The Lovesac Company · NASDAQ:LOVE
The Lovesac — Q3 2023 Earnings Presentation
53 slides from The Lovesac's earnings presentation, December 2022
Slide 1: Investor Presentation December 2022
Investor Presentation December 2022
Slide 2: Safe Harbor Statement
Safe Harbor Statement This presentation by The Lovesac Company (the “Company,” “we,” “us,” and “our”) includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securi
Slide 3: LOVE's Unique Product Philosophy: Designed For Life
LOVE’s Unique Product Philosophy: Designed For Life Changeable Maintainable Moveable Rearrangeable Upgradable Waste-less We intend to become one of the biggest, the most innovative, and the most beloved furniture brands in the world. 3
Slide 4: LOVESAC's Senior Executive Management Team
LOVESAC’s Senior Executive Management Team Mary Fox Jack Krause John Legg Shawn Nelson Donna Dellomo Todd Duran President & COO Chief Strategy Officer Chief Supply Founder & CEO 1+ Years at Lovesac 6+ Years at Lovesac EVP & CFO CIO 20+ Years at Lovesac (Previous Lovesac Board (New Lovesac Board Memb
Slide 5: Lovesac at a Glance: FY2022 Key Financial Metrics
Lovesac at a Glance FY2022 Key Financial Metrics NET SALES NET SALES GROWTH $498.2 million 55.3% (87.6% of Net Sales = Sactionals) (4 YEAR CAGR of 48.7%) GROSS PROFIT GROSS MARGIN $273.3 million 54.9% ADJ. EBITDA1 BALANCE SHEET $55.5 million $92.4 million cash and cash equivalents GEOGRAPHIC PRESENC
Slide 6: Key Business Highlights
Key Business Highlights Mid-luxury positioning target customer is 25 to 45 Proven omni-channel advantage with strong year-old “young parent want-it-alls” with our key ecommerce performance, highly productive customer between ages of 35 to 39 years old showrooms and touchpoints, expanding marketing R
Slide 7: Recent Developments
Developments — = v bs a4
Slide 8: Operational Accomplishments
Operational Accomplishments • Footprint expansion: Net addition of 37 showrooms and 6 kiosks and remodeled 3 showrooms in the fiscal Q3 year-to-date period; Operated a total of 22 new Best Buy shop-in-shops in addition to online pop-up-shops with Costco • Innovation: Stealthtech sound-plus-charge pr
Slide 9: FY 2023 Q3 Financial Update and Q4 Guidance
FY 2023 Q3 and FY 2023 Financial Update Q/Q Growth • Showroom net sales increased 19.0% • “Other” channel net sales increased 61.8% 20% • Internet channel net sales decreased (6.3%) 15.5% 10% 8.9% • 8.5% increase in gross margin $ • (3.0%) decrease in gross margin % primarily due to supply chain hea
Slide 10: FY 2023 Q3 Operations Update: Touchpoints
FY 2023 Q3 Operations Update Touchpoints • In 3Q23, opened 16 • Operated temporary • Extended our Best showrooms, closed 1 online pop-up-shops Buy shop-in-shops and remodeled 3 in Q3 and restarting by 18 locations, • On a Q3 year to date physical roadshows bringing total count basis, opened 38 • In
Slide 11: Disruptive Model
Disruptive Model
Slide 12: Disrupting a Stale Category
Disrupting a Stale Category Traditional Model Long lead time, inventory & personnel heavy delivery Direct to consumer with ability to ship next day Low excitement and mundane products Patented, inventive, Designed For Life products Non-engaged commodity shoppers Highly engaged brand advocates Numero
Slide 13: Massive, Untapped Addressable Market
Massive, Untapped Addressable Market Furniture expenditures are expected to grow 4.96% per year through 2025 from $148.4 billion to $189 billion and the home audio segment is expected to reach $4.9 billion by 2025. Lovesac captures a small portion of this $46+ billion, representing a greenfield of o
Slide 14: Sactionals Overview
