The Lovesac Company · NASDAQ:LOVE
The Lovesac — Lovesac — Investor Presentation (January 2020)
36 slides from The Lovesac's investor presentation, Jan 13, 2020
Slide 1: Investor Presentation January 2020
Investor Presentation January 2020
Slide 2: Forward-looking statements and non-GAAP information
2 This presentation by The Lovesac Company (the “Company,” “we,” “us,” and “our”) may include “forward - looking statements” with the meaning of Section 27 A of the U . S . Securities Act of 1933 , as amended, and Section 21 E of the U . S . Exchange Act of 1934 , as amended . All forward - looking
Slide 3: LOVE's Unique Product Philosophy: Designed For Life
3 LOVE’s Unique Product Philosophy: Designed For Life Waste - less Changeable Maintainable Rearrangeable Upgradable Moveable “ Lovesac Designed for Life products are built to last a lifetime & designed to evolve so that they never go out of style or become obsolete. New technologies & additions are
Slide 4: LOVE Management Team
LOVE Management Team Shawn Nelson Founder & CEO 20+ Years at LOVE Jack Krause President & COO 3+ Years at LOVE Donna Dellomo EVP & CFO 2+ Years at LOVE 4
Slide 5: Our Fiscal 2020 Strategic Priorities
5 Our Fiscal 2020 Strategic Priorities Product Marketing Omni - channel Distribution Technology Platform Brand ▪ Two key platform innovations per year ▪ Drive appeal to new & repeat business ▪ Drive ongoing growth spending 10% - 12% ▪ Test & learn to drive efficiency & volume ▪ New TV creative ▪ 17+
Slide 6: LOVE at a Glance
LOVE at a Glance CUSTOMER - LIFETIME VALUE 3 $1,540 GEOGRAPHIC PRESENCE 84 Branded Showrooms in 32 states in U.S. 2 REPEAT CUSTOMERS 38% of all transactions 6 1 Adjusted EBITDA Reconciliations can be found on page 35. 2 Represents Showroom metrics as of Q3 FY 2020. 3 Represents average value for for
Slide 7: Highlights
Highlights • Lifestyle brand disrupting the rapidly changing Home Furnishings landscape • Portfolio of products centered around innovation ; 35 issued patents • Mid - luxury positioning ; Target is 35 – 39 year - old “Young parent want - it - alls ” • Proven omni - channel approach • Loyal customer
Slide 8: Disrupting a Stale Category
Disrupting a Stale Category • Low excitement and mundane products • Patented, inventive, Designed For Life products • In - store stocking / long lead time, inventory & personnel heavy delivery • Direct to your door FedEx; Ships out next day • Non - engaged customer base • Highly engaged customers •
Slide 9: Large and Growing Addressable Market
Large and Growing Addressable Market All Other Market Share Lovesac Market Share Source: Mintel Group Ltd: Furniture Retailing, US, July 2016. Source: Home Furnishing Stores and Digital Commerce, eMarketer, US, February 2018. 1 Expenditures in 2015. In Furniture Expenditures 1 $103.1 billion 30% cou
Slide 10: Our Innovative Product Portfolio
SACTIONALS SACS 10 Our Innovative Product Portfolio FY 2019 Revenue 72.5% 24.8% 2.7% ACCESSORIES Seat Table Drink Holder Footsac Blanket Custom Covers & Dec Pillows
Slide 11: Sacs Overview
Sacs Overview 11 FY 2019 Revenue 24.8% SACS • Sacs shrink to 1/8 original volume • Multiple shapes & sizes • Wash & change covers • Category leader in oversized beanbags • Product line offers 6 different sizes ranging from 22lbs to 95lbs • Capacity to seat 3+ people on the larger model Sacs • Durafo
Slide 12: Sactionals Overview
