Earnings call transcript Q4 2023

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Operator

Greetings. Welcome to The Lovesac's Fourth Quarter Fiscal 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to Rachel Schacter of ICR. you. Thank

begin. may You

Rachel Schacter

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

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

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

Shawn Nelson

Fox, fiscal sharing our and record plans fiscal a by XXXX, both. morning, Good COO key and Rachel. underway. is year I discuss for for everyone. And to President thank Mary results of our you, overview which growth will review will joining and Thank our fiscal initiatives Then for to you XXXX. XXXX high-level our for outlook discuss begin already us

related CFO, our in our outlook items detail. to Donna results Finally, other will review a more financial few and our Dellomo,

long track put year a quarter record share Starting driving our our fourth industry the the building and for full for We outperforming record and performance. fourth and XXXX results on quarter gains. up with fiscal the of

and quarter, adjusted we the For XX.X% both XX% of shared of of outlook QX growth ahead EBITDA our call. on growth we delivered sales the

generated total with line of XX.X% year million. liquidity of of earnings million. of includes backdrop. growth and increase year, of an our to X.X% annual on a cash net EBITDA million adjusted navigate strong difficult macro availability total We XX.X% debt our to the sales $XX.X notably, omnicomp to $XX.X increase sheet For balance which credit, million, free we us the and well Total, ended a $XX.X positions $XXX.X of sales

on the fiscal furniture challenging Put of significance results, macro perspective the these XXXX consumer. pressures the the given facing a year was industry, for

XX.X% down year-end, of In the As meaningful gains. increased versus data the to full year. indicating overall year XX% our sales showed home share category market our sources be contrast, prior

industry leading inflating achieved after importantly, placed. real-time ship were is backlog typically revenue More sales meaningful results We just days by an had any these converting never we demand results. our as order

our We degrees. base varying with inflation across also continued cost to

and XXXX up results were delivered stacked. financial we the fiscal XXXX Additionally, were against that record in

EBITDA net and financial a is continue The across growth strong XXX%. unique our results adjusted people, with Our sustained our X-year be of operational story business CAGR platform. Lovesac and competitive XX.X%, operational and a of operating reflective CAGR model to brand, X-year of and advantages sales

full 'XX year Shifting results. gears back to FY

our the model driven more our which year, omni-channel are success flywheel infinity by unique around centered were proud very success. where accomplishments for We of drives business our

differently outperform us do allows to which the category business flywheel Our and operate. infinity we in consistently

investable. research online ticket They long various or physical products advertising of so Configure proprietary the experience In of it, touchpoints. our highly are invest a because nutshell, branded products see Customers kind. the it and because to this Designed every is For one with kind uniquely Life Designed it in Life finally, the this. For our like was to that of good. it experience high seek goes value, our facilitate lifetime our repeat investments in their in actively of brand so showroom product to products advantaged to upgraded they and the we've and Thanks lasting, experience customer advocated continued drive model because ongoing. improve Evolved behavior. And make

our on this for people through and validate it each sharing This again, us specific flywheel. flywheel, plans enhance further all it results investment will our again then node further drives process see and over the to Mary drive the of which future. the starts to more expound to

continue of have produce meaningful we to profits. even to hold as make We late and made ourselves accountable

terms for our 'XX. outlook of FY In

higher We challenging cautious and interest remain more the rates put high pressure more as category expect discretionary consumer to the drive overall. home a macro and ticket, inflation elevated on backdrop

We operationally are highly this cautious in environment.

in very the realm We efficiency. tightly every in are controlling expenses name of

freight costs. in net EPS This beginning as margins We growth. benefits known and up last drive will the G&A also realize The over expect offset QX year-over-year. be to will inbound increases from significant result serve a year's partial gross to amortization especially as

our adjacent X% announced, to in Designed very massive highly For believe will total TAM yet will less have categories and strongly seating await and our because We continue which not we markets competitive the audio make surgical penetration where Life future approach. investments in headroom available leverage than that for categories, home in we the the

Sactionals as year product pay results key Recent investments this begin soon and to the from the of in half a of as products. expected launch second family back

with flows gains provide will share scheduled have expansion year market decelerating sales another cash will physical strong that of guidance. broader category. We detail on launches Donna versus for a and more touchpoint for growth product reliable drive positive

revenue services. greatly margin the growth high adjacent we we model has spoken categories, on for that our a This the trend Lovesac. long-term are And further outperform related Lovesac, multiyear focused in effect convinced a continuation because of for We potential maniacally is flywheel strengthens our of. At are category. current our and this tremendous Infinity categories continued business

these policies will is that very unique We pair make eventually are long-term brand love. Because long-term We be us. relationships to monetized. approach, Designed services of just opportunities differentiated customers, intended with Life and result The For long-term people focused a that products. these with our programs,

of efficient to environment, pursuit tightly, a vision long-term and expenses generating but that investments We we investing business right need unlock nonetheless. so cash surgical macro promising disciplined, is cash, very relentless in run challenged preserving the sustained. with this our means view Our ending now managing may future. This this

to We this can disciplined be we because are patient. willing be

to Looking opportunity expanding the forward ahead.

