The Lovesac Company - Q2 2025

Transcript

Operator (participant)

...Greetings, and welcome to the Lovesac Second Quarter Fiscal 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ms. Caitlin Churchill, Investor Relations for Lovesac. Thank you. You may begin.

Caitlin Churchill (Head of Investor Relations)

Thank you. Good morning, everyone. With me on the call is Shawn Nelson, Chief Executive Officer, Mary Fox, President and Chief Operating Officer, and Keith Siegner, Chief Financial Officer. Before we get started, I would like to remind you that some of the information discussed will include forward-looking statements regarding future events and our future financial performance. These include statements about our future expectations, financial projections, and our plans and prospects. Actual results may differ materially from those set forth in such statements. For a discussion of these risks and uncertainties, you should review the company's filings with the SEC, which includes today's press release. You should not rely on forward-looking statements as predictions of future events. All forward-looking statements that we make on this call are based on assumptions and beliefs as of today, and we undertake no obligation to update them, except as required by applicable law.

Our discussion today will include non-GAAP financial measures, including EBITDA and Adjusted EBITDA. These non-GAAP measures should be considered in addition to, and not as a substitute for or in isolation from, our GAAP results. A reconciliation of the most directly comparable GAAP financial measure to such non-GAAP financial measure has been provided as supplemental financial information in our press release. Now, I'd like to turn the call over to Shawn Nelson, Chief Executive Officer of the Lovesac Company. Shawn?

Shawn Nelson (CEO)

Good morning, everyone, and thank you for joining us. I'll start by sharing a high-level overview of our second quarter results and outlook. Then Mary Fox, our President and COO, will discuss our key growth initiatives. Finally, Keith Siegner, our CFO, will review our financial results and a few other items related to our outlook in more detail. Turning to the highlights of our Q2 results, we're pleased to deliver results in line or slightly favorable to our expectations, including total net sales of $156.6 million and Adjusted EBITDA of $1.5 million. These results reflect positive net sales growth of 1.3% for the quarter, indicative of continued market share gains despite the ongoing headwinds facing our category. Total omni-channel comparable net sales decreased 5.4%, but this was more than offset by new and non-comp touchpoint contributions.

Net loss and net loss per common share were pressured by slight declines in gross margins and deleverage in SG&A, partially offset by leverage in advertising and marketing, all of which was expected and consistent with our previous guidance. Underpinning our performance is our highly productive omnichannel footprint, which is built upon our Designed for Life platform, enhanced by the love evidenced in our customer engagement, compounded by compelling marketing, and reinforced by our accelerating focus on product innovation. Demonstrating this commitment to innovation, in Q2, we successfully launched our PillowSac Accent Chair Frame, or PACF, which saw incredible response and is surpassing our expectations. In fact, the Accent Chair Frame sold out just a few weeks after launching. Let me share some highlights. Our PACF launch post was Lovesac's top-performing single social post to date, with over 8.8 million views.

Two-thirds of all PillowSacs sold since launch were ordered with an Accent Chair Frame. PACF excitement was haloed onto the entire Sac business, which has grown double digits, +25%, since we launched the PACF. Looking ahead, we are actively developing more innovations against this highly successful offering, as well as our broader Sacs platform. But perhaps most exciting of all is that the PACF has driven incremental Lovesac market penetration. Greater than 50% of PACF purchases since launch have been from existing Lovesac customers, and this is just the beginning of our plan to ramp up our efforts to generate more repeat business, which I'll talk more about in just a minute. Following the PACF success, we are excited to have just launched the new AnyTable.

AnyTable brings the unrivaled adaptability of Sactionals to a table and represents the first of Lovesac's entry into an adjacent furniture category, tables and case goods. AnyTable seamlessly integrates into new and existing Sactionals setups in many configurations, connected to the Sactionals or freestanding, connected to each other. You can grow it and change it and rearrange it. It offers style, functionality, and hidden storage, and it's designed with future innovations in mind. There's more to come on the AnyTable platform. AnyTable is available in three wood finishes that match our newly redesigned Sactionals accessories: Weathered Gray, Dark Brown, and Blonde.

Speaking of accessories, we are also launching an entirely new suite of redesigned Sactionals Drink Holders, coasters, and the all-new Sactionals Tray in the same three wood finishes that coordinate with all of the new wood designs from Lovesac. We're moving closer to a design point of view on the entire living room, and someday, the entire home. If not every product category, then at least the ones that really matter to people and how they live their everyday lives. We're solving problems that people didn't even know they had, with products that are totally unique to Lovesac, and of course, built to last a lifetime and designed to evolve as lives change.

This is our Designed for Life business model unfolding in real time, where all products coordinate, build on each other, and make the customer's core Lovesac purchase, that perhaps they made years ago, even more valuable and useful to them than it did when they bought it in the first place. There is no other home brand designing or marketing in this way. We have much more to come. Through these launches, our plans for a few other smaller launches still yet to come this year, and a major launch in fiscal 2026, we are driving momentum. These will give us entry into more rooms in households and expand our reach. Combine this reach with our CRM and omni-channel tools that we have invested in over the past few years, and we believe we have a massive opportunity to capture much more repeat customer action in the future.

Before we move on to the outlook, in addition to our product innovations, we have some exciting collaborations happening right now. First up, we're thrilled to launch our collaboration with fashion phenom, KidSuper, during Fashion Week in New York City just a couple days ago. So keep your eye on pop culture, fashion, and Fashion Week to see how Lovesac shows up in the most avant-garde channels out there. The focus on innovation that is ingrained in our DNA at Lovesac, coupled with the appeal of our Designed for Life platform, our convenient omnichannel model, and compelling marketing, are all enabling us to deliver continued market share gains against a still challenged industry and category backdrop. That playbook remains in place and remains our goal, regardless of the macro situation. Now, listen, we'd all love to see interest rate decreases create a potential tailwind for our category, and they might.