Sactionals Overview Next-gen premium modular couch with two simple pieces – seats and sides Patented modular system makes it easy to assemble & change over time Enables endless permutations of a sectional couch FY 2022 87.6% Net Sales Over 200 customizable, machine washable removable covers that fit
Slide 15: Sactionals is a Platform, Not a Product
Sactionals is a Platform, Not a Product Comfort Decor Function/Upgrade Platform Extension Drink Holder Seat Table Custom Covers & Dec Pillows Sactionals StealthTech Sound + Outdoor Sactionals Charge Footsac Blanket Coaster & Couch Bowl Roll Arm Power Hub 41.6% of Lovesac transactions are from repeat
Slide 16: Beautiful, Changeable, Washable & Comfortable
Beautiful, Changeable, Washable & Comfortable • 29 quick-ship covers constitute more • Fabrics manufactured for wash • Hardwood frames + sinuous springs enable than 94% of all covers sales1 • Fabrics engineered & tested for proper sit • Approximately 200 custom covers offer durability • 3 cushion-ty
Slide 17: StealthTech is an Ingredient Brand
StealthTech™ is an Ingredient Brand that Enhances Without Impacting Style LOVESAC STEALTHTECH • StealthTech is an ingredient brand under the Lovesac trademark • Enhances user experience of Lovesac products by embedding premium technology that addresses key consumer use cases for activities on or aro
Slide 18: StealthTech comes with core bundle and can be augmented
StealthTech™ comes w/ core bundle and can be augmented for any configuration 6 Speaker Immersive Sound + Charge System Add-On Enhancement Satellite Sound Side MSRP $3,700 MSRP: $500 *Pricing includes cost of the Side inserts. Net increase Up to 4 Satellite Sound Sides can be purchased to customer is
Slide 19: Sacs Overview
Sacs Overview • Category leader in oversized beanbags • DurafoamTM filling • Product line offers 6 different sizes ranging from FY 2022 • Sacs shrink to 1/8 original volume for shipping 25lbs to 95lbs 10.6% Net Sales • Multiple shapes, sizes with washable, changeable covers • Capacity to seat 3+ peo
Slide 20: Our Innovative Product Portfolio Continues to Expand
Our Innovative Product Portfolio Continues to Expand Sacs Sactionals Accessories FY 2022 Net Sales Custom Covers & 1.8% Footsac Blanket Drink Holder Seat Table Dec Pillows 20
Slide 21: Balanced Omni-Channel Strategy
Balanced Omni- Channel Strategy
Slide 22: Balanced Omni-Channel Strategy
Balanced Omni-Channel Strategy Diversifying Channel Mix 11.9% 12.7% 7.3% 9.8% 19.9% FY 2019 FY 2020 FY 2021 45.6% FY 2022 23.9% 30.2% Net Sales Net Sales Net Sales1 Net Sales 47.1% 60.0% 63.4% 68.2% Showrooms Internet Other Showrooms and Touchpoints Internet Other • Small-footprint retail locations
Slide 23: Superior Touchpoint Strategy & Productivity
Superior Touchpoint Strategy & Productivity 38 37 28 new showrooms, 8 kiosks, and 2 Net addition of 37 showrooms and 6 mobile concierges opened in FY2022 kiosks Q3 YTD 2023 Lovesac Showroom Features Economics of Showroom Model • Turns product inside-out to reveal technology • Low merchandising, aest
Slide 24: Superior Customer Experience: In Showrooms & Online
Superior Customer Experience: In Showrooms & Online Easy to Purchase • Mobile & Lovesac App purchases are easy • In-showroom checkout via iPad technology—never leave the couch • 30.4% of sales through in-house financing facilitated by a leading third party consumer financing company1 Easy to Ship •
Slide 25: Immersive Experience
Immersive Experience See It Touch It Buy It Physical retail locations and Social Media Showrooms / Shop-in-shops Lovesac.com / online pop-ups other direct / Kiosks / BestBuy.com marketing Social Media efforts drive conversion Advertising Mobile Concierge Showrooms / Shop-in-shops / Kiosks 25
Slide 26: Return on Advertising Spend is High and Ready to Grow