that and a generating of big This in greatest Management its can all business is XXX% actually pragmatic actually thinking. of part sustain what when forms sustainability. we can way that sustain cash Products passion. to a committed mean is of our we this sustainability is speak

a our the was another We important of still foundation to at strides So support strong end made made growth in good great each to of against progress and Lovesac. initiatives summary, year long growth strengthening our it ahead. strategic runway

We year more already and are significant in were even ahead profitable than IPO Cash Xx with in we size the at headwinds ongoing XXXX. generative the contemplated.

line and willing stakeholders. continue and choppy for adjust long-term We conditions grow are a we'll braced changing discipline, all to backdrop to to bottom value drive as we results execute with for deliver macro and

all entire Before Lovesac for turning the I to XXXX, the fiscal to call over while accomplished thank in they uncertainty. team Mary, navigating want much

on timeless culture exudes symbol, ticker in all frontlines, and touchpoints. and various a the We our have inferred our by a that sentiment hubs both at and the our team great

disposition. are fiscal We for thankful forward cool on XXXX. and our discipline and in commitment to so their generally We building look success

our to hand priorities I cover over strategic will that, Mary Mary? progress. it to With and

Mary Fox

Thank you, Shawn, and everyone. morning, good

year we in to We are pleased delivered operating a as 'XX. with fiscal in strong our fiscal environment. results record the end difficult Even

As net demand Shawn XXX%. 'XX comp using stack a is sales in XX.X%. growth our as And X-year shared, baseline, 'XX our fiscal was fiscal up

anyone then a focus, an of sales of flywheel year, a product delivered every underpinned unlike business else. growth customer profitable XXX.X%. This Every our with brand any infinity by centric outperformance our with financial and CAGR X-year year have model unique other X-year is consistent and of And adjusted we our category, XX.X%. ahead CAGR in omni-channel net EBITDA

flywheel income our number over a per America. in addressable of couch year, we highlights best XX% one unique the compete have firstly, we few of of market include: of billion. A With selling $XX,XXX households annual infinity an over $XX large in having

to and barely continue year, we category. scratched fragmented take and huge market yet share every this the We surface of

customers Designed and Life resulted report in any driver. of our product awareness they they shop even friends that and becoming brand. brand cross XX% love For one their other tell don't our which this And mouth our number platform. with Customers word has family of

brand be which by our than highlight is is the very our home. health that the of ROI, can innovation changing ever, to with continued stronger This strong. is exemplified landscape marketing That

acquisition lifetime in enables that helped us has with innovation In over have ratio of cost self efficient five sales of levels customer leading turn to continue addition, Tech drive customer marketing This unsurpassed. a investment. incredibly the to with of market to continue to value, us is

best-in-class have our touchpoint of With only under foot competitors. Apple and to per payback and year economic the four Xx second a incredible we Tiffany. periods productivity Thirdly, sales

We new expansion expand our our us ability additional in ramp penetration our continue rate, to with confidence to showroom plan. see touchpoint improvements in up gives which

Infiniti and And of satisfaction customer finally, increase evergreen advantage with in flywheel. matter of This customer supply XX%, a orders our over results loyalty customers chain to in our days strengths delivers inventory. of our in the

even share, the positioned We market continue discussed. through Shawn dynamics profitably market current take are to that uniquely to

aware, ROI by and are in [indiscernible]. discipline, growth you a an our strong fiscal as with focus we driven our As results on investment and run demonstrated 'XX business

in initiatives and ahead grow investments to continue will the We strategic industry by our our fueled disciplined capabilities. of

strategic highlights now provide plans of on will each I our our on key progress go-forward initiatives.

