the as you a upcoming Most of filing of the of impact controls areas large Form efforts in mention expect filer. on the or Remediation of fully this our certain statements

expectations we conclusion, results that with quarter strong pleased close line. fourth in bottom both top exceeded to are on and XXXX our fiscal the out So

back on serve testament XXXX are in to questions. as of to who it forward the like the up and would to We entire team, Our performance now operator open the and call fiscal continues their for to Lovesac for to caliber contributions. we a building With Operator? this that, turn performance look we the beyond. can grateful

Operator

your Thomas from Davidson. Forte comes proceed question with Please with first Our question. Instructions] D.A. [Operator

Thomas Forte

Shawn, off, I first year. year. Mary forward bravo. and to So look Donna, Excellent this

prepared talk touched want unaided but on of sort this you in So awareness. I your about remarks, to

game. television original And you It last Renee TV a during title product also saw then I the So Lovesac a during reference Zellweger NFC the game. title for night, product the had ad sounds show. your like in had one you AFC

how is thoughts curious overall we're drive category unaided can seeing on your increasing slowing. I'm on awareness Shawn, that So sales as the for home signs even Lovesac

Shawn Nelson

Yes.

not we small we're we this team for that's have word still really tons inflection are exactly a a of the and As a headroom adoption, awareness moment and think of of Lovesac driving where I to job, as that they've just unaided kicked big of where I small. has done. say with success happens has fantastic Sactionals still what thankfully, product we curve timing, that - portion us, hasn't a do penetrated to are in continued done as brand, our mentioned, at to that be but and in have mouth as a moment But enough

all an us, And has world home where category by this COVID people was at emerge the is into did in factors, driven these probably than that unpredictable, tumult, better and way, the home And cycle. moment, went pretty gone so we for obvious at the place we that a where through remaining cycle through of we that in well from by it. great and

so just great us, it's marketing decisions. and for of timing, And a execution confluence great great

is those very with awareness grown our just are And that, the factors. balancing much. marketing category has spend our risks and growing, as in being We judicious while unaided taking but

available who Q&A, that is might headroom comments continue this. to Jack, the way, on some on sure have And that we have. And this have also so we by I the I'm

Jack Krause

win least unaided right? conversion. I I'm Anyway, think couple still awareness key is the here at is Tom, Thanks. quarters, Absolutely. critical for absolutely of at a because we

funnel into crush start in funnel conversion they the the get we you to down, know it if we'd funnel. people So and

be because So to when awareness, compared, products. the comparable our it to are absolutely it is every other unaided allows time. we critical us products And win a important,

not trajectory critical, fighting we're above brand well any and but trends. the overall the of disrupting the for So And disrupting. it's at point We're why causes that's that's that what category the consideration. we're only awareness, of to have

Operator

Our comes Canaccord. Please your Maria next with question. Ripps from with proceed question

Maria Ripps

Congrats on results very here. strong

the campaign, it top First, touch quickly addition in but the year sort in of and being consumer to points in you the stock of how having to you cetera? et to between of attribute success the concierge, would mobile much get that, all able added past sort mentioned showrooms, outperformance holiday and new versus of your inventory line to kiosks

Shawn Nelson

Yes.

to for many factors with difficult - the in. would of the strip out obviously, that the factor. in are so Sorry, coming main last - jump There to couple separate business volume growth is over what for because it's reason of for who just It's very out sheer us. of We the deciding - Obviously, last massive is and the years. over what us growth.

and just over well, tailwind XX%, let's extremely a being the it. We than of as is so as especially. is kind instance, greater of, but of really the hope many, has to we stock, And of And of whatever, for it, which is or the call over prepared true, hard it not any of being bought for like inventory sharp just when we on particular, many And past fundamentals all our a growth advantage from is think environment table we've in kind we've some management you in the that, plenty us. tumultuous rooted mentioned, I product in the out any of And us long business. it's well it's in has factors past simple stock is evidenced frankly, operating and whether past huge industry team take proven movement, that the for been years, in time. for separate But we've been over we'll been ground for and element a year, the but things our the that been the - years. for pounding that saying the been the

