love-20230730

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to


Commission File Number: 001-38555

THE LOVESAC COMPANY (Exact name of registrant as specified in its charter)


Delaware						32-0514958
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


Two Landmark Square, Suite 300
Stamford, Connecticut						06901
(Address of principal executive offices)						(Zip Code)

Registrant’s telephone number, including area code: (888) 636-1223

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.00001 par value per share

LOVE

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files) ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the Registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 31, 2023, there were 15,486,187 shares of common stock, $0.00001 par value per share, outstanding.


		Page
PART I. FINANCIAL INFORMATION		1

Item 1.	Financial Statements	1

	Condensed Balance Sheets as of July 30, 2023 and January 29, 2023 (unaudited)	1

	Condensed Statements of Operations for the thirteen and twenty-six weeks ended July 30, 2023 and July 31, 2022 (unaudited)	2

	Condensed Statements of Changes in Stockholders’ Equity for the thirteen and twenty-six weeks ended July 30, 2023 and July 31, 2022 (unaudited)	3

	Condensed Statements of Cash Flows for the thirteen and twenty-six weeks ended July 30, 2023 and July 31, 2022 (unaudited)	4

	Notes to Financial Statements (unaudited)	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	24

Item 4.	Controls and Procedures	25

Part II. OTHER INFORMATION		27

Item 1.	Legal Proceedings	27

Item 1A.	Risk Factors	27

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27

Item 3.	Defaults Upon Senior Securities	27

Item 4.	Mine Safety Disclosures	27

Item 5.	Other Information	27

Item 6.	Exhibits	28


(amounts in thousands, except share and per share amounts)	July 30, 2023		January 29, 2023
Assets
Current Assets
Cash and cash equivalents	$	54,716	$	43,533
Trade accounts receivable	7,994		9,103
Merchandise inventories, net	104,970		119,627
Prepaid expenses and other current assets	15,947		15,452
Total Current Assets	183,627		187,715
Property and equipment, net	63,079		52,904
Operating lease right-of-use assets	149,285		135,411
Other Assets
Goodwill	144		144
Intangible assets, net	1,474		1,411
Deferred tax asset	10,075		8,677
Other assets	25,882		22,364
Total Other Assets	37,575		32,596
Total Assets	$	433,566	$	408,626
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable	$	33,858	$	24,576
Accrued expenses	24,984		25,417
Payroll payable	6,239		6,783
Customer deposits	12,279		6,760
Current operating lease liabilities	16,072		13,075
Sales taxes payable	3,910		5,430
Total Current Liabilities	97,342		82,041
Operating Lease Liability, long-term	149,431		133,491
Line of Credit	—		—
Total Liabilities	246,773		215,532
Commitments and Contingencies (see Note 6)
Stockholders’ Equity
Preferred Stock $0.00001 par value, 10,000,000 shares authorized, no shares issued or outstanding as of July 30, 2023 and January 29, 2023.	—		—
Common Stock $.00001 par value, 40,000,000 shares authorized, 15,481,925 shares issued and outstanding as of July 30, 2023 and 15,195,698 shares issued and outstanding as of January 29, 2023.	—		—
Additional paid-in capital	181,003		182,554
Accumulated earnings	5,790		10,540
Stockholders' Equity	186,793		193,094
Total Liabilities and Stockholders' Equity	$	433,566	$	408,626


	Thirteen weeks ended				Twenty-six weeks ended
(amounts in thousands, except per share data and share amounts)	July 30, 2023		July 31, 2022		July 30, 2023		July 31, 2022
Net sales	$	154,529	$	148,534	$	295,722	$	277,914
Cost of merchandise sold	62,139		69,435		132,757		132,841
Gross profit	92,390		79,099		162,965		145,073
Operating expenses
Selling, general and administration expenses	63,834		48,815		120,380		93,733
Advertising and marketing	26,535		19,088		43,448		34,989
Depreciation and amortization	3,014		3,076		5,836		5,737
Total operating expenses	93,383		70,979		169,664		134,459

Operating (loss) income	(993)		8,120		(6,699)		10,614
Interest income (expense), net	351		3		692		(32)
Net (loss) income before taxes	(642)		8,123		(6,007)		10,582
Benefit from (provision for) income taxes	7		(2,274)		1,257		(2,947)
Net (loss) income	$	(635)	$	5,849	$	(4,750)	$	7,635

Net (loss) income per common share:
Basic	$	(0.04)	$	0.38	$	(0.31)	$	0.50
Diluted	$	(0.04)	$	0.37	$	(0.31)	$	0.48