gain products past believe product future. be $XXX annual to in merely the share, which potential, scratched we for sales surface in with respect innovation, the StealthTech million to continues and we to highlight grow believe us. will the more Notably starting with the the its have and continues we Firstly,

an for building for 'XX Our $XXX order the average year. Sactionals with sold that were and Sactionals fiscal order average with had over transactions StealthTech Sactional average Total or close nearly StealthTech included throughout $X,XXX, to the value. value Xx 'XX million fiscal were

to closer half have in We significant will have sharing forward each looking up years, X further new a the product couch we aperture the the planned the 'XX, second the more share with shared X out As will category. look date. we details for to launch that fiscal of you of launch we to next innovation And our open year. in to launches

our terms Looking product about excited agenda. ahead innovation, of in we're innovation

tech. Sactionals We to are entertainment portfolio. the our come expanding TAM with addressable our Sacs, where home more meets home from to StealthTech to and product consistently adding that's And

the some runway next the product We over future steadily planned are years, innovations For categories. with XX Life new focused unlocking on disruptive Designed in

experience. omni-channel our Secondly,

touchpoints physical our We digital have of and become a a omni-channel retailer through platform. true combination

data utilizing Our continued leader the first-party customer meets be a the truly and right omni-channel and and choose experience and prospect wherever in a of us focus brands drive on to is expectations needs our they products. experience shoppers personalized to enabling to our data

in Traffic overall, fiscal we XX.X%, 'XX had in increased over and our a as by we brands trend e-commerce quarter and X sales a with from X,XXX e-commerce conversion grow experience. the the one basis benefited for and overall For tool strong growth which bucking to of the only accelerated furniture quarter quarter of redesigned be as very configuration enhance conversion particular X profitable. full of points has

pay We roughly returns with years, double opportunities of with and we generate reduced very four-wall more additional contribution terms financial over a to in cash our now they current standpoint, locations continue to year, showroom exploring see will cash strong deliver from and our to next high the under from on a fleet and occupancy continue shop-in-shop opportunity XXX showrooms XXX increasingly back X retailers. year-over-year. cost than In

to Buy including very when most product, other Looking powerful, immersive system, and sound effective our in-person. at shoppers they experience allow StealthTech embedded surround technologies our our shops experienced channels, shopping Best are as that our are

Best shop-in-shop and our to are they roughly online, showrooms grow. Importantly, Buy attachment standalone continue and of Xx StealthTech rates double that for

plans shows delivering continue improved we with pre-pandemic partnership are and road are level. in Costco, economics strengthen which For this team growth managed year, for to by our our to physical

satisfaction Our investments by omni-channel our our is resources in chain improved our customer digital consumers from driven QX Overall, strategic as in to by customer in model satisfaction our supply levels with quarter recorded, improving and shown highest is in and capabilities, X resonating particular technology service customer experience. scores.

will we improve fiscal expect omni-channel ahead, continue our we And new As showrooms. expand open and for to we look 'XX, to XX strategy.

selection and our Our model. site predictive real both estate to updating strategy evolve, continues leveraging analytics our tools consistently

ecosystem. our Thirdly,

are and that our all with Our is ecosystem and and leading ratio positive that marketing is year-over-year. best-in-class awareness to ROIs driver. customer number grew and word of robust a one value Strong unique lifetime mouth indicators including CAC

is driving ecosystem and customers ecosystem philosophy invested for customers in. their circular centered our consumer optimal goal have a to Our for The relationships. product value our Life development Designed around For the circle of and platforms and products, is long-term they

we and leveraging and year, continue products traditional established digital media various market social national media, influencer advertising. advertising with including TV, nonlinear formats brand the During strategies using our TV and to and coupled

digital in-person. choose efforts This meeting where customers localized interact a omni-channel into marketing on truly to us. tactics, our shoppers products touchpoint Our commitment to heavily targeted and focus Lovesac model, reinforces they experience with driving our a to business

fiscal digits gained new and we customers, year XXX,XXX over from In double margin first our fiscal purchase up was 'XX. 'XX,

spite ratio our inflation the value some the increase year. any customer within lifetime versus of in measure continue full 'XX only first to the actually first CAC in headwinds our repeat lifetime cost fiscal same Included value business is year purchase year. of fiscal Importantly, customer plus throughout

Designed than Life more our know decades. Sactionals do for purchase, or the upgrading to they're breakeven For We at repeat, customers and we adding or facts first

business the and these XX% top be from of highest many at bottom performance overall the fiscal at to of of 'XX. metrics other performance our end range line increased transactions and overall home to We in perceive and Our categories. the repeat XX% ROI

We pandemic are of even this results, these pandemic. before the like and were they especially when the after proud during strong

and notable deploy marketing will programs ROI endeavors local tactics hyper Search to invest performing we marketing relevant include touchpoints. that to to traffic continuing and new as high 'XX, grow in drive continuing fiscal to our such For our

prime and reach, with fiscal TV continue be line We at in of sales of we XX% rate expect to to linear drive to in will last leveraging a buys 'XX also year. net spend and

our ESG targets targets 'XX, where among purpose, by we focus on emissions ESG equity maintained earth, and strong second other long-term zero report ESG we priorities, love to our focus We roadmap also outlined designate new items. annual publishing reach diversity, and a inclusion, December of in XXXX, in as for areas