Sactionals Overview • Next - gen premium modular couch • Patented modular system makes it easy to assemble & changeable over time • Create endless permutations of a sectional couch with just two standardized pieces, “Seats” and “Sides” • Over 250 customizable, machine washable removable covers that
Slide 13: Simple Pieces – Seats and Sides
2 Simple Pieces – Seats and Sides 13
Slide 14: Slide 14
Slide 15: Geometrically Modular System
Confidential Geometrically Modular System 15
Slide 16: Beautiful, Changeable, Washable & Comfortable
Beautiful, Changeable, Washable & Comfortable • 19 quick - ship covers constitute more than 85% of all covers sales • 250+ custom covers offer broad choice with zero inventory • Fabrics manufactured for washability • Fabrics engineered & tested for durability • Changeable covers • Hardwood frames +
Slide 17: Designed For Life = Sustainable Inputs Too
17 Designed For Life = Sustainable Inputs Too Last year alone, Lovesac repurposed more than 17 million plastic water bottles to make Sactionals
Slide 18: Sactionals is a Platform, Not a Product
38% of Lovesac transactions are from repeat customers¹ Sactionals is a Platform …Not a Product 1 % Transactions that are repeat is calculated by dividing transactions from existing customers over total transactions for FY2 01 9. We based this on our internal data relating to customers purchasing in
Slide 19: See It, Touch It, Buy It
Buy It Immersive Experience Friend / Neighbor Showroom / Shop in Shops Lovesac.com Social Media Advertising 19 Physical retail locations and other direct marketing efforts drive conversion See It Touch It Showroom / Shop in Shops
Slide 20: Superior Customer Experience
Superior Customer Experience Easy to Purchase • Mobile & Lovesac App purchases are easy • In - showroom checkout via iPad technology — never leave the couch • 42 . 1 % of sales through in - house financing facilitated by a leading third party consumer financing 1 company ; Drives larger purchases •
Slide 21: Balanced Omni-Channel Strategy
64.2% 20.8% 15.0% 21 Balanced Omni - Channel Strategy Diversifying Channel Mix 81.6% 16.1% 2.4% FY 2017 Revenue 68.2% 19.9% 11.9% FY 2019 Revenue 68.2% 19.9% 11.9% Showrooms Internet Other Showrooms • Small - footprint retail locations in high - end malls to create an environment where consumers can
Slide 22: Superior Showroom Strategy & Productivity
• Opened 13 new showrooms in fiscal 2019 • Opened 17 showrooms in fiscal 2020 • Completed showroom remodels in fiscal 2020 • Collaborated with leading design firm, Prophet NYC, for re - branding effort • Turns product inside - out to reveal construction & technology • Minimal merchandising, aestheti
Slide 23: Attractive New Showroom Model
23 Attractive New Showroom Model • Opened 17 new showrooms in FY 20 or 20 % year - over - year growth • Economics of new showroom model are favorable with strong returns on investment : • Target net sales of $ 1 . 5 to $ 1 . 6 million in the first year • Positive four - wall Adjusted EBITDA in the f
Slide 24: Marketing R.O.A.S. is High
Conversion Marketing Awareness* Marketing 24 R.O.A.S. is High, and is Amplified Each Year By…. National TV Focused around major buying holidays; driving positive ROI’s across both showroom and non - showroom markets. *Awareness unaided is currently < 2% nationally Social and Search Focused around te
Slide 25: Large and Growing Social Media Presence