Weighted average shares outstanding:
Basic	15,422,640		15,195,116		15,326,702		15,175,247
Diluted	15,422,640		16,004,061		15,326,702		16,032,731


	Common			Additional paid-in capital	Accumulated (deficit) earnings		Total Shareholders' Equity
(amounts in thousands, except share amounts)	Shares	Amount
Balance - January 30, 2022	15,123,338	$	—		$	173,762	$	(15,948)	$	157,814
Net income	—	—			—		1,786		1,786
Equity-based compensation	—	—			1,163		—		1,163
Vested restricted stock units	1,704	—			—		—		—
Taxes paid for net share settlement of equity awards	—	—			(47)		—		(47)
Balance - May 1, 2022	15,125,042	$	—		$	174,878	$	(14,162)	$	160,716
Net loss	—	—			—		5,849		5,849
Equity-based compensation	—	—			1,034		—		1,034
Vested restricted stock units	58,235	—			—		—		—
Taxes paid for net share settlement of equity awards	—	—			(1,402)		—		(1,402)
Balance - July 31, 2022	15,183,277	$	—		$	174,510	$	(8,313)	$	166,197

Balance - January 29, 2023	15,195,698	$	—		$	182,554	$	10,540	$	193,094
Net income	—	—			—		(4,115)		(4,115)
Equity-based compensation	—	—			747		—		747
Vested restricted stock units	21,422	—			—		—		—
Taxes paid for net share settlement of equity awards	—	—			(470)		—		(470)
Balance - April 30, 2023	15,217,120	$	—		$	182,831	$	6,425	$	189,256
Net loss	—	—			—		(635)		(635)
Equity-based compensation	—	—			1,290		—		1,290
Vested restricted stock units	190,213	—			—		—		—
Exercise of warrants	74,592	—			—		—		—
Taxes paid for net share settlement of equity awards	—	—			(3,118)		—		(3,118)
Balance - July 30, 2023	15,481,925	$	—		$	181,003	$	5,790	$	186,793


	Twenty-six weeks ended
(amounts in thousands)	July 30, 2023		July 31, 2022
Cash Flows from Operating Activities
Net (loss) income	$	(4,750)	$	7,635
Adjustments to reconcile net (loss) income to cash provided by (used in) operating activities:
Depreciation and amortization of property and equipment	5,608		5,549
Amortization of other intangible assets	228		188
Amortization of deferred financing fees	81		71
Net loss on disposal of property and equipment	145		—

Equity based compensation	2,037		2,197
Non-cash operating lease cost	10,880		8,711
Deferred income taxes	(1,398)		2,313
Change in operating assets and liabilities:
Trade accounts receivable	1,109		(423)
Merchandise inventories	14,657		(37,199)
Prepaid expenses and other current assets	(524)		(16,510)
Other assets	(3,518)		(10)
Accounts payable and accrued expenses	3,087		(18,520)
Operating lease liabilities	(5,817)		(10,064)
Customer deposits	5,519		(6,828)
Net cash provided by (used in) operating activities	27,344		(62,890)
Cash Flows from Investing Activities
Purchase of property and equipment	(12,361)		(9,965)
Payments for patents and trademarks	(160)		(160)
Net cash used in investing activities	(12,521)		(10,125)
Cash Flows from Financing Activities
Taxes paid for net share settlement of equity awards	(3,588)		(1,449)
Payment of deferred financing costs	(52)		(276)


Net cash used in financing activities	(3,640)		(1,725)
Net change in cash and cash equivalents	11,183		(74,740)
Cash and cash equivalents - Beginning	43,533		92,392
Cash and cash equivalents - Ending	$	54,716	$	17,652
Supplemental Cash Flow Data:
Cash paid for taxes	$	1,232	$	9,393
Cash paid for interest	$	66	$	34
Non-cash investing activities:
Asset acquisitions not yet paid for at period end	$	3,698	$	3,536


	Thirteen weeks ended				Twenty-six weeks ended
	July 30, 2023		July 31, 2022		July 30, 2023		July 31, 2022
Operating lease expense	$	7,391	$	5,808	$	14,395	$	11,142
Variable lease expense	2,486		3,991		4,542		6,205
Short term lease expense	407		180		647		359
Total lease expense	$	10,284	$	9,979	$	19,584	$	17,706