'XX, upholstery And plastic plastic extremely diverted giving repurpose fabrics We stream. we the adaptable Along of nature Sacs. into believe XX durable more Sactionals these lines in more the landfill waste fiscal XXX date, than bottles million bottles or we've couches have thousands million to the from than of we Sactional. and well diverted and buffs from as

fifth lastly, our in made of then scale 'XX, quarter by ahead of at was area. infrastructure investments. the making And this chain, fully disciplined fiscal Worth In opening the supply and best-in-class we critical operated DC investments the our end target. fourth enhance Fort including our third-party And and

in in invested volatile talent ensure also technology, a chain environment. highly supply delivery and capital times working We to best-in-class

also by the the enabled working sustain development as in In start by we productivity which orders the efficiency research following the our upcoming investments have This expect significant half delivering fuel This in freight well cost launch. our and to inbound primarily of second in year reductions capital of on associated XX%, we just see and fiscal continue customer to also while recent warehousing, across 'XX, around our will and will of of inventory as year, growth days will for our will investments. flywheel. improvements our to delivering be the satisfaction technology to areas effects

our important very fiscal expand the progress to pleased X to as growth Donna? we our that strong business and strategic pass brand as with a fiscal continue the to strong difficult 'XX a substantial to our investments outlook to So very We beyond. in and I successfully made summary, against the results ahead make and quarter we lies are backdrop. priorities results to year quarter in Lovesac fourth when cap our for 'XX. support the over call as review And Donna well drive foundation 'XX fiscal and on

Donna Dellomo

my $XX.X remarks fourth our quarter the of then everyone. morning, quarter million increased XXXX. will I discuss $XXX.X to our XX.X% a and million fiscal of Mary or Net outlook and for fiscal review in results good you, begin Thank fourth with XXXX. sales

the increase than projected originally was in With driven by driven had net This by quarter, all primarily sales. channels. year-over-year what we stronger than planned higher growth the increase internet for

million sales to was the promotional XX addition showrooms fiscal holiday driven related the $XXX.X to prior as XX.X% and XXXX increase in net by XX.X% compared in net of $XX.X to The of sales period. strong million an in to comparable new fourth five increased prior and Showroom the the year in kiosks compared showroom increase of sales or $XXX.X net showroom quarter million year period. campaigns,

our XX.X% net to reminder transfers when $XX as orders control of our driven in sales in promotional always quarter the Internet a placed a sales in prior reflect $XX.X campaign. point-of-sale transactions not which which the recorded. represents As through compared million, are at strong does period, million to reflect customer, metrics, showrooms, point increased sales that or and net we the comparable $XX.X holiday the fourth by year fiscal million to XXXX

continued inventory New returned shop-in-shops. Best sales continue net border inventory and transactions compared prior XXXX and fiscal We year increased in $XX.X inventory The to Costco million, $X.X our of up open was shops XX.X% box million to barter XX planned shop-in-shop with $XX.X or Buy to in the increase which period. icon XX Other the hosted partner. driven in-store largely an pop-up-shops, fourth operate as by quarter we pop includes additional transactions million

used net initiatives sales awareness being ESG brand which create to our and DFL, open in of credits, inventory to support advertising drive see exchange inventory growth. box and for We returned transactions part As to a see, repurpose reminder, are media are our our with initiatives. icon

transactions all review box our to these be to upside quarter, DFL CDC, will with in XXXX initiatives Any fiscal as first the continue of projections first align only we options ESG our current Our projection. reflect the fiscal available to inventory initiatives. and open quarter beyond XXXX

fourth category, pillows, over and product our X.X%, other the which By other Sactional increased sales, increased includes category decorative prior Sacs period. quarter, net blankets sales increased in XX.X%. the year accessories XX.X% net sales net and

margin offset sales of of total quarter, to from by points basis in fourth fiscal of decrease sales XXX of product XXX net prior year the in in XX.X% basis driven primarily approximately the freight a increased in net decrease points margin. partially XX.X% XXXX XX Gross basis points of by a quarter

in which outbound a XXX point principally inbound warehousing. freight was costs container total point warehousing XXX decrease by and The in outbound and related transportation costs and includes higher due increase partially to inbound freight decrease costs freight basis to offset basis

margin higher driven product The decreased by was discounting. promotional

Our our than inbound projections originally to in came margin due lower the deleverage rate projected points slightly in in quarter. below basis XX freight fourth gross by

associated Given we in to be rates, impactful which the benefits, and in XXXX. decrease QX and in see expect will freight most inbound of XXXX. QX to modest continue QX fiscal