Return on Advertising Spend is High and Ready to Grow + (Eventual) International Additional Showrooms New Product Innovation More Shop-in-Shop Partners Expansion Our investments in national advertising are increasingly amplified by the above Initiatives, driving ROI’s up Awareness* Marketing Convers
Slide 27: Large and Growing Social Media Presence
Large and Growing Social Media Presence Social Engagement Metrics FY2022 854K followers 514K followers Lifetime views apx. 24.5MM • Unsolicited celebrity endorsements and promotion • Lovesac’s founder has a strong online following 27
Slide 28: Strong Customer Lifetime Value
Strong Customer Lifetime Value New Customer Count Lifetime Value of Customers 120,351 2022 LTV as % of 105,336 Base Year $2,840 79,252 $2,044 $2,167 106% 64,686 $2,027 $1,835 110% 51,858 42,732 $1,771 38,423 42,550 $1,540 115% $1,450 $1,206 120% $1,360 $1,103 123% $1,346 $1,064 127% $1,071 $1,385 12
Slide 29: "Designed for Life" Platform
“Designed for Life” Platform
Slide 30: "Designed For Life" Driven By Sustainable Inputs
“Designed For Life” Driven By Sustainable Inputs 82 966 3 Plastic Bottles 1 Plastic Plastic Bottles Bottles From April 2018 to January 2022, Lovesac repurposed more than 100 million plastic water bottles to make Sactionals 30
Slide 31: Evolution of Lovesac into a Circular Economy Business
Evolution of Lovesac into a Circular Economy Business Eliminates Looped Waste Sustainability Revolutionary CTC Commitment to “Circle to Consumer” Circle to Customer Sustainability Business Model Modular products built Delivers high-value products to last a lifetime and evolve to consumers, leveragin
Slide 32: Implementation of Circle To Consumer
Implementation of Circle To Consumer CTC Framework Targeting Long-term Localized Looped Operations Long-term Higher Customer New Revenue Streams & Operational Sustainable Growth Lifetime Value Ecosystem Development Efficiencies Next Steps ✔ By Quarter End FY23 Q1 ✔ By Quarter End FY23 Q2 By Quarter
Slide 33: ESG Initiatives
ESG Initiatives 0 waste, 0 emissions by 2040 FY22 ESG Report E We intend to demonstrate our sustainable commitments through measurable actions. This is why we’ve developed a Zero Emissions and Zero Waste roadmap to guide us to our goals. Our planetary impact is integral to our highest Lovesac expect
Slide 34: Strategic Priorities
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Slide 35: Our Fiscal 2023 Strategic Priorities
Our Fiscal 2023 Strategic Priorities Product Marketing Omni-channel Supply Chain/ Sustainability Distribution Infrastructure • Continue to increase • Drive growth spending • Continue partnership • Leverage diversified • Designed For Life ethos Sactionals StealthTech ~11-13% of net sales with Best Bu
Slide 36: Infrastructure: Built For Scale & Efficiency
Infrastructure: Built For Scale & Efficiency Large format motion screens and interactive touchpads to Showroom Technology enhance CX Data Warehouse & CRM Scalable foundation for ERP and CRM Concentrated inventory without shelf-life, at high carry to Logistics Optimization facilitate growth and flex
Slide 37: Summary
Summary • Large Addressable Market: Significant opportunity to disrupt a huge, and transitioning home furnishing market • Increasing Marketing Effectiveness: Still low brand awareness + strong marketing ROIs = Leaning into traditional, digital and social marketing strategies • Disruptive Omni-channe
Slide 38: Financials
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Slide 39: Fiscal 2023 Q3 and Q3 YTD Results
Fiscal 2023 Q3 and Q3 YTD Results 1 Adjusted EBITDA is a non-GAAP measure. See “Non-GAAP Information” and “Reconciliation of Non-GAAP Financial Measures” included on slide 41. 39