But we believe it's prudent, given actual spending data and recent promotional intensity within the category, to leave our industry outlook unchanged at this point. As such, our outlook still assumes that the category will be down 10% versus last year. Based upon that macro foundation and where we sit after seven months of our fiscal year, we are tightening our guidance range for net sales. While the midpoint of the range is slightly lower than before, it still reflects growth for the fiscal year. We remain well positioned to deliver on our objectives for this year and beyond. And should the environment change, our teams are nimble and poised to pivot quickly with the ability to chase growth.

In summary, our teams are at the heart of what we do day in and day out at Lovesac, and I want to thank them for their ongoing hard work and disciplined execution as we continue to navigate a dynamic consumer environment. Lovesac's runway for growth is long and attractive, with a large and extremely fragmented addressable market, of which we currently enjoy very low share, even in our current platforms. Our strengthening market position, profitable and growing business, and debt-free balance sheet, all enabled our recently announced first-ever share buyback authorization. As Keith will review, we intend to continue to operate and deploy capital with discipline, focused on delivering long-term, sustainable, profitable growth that should create value for all of our stakeholders. We look forward to sharing more on our long-term vision during an Investor Day, which we are targeting to host during our fourth quarter.

So stay tuned for more details. With that, I'll hand it over to Mary to cover our strategic priorities and progress in more detail. Mary?

Mary Fox (President and COO)

Thank you, Shawn, and good morning, everyone. As Shawn discussed, we're pleased to have delivered results in line with our guidance for quarter two, even as the category remains challenging. Importantly, not only did net sales grow versus last year, but on a five-year basis, they're up 225% from pre-pandemic levels, compared to the comparable category performance of flattish. Our Adjusted EBITDA margin has increased 430 basis points over the same time period. In quarter two, we outperformed the category, gaining market share underpinned by our customer and product-centric focus and our unique omni-channel infinity flywheel. We've built a business model and a platform unlike anyone else in the category, resulting in a total addressable market opportunity that is significant. Brand health that is strong and growing, best-in-class touchpoint economics, and an advantaged supply chain.

We continue to extract benefit from disciplined investments in our strategic initiatives and capabilities that expand our addressable markets and enhance underlying profitability. I'll now provide key highlights of our go-forward plans on each of our strategic initiatives. Firstly, product innovation. We are happy to launch a number of great innovations this year, starting with the PillowSac Accent Chair in May. I just want to add a few details beyond what Shawn shared earlier. Our marketing team brought this unique innovation to life, leveraging our Architectural Digest partnerships through a 360-degree campaign of digital marketing, PR, influencers, and social media, building excitement and intrigue among consumers, influencers, and media. We've delivered over two billion earned impressions and over 500 media placements, thereby building buzz and news, not only for PillowSac Accent Chair, but for Lovesac, the brand.

We're extracting the learnings from this entire process to sharpen our approach on all of our upcoming innovation launches. PillowSac Accent Chair also serves as a great experiment for driving greater repeat customer business. Existing PillowSac owners have been buying the Accent Chair Frame, allowing them to experience their Sac in a new way, and many are buying multiple covers to truly accent their rooms. From bouclé to plush furs or even seasonal covers, such as the top-selling limited edition Pine Quilted Velvet. It's a fun way to add interest and style and appreciate the flexibility that's actually in every product Lovesac makes. We see the tremendous opportunity to tap into this and drive incremental lifetime value with future innovations.

Building on this momentum, we've just launched the second innovation of the year, AnyTable, with the third right behind in the newly redesigned Sactionals accessories platform, including the Sactionals Drink Holder, coasters, and a much more contemporary tray. Our teams are super excited to share these with our customers and are already off to a strong couple of days. We'll continue to refine our launch program and repeat customer outreach, putting us in an increasingly effective position ahead of much bigger launches coming in the future. We're on track for our material innovation launch in early fiscal 2026, that we expect to significantly open the aperture of where we compete in the couch category, and thereby enable us to accelerate our market share gains. We look forward to sharing more details with you closer to launch.

On Monday, we launched the first of its kind collaboration, which merges Lovesac's ingenuity in furniture design with one of the most talented and trending fashion designers today. Teaming up with disruptive fashion house, KidSuper, we have launched a limited edition collection of home furnishing styles that merges our cloud-like comfort and boundary-pushing streetwear. The hero of this collaboration and campaign is our PillowSac Accent Chair, featuring KidSuper's iconic Kissing design. We're very proud of this groundbreaking collaboration and of the energy and excitement at the launch event, with its coverage blowing past our expectations. Second is our omnichannel experience. We continue to strengthen our position as a true omnichannel retailer through a combination of our physical touch points and our digital platform.

First, during the quarter, we opened ten touch points, and we remain on track to deliver at or just over thirty net showroom openings in fiscal 2025. Second, during the quarter, we launched a series of website enhancements that nurture long-term relationships with new and existing customers and support our plan to have the best-in-class omnichannel experience. We made significant enhancements to MyHub, a singular destination on lovesac.com that allows for seamless pre- and post-purchase experiences. In quarter two, the focus was providing enhanced personalization of the shopping experience that more closely mirrors touch points, allowing the customer to easily and seamlessly add to, adjust, or otherwise reconfigure their Lovesac where, when, and how they choose. This has led to a significant increase in account creation, which provides us with a greater opportunity to engage the customer in a more personalized and relevant manner.

Building long-term relationships with our highly engaged, addressable base of existing customers remains a significant opportunity for Lovesac and a key strategic focus as we continue to launch new products that integrate into their existing purchases. Early performance is extremely positive, indicating that customers are responding well to these new features. The next exciting website enhancement was our replatforming to Adobe Edge, a technologically evolved platform experience that significantly improves website performance, data, and software integration. A more performant website benefits not only the on-site experience, but also SEO and organic search. We're already seeing notable improvements in these areas and improved conversion of customers online. Importantly, as a result of our unique omnichannel experience, our customer satisfaction scores continue to strengthen and sequentially increased in quarter two, especially our digital experience. These scores improve year over year to our highest levels recorded.