XX.X% increase addition the as variable sales, employment rent related increases with fees, The higher an in expense and in in showroom an increase card volume hires XX to net rent to due interest well by and to touchpoints, fees costs sales of SG&A related compensation, and in increases equity driven both percentage credit new in year-over-year in technology was on professional rates. as increase increase new

as almost even sales given the fourth infrastructure increase. $XXX,XXX leveraged the including fiscal prior or year and for selling-related as Advertising compared million sales a and the in employment by we million costs, XX%. expenses $XX.X quarter in expense $XX.X points basis decreased percentage areas investments, of net SG&A XXXX to marketing XX as period. X.X%, increased expenses

net of to were fiscal XX.X% year the marketing the of prior expenses as period. in of sales and net sales quarter XX% in 'XX compared Advertising fourth

and decreased media As our sales, points by has an due a activities, percentage advertising sales. of which improved net driven in XXX basis net to marketing in performance increase

reminder, multiple periods. a As marketing investments benefit advertising fiscal and

to to million, for new investments the increased capital Depreciation principally related $X.X year and showroom. $XXX,XXX and amortization remodeled from prior

this the million discussed. fourth $XX.X to by of Operating fourth was increase quarter that to in the credit factors due related the of slightly was period year. expense last just Net prior unused the driven year's fees lower compared income quarter line of credit earlier million than interest of for to quarter year, the increased $XX.X our line the for $XX,XXX in revolving

please was in period. each earnings $X.XX Before measurements attention million per Net turn income we earlier directly their our our or today. the most per release share reconciliation the $XX.X net comparable share, income, diluted Justin between to or terminology refer GAAP metrics diluted quarter net our issued and to share and of prior EBITA, and $XX.X $X.XX in income diluted million per the to year compared for adjusted

million the recorded allowance a tax company's million the net fiscal share. due of to quarter quarter fiscal an XXXX prior both tax of the had in full XXXX. $XX.X diluted the to in provision the the primarily the release earnings deferred XXXX, valuation fourth fourth the income of of company an XXXX. year The The the valuation in and recognized on compared tax During reserve the per income fiscal benefit was as in year benefit quarter of of positive release impact tax assets fiscal fourth $X.X on

the expectations was year driven leveraging ahead by EBITDA SG&A expenses. quarter to the quarter was marketing of fourth in sales of Adjusted and million the and for prior for our higher period. million as $XX Adjusted $XX.X compared net EBITDA

our sheet. balance Turning to

XX.X% Our our merchandise and line about increased are quantity have out inventory quality the inventory. call. discussed good leveled we we our feel total as year-over-year prior levels projections Inventory with and our exceptionally on and of in the had

reduce to in-stock levels. is of not do of advantage, inventory to not is inventory or and risk having overstocked comprised We merchandise. be evergreen seasonal a being Our run the it competitive promotional

Our and in times. in-stock positions delivery industry-leading maintain goals our with line to inventory levels are

availability freight $XX.X and due relief in efficiently. in quarter and us with inventory no to our borrowings. on allocate with more moderate million equivalents inventory fourth As move line XXXX, of and to investments, cash fiscal into which credit technology $XX our ended we pragmatically revolving levels cash We million enable will inbound the

our our on the timing for fiscal net release of the our inventory and financial sales, seasonality investments of and quarter press cash generation. performance. Please fourth to reflects XXXX and earnings our profitability refer year This other details

Now our outlook. moving to

fiscal we by backdrop, expect macro we to planned our and our growth. backdrop innovation expect to continue share touchpoint 'XX, For and driven this the category outperform persist. gain to difficult primarily Against

year, we sales the expect approximately For low-double-digit net driven net $XXX comparable million sales to the and $XXX of of million, new in XX opening planned showrooms high-single-digit range. total the to by

embeds the product expectation the Our not million include half barter does that that in introduction the launch assumption XXXX. new open-box outlook year $XX and Shawn through the beyond in revenues for and quarter, any and fiscal QX the sales for net Mary will approximately second discussed which inventory-related first QX was of

We fees. rates expect the credit X% our EBITDA interest development well margin by impact that higher the as in to driven support as payroll year-over-year card technology X% for and decline to on the year and research with and of future adjusted investments be growth current

partially count are of Deleverage margin across offset be diluted average due the share of to million lower costs. per SG&A gross to container by share of areas expansion these to in $X.XX with freight a only XX.X weighted range Earnings shares. expected to is $X.XX expected be inbound from resulting

in million fiscal our Additionally, contribute fourth and guidance. expected EBITDA week XXrd is XXXX contain quarter, sales in $X $XXX,XXX approximately adjusted [ph] fiscal a XXXX is in net reflected to will $X.XX which EPS, in in which the

opening million comparable approximately planned X% million, first a $XXX the XX we of by to the in sales of to being driven expect the range. quarter, total For showrooms decrease net sales X% $XXX and