attributes. our healthy sell clip COVID, a for differently Sactionals appointments of very in delivery. And people's got look last-mile just very rode sectional on we homes while these delivery, continued touchless these to possible competitors, that through at They all that container sort very, all of for through with ships. furniture, You of remember no thing, they attributes and pack because like differently pack very, to of

data I the out. that We so had And we that to wish don't. strip

be mentioned I before, can in I that as formidable partly well operate really continue tumult, winner. will as are a long a It we no as operating the be think enough growing I the volatile I we're into that what we're get at because enough of consumer we the plenty of - we less the to forefront based people obviously in when the think into to our to be insights winner of a next time, And we on think many right size still matter peace in mindset. will be times, small and of seeing. have become years but few headroom,

business. consumer on on supply our mentioned, that, are control separated not direct-to-consumer We're will not you as chain the a our front that collecting of. We're receivables. So add And the model we this by reliant We're Maria, in from relationships. middleman. just not wholesale business end, stability with to to continue truly couple you a model

cultivate. mine of that that all We way, those by more and efforts to useful that will and But data talk remarket are, leverage the to those our very beginning. us, market relationships the able our to that the we're we have to consumers, just build bigger and them about CTC, the through circle-to-consumer and to and our base fledgling customer and be to grows, to

business don't in product And model different and very time think Lovesac be these on we continue think into, aspects ways we're can - advantages. where that we even continue based all in others these and a to get to these win very I feel situation and attributes our I demonstrate can to how to have so fundamentally win. blessed deliver listen, And of we

Maria Ripps

this very StealthTech. maybe That's that standpoint? to And so. Sactionals margin the last any believe then And can the compares your results? all color appreciate way the describe around attach Shawn. of on it around you I you share color from mentioned contribution product the update to it. could But from or secondly, helpful, any StealthTech QX And Got gross there any on then rate? is quarter, was how I you XX% sort

Mary Fox

overall kick in it's and Donna in, of Mary. Maria, start, contribution. terms Yes. I'll want to may then

X. seen the four we of launch achieve KPIs. And terms at very was for in quarter I that the at looking points data for expectations. think what middle for quarter It's it looks as StealthTech, with us planned in I we shared, to are have happy with October initial obviously, we we multiple So line to you've as our us, of our And performance. that are through that seen that in

we're with very that. happy So

another I on in-stocks. to that with is many does everything think point, competitors you we that's of will And demand in-stocks, deliver trying Maria, having know that with balance to able they're a and Lovesac of. also we're there, out always and let not that foundation never go

know, don't with in-stock overall that for contribution I the of managing service anything terms has demand Donna, always So ratio to been to QX? else comment you key. that want in

Donna Dellomo

numbers. as be QX, XXXX. we give I know, the going with the for like Maria, you to it for ended expect specifically pleased into strong Not But as and won't I were stats And we the really fiscal fiscal and attachment rate year. XXXX, we

overall. So again, pleased difficulty] StealthTech [technical very

Mary Fox

with overall asked Yes. That's And you I well. our in line margins as margins. about think, Maria,

So is continuing that to perform.

rates, contribution So is everything strong.

yes, see said the consumers of stage it. and adoption, to proven driving in a hear seen honestly, demos we're before, around very love to and be But They what Shawn once emphasis our think put the of So that will awareness. also, lot showrooms as we they product, in it's remarkable. we've is continue early excited. because But it's

feel we So good momentum. forward very the about

Operator

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

Brian Nagel

too on congratulations First off, Congrats. I nice another would like add to my quarter.

significantly more provided, guess, the better here that suggest you you really estimates - going we margin significantly better the quarter, gross not in chain historical time - framework the the spent to most regard necessarily of have out the in with the just is than off I and the and question with. quarter. not question, the comments there, I in a issues tracked first my But talking would current at to then guidance have, highs. I think like what QX question fourth performance continue about is deal I the of look So than I prepared for pressures far I supply I guess you know And the say, guide kind initial, would

reason gross in this the why should whatever, it QX kind margin of takes. back challenging was - And sourcing is in than it QX? shipping, any that perspective, there question the So a be and and to puts here more maybe from is go I'll

Donna Dellomo

it's Brian, Donna.