Third is our ecosystem, which is centered around acquiring, delighting, and maintaining relationships with loyal, loving customers. We continue to leverage our marketing mix and marketing spend, especially during the Memorial Day and July Fourth market share events, and improved efficiency in return on ad spend and cost per acquisition. Looking ahead, we will actively test in the media space to optimize our investments for growth, especially considering opportunities in the spaces of video, connected TV, search, and audience targeting, as well as broadening our brand awareness. We continue to see inflationary cost pressure, especially in paid search, but have become incredibly efficient in driving the right audience into touch points and to the website, resulting in higher conversion rates. We're also excited about the progress we've made, expanding our reach on YouTube as another lever, not only for brand awareness, but throughout the purchase funnel.

In quarter two, we continued to have success marketing to our existing customers and saw strong growth in existing customers' transaction count. In quarter two, we completed the infrastructure requirements necessary to deploy our first phase of offering services. Last week, we launched our beta resale platform, piloting with our own associates, before launching a customer-facing experience in the near future. We're very excited about the progress we've made in this important area, leveraging open box inventory to fuel our endeavor and continuing to expand on our promise to create products that are Designed for Life and supported by circular operations. Now, finally, making disciplined infrastructure investments and driving efficiencies. In quarter two, we delivered material cost of goods and inbound freight improvements through prudent management and planned infrastructure investments, both in capabilities and technology, that we continue to realize the benefit from.

As we shared at the beginning of this year, we enhanced our inbound logistics strategy, moving from a freight forwarder model to a direct carrier relationship, minimizing our reliance on spot rates. This has benefited us both in overall better pricing and availability of containers, as well as de-emphasizing the spot market pricing inflation, and this represents significant cost avoidance. From a gross margin perspective, these savings were offset by an increase in promotional discounting in the quarter as we continue to see higher promotional levels in the category. We also delivered a 16% reduction in total inventory at the end of the quarter, driven by the benefits of recent investments, including our new order management system. We're making strong advancements in our outbound logistics model, and we've successfully introduced local parcel providers in one key market, which is helping deliver overall lower costs and improved customer satisfaction.

We'll continue to expand this program throughout this year and beyond. So in summary, we're pleased with the progress on our strategic priorities as we continue to successfully expand the business and make important foundational investments to drive, as well as support, the substantial growth that lies ahead. I will now pass the call over to Keith.

Keith Siegner (CFO)

Thanks, Mary. Let's jump right on into a quick review of second quarter, followed by our outlook for the rest of fiscal 2025. Net sales increased $2.1 million, or 1.3%, to $156.6 million in the second quarter of fiscal 2025 compared to the prior year. This was consistent with our guidance and reflective of continued market share gains, driven by expansion of physical and digital footprint, promotional efficacy, product news, marketing, and our excellent customer experience across the board. Showroom net sales increased $0.6 million or 0.6% to $98.8 million in the second quarter of fiscal 2025 compared to the prior year, which was driven by the net addition of 31 new showrooms, partially offset by a decrease of 5.4% in omnichannel comparable net sales.

While we have seen week-to-week volatility, depending on timing of holidays, promotions, and product launches, underlying trends have been relatively stable. Internet net sales increased $2.9 million or 7% to $44.3 million in the second quarter of fiscal 2025 compared to the prior year period. Other net sales, which include pop-up shop, shop-in-shop, and open box inventory transactions, decreased $1.4 million or 9.3% to $13.5 million in the second quarter of fiscal 2025 compared to the prior year period. This is primarily due to lower productivity of our temporary online pop-up shops on Costco.com. As a reminder, we may engage in limited open box inventory transactions with ICON going forward in order to ensure our warehouses are operating as efficiently as possible.

Consistent with what we discussed last quarter, and which was the case for second quarter, we believe the fiscal 2024 quarterly run rate is reflective of a potential baseline level to use in your models, reaching approximately $12 million for the fiscal year. By product category in the second quarter, our Sactional net sales increased 2%. Sac net sales were flat, which was the strongest performance in several quarters as a result of the strength in our PillowSac Accent Chair. Encouragingly, we have some backlog on PAC, given it's sold out on high demand, and we currently estimate net sales catching up with demand in the fourth quarter. Our other net sales, which includes decorative pillows, blankets, and accessories, decreased 15% over the prior year.

Gross margin decreased eighty basis points to 59% of net sales in the second quarter of fiscal 2025 versus 59.8% in the prior year period, primarily driven by a decrease of one hundred and ten basis points in product margin, driven by higher promotional discounting and an increase of fifty basis points in outbound transportation and warehousing costs. This was partially offset by a decrease of eighty basis points in inbound transportation costs. SG&A expense as a percent of net sales was 47% in the second quarter of fiscal 2025 versus 41.3% in the prior year period. The increased percentage is primarily related to investments in payroll, equity-based compensation, professional fees, rent, and infrastructure.

The increase in selling, general, and administrative expenses was primarily related to an increase of $6.4 million in payroll, $1.5 million in equity-based compensation, $0.9 million in professional fees, $0.7 million in rent, and $500,000 in infrastructure investments in the business to support current and future growth. Rent increased by $0.7 million, related to a $1.2 million increase in rent expense from our net addition of 31 showrooms, partially offset by a $0.5 million reduction in percentage rent. We estimate non-recurring incremental fees associated with the restatement of prior period financials was approximately $1.9 million in the second quarter. These are very difficult to forecast and have been above our original fiscal 2025 forecast for the past two quarters. We will continue to highlight any, if applicable, each quarter.

