The Lovesac Company · NASDAQ:LOVE
The Lovesac — ICR Conference 2022
49 slides from The Lovesac's conference presentation, January 2022
Slide 1: ICR Conference January 2022
LOVESAC Designed for Life Furniture Co. ICR Conference January 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 Shawn Nelson Mary Fox Jack Krause Donna Dellomo Founder & CEO President & COO Chief Strategy Officer EVP & CFO 20+ Years at Lovesac 1+ Years at Lovesac 5+ Years at Lovesac 4+ Years at Lovesac (Frm Lovesac Board Member) (New Lovesac Board Member) 4
Slide 5: Lovesac at a Glance: FY2021 Key Financial Metrics
Lovesac at a Glance FY2021 Key Financial Metrics NET SALES NET SALES GROWTH $320.7 million 37.4% (84.5% of Net Sales = Sactionals) GROSS PROFIT GROSS MARGIN $174.8 million 54.5% ADJ. EBITDA1 BALANCE SHEET $28.3 million $78.3 million cash and cash equivalents GEOGRAPHIC PRESENCE CUSTOMER LTV3 CUSTOME
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, expanding marketing ROIs and strong c
Slide 7: Recent Developments
Recent Developments
Slide 8: FY 2022 Q3 Financial Update
FY 2022 Q3 Financial Update Y/Y Growth • Showroom net sales • 41.9% increase in gross margin $ 60% 56.1% increased 67.8% • (5.1%) decrease in gross margin %* 50% • Internet channel net sales • Positive adjusted EBITDA1 of $5.8M 47.1% increased 38.2% • $47.9M in cash and cash equivalents at end of qu
Slide 9: Touchpoints
FY Q322 Operations Update Touchpoints Testing two new Best Buy shop-in-shop Strong performance from touchpoints in 2H by expansion plans to open our continued Costco opening up to 8 branded ~18 new units for 2H of this online pop-up-shop kiosks and launching 2 year. We will evaluate unit business. H
Slide 10: Disruptive Model
Disruptive Model
Slide 11: 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 12: Massive, Untapped Addressable Market
Massive, Untapped Addressable Market Furniture spend in the US totals over $100 billion, of which 30% is comprised of couches, chairs & seating. Lovesac captures a small portion of this $30+ billion, representing a greenfield opportunity in the space. Lovesac Market Share 30% couches, chairs $103.1
Slide 13: 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 2021 84.5% Over 200 customizable, machine washable removable covers Net Sales that fit
Slide 14: 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 37.5% of Lovesac transactions are from repeat
Slide 15: Beautiful, Changeable, Washable & Comfortable
Beautiful, Changeable, Washable & Comfortable • 29 quick-ship covers constitute more • Fabrics manufactured for wash • Hardwood frames + sinuous springs enable than 93% of all covers sales1 • Fabrics engineered & tested for proper sit • Approximately 200 custom covers offer durability • 3 cushion-ty
Slide 16: 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. Its role is to enhance user experience of Lovesac products by embedding premium technology that addresses key consumer use cases for activitie
Slide 17: StealthTech comes with core bundle and can be augmented
StealthTech™ comes w/ core bundle and can be augmented for any configuration 5.1 Immersive Sound + Charge System Add-On Enhancement Satellite Sound Side MSRP $3,700, Avg. SMSM: $2,960 MSRP: $500 *Pricing includes cost of the Side inserts. Net increase Up to 4 Satellite Sound Sides can be purchased t
Slide 18: Sacs Overview
Sacs Overview • Category leader in oversized beanbags • DurafoamTM filling • Product line offers 6 different sizes ranging from FY 2021 • Sacs shrink to 1/8 original volume for shipping 22lbs to 95lbs 14.0% Net Sales • Multiple shapes, sizes with washable, changeable covers • Capacity to seat 3+ peo
Slide 19: Our Innovative Product Portfolio Continues to Expand
Our Innovative Product Portfolio Continues to Expand Sacs Sactionals Accessories FY 2021 Net Sales Custom Covers & 1.5% Footsac Blanket Drink Holder Seat Table Dec Pillows 19
Slide 20: Balanced Omni-Channel Strategy
Balanced Omni- Channel Strategy
Slide 21: Balanced Omni-Channel Strategy
Balanced Omni-Channel Strategy Diversifying Channel Mix 5.0% 11.9% 12.7% 7.3% 18.5% FY 2018 19.9% FY 2019 FY 2020 FY 2021 45.6% 23.9% Net Sales Net Sales Net Sales Net Sales1 63.4% 47.1% 68.2% 76.5% Showrooms Internet Other Showrooms Internet Other • Small-footprint retail locations in high- • eComm
Slide 22: Superior Showroom Strategy & Productivity
Superior Showroom Strategy & Productivity 19 2 28 * New showrooms and closed 2 Full showroom remodels Planned new showrooms in showrooms in FY2021 completed in FY2021 FY2022, opened 28 in Q3 YTD Lovesac Showroom Features Economics of Showroom Model • Turns product inside-out to reveal technology • L