So I in. the would as script, come are we really, thought where they outlined in my rates

we would the inventory high in off volume factor significant it's customer right? for But freight, outbound covered XXX% what we other all as as they're is to So us freight thing, the come year, impacts in, models. thought thought amortize well, in. some of where the outbound The in because seeing and our freight mile it well sits P&L. they as QX contributing - The to last based we out comes than what the into going more as but last costs on as it is our

from overseas coming for QX for timing it's and of see why containers. only more year. and in outbound outbound covered see as all it's costs, not at covered all freight starting - well. the are that's But So inbound we QX, framework accelerated We're the those the freight. specifically to build of we're you in, QX, freight are I'll - But - again, then increased - in the models seeing lot the call containers all the the I rates that getting guidance the for a

Brian Nagel

product of Shawn, continued here Okay. the - talked my Donna. success That's and that initial helpful, launch. a picture, you question, bigger I Then guess, but bit second about little about StealthTech

additional the I be maybe any be? to that, idea past, of update timing what heels these or newer we've know we the products thinking even but in On products, could in either should this of discussed talked, about as Lovesac, how

Shawn Nelson

Yes.

at to mean And platform, what I platform-based we'll grow. said, been is out we've continues As But opportunity business. continue a driving to we're very Sac constantly. platform the is trickle to a a our have sales. powerful of put products Sactionals that most new by

a be us to move more projects meaningful, that continue The accessories add-ons than will of even number kinds make in has will Sactionals brewing have of the all that that and realm. been. platform We it platform and for has needle that competitive

come, right? for enough. home innovate them technology. the comfort-wise. in? take on that shrouded an be but of That still esthetically will our the for own that that category. the shape, like emphasize foam because - StealthTech I we'll And invisible our in to that crazy think I system And matured Sactionals making have that we're patented we've communicate whatever the who number of Heretofore, far-fetched products a years. recognize a to asking be kinds cover, exciting people I decade it, into all there newborn. realm audio. completely your - team, still in but removable innovate expected toe are to the any You from of one lots Sactionals still place years And our and of home people say then launch a to you where your underneath I many before can't and not you going of our don't know to has toddler. their at over tuned all company, big the we audio, into it's Sactionals but look It's enough. quality There's upholstery to a the all have a even a a loss doesn't theater new category, next quarter-on-quarter toddler is to for just categories of and I less could I'll the Sactionals new matured like the in that's done Like audio. how of home think to, it that are first and probably StealthTech us and with absolutely question and ears But is StealthTech with even innovations or and idea love sound is work time to are no a home. What is, it, are names style, innovation. a coming beanbag home fair, that products I don't for that music take pontificate around then

take partner wires you really we the of couple be system because a of a think lot like a work not home perhaps that that strewn out category major home care invent to on people beautiful, That's contemplated. or take merchant's time. or things invention, hopefully idea wanted get awareness bring these the of a the market. even that meaningful problem Those a speakers things. right? necessarily point continue will like before last make it We'll don't newborn spew didn't was elegantly. thing you pleasing into solve remarkable we And another to know stage lot didn't the to cut They whatever, drive that your launched elegantly. had, We products solve meanwhile, their esthetically look, floor and I that because we a But of We we the years lot adolescence. of where ceiling about that theater across they the have problems problems some toddler newborness, to into a they're commodity. stage, launch a new comes more a So we'll solve beyond into with throughout growth beyond

two between, of the and platform. every that another that StealthTech's point platform. grow by is of see. we'll - We'll years a launch continue our the product Every way, really on on platform. view. couple we'll And But major or in So grow years three to

will excited long answer really future, question for be about so but come. to that And a the time to my that

Operator

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

Camilo Lyon

the To changed close health strong the the consumer. fourth lot a a on you us point, since give also to the year. I'm curious quarter. there's your on a from that's congrats of if some details Everyone, of And perspective end very could that macro

rates the Is creating very of a But sentiment. some you parse invasion the consternation a Russian inflationary you adding of and that it just are trying enjoy? world increases, on as components parse to sales health are ticket to You the price provided. in average that to the usually around strong where I'm quarter rising of to framework StealthTech alluded doubling to the trying out continued that clearly in momentum this consumer expectations pressures that. is really And out mounting, first relates