Advertising and marketing expenses decreased $3.2 million, or 12.2%, to $23.3 million for the second quarter of fiscal 2025, compared to the prior year period. Advertising and marketing expenses were 14.9% of net sales in the second quarter, as compared to 17.2% of net sales in the prior year period, with the decreased percentage primarily due to costs related to our 25th anniversary campaign in fiscal 2024, not repeating in fiscal 2025. Operating loss for the quarter was $8.4 million, compared to $1 million in the second quarter of last year, driven by the factors we just discussed.

Before we turn our attention to net loss, net loss per common share, and adjusted EBITDA, please refer to the terminology and reconciliation between each of our adjusted metrics and their most directly comparable GAAP measurements in our earnings release issued earlier this morning. Net loss for the quarter was $5.9 million, or negative $0.38 per common share, compared to net loss of $0.6 million, or negative $0.04 per common share in the prior year period. During the second quarter of fiscal 2025, we recorded an income tax benefit of $1.8 million, as compared to less than $0.1 million in the prior year period. Adjusted EBITDA for the quarter was $1.5 million, as compared to $5.3 million in the prior year period. Turning to our balance sheet.

We ended the second quarter with a very healthy balance sheet. First, we reported $72.1 million in cash and cash equivalents, which was flattish sequentially and up nicely year over year. Second, our total merchandise inventory levels are in line with our projections. We feel exceptionally good about both the quality and quantity of our inventory and our ability to maintain industry-leading in-stock positions and delivery times. Third, and last, I want to provide an update on our credit facility, which ended the second quarter with $36 million in committed availability and no borrowings. During the second quarter, we successfully closed on the amendment and extension of our credit facility. The facility was extended to July 27, 2029. We added $10 million of incremental uncommitted capacity or an accordion feature, and we enhanced numerous other elements within the agreement.

Combined, the amendment further increases Lovesac's financial flexibility to continue to invest in the business while also delivering value to shareholders. To that end, we were also pleased to announce the authorization of an inaugural share repurchase program. Lovesac's board of directors authorized the repurchase of up to $40 million of outstanding common stock, expected to be funded through existing cash and future free cash flow. The timing, manner, price, and amount of any repurchases are dependent on many factors, and we plan to be measured but opportunistic, but for some baseline context, we initially estimate offsetting the dilution of stock compensation at a minimum. We look forward to discussing more with you in coming quarters. Please refer to our earnings press release for other details on our second quarter financial performance, so now for our outlook.

We aim to grow irrespective of the category in the near term, continuing our track record of market share gains. Plus, we're primed to capitalize on the category rebound as soon as it happens and in more real time than our peers. As this occurs, the additional revenues should drive expanding flow-through of top-line growth to bottom-line growth. Specifically, we have not changed our baseline assumption for a 10% full year category decline, which underpins our fiscal 2025 outlook. The fiscal first half category decline was about 12%, roughly consistent with our original assumption, which also expected modestly better category conditions in the second half versus the first half. Again, should the category perform better, we would expect to perform better or vice versa. For the full year fiscal 2025, we are tightening our guidance ranges.

We estimate net sales of $700 million-$735 million. We expect Adjusted EBITDA between $52 million and $59 million. This includes gross margins of 58%-59%, advertising and marketing of approximately 13% as a percent of net sales, and SG&A of approximately 40% as a percent of net sales. We estimate net income to be between $17 million and $21 million. We estimate diluted income per common share in a range of $1.01-$1.26, and approximately 16.9 million estimated diluted weighted average shares outstanding. As a reminder, fiscal 2025 will contain 52 weeks, versus fiscal 2024, which contained an additional fifty-third week in the fourth quarter. For the fiscal third quarter, we estimate net sales of $152 million-$160 million, representing another quarter of slight growth at the midpoint.

We expect Adjusted EBITDA to be between a loss of $3 million to an income of $1 million. This includes gross margins of approximately 58%, advertising and marketing of approximately 15% as a percent of net sales, and SG&A of 45%-47% as a percent of net sales. We estimate net loss to be between $4 million and $8 million. We estimate basic loss per common share is expected to be $0.28 to $0.50, with 15.6 million weighted average shares outstanding. I'd like to take a minute to preempt a question on the implied net sales growth acceleration in fiscal fourth quarter as compared to fiscal third quarter. We estimate sequential growth acceleration owing to a few factors.

First, catch up on demand shipments for PillowSac, Accent Chair, and StealthTech, both of which had some delays in shipments owing to longer lead times. Second, new innovation recently rolled out will have a full quarter of sales and more awareness in fourth quarter, whereas last year, new innovation primarily benefited the third quarter following the launch of Angled Side. Lastly, we forecast a modest category improvement from Q3 to Q4, though clearly still declines, as rates begin to lower and election uncertainty subsides post-election. In summary, stabilization of the category and an eventual return to category growth are ahead of us. In the meantime, even while the category declines linger, we believe we can balance growing revenues and profitability with investments in foundations and product innovation, thereby optimally positioning us to generate stakeholder value for years to come.

I'll now turn the call back over to the operator to start our Q&A session.

Operator (participant)

Thank you. At this time, we'll be conducting a question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of Michael Baker with D.A. Davidson. Please proceed with your question.

Michael Baker (Managing Director and Senior Research Analyst)

Okay, thanks. You did preempt my question on that fourth quarter ramp, which still looks pretty aggressive to me. But I guess I get the factors. So if I could follow up on that, though, how much can you quantify how much you know 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 have a lot of visibility into it. So if you can just quantify how much of that helps that fourth quarter ramp.

Keith Siegner (CFO)

Yeah, sure thing, Mike. So that impact started to impact in the second quarter, near the end of the second quarter, will pick up a little bit more through the third quarter and then resolve in the Q4. It's millions of dollars, but it's in the single digits. So single digit millions of dollars of transfer that'll recover within the fourth quarter. We've got really good visibility into the closure of those lead times and when we could ship, so you know, that, that's a number we feel real confident in.