the year our XX%. last are As toughest comp up comparison given our quarter, against a of reminder, year we was first comp QX in the

million adjusted Loss an share points XXX by card EBITDA between $X expected deleverage for to approximately expected rent payroll, to credit first XX.X expect quarter in and range, We in outstanding. is with gross be per $X.XX loss SG&A and the margin of $X.XX shares million basis weighted fees. driven average million decline $X the and primarily

ability to long-term the gains. and introduction share investments These to support and current product in sustained are discussed. growth making business future We important drive including market our are investments growth, the critical new to

when sheet. year of from ended We under and sheet the position We $XX a to $XX ABL balance of our are of cash million also million our and balance strength investing the on no borrowings. it comes availability with

net our the first half inbound With openings expect year before to substantial ABL. the and the the we of planned the significantly traditionally new cash of touchpoint in product new flow cash our use no flow borrowings launches year-over-year of and year inventory, timing sales, fourth during being XXXX second fiscal strongest higher three the cash quarters a of in with under to the and balance free the end quarter generating our

the conclusion, and finished very discipline. in business pleased environment are we XXXX. and our So the macro Despite how we inflationary team challenging operate execute impacts, with fiscal continues to with our growth strategies

dynamic and all a execution market to to braced continue we share and gains are promises drive XXXX, our long-term what to of will for stakeholders. prioritize fiscal growth, be for We disciplined value

open to questions. call that, turn to Operator? it back can like With now the the we would operator, up who for

Operator

[Operator with proceed. Please from Our question is first Brian Oppenheimer. Nagel Instructions]

Brian Nagel

congratulations. quarter, Nice morning. Good Hi.

Shawn Nelson

you. Thank

Brian Nagel

question merge So questions two and kind will of together. have I I the --

of than there's were noise the were you the regard headwind to that from I a But And gross be up then and there the guess, of to is mentioned, we've of these all in they begin discussed you Donna, on sales, dynamics past, challenging in with second kind and us look is improving moderate, ease of mentioned better dynamic you First would perspective much reinvestment philosophically, overall but growth something what year better QX. magnitude renormalize? macro The have, costs I Did more margins, that? it will rates, for Or question you I the of some improve or how just growth If at off, just and type both to progresses, have as could size question Shawn in help and the particularly kind -- Lovesac? there as I rates times, to QX. tailwind some backdrop. here. you? recognizing allow in any at a the know then that QX I in for number the And

Operator

have lines to there I Can check see the speakers are please muted. if

Shawn Nelson

No, minute. One we can't hear.

Mary Fox

it's Mary. Brian,

Donna issue think with is her phone. an having I

apologies So for that delay.

So second back let while me take the on. get Donna question

we of improvements. So point at see obviously, e-commerce that in we and of When we QX, thrilled of terms called tracking we think our the sales that And to terms than at you with I out. your the Donna beginning December of in business particular, were we guidance. stronger the shared point, were think expected. I talked to you in it's by for had our driven high-end -- January December, has were actually

So -- plus good we uptick. saw with that a also

We New sale deliver Year's that saw. really Eve and [ph], which a other did promotional the a we outperformance of had flash cadences couple

happy We've the e-commerce, outperformed experience. through to And we for see the quarter like relaunched by to that basis with digital kind you X just very results of that industry translate performance saw. I So amazing configurator an points. particularly X,XXX over think e-commerce our

conversion up, are We up. seeing traffic

else touchpoints, as of the in So really business cetera, et drove fundamentals performance. our well as the that saw we just everything all in great

of the then gross on in in think margin. you of terms question terms had that I

on. from just improvement points touch we inbound see, then, I can in So XXX over onwards, think And think, you QX I Donna, freight. do basis

We have headwind, freight, you a hand it that. for little I Donna, bit but Brian, a outbound of will with maybe

Donna Dellomo

hear me? Yes. Hopefully. Brian, you can

Brian Nagel

you hear I can Yes, fine.

Donna Dellomo

Technology. Good. don't good know. Well, Okay. morning. I

costs. which in XXX headwind points see be total. tailwind warehousing we -- XXX about that, in about or up leverage there's Mary around on the to against do But that we increase in freight just operating as plan that's provided guidance we earlier warehousing, outbound everything so related mentioned, basis costs labor point netting yes, basis would and of all do that So, inbound

As year I of basis net this about in we XXX investments the future going help of see that investments in use to around our -- said, that mitigate in is continued our SG&A. points of deleverage you the some are some specifically future gain to going

those So this year, investments. it's helping mitigate of some

inbound leverage, more of I should a see bit well. as that would right about And years the continued say, now, there's we on get leveraging as costs fiscal future we we've But the probably freight into XXX provided. related grow little and the we inbound continue points hope guidance we basis in going will into which deleverage, 'XX to will as out see freight we go or to