Mary Fox

you. Camilo, great question. Thank

outlook, around around in supply demand particularly So thing we I we our a ability as is, think the also our our days. and to customers confident confident in matter first feel very to of shared

Sactionals about of any I really that. yet continue, seeing very will And think that that around think also anything not around early adopting dynamics into as they it demand web. as or, be we're consumers then whether great from strongly or you said, traffic strength you into in So talk we feel I and as to continuing really showrooms or on terms are see StealthTech. the on buy impacting our We're disruptions,

So basket continue at as at from spend, great look really AOVs, be it we to whether look strength. that side, we we see

we're feel many are with that delays many of and disruptions so of unable other small So side, for you the that truly deliver, category, winning success. we with that in each and that that else so to and things, so everybody day with every that mentioned, because formula we

anything. So fiscal feel 'XX. obviously, into good we'll look always today, we be very mindful, forward we see continue as to watch But and very adjust as we

Camilo Lyon

on... That's great And to hear.

Jack Krause

to add Just that. to

Camilo Lyon

sure, Oh, Jack.

Sorry.

Jack Krause

sorry. Oh,

to of doing? bit the total of we've despite is Mary's One short up. think, we think to less by dynamics price year, customers you Sorry, something points of customer that, is add promoting I own taking some as brand really top of a from that the A go the important increases, significantly things. than last despite population. value couple seen determined is, our Camilo, And in on how run are protected little the target more the our

our growth, think, to that important conversion That's more so conversion. talk the misses is else that is play trying out about or just plain conversion. conversion more while category really the get brand the in disruption, figure by I And to is everybody small hits disrupting the disrupting. because we're to rate and doing they and the they're with significant And getting And us. converting why whole how as what's it, valuing within category to seeing know we're the it to we're back for

Camilo Lyon

us expectations in margin you, a can you year you're to you the relief the And throughout the pressures Donna, costs? on freight I if That's those ask provided, it. at to current embedding tell expect when the this just that if the could the if about framework guidance provided, Got excellent you for guidance, think you Jack. hear. color, persist Thanks or you rate? those year that

Donna Dellomo

Yes.

when they said end rates freight of at a consistent standpoint in-stock So we we with provided we of an persist in position Also had inventory the outlook year. healthy maintain just remainder inventory, quarter building conservative third are or still evergreen because throughout this what as - maintain a we framework, higher strong our we the the the position. if from a will remember, of

throughout drop, we year, have the inventory the freight. inbound outbound freight still So costs to even the those impacted be that if would started by were or higher would

throughout So fiscal guidance provided, we rates the we've outlook or freight in any assumed the full that higher year. the of

Operator

next with Craig-Hallum question from Capital with proceed Fuhrman comes Alex your Group. Please question. Our

Alex Fuhrman

Wanted It have knowing, your just to just a like inventory in consists of bit this I just the how of year. Curious but it? bring tell Is huge more looks of year managing ask a your what big anticipation guess, supply your with. us not you of? regular chain you're that assortment, begin you little inventory. about Can this what pretty to war chest could basically it

Mary Fox

thank Alex, question. the you Yes. for

we inventory to Chinese I earlier. strong, impacts continue but New SKUs secondly, very to out we we core made that X, bet firstly, drive I as our the obviously Year also put levels, on quarter sides. top-selling up our just continuing and starting look, I to seats our In be mentioned to around business on it also. a in we're the That anticipation we think see build of was think saw - big really into continuing demand and as

deliver are the just That's continuation and trying a also So it's earlier of our to within to reflection us you'll consumers. a - board, how see, the the Lovesac of continually day days in CSAT just of are a always the to such I when Every across improvement. touched our is on them industry rest really is is able feeling. really to struggling customers time delaying. short deliver

year, at So actually we've go were going certainly of us are that to good. the we We because start through. And levels best in. it's we ever in-stock help the feel been this bullish really

the to and team we will to congratulations So that, continue manage always make always deliver we sure our for customers. we so to anticipating invest forward and that that

Donna Dellomo

I inventory, inbound just a too. the on say, about freight to is as piece to that, sheet. of add I that sits the There want balance that