Michael Baker (Managing Director and Senior Research Analyst)

Okay, thank you. That's helpful. A couple more quick follow-ups. You know, some of the industry data that we track at least is already starting to get a little bit less worse, and I think you sort of implied that as well, just as rates have come down. You know, any green shoots, anything you can point to, maybe in terms of mix or higher end versus lower end, or any sort of early signs of mortgage rates coming way down that might, you know, be helping your business, or at least give visibility into how, you know, the back half outlook?

Keith Siegner (CFO)

Hold on one second. Shawn is on mute, I think.

Michael Baker (Managing Director and Senior Research Analyst)

I thought I stumped you.

Keith Siegner (CFO)

No. Bear with us for a second. He's coming off mute.

Shawn Nelson (CEO)

Yeah, the best way to characterize what we're seeing in the business right now is, you know, Lovesac has been in growth mode for so long, and as we look at the competition, we are pretty shocked at the promotional environment, right? That is one of the, at the moment, one of the biggest bellwethers of kind of what's going on in the industry. For Lovesac itself, we've really tried to hold the line in terms of where our promotional levels lie, and we've been pretty pleased with the resilience of the business. It's hard to say that we're seeing any meaningful green shoots. We continue to be very vigilant in terms of how we plan the business quarter to quarter, even month-to-month.

And, you know, obviously, we're all watching the macro. We're all observing the fact that, you know, interest rates will likely be coming down, and that should have an effect on this category. But our point of view, if you were to, you know, if you're asking us as the management team, is to be really conservative in terms of when that might take effect. And so, you know, for us, it's more of the same for now. And then, you know, our business, we have the benefit of this innovation, right? So you ask about green shoots?

Part of the reason I think we continue to be resilient, in fairness, is because we continue to launch new products that have new momentum for us, like the PillowSac Accent Chair Frame, which is driving both repeat business as well as, of course, new business, like the AnyTable that just launched this last week. And so for us, these are, or I should say, you know, non-cyclical kind of, opportunities that we're creating for ourselves. But, as far as industry green shoots, it's more of like a steady holding pattern right now.

Keith Siegner (CFO)

Mike, just one thing to-

Michael Baker (Managing Director and Senior Research Analyst)

Fair enough.

Keith Siegner (CFO)

One data point to add in case this is of interest to you. So we've seen some interesting trends this year in the utilization of the Lovesac credit card program, basically the financing program that our customers use. You know, we had told you in the very beginning of the calendar year, we'd seen some, you know, some decreases in the percentage of revenues run through the program, with particular emphasis on the low-end consumer. That then stabilized for several months. But then we had these changes, which were industry-wide, nothing specific to Lovesac, related to program fees, implemented by a lot of the banks on these types of programs.

This quarter, second quarter, in aggregate, we did end up seeing several hundred basis points lower utilization of the credit card as a percentage of revenues than we did in the past. And it does seem to really relate to the implementation of that program fee. So we're working with our partners on that to try to see what was the impact of that on our overall demand trends. How do we tweak our offers to make sure that we're as relevant as we can be, whether that's using lower duration, you know, deferred interest programs, things like that, to try to make sure that we have the most compelling offer that we possibly can, as we get into the back half of the year.

So look, if rates start to come down and therefore implied interest fees start to come down, that'll all help as well. So we'll juggle this, but I did want you to know that, you know, post that implementation, we have seen a couple hundred basis points decline in our utilization rate.

Michael Baker (Managing Director and Senior Research Analyst)

Yeah, that is interesting, and thanks for that color. One more quick one. Does your guidance include any buybacks? You said that, you know, you expect to offset dilution, but I guess specifically, you know, 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 was some, you know, a shareholder letter written during the quarter. Just trying to, you know, understand the buyback philosophy a little bit more.

Keith Siegner (CFO)

So just to give you some of the background, the discussion's been underway between management and the board for quite some time. As we've discussed on prior calls, there was a sequence that needed to be followed, which included addressing the nearing expiration of the credit facility before the implementation of a you know of a change in capital management philosophy, so we had to do the credit facility first. Now that that was accomplished, I think what the message here is we feel very good about the health of the balance sheet and the way that we're managing and balancing both the current environment and the desire to continue to fund all this, like, really powerful innovation, some of which you've seen and more of which is on the come. We've not built any into the forecast.

That's, you know, that program was just increased. I did say on the call, and this is probably, like, the extent of what I can get into today, which is we're thinking about offsetting the dilutive impact of equity compensation as a sort of a good, healthy base rate. That's less than $10 million a year would be required to accomplish that. So as you think about your models, that's probably a healthy place to start.

Michael Baker (Managing Director and Senior Research Analyst)

Thank you. Appreciate all the time.

Operator (participant)

Thank you. Our next question comes from the line of Maria Ripps with Canaccord Genuity. Please proceed with your question.

Maria Ripps (Managing Director and Senior Research 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's 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?

Keith Siegner (CFO)

Not really. You know, I think we're very bullish on our innovation, but there's lingering uncertainty in the macro environment, especially heading into this election. You know, your promotional activity has intensified as well, and you heard Shawn talk about this a little bit before. We've seen some of the competitors extending and increasing promotional rates, you know, through the... It was interesting at a macro level, and if you look at some of the data that's out there, headline promotions were slightly higher than they were for Labor Day, were slightly higher than they were for Black Friday last year. So look, we're just trying to be pragmatic, taking into account all these factors. You know, no real major changes other than that, and we felt it was prudent to tighten the range.

Maria Ripps (Managing Director and Senior Research 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 touchpoints, like, 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.