Brian Nagel

I Thank very you. helpful. appreciate Great. it. That’s all

Operator

from Our proceed. D.A. Thomas Forte next with Please Davidson. is question

Thomas Forte

Great. Mary, Donna, quarter, great Jack, Thanks. a great year. Shawn,

one my expansion. for international use So my question going question, to current for Shawn, on I'm your thoughts [indiscernible]

Shawn Nelson

Yes.

excited understand the very are this domestically. likely the and trademarks we all prospects and expansion. get research world, of are the to done fair year, But prize. patents intend understand our by opportunity over the the focused the of amount opportunity not on We hold We've a of international very there. to we We size internationally,

surface in market we total we United the do of the in we in of barely investment we what And use near-term. in in terms just available scratched frankly, States that's just the definitely think the have categories compete the against can best now, dollars the and

the on we U.S. so will continue to And focus

believe. And look to we to continue international future. market gain forward in share, sometime -- we will but We expansion the do

Thomas Forte

Great. Thank you.

Operator

question is next from Maria Canaccord. Ripps with Please proceed. Our

Maria Ripps

results. morning and on Good congrats Great. strong

factors has sort highly Designed in philosophy noticing purchase few of For inflation that level over past point, And maybe as you this the price products your conservatism. but with has in Are months consumer like some Life behavior or been how related that, So uncertain? a macro higher resonating environment? your guidance remains to consumers macro given your trends broader environment carry of any the been changes of decelerating, sort it seems in

Mary Fox

and Maria. a one take I Designed talk Good bit then will more think questions. and around you the your will For Life. Okay. Hi first thank Shawn morning, I for

we I how they're transacting, customers are think But how brands. shifts experiencing before, seeing varying in of actually, stabilization. we've we our see our do as So late, are shared more

high-end the So strong. been AOV continues be strong. to has

uptick a Lovesac that one At the we see I bit little an credit card, and would a little say the in are trend in so shift of on size of configuration low fully forth. end, we why sometimes terms the year. factored is for bit of seeing we more clear

of brand cross-shopping I even customer because to strong. flywheel traffic And in it aren't think be then well I strength think it know the that. saw XX% customers continues just of that be the our just the you we -- strength our quarter bodes continuing. of X. whether to with So to I back And our And that very goes anyone, think

have cause as for significantly you with just that's widen to amazing in this year. So continue forma lifetime about of launching gains more perform over strong with year, we've else. very just our this CAC sight marketing expansions line through we see even conservatism gain and as but that don't aperture share of baked pro machine a value called That share you to the the to exciting performances touchpoint halfway to from the we out, us that have for around anywhere really ratio, then we the year talked the will customer innovation the that economics incredible that through

to do So how answer the team's the think, all everything. Maria you the second I will about reflect had to we -- the macros obviously baked pragmatism in, first with but agility, in And Shawn, question think to as and continue then well? want

Shawn Nelson

Yes.

in think I based many But that watching are are And we we this we into year. quarter is model, seeing. new what under and products respects. are consumer on feel we Life we news Designed the we Clearly, resilience that the really our of that For all recognize others think, business the has environment, in our confident same already don't. and pressure first

XX% we the few kind past. are and a seeing growth XX% So not while saw for we years of

onlookers and that This many really think a And that the here we stronger feel seeing the post-pandemic, pandemic, pandemic, category. And question been glaring trend are growth in the I rest the through good time, the the to we today. why answer are I And has is. We biggest, think before about most in that. our that entire of product. is

This brain, that understand We math category. that. can they people do that the we designed rest who with the proud and It's to lives, very For a are product their have Life, of and have who are Designed them last a the with rest to very built resonates can of different a evolve. be and something lifetime, the of investing in

team just choppiness rate this of said, our satisfaction and recently in are this in flywheel And the the of Designed the fruit. share, that customer in continue made of particularly spreading massive not but highest about is evidence, brand, we’ve financial we and And ways. the through [ph] others our will, the side investments think when we've and intend in are -- people of environment the further we've seen. that. word market Lovesac With supply our is our choppiness through products. we chain strengthen experienced beleaguered Life here of that mouth the results, that it the results apparent business shows again, For to of take I all other this And infrastructure bearing of all about I think And to various on the

really ethos, for. feel we the stand so about way product, around for we've everything For And it brand, wrapped course, what, and the the Designed means about that our environment our confident we it Life that of