• Unsolicited celebrity endorsements and promotion • Lovesac’s founder has a strong online following • One of the most viewed viral videos in the first 24 hours after posting involves a Sac 1 1 Source: Wikipedia. List of most viewed online videos in first 24 hours. FY2019 vs. Prior Year + 30% 733,00
Slide 26: Infrastructure: Built For Scale & Efficiency
Showroom Technology Data Warehouse - CRM Logistics Optimization Supply Chain • Large format motion screens and interactive touchpads to enhance CX • Scalable foundation for ERP and CRM • Concentrated inventory without shelf - life, at high carry to facilitate growth and flex • Easily scalable with e
Slide 27: Summary
Summary • Large TAM : Significant opportunity to disrupt a huge, and transitioning home furnishing market • Unique Product : Products are shippable, durable, washable and easily changeable with a focus on sustainability given our Designed For Life philosophy • Patent Portfolio : Patent portfolio hel
Slide 28: Financials
Financials
Slide 29: Fiscal 2018 and Fiscal 2019 Metrics
$101.8 $165.9 FY18 FY19 $57.2 $90.9 FY18 FY19 Net Sales Gross Profit Selling, General & Admin Expenses 29 Fiscal 2018 and Fiscal 2019 Metrics 1 The gross margin change was primarily due to higher freight expense and channel mix shift toward shop - in - shop locations and growth in Sactional products
Slide 30: Q3 YTD Fiscal 2019 and Q3 YTD Fiscal 2020 Metrics
$49.2 $65.2 $13.2 $18.7 $5.8 $5.1 Q3 YTD FYE 2019 Q3 YTD FYE 2020 One time IPO/Financing Marketing and advertising SGA (excluding One time IPO/Financing and Marketing) $55.4 $71.5 Q3 YTD FYE 2019 Q3 YTD FYE 2020 Net Sales Gross Profit Selling, General & Admin Expenses 30 Q3 YTD Fiscal 2019 and Q3 YT
Slide 31: FY20 Outlook Update
31 FY20 Outlook Update • Fiscal 2020 net sales growth is expected to be approximately 40 % versus the previous range of 40 % to 42 % • Fiscal 2020 Adjusted EBITDA * is expected to be a loss of $ 3 . 0 million to $ 4 . 0 million versus prior guidance of positive Adjusted EBITDA • Adjusted EBITDA * im
Slide 32: FY 2020 Adjusted EBITDA Non-GAAP Reconciliation
32 FY 2020 Adjusted EBITDA Non - GAAP Reconciliation ($ in 000’s) (dollars in thousands) Preliminary estimate for the fiscal year ended February 2, 2020 Actual for the fiscal year ended February 3, 2019 Net Loss (16,400)$ (6,704)$ Interest income (600) (355) Depreciation and amortization 5,100 3,134
Slide 33: FY 2018 FY 2019 FY 2019 FY 2020 FY 2019 FY 2020 FY 2019
FY 2018 FY 2019 FY 2019 FY 2020 FY 2019 FY 2020 FY 2019 FY 2020 FY 2019 FY 2020 Net Sales Showrooms 77,837$ 113,105$ 18,549$ 26,925$ 23,023$ 31,262$ 28,043$ 32,474$ 69,616$ 90,661$ Internet 18,859 33,024 4,566 8,459 5,515 9,457 7,729 11,416 17,811$ 29,331$ Other 5,114 19,752 3,653 5,574 4,710 7,428
Slide 34: Appendix
Appendix
Slide 35: Balance Sheet
35 Balance Sheet As of November 3, 2019 As of February 3, 2019 Current Assets Cash and cash equivalents 27,896,406$ 49,070,952$ Trade accounts receivable 8,581,102 3,955,124 Merchandise inventories 50,206,326 26,154,314 Prepaid expenses and other current asssets 8,415,638 5,933,872 Total Current Ass
Slide 36: FY 18/19 Income Statement & Non-GAAP Reconciliation
36 FY 18/19 Income Statement & Non - GAAP Reconciliation ($ in 000’s) FY 2018 FY 2019 FY 2018 FY 2019 FY 2018 FY 2019 FY 2018 FY 2019 FY 2018 FY 2019 Net Sales Showrooms 13,993$ 18,549$ 16,242$ 23,023$ 19,042$ 28,043$ 28,560$ 43,490$ 77,837$ 113,105$ Internet 3,051 4,566 3,221 5,515 3,986 7,729 8,60