Mary Fox (President and COO)

Yes. Hi, Maria. Thank you. Great question. So, you know, we've always said we see a runway of, you know, just over four hundred showrooms. And obviously, you know, as we see for this year, we're gonna be delivering around a net thirty, so we continue to be able to see that opportunity. We refresh our model all the time as we think about how we go to market, so feel very good around that runway. I think the second piece, as you rightly called out, is when we open up a showroom, we also see that incremental halo around our digital business. And as you see that penetration of our business kind of continue to grow, particularly around some of the technology that we've added, as I talked about, My Hub, it really goes hand in hand.

So, you know, you're able to drive business not just in terms of the showroom, but also kind of broadly from an omni-channel point of view. And for us, the showrooms really do act as driving awareness. And then, you know, we know so many, you know, customers. They want to come in and actually sit in our couch and experience our product. You know, one of the things that was interesting, you know, Shawn, as we talked about PillowSac Accent Chair, it created a buzz for the whole brand. People came into the showrooms to, you know, see this new product, and then they're like, "Hey, these Sactionals are cool." And, you know, they went through a demo and bought a Sactional. So just so much opportunity.

If you go back to thinking about our flywheel, you know, and the ability to be able to demo, experience the product, bring in great innovation that gets people excited about the brand, we see a long runway ahead. So, so very happy in terms of performance this year and then obviously the plans for next year.

Maria Ripps (Managing Director and Senior Research Analyst)

Got it. That's very helpful. Thank you, Mary, and thank you, Keith.

Operator (participant)

Thank you. Our next question comes from the line of Tom Forte with Maxim Group. Please proceed with your question.

Tom Forte (Managing Director and Senior Consumer Internet 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?

Shawn Nelson (CEO)

Yes, thanks for the question, Tom. First and foremost, as we've said for years, our Designed for Life philosophy underpins everything that we do, right? Just to make sure everybody's tracking, this means products that are built to last a lifetime, designed to evolve. We believe that this point of view is completely unique in the landscape. We don't see any other home companies or really any other product companies able to live up to that kind of an ethos. And it goes beyond our product. It really informs our business model. Everything that we're doing on the horizon with services, trade-in, trade-up, everything that we've spoken of before, really pays off this Designed for Life way of doing business. Now, that said, I'll repeat something we've also said before, but not recently.

We view our territory as, from the mailbox to the backyard fence, right? And we take a very long point of view on our business. We believe we're building a brand that will be here for many, many decades and be very loved because of our commitment to this ethos that I just described. And so, for now, we've been very focused on the living room with Sactionals and extensions on Sactionals, including the recent AnyTable launch. It is a Sactional, and it can integrate with Sactionals, for instance, but it can also stand alone as a coffee table.

At the same time, the AnyTable has been designed to accept future innovation, and one of the things that I'm most proud of, it has attributes and dimensions and different elements to it that could allow AnyTable to potentially be its own platform and grow into other extensions and case goods, et cetera. But it also allows us, in the nearest term, to stay very focused on a business that continues to do well and really take market share in a powerful way. That is, of course, the business of Sactionals. And so it's kind of a straddle product at the moment, and it does have the opportunity to grow into bigger and broader things.

In terms of, you know, leaping into other rooms, let's say, within the home or, you know, from that mailbox to the backyard fence, it will come and we are actively developing, patenting, and prototyping in other realms outside of the living room. But in the nearer term, we continue to remain very focused, and I think that time is on our side. Were we to launch the next greatest, you know, whatever, in a completely new category at this time, in the... I think it would be lost on everyone. Not just things like the election, but we're at the state of the economy, the state of this category. You know, I...

We can't overemphasize what we're living through in the home category is worse than 2008, 2009, 2010. And thankfully, we're more than a few years into it. And so, you know, I don't mean to be glib, but I think Lovesac weathered it well, and it's really given us cover to continue to lean into innovation like I'm describing vaguely, at a time when I believe many of our competitors have experienced layoffs and probably pared back on a lot of this kind of stuff. And I think it's going to allow us to emerge with strength, as the world continues to change and evolve, and this category continues to change and evolve.

We are both hands on the wheel, yeah, all hands on innovation and really excited about what the future holds and really enjoying this time to invest in this way in the business, even as, of course, we manage expense as well and try to continue to generate profits and cash. We're you know, innovation is what drives us, and we can't help it, it's what gives us energy, and we really look forward to sharing with you more at this Investor Day that's coming up. That's probably the thing and the opportunity for you to get the best glimpse and for us to be a little less vague on what's coming.

Tom Forte (Managing Director and Senior Consumer Internet Analyst)

Excellent. And then 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 advertised the Sactional, but then included it as part of the advertising. So I'd appreciate your thoughts on that.

Shawn Nelson (CEO)

Yeah, sure.

Keith Siegner (CFO)

Go ahead, Shawn.

Shawn Nelson (CEO)

Yeah, first, let me just bridge one thing on StealthTech, because you asked the question, and I didn't comment, and I think it's important. And then, Keith, you take it on the margin front. StealthTech, for us, has, of course, been a major innovation in the last few years. And what you'll see it become is really sort of in our metaphor of Lovesac, or will really be the sinuous tissue that binds together all of our future product platforms and really separates us, I think, as a company that has embraced technology in a way that's very different, of course, from those that we compete with in Sactional sofa land, and not just Sactional sofa land, but the home category broadly.

From StealthTech to these new innovations, we are very disciplined about how we manage the gross margin profile and develop the products to compete. Being Designed for Life, there's a lot that goes into the design of these products and the production of these products, but, you know, we're very disciplined about maintaining those gross margins. I'll let Keith give you some color on that.

Keith Siegner (CFO)

Yeah, I think I think Shawn said it well. When we think about this process, and we think about our holistic business model, returns on capital and where gross margins fit into that puzzle, these new product innovations start with a, you know, where we play and how we win, what our relative brand positioning is, what price points the customers will respond to most for us relative to the other offerings. We use that to engineer products that meet those expectations, yet provide us the margins that we need, right? To keep this business model going for the long term, as Shawn said. So we're very purposeful when we think about this. You know, look, and then there's new things we learn all the time.

