Lovesac Co Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Michael Baker - D. A. Davidson & Co. - Analyst : You did pre-empt my question on that fourth quarter ramp, which still is pretty aggressive to me, but I guess I get the factors. So if I could follow up on that, though, can you quantify how much of your sort of pent-up demand you have for the new Accent Chair and StealthTech, how much were the delays? So I presume some of that revenue, you've got a lot of visibility into it. So if you can just quantify how much of that helps that fourth quarter ramp?

Question: Michael Baker - D. A. Davidson & Co. - Analyst : Okay. Thank you. That's helpful. A couple more quick follow-ups. Some of the industry data that we track at least has already started to get a little bit less worse. And I think you sort of implied that as well, just as rates have come down, any green shoots or anything you can point to maybe in REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 12, 2024 / 12:30PM, LOVE.OQ - Q2 2025 Lovesac Co Earnings Call terms of mix or higher-end versus lower-end or any sort of early signs of mortgage rates coming way down that might be helping your business or at least give visibility into the back half outlook?

Question: Michael Baker - D. A. Davidson & Co. - Analyst : Yeah, that is interesting and thanks for that color. One more quick one, does your guidance include any buyback that you said that you expect to offset dilution, but I guess specifically as we do our model, are you planning -- should we include buybacks in the estimates? And just bigger picture, how did that decision come about? We know there were some shareholder letter written during the quarter, just trying to understand the buyback philosophy a little bit more.

Question: Maria Ripps - Canaccord Genuity LLC - Analyst : Great. Good morning and thanks for taking my questions. First, I just wanted to follow-up on your full-year guidance. So with Q2 coming in more or less sort of in line with expectations to maybe slightly better, can you maybe talk about your thoughts around narrowing your guidance, especially on the kind of on the upper end? And it seems like there is a little bit of shift in sales that's happening from Q3 into Q4. But kind of as we look at the full-year guidance, is there anything different that you are seeing now versus, let's say, last quarter?

Question: Maria Ripps - Canaccord Genuity LLC - Analyst : Got it. That makes sense. And then, secondly, can you maybe refresh us on your latest thoughts around the optimal number of showrooms and maybe overall touch points for the business? And I guess any color maybe you can share on incremental uplift to sales and brand awareness sort of when you add new showrooms now compared to, let's say, a couple of years ago?

Question: Tom Forte - Maxim Group LLC - Analyst : Great, so first off Shawn, Mary, and Keith, congrats on the quarter. I have one question and one follow-up. So Shawn can you give us your current thoughts on your strategy for new product development, how you think about new lines such as StealthTech and how you think about adjacent products such as AnyTable?

Question: Tom Forte - Maxim Group LLC - Analyst : Excellent and for my follow-up can you talk about the gross margins and the contribution margins on new products such as the PillowSac Accent Chair and AnyTable. I would think that the contribution margins would be quite favorable because unless you're directly advertising them I feel like historically at least with StealthTech you advertise the Sactionals, but then included it as part of the advertising. So, I'd appreciate your thoughts on that.

Question: Brian Nagel - Oppenheimer & Co. Inc. - Analyst : Hi, good morning. Nice quarter, congratulations. So for my questions, I actually want to focus on innovation, given it's a key topic of the reporter call today but I guess the first question I ask is we as we think about recognizing your sector is choppy, it remains choppy, but as we think about the top-line growth algorithm for Lovesac, I mean, now with product innovation kicking out maybe going to a more consistent cadence. I mean, how should we think about product innovation is a contributor to your top-line growth algorithm.

Question: Brian Nagel - Oppenheimer & Co. Inc. - Analyst : No, it's helpful, Keith. And then, my follow-up, and I think you talked about this in the prepared comments, but this is we look at that the PillowSac Accent Chair in the initial demand for that it, so has that been -- is it existing new customers? I mean, how are you seeing that in that initial demand makeup for that, that new innovative product?

Question: Matt Koranda - ROTH Capital Partners, LLC - Analyst : Hey, guys. Good morning. Just wanted to cover, I think Keith mentioned in the prepared remarks, underlying demand was steady throughout the quarter. Just wondered maybe if you could unpack a little bit more about the cadence that you saw in terms of month by month. And just anything you can share in terms of August to September trends in terms of what you've seen? I guess, is it fair to say demand is consistent with sort of the third quarter guidance that you provided? I think it's a low-single-digit growth rate that's embedded there. Or are we counting on any other kind of bigger promotions later in the quarter that drive demand?

Question: Matt Koranda - ROTH Capital Partners, LLC - Analyst : Okay. That's helpful, Mary. Thank you. And then, just on the I guess the implied ramp in EBITDA margin in the fourth quarter is relatively high. Looks like sort of the midpoint of the guide is implying something in the mid-20% range, which would be a little bit higher than what you've done in the past. Maybe if you guys could talk about the levers to get there. I know you kind of gave some gross margin commentary, but I guess it implies also that you're going to see significant operating leverage in the fourth quarter. So, maybe just you could parse out where you're seeing that between SG&A and marketing, that'd be super helpful.

Question: Matt Koranda - ROTH Capital Partners, LLC - Analyst : Okay, great. And could I sneak one more in just on the financing program that you mentioned, Keith? You mentioned there are program fees that started to kick in that may have reduced sort of the penetration of revenue that's financed through the credit card program. Could you cover the timing of when that happens? And maybe it sounded like the levers to get back to a more similar rate of financing or just more kind of tweaking promotions. But is there anything else that you can do on that front to kind of boost the penetration of financing?

Question: Alex Fuhrman - Craig-Hallum Capital Group LLC - Analyst : Hey, guys. Thanks for taking my question. A lot of talk here about accelerating new product development, I was wondering if you can kind of quantify a little bit for us, how much of your business this year do you expect to come from new products? And I know that's probably a little bit easier to ask than answer considering some products are more geared towards incremental sales than others. But just any way you could frame that for us? And then, is it fair to assume that the contribution from new products is going to be a lot more significant next year?