Slide 23: 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 24: 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 24
Slide 25: 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 26: Large and Growing Social Media Presence
Large and Growing Social Media Presence Social Engagement Metrics FY2021 853K followers 480K followers 42M+ views in 24 hours & 202M views in total • Unsolicited celebrity endorsements and promotion • Lovesac’s founder has a strong online following 26
Slide 27: Strong Customer Lifetime Value
Strong Customer Lifetime Value New Customer Count Lifetime Value of Customers 105,336 2021 79,252 Lifetime $2,044 Value as % 64,686 of Base $1,939 Year 106% 51,858 $1,835 38,423 42,550 42,732 $1,700 $1,540 110% $1,396 $1,206 116% $1,315 $1,103 119% $1,064 $1,301 2015 2016 2017 2018 2019 2020 2021 12
Slide 28: "Designed for Life" Platform
“Designed for Life” Platform
Slide 29: 100 million plastic water bottles to make Sactionals
“Designed For Life” Driven By Sustainable Inputs 82 966 3 Plastic Bottles 1 Plastic Plastic Bottles Bottles From May 2018 to April 2021, Lovesac repurposed more than 100 million plastic water bottles to make Sactionals 29
Slide 30: 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 31: 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 Q2 By Quarter End FY23 Q4 Next Steps Deve
Slide 32: ESG Initiatives
ESG Initiatives 0 waste, 0 emissions by 2040 1st ESG Report E We’re committed to achieving a 100% circular and sustainable business model by 2040. We currently use 100% recycled cardboard for our packaging. Guided by our DFL philosophy, we improved our sourcing to make the base liner fabric Lovesac
Slide 33: Strategic Priorities
Strategic Priorities
Slide 34: Our Fiscal 2022 Strategic Priorities
Our Fiscal 2022 Strategic Priorities Product Marketing Omni-channel Supply Chain/ Sustainability Distribution Infrastructure • Leverage diversified • One major product • Drive growth spending • Approximately 28 supply chain and • Designed For Life ethos launch ~12-14% of net sales new showrooms in r
Slide 35: 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 36: 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 37: Financials
a ® om >) | ® =| opm ae
Slide 38: Q3 and YTD FY22 Results
Q3 and YTD FY22 Results 1Adjusted EBITDA is a non-GAAP measure. See “Non-GAAP Information” and “Reconciliation of Non-GAAP Financial Measures” included on slides 38 and 39. 38
Slide 39: Q3 and YTD FY22 Comparable Sales Metrics
Q3 and YTD FY22 Comparable Sales Metrics 39
Slide 40: Q3 and YTD FY22 Adjusted EBITDA Non-GAAP Reconciliation
Q3 and YTD FY22 Adjusted EBITDA Non-GAAP Reconciliation 40
Slide 41: Fiscal 2021 Adjusted EBITDA Non-GAAP Reconciliation
Fiscal 2021 Adjusted EBITDA Non-GAAP Reconciliation 41
Slide 42: Q3 FY21 and Q3 FY22 Metrics
Q3 FY21 and Q3 FY22 Metrics Net Sales Gross Profit Operating Expenses ($ in millions) ($ in millions) ($ in millions) .5% 1% : 43 : 56. .9% th wth : 41 row Gro $116.7 th YG $1.7 YoY row $58.6 Yo YG Yo $15.8 $41.3 $1.9 $74.7 $11.0 50.2% of Net Sales(1) YoY $38.1 55.3% of Growth: Net Sales(1) $25.9 46
Slide 43: Q3 YTD FY21 and Q3 YTD FY22 Metrics
Q3 YTD FY21 and Q3 YTD FY22 Metrics Net Sales Gross Profit Operating Expenses ($ in millions) ($ in millions) ($ in millions) .1% : 58 .3% th 64 $163.7 .3% row $302.0 : th: 40 G th w Y ow Gro Yo r YoY $5.7 YG Yo $39.5 $0.0 $191.1 $99.6 $5.0 $26.3 54.2% of Net Sales(1) YoY 52.2% of Growth: $104.2 Net
Slide 44: Fiscal 2020 and Fiscal 2021 Metrics
Fiscal 2020 and Fiscal 2021 Metrics Net Sales Gross Profit Operating Expenses ($ in millions) ($ in millions) ($ in millions) .4% .8% th: 37 th: 49 w w Gro $320.7 Gro $174.8 YoY YoY wth: 20 .7% Gro YoY $6.6 $233.4 $116.7 $0.5 $5.2 $41.9 54.5% of $29.2 Net Sales(1) 50.0% of Net Sales(1) YoY Growth: 1
Slide 45: Appendix
Appendix
Slide 46: Q3 YTD FY22 Income Statement & Non-GAAP Reconciliation
Q3 YTD FY22 Income Statement & Non-GAAP Reconciliation Q1 Q2 Q3 Q3 YTD ($ in 000's) 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 $ 72,506 $ 181,274 Internet 30,064 25,175 46,074 29,480 25,710 35,542 101,848
Slide 47: FY20/21 Income Statement & Non-GAAP Reconciliation
FY20/21 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 9,456 4
Slide 48: Q3 FY22 Balance Sheet
Q3 FY22 Balance Sheet LOVESAC ‘THE LOVESAC COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS October 31, January 31, 2021 2021 (amounts in thousands, except share and per share amounts) (unaudited) Assets ‘Current Assets ‘Cash and eash equivalents $4782 § 78341 “Trade accounts receivable 9,794 4513 Merc
Slide 49: Q3 FY22 Statement of Cash Flows
Q3 FY22 Statement of Cash Flows 49