Maria Ripps

so much. Great. you Thank

Operator

MKM. with is question Please proceed. Matt from ROTH next Our Koranda

Matt Koranda

the Hey, guys. Good and on nice quarter. morning job

'XX commentary to fiscal could outlook. wanted by Just if see channel that's provide embedded on in the growth any you

high to outlook? location in channels showroom if in are for And as the example, some factoring going that StealthTech improvement then that's grow you the online the maybe just embedded you're 'XX year. are There's that curious fiscal well? expansion StealthTech the if how factoring there, terms probably across data And other suggest you're of rates? plus I outlook. shared in the teens this curious comps rates last you versus but then probably point Just and into noticed attach in

Mary Fox

talk the thank morning, the you year. for Donna questions. your for take then one Good can about a StealthTech and mix will Yes. and I Matt the little bit

just whilst earlier are had, very both market growth runway success of And StealthTech, we year. about long-term where we excited was customer had the year, attracting for we've all just XX%. as see great and well traffic yes, X a obviously, advantages business and in of saw performance also customers have as that we've quarter I in the terms overall the always for our we So, particularly and the I growth, continued new the built up over shared we think in in of nearly in of because AUV in one last the terms

driven, really technology, and drive to this customers experience it. was as test It came and to really to feel new hear this new in new

So grow. we're to continuing to that plan for

an the then do us continue home as does enable message the the channel of continues at flywheel. to million look shared customer continues really to one on earlier we in with be just see mix to I able you over I to I amazing strength. our Sactionals. be the the marketing successes audio just experience coupled our acquisition about want build if year? brand ratio the system that market for we it out touch expect And what you is think to think in And great to $XXX the just think best it Donna, And the costs, as the share I the improve, with to

Donna Dellomo

Yes.

we So to called I things to relative was for The is that inventory we one returned That million we innovation. year-over-year to because product projecting now, Internet are not channel, all right any into been in today specifically not the being of showrooms, channel, are about channel guidance. has -- showrooms the mix, which we built repeated out transactions. $XX the box are projecting which discussed of the increase both not our and other

inventory by the in that's removing So projections transactions channel is current inventory just increase. not those our barter one the projected to that to

extraction barter not to increase But -- Buy of is and those Best channel inventory channel total, -- the other the the of -- is in projecting other the the inventory just because transactions. other Costco the within

we Obviously, increasing. Internet omni-channel. it at increasing, look all as showroom So

So, happen But separately to helps. Costco Buy inventory [indiscernible] as boxed within slightly. return channel. transactions and well. the QX Hopefully, Best increasing increasing in again that because highlight, just reprojected total of down coming and through And a the is that QX, being currently increasing as it's it's channels year-over-year not that other

Matt Koranda

Very helpful. back will guys. get queue. I in Thanks,

Donna Dellomo

Okay.

Operator

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

Alex Fuhrman

and really about guys. ratios, the counterintuitive, to on given wanted Hey, is rates. with Thanks to high the increasing customer everything impressive I economy acquisition taking which and cost think, I ask for interest lifetime and going inflation my value question.

more Has sides it it product of an more add maybe But it can be as So seeing Thanks. lifetime more customer curious what's very helpful. any been value increase there seeing Or acquisition? time? you're more that? give in color is would you both of efficient been from you're driving about over the more it. that you Or us

Mary Fox

just just year as the even thrilled awareness first optimization I know we be repeat I I is customer of are very whether search it through from great the getting Thank our way see are acquisition. is shared as that the brand great. Yes, else. terms in don't XX% actually what's our the we And And come much transactions, you a think, from to to talk, purchases. job, we equally, along think business And efficient get of all we up And the to team yes, to back Alex. so really to we see out think hyper you, do more year anyone first And, acquisition. exciting of just results of use, also payback more. The just of they for marketing I fiscal local transaction through us and we decades. or sharing the full the only that

market. benefit a really into I think other seen categories, total the we second advance our expand is have piece addressable that as we

know, Sactional. creative do that As effort we and StealthTech is our alongside you part of the

advertising think free. that, get you the of Just literally for

proud because really that been There's work well. are incredibly to hard And and of So can as manage team a will we we going continue but that in start more has job. see leading. opportunities great we've into very see over that our even you all done efficiency And expansion, shared, of time big the some the we categories their shift continue the continue. and really optimize, of flywheel everything to new they do mix inflation, just industry

Alex Fuhrman

really That’s Thank Great. much. you helpful. very

Mary Fox

you, thank Yes, Alex.

Operator

We question-and-answer closing of comments. have to end conference Nelson would I session. like reached to the for back over our turn Shawn the

Shawn Nelson

for and great Lovesac the thank off these investors as amazing well come are like to have at company, to We would associates results the pass another of to year made Yes. supporting thank we all who Lovesac. our and

Operator

conference. This you. will Thank conclude today's

participation. at lines and you your disconnect time, for this may thank your You

The Lovesac Company (LOVE) 28 Mar 232023 Q4 Earnings call transcript