So of $XX million. an increase year-over-year there's about

balance as well. in prepaid So that at freight, when you look on that, sits sheet the

freight sheet, it's is inventory that about, follows So balance that will I our go our as on plus sold. the inventory tangible talk P&L what the through which inventory the sitting is

a you that there's of and associated the want you're just growth on then with to inventory there's I focus make So tangible sure piece that it. freight -

Operator

question next comes with with from Matt Our question. Capital. Please ROTH proceed Koranda your

MattKoranda

Congrats on great quarter. a

you Just benefited a the of different we higher for to than as fourth are lift year you mentioned in wanted attack put the satellite implications provide commentary sort there? And StealthTech? quarter what angle AOVs? on just expected. base out the or and how larger customers have to from commentary Should guys sides those maybe either that here. And sort question was are of interpreting the suggested choosing values, your Can that from the customer average any 'XX demand that StealthTech you full on order be configuration then in systems than

Mary Fox

think Thank for Yes. And add I question. also Jack hear I'll you from then to and nice on. start, Matt. you, can the

view, point by obviously, lifting of just StealthTech a over just just So it's $XXX points, transaction. StealthTech just so we're XXX basis of from $X,XXX. AOVs our per for seeing the overall over over AOV alone And

pleased satellite around larger little And a we've being bit see your we're from. to initially it great we forecasted, overselling around lift has to the which where that purchased. configuration point feel very that fact side is come where the So about, seeing to we'd been the

being configurations bought the So through seeing go you to of through kind actually just X- the the XX-seat we're the side, - X- not larger as into. it's to

going that want really experience a that forward again, to great So gives with StealthTech. us have people confidence great

so And that to you else know anything that stock. those from day. We I there's in are deliver that? want then, the to we So back we to want side, Jack, build satellite inventory don't every add sides if on just

Jack Krause

all. covered You've at it Thanks.

Mary Fox

you, Thank Matt. Great.

Operator

question proceed Lamont Please next with your Williams from Stifel. with question. Our comes

Lamont Williams

Congrats.

you next can customers? between investing what's where follow-up just in new So Sactional customers? you ask new on your working secondly, and product initial the to is the it expect hiring are wanted for where to Just a And the quick How StealthTech. And breakdown plans? then going? in are on existing people bring in - sales year? And

Mary Fox

question. Great. the for you, Lamont, Thank

first talked of I terms one you the So in on think hiring.

did a honestly coupled pay, includes I feel sales really program. purpose-driven also point, with great seeing that points and filling 'XX. we have fiscal incentive 'XX. about we in in the some building and for expansion be great I well which Donna think And base adjustments as hiring service we're our as whether think from in shared the first as that the progress We we brand, it strategy, but roles we're fiscal the touch the into the make field, entering good around hiring rolled of out

feel So there. good

head think great that also we in builds terms I feel in office, abilities the very out. also the where hubs, of hire good to talents, we see and

a feel, fiscal from 'XX, we today, very there. strong So

seeing customers Sactional StealthTech very that's But coming a anything that adding seeing new we're around StealthTech, we can to seen and is consumers for so product to consumers is return your to of to attracted Sactionals StealthTech of index then, XX home. StealthTech. we've you technology new their strength being StealthTech, a back we're that Because before. bought current flexibility also question that there's think terms wonderful add years I Lovesac in you in higher whether their ago, much And thing us phenomenal. your are current than which are the The via yes, about. predominantly excited

just get So for or But it again, very drive even raise that it's the awareness excited very confident it adoption, web. said, will as to just understanding well around and us feel to year. hear and they it through to come we continue as to we early the StealthTech as the the bodes Shawn really stage continue the our see, at performance on showrooms and them we about feel of get people and demos

Operator

the over Nelson are There no Shawn you. back turn to floor questions for any I to this at comments. Thank time. further closing would like

Shawn Nelson

love. and drive our the Yes. of support invest Lovesac and who team all amazing business Thank who with to call and you lots that resilient, A Thank you the are to Lovesac. supporters forward huge you. investors to thank joining continue and capable our

Lovesac, As at their are we fault. results say these great Have day. a

year. to forward another great Looking

Operator

conference. concludes This today's

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

The Lovesac Company (LOVE) 29 Mar 222022 Q4 Earnings call transcript