For example, with the PillowSac Accent Chair, here's a product that sold out, given such high demand, you know, how we approach discounting or promotions, other things like that, particularly on new products. You know, there's a lot of things we can take away from this. And look, I'll go back to what Mary said on the call, which is, as this pace of innovation is really ramping up, we're absolutely codifying the learnings from things like PillowSac Accent Chair, testing it and enhancing it as we move into the next product with AnyTable. And then we'll continue to refine this as we move into much bigger products that are on the come over the next couple of years. So this is a constant data-driven, you know, exercise to optimize, and, you know, but we do think about it all holistically. It's not haphazard.

Mary Fox (President and COO)

Yeah, and I think, Keith, just to add, Tom, just on your marketing question. So, you know, when we are obviously launching AnyTable right now, it's as focused on selling more seats and sides, more Sactionals, and look, your Sactional just got a whole lot better because of this amazing innovation with AnyTable. So, you know, it's back to the power of the, the platform, and you can continue to reinforce the platform and then injecting this incredible innovation, you know, is just continuing the playbook that we've seen as you referenced with StealthTech, and we will continue to do that with all of our innovations.

Tom Forte (Managing Director and Senior Consumer Internet Analyst)

Thanks, Mary.

Operator (participant)

Thank you. Our next question comes from the line of Brian Nagel with Oppenheimer & Co. Please proceed with your question.

Brian Nagel (Equity Research Analyst)

Hi, good morning. Nice quarter.

Keith Siegner (CFO)

Good morning.

Brian Nagel (Equity Research Analyst)

Congratulations. So for my questions, I do want to focus on innovation. You've given it, and it's a key topic of the earnings call today. But I guess, you know, the first question I ask, you know, as we think about recognizing your sector remains choppy, but as we think about, you know, the top line growth algorithm for Lovesac, I mean, and now with product innovation, you know, kicking up, maybe going to a more consistent cadence, I mean, how should we think about product innovation as a contributor to your top-line growth algorithm?

Keith Siegner (CFO)

Great question, and this is something we're gonna, we're gonna talk a little bit more about in at the Investor Day that Shawn mentioned. Look, the real trick, the real trick for us is everything starts with seats and sides, right? That's the core of the business model. That's what generates the profits and the cash flows. That's what provides the capital necessary to pull this innovation that we have, you know, lots of, in the pipeline forward and actually commercialize it and launch it. What we're trying to do is to balance the reality of the category and the cash that we generate with seats, with seats and sides, against the unleashing of that product portfolio, if that makes sense, and we have to be balanced through this time.

If the category was absolutely ripping upward and we had more cash off seats and sides, we could accelerate even more. That's the juggle that we're going through, and that's what influences the way it shows up in the business model and the top line, Brian, if that makes sense? Some of what we're doing is continuing to put ourselves into a position to enhance that or accelerate that, should the macro really generate the profit to cash flows to support it. That, you know, again, the macro is driving a lot of that pace. We'll talk more about that, but that's really a little bit of context for how it shows up in the model.

Brian Nagel (Equity Research Analyst)

That's helpful, Keith. And then my follow-up, and I think you talked about this in the prepared comments, but you know, just as we look at the you know, the PillowSac Accent Chair and the initial demand for that. So has that been, is it existing new customers? I mean, how are you seeing that initial demand makeup for that new innovative product?

Shawn Nelson (CEO)

Yeah, it's 50/50, which is really exciting for us because we're seeing tremendous repeat business, which to, you know, build on the question earlier, is just so great for our business from a gross margin and net contribution standpoint, right? These are customers that we don't have to go find again. We don't have to, you know, pay, you know, the marketing expense to get them again. And that continues to roll in because the product has been sold out. You know, we continue to, by the way, take in container loads of it, and it continues to sell out as fast as it can land. And so, we're really excited about that product and everything that it represents, and it's just been a phenom on social media, right?

The PillowSac Accent Chair Frame, in particular, I mean, our best performing post ever. And by the way, Lovesac is no slouch in social media land. And so it really says something. I think we really struck a nerve somehow with that product and the way it appears and the way it's showing up for us and what it does for our brand. And it, it's an accent chair, which has not been in our bailiwick. It's a very unique one. You know, it doesn't look like your mother's armchair, but you know, it puts us in a new niche of the category that we weren't competing in before.

And so, we're very heartened to see that so many existing customers are buying the product, by the way, along, of course, with so many new customers. And so we'll continue to lean into it. And I think the last piece on that, I think, is also heartening to the model. Again, our overall model constantly being oppressed by the macro environment. But you know, we have these bright spots like this one is that this is a product we'll be selling for the next, you know, couple decades at least, and that's how we designed it, right? Like, if you really break down that PillowSac Accent Chair Frame, it's built in a way, as we say, built to last a lifetime, designed to evolve.

And by the way, we took a long time. As simple as that, a product like that looks, we took a long time refining it. We could have launched it, you know, much earlier if we had lower standards. But because of that, it's going to continue to attract new customers and continue to, you know, drive repeat business for a long time inside of our ecosystem. And we're just gonna layer one after the next, after the next. And I think when we get the benefit of at least reduced headwinds, forget tailwinds, I think Lovesac will. I think all of these innovations will really take flight.

Brian Nagel (Equity Research Analyst)

Thanks, John. Very helpful. Appreciate it.

Keith Siegner (CFO)

Thank you. Our next question comes from the line of Matt Koranda with Roth Capital. Please proceed with your question.

Matt Koranda (Managing Director and Senior Research 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 wondering 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 and 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?