(amounts in thousands)
2024	$	7,896
2025	30,562
2026	28,231
2027	25,946
2028	23,692
Thereafter	82,929
Total undiscounted future minimum lease payments	199,256
Less: imputed interest	(33,753)
Total present value of lease obligations	165,503
Less: current operating lease liability	(16,072)
Operating lease liability- long term	$	149,431


	Number of shares	Weighted average grant date fair value
Unvested at January 30, 2022	533,333	$	28.41
Granted	278,087	45.58
Forfeited	(21,243)	23.12
Vested	(102,649)	34.86
Unvested at July 31, 2022	687,528	$	34.87


	Number of shares	Weighted average grant date fair value
Unvested at January 29, 2023	640,256	$	34.50
Granted	815,340	26.76
Forfeited	(25,874)	35.32
Vested	(369,017)	24.37
Unvested at July 30, 2023	1,060,705	$	32.05


Condensed Statement of Operations Data:
	Thirteen weeks ended				Twenty-six weeks ended
(amounts in thousands, except per share data and share amounts)	July 30, 2023		July 31, 2022		July 30, 2023		July 31, 2022
Net sales
Showrooms	$	98,226	$	92,426	$	181,800	$	173,680
Internet	41,425		35,534		81,650		66,789
Other	14,878		20,574		32,272		37,445
Total net sales	154,529		148,534		295,722		277,914

Cost of merchandise sold	62,139		69,435		132,757		132,841

Gross profit	92,390		79,099		162,965		145,073
Operating expenses
Selling, general and administration expenses	63,834		48,815		120,380		93,733
Advertising and marketing	26,535		19,088		43,448		34,989
Depreciation and amortization	3,014		3,076		5,836		5,737

Total operating expenses	93,383		70,979		169,664		134,459

Operating (loss) income	(993)		8,120		(6,699)		10,614

Interest income (expense), net	351		3		692		(32)

Net (loss) income before taxes	(642)		8,123		(6,007)		10,582

Benefit from (provision for) income taxes	7		(2,274)		1,257		(2,947)

Net (loss) income	$	(635)	$	5,849	$	(4,750)	$	7,635

Net (loss) income per common share:
Basic (1)	$	(0.04)	$	0.38	$	(0.31)	$	0.50
Diluted (1)	$	(0.04)	$	0.37	$	(0.31)	$	0.48

Weighted average shares outstanding:
Basic	15,422,640		15,195,116		15,326,702		15,175,247
Diluted	15,422,640		16,004,061		15,326,702		16,032,731


	Thirteen weeks ended				Twenty-six weeks ended
(dollars in thousands)	July 30, 2023		July 31, 2022		July 30, 2023		July 31, 2022
EBITDA (2)(3)	$	2,021	$	11,196	$	(863)	$	16,351
Adjusted EBITDA (2)(3)	$	5,283	$	12,319	$	3,204	$	18,541


Balance Sheet Data:
	As of
(amounts in thousands)	July 30, 2023		January 29, 2023
Cash and cash equivalents	$	54,716	$	43,533
Working capital	86,285		105,674
Total assets	433,566		408,626
Total liabilities	246,773		215,532
Total stockholders’ equity	186,793		193,094


Condensed Statement of Cash flow Data:
	Twenty-six weeks ended
(amounts in thousands)	July 30, 2023		July 31, 2022
Net cash provided by (used in) operating activities	$	27,344	$	(62,890)
Net cash used in investing activities	(12,521)		(10,125)
Net cash used in financing activities	(3,640)		(1,725)
Net change in cash and cash equivalents	11,183		(74,740)
Cash and cash equivalents at the end of the period	54,716		17,652


Statement of Operations Data:
	Thirteen weeks ended				Twenty-six weeks ended
	July 30, 2023		July 31, 2022		July 30, 2023		July 31, 2022
Net sales	100	%	100	%	100	%	100	%
Cost of merchandise sold	40	%	47	%	45	%	48	%
Gross profit	60	%	53	%	55	%	52	%
Selling, general and administration expenses	41	%	33	%	41	%	34	%
Advertising and marketing	17	%	13	%	15	%	13	%
Depreciation and amortization	2	%	2	%	2	%	2	%
Operating (loss) income	—	%	5	%	(3)	%	3	%
Interest income (expense), net	—	%	—	%	—	%	—	%
Net (loss) income before taxes	—	%	5	%	(3)	%	3	%
Benefit from (provision for) income taxes	—	%	(2)	%	—	%	(1)	%
Net (loss) income	—	%	3	%	(3)	%	2	%

SEC Form 10-Q filed by The Lovesac Company