Slide 40: Fiscal 2023 Q3 and Q3 YTD Comparable Sales Metrics
Fiscal 2023 Q3 and Q3 YTD Comparable Sales Metrics 40
Slide 41: Fiscal 2023 Q3 and Q3 YTD Adjusted EBITDA Non-GAAP Reconciliation
Fiscal 2023 Q3 and Q3 YTD Adjusted EBITDA Non-GAAP Reconciliation 41
Slide 42: Fiscal 2022 and Fiscal 2021 Adjusted EBITDA Non-GAAP Reconciliation
Fiscal 2022 and Fiscal 2021 Adjusted EBITDA Non-GAAP Reconciliation Fifty-two weeks ended (dollars in thousands) January 30, 2022 January 31, 2021 Net income $ 45,900 $ 14,727 Interest expense, net 179 67 Taxes (7,638) 86 Depreciation and amortization 7,859 6,613 EBITDA 46,300 21,493 Management fees
Slide 43: Fiscal 2021 Adjusted EBITDA Non-GAAP Reconciliation
Fiscal 2021 Adjusted EBITDA Non-GAAP Reconciliation 43
Slide 44: Q3 FY2022 and Q3 FY2023 Metrics
Q3 FY2022 and Q3 FY2023 Metrics Net Sales Gross Profit Operating Expenses ($ in millions) ($ in millions) ($ in millions) $134.8 $63.6 $2.5 $58.6 $116.7 $19.1 $1.7 $15.8 47.2% of Net Sales(1) YoY 50.2% of Growth: $53.7 Net Sales(1) 40.9% $38.1 Q3 FY22 Q3 FY23 Q3 FY22 Q3 FY23 Q3 FY22 Q3 FY23 Deprecia
Slide 45: Q3 YTD FY2022 and Q3 YTD FY2023 Metrics
Q3 YTD FY2022 and Q3 YTD FY2023 Metrics Net Sales Gross Profit Operating Expenses ($ in millions) ($ in millions) ($ in millions) $412.7 $210.6 $8.2 $302.0 $163.7 $54.0 $5.7 51.0% of Net Sales(1) $39.5 YoY 54.2% of Growth: Net Sales(1) 41.5% $147.4 $104.2 Q3 YTD FY22 Q3 YTD FY23 Q3 YTD FY22 Q3 YTD F
Slide 46: Fiscal 2021 and Fiscal 2022 Metrics
Fiscal 2021 and Fiscal 2022 Metrics Net Sales Gross Profit Operating Expenses ($ in millions) ($ in millions) ($ in millions) $273.3 $498.2 $2.3 $7.9 $65.1 $174.8 $320.7 $6.6 54.9% of $41.9 Net Sales(1) YoY 54.5% of Growth: $159.7 Net Sales(1) 43.4% $111.3 Fiscal 2021 Fiscal 2022 Fiscal 2021 Fiscal
Slide 47: Fiscal 2020 and Fiscal 2021 Metrics
Fiscal 2020 and Fiscal 2021 Metrics Net Sales Gross Profit Operating Expenses ($ in millions) ($ in millions) ($ in millions) $320.7 $174.8 $6.6 $233.4 $116.7 $0.5 $5.2 $41.9 54.5% of $29.2 Net Sales(1) 50.0% of Net Sales(1) YoY Growth: 14.1% $111.4 $97.6 Fiscal 2020 Fiscal 2021 Fiscal 2020 Fiscal 2
Slide 48: Appendix
Appendix
Slide 49: Q3 FY2022/2023 Income Statement & Non-GAAP Reconciliation
Q3 FY2022/2023 Income Statement & Non-GAAP Reconciliation Q1 Q2 Q3 Q3 YTD ($ in 000's) FY 2022 FY 2023 FY 2022 FY 2023 FY 2022 FY 2023 FY 2022 FY 2023 Net Sales Showrooms $ 48,986 $ 81,254 $ 62,594 $ 92,426 $ 69,694 $ 82,957 $ 181,274 $ 256,637 Internet 25,175 31,255 29,480 35,534 35,542 33,319 90,1
Slide 50: FY2021/2022 Income Statement & Non-GAAP Reconciliation
FY2021/2022 Income Statement & Non-GAAP Reconciliation Q1 Q2 Q3 Q4 FY ($ in 000's) FY 2021 FY 2022 FY 2021 FY 2022 FY 2021 FY 2022 FY 2021 FY 2022 FY 2021 FY 2022 Net Sales Showrooms $ 18,118 $ 48,986 $ 12,850 $ 62,594 $ 41,538 $ 69,694 $ 73,644 $ 117,714 $ 146,150 $ 298,988 Internet 30,064 25,175 4
Slide 51: FY2020/2021 Income Statement & Non-GAAP Reconciliation
FY2020/2021 Income Statement & Non-GAAP Reconciliation Q1 Q2 Q3 Q4 FY ($ in 000’s) FY 2020 FY 2021 FY 2020 FY 2021 FY 2020 FY 2021 FY 2020 FY 2021 FY 2020 FY 2021 Net Sales Showrooms $ 26,925 $ 18,118 $ 31,262 $ 12,850 $ 32,474 $ 41,538 $ 57,343 $ 73,644 $ 148,004 $ 146,150 Internet 8,459 30,064 9,4
Slide 52: Q3 FY 2023 Balance Sheet
Q3 FY 2023 Balance Sheet LOVESAC CONDENSED BALANCE SHEETS (unaudited) October 30, January 30, 2022 2022 ‘amounts in thousands, except share and per share amounts) Assets ‘Current Assets ‘Cash and cash equivalents s 2392 “Trade accounts receivable 8547 Merchandise inventories 108,493, Prepaid expense
Slide 53: Q3 FY 2023 Statement of Cash Flows
Q3 FY 2023 Statement of Cash Flows 53