Mary Fox (President and COO)

Hey, Matt, thank you for the question. So yes, obviously, you know, as Keith had commented, Q3 is very much in line with Q2, and our underlying trends have been stable. We have a bit of week-to-week variability, whether it be holiday timing, promotions, product launches. Labor Day was up to where we expected, and followed a very similar cadence to what we saw through the last two market share events of Memorial Day and July Fourth. You know, and, and as we delivered mid-single-digit, low single-digit revenue growth in Q2, and we're guiding to being at a similar level for the midpoint for Q3, we feel really good on this guidance based on the Labor Day performance. It was a lot more competitive through Labor Day, as Keith talked about.

So you saw promotions being even stronger than before. But I think the good news for us, as we've shared in the past, and we test all the time, is as long as we have a three in front of it, we don't need to be anywhere near where others are. So as others are 40%, 50%, 60% off, we just need to be at that 30% off. And we've seen a lot of benefits of how we build that sweet spot between delivering the top line as well as driving gross margins. So, you know, more of the same from Q2 into Q3. That's how we've planned for the rest of this quarter and feel good to be able to deliver that.

Matt Koranda (Managing Director and Senior Research 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, you know, sort of a, 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 gonna see significant operating leverage in the fourth quarter. So maybe just if you could parse out where you're seeing that between SG&A and marketing, that'd be super helpful.

Keith Siegner (CFO)

Yeah, Matt, so there are a whole bunch of pieces to the profit, you know, puzzle. I'd point you to a couple things. Number one, there's a lot of leverage to the top line, right? And we're back to more top-line growth at the midpoint. Number two, from a gross margin perspective, we'll start to see some benefits from the outbound logistics stuff, as we talked about over the last couple quarters. That starts to kick in more. You know, we've seen some good initial savings starting here, and then that ramps through the rest of the year. So we feel really good about that. We, from an SG&A perspective, as you recall, carried a lot of expenses through the end of last year for the restatement.

We're hoping that that does not continue at those levels, so you get some leverage on that. You know, we also see some opportunities just across the board on things like professional fees. You know, there are quite a few line items here and there that contribute to this. So it's sort of, you know, we're not overly reliant on one particular line item in this process. It's, you know, these are numbers and ranges that we feel quite good about at this time.

Matt Koranda (Managing Director and Senior Research 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 those, the penetration of revenue that's financed through the credit card program. Could you cover the timing of when that happened? And maybe... It sounded like the levers to get back to, you know, a more similar rate of financing are 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?

Keith Siegner (CFO)

Yeah, like, this is stuff that's there has been a lot of discussion about by the purveyors and and backers of these of these private label cards. They give tons of details about when it all went into effect. It's probably best suited for that. During the quarter, that's kicked in, and in many cases, you have a you know, let's call it a 2% fee upfront now, that's been implemented by many of the backers and issuers of of these programs. So, you know, that's what we were referring to, you know, and we and we can get into more details about this offline, but you know, there are other offers that you can make that are not subject to that program fee, that initial 2%. So we're gonna test things like that to see if we take a different than historical program, right?

Because we've mostly done equal payments, no interest in the past. If we change and use other forms of financing offers, does that affect behavior? That's the stuff we're testing now. We don't know the answers to that yet, but that's what we're gonna test, and we're gonna learn. And we're gonna see if it does make a difference. We'll shift around and make sure that the customers have something that's very compelling to them, especially as we get into the big selling season for holiday. That's kind of more what we're getting at.

Matt Koranda (Managing Director and Senior Research Analyst)

Okay, makes a lot of sense. I'll leave it over here. Thanks.

Operator (participant)

Thank you. Our final question this morning comes from the line of Alex Fuhrman with Craig-Hallum Capital Group. Please proceed with your question.

Alex Fuhrman (Senior Research Analyst)

Hey, guys. Thanks for taking my question. You know, a lot of talk here about accelerating new product development. Was wondering if you can kinda 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, you know, 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 gonna be a lot more significant next year?

Keith Siegner (CFO)

And maybe I'll just start on this, and then if, Shawn, you want to jump in on any of this. Look, Alex, it's a good question, a difficult one to answer, and I'll explain why. Right, so for example, with PillowSac Accent Chair Frame, I think this is a perfect case. Because we launched such a unique and compelling, you know, an exciting product within our Sacs platform, we know we sold more Sactionals. Do we know exactly how many more Sactionals we sold? No, that's a little bit difficult, right? But it's a very positive and constructive, brand-forward way to engage customers and make them think about the overall value proposition that we offer, so we sell more of everything, right?

And that's really what the power of Lovesac is, as we enhance our ecosystem, our suite of products that are Designed for Life, we think it reinforces the overall value proposition we have, and we'll sell more of everything. So Shawn... That's my take. So Shawn, I don't know if you want to add to that at all.

Shawn Nelson (CEO)

Yeah, I think your question is, I'm excited to get to the end of the year and find an answer to your question, how much of our sales were from new products? And I don't mean to sound ignorant. You know, like we said, the PillowSac Accent Chair Frame has outstripped our plans, which were robust, right? Obviously, we were excited about the product. We believe we had a good launch plan. And, you know, for Lovesac, we don't, I mean, you could then argue we should plan better or something. I don't know. In fairness, we're gonna be selling this product for the next few decades. So if, you know, we have some outages in the beginning when we launch, we're okay with that.

There's you know, we're building a long-term customer base. We're looking to build relationships. We're not just talking new items, and I know that's not the tone of your question, but, it does give you just a glimpse into how we think, how we plan. We're both aggressive and conservative simultaneously. We'll be aggressive in how we go to market. We'll be conservative in how we plan our inventory sometimes, et cetera, especially in times like this. So, and so, you know, we're chasing on that product. We'll obviously see how the AnyTable does, and you know, we're dealing with some extended lead times on some other products, et cetera, just in this kind of environment.

I think, obviously, we have a layer cake that we've built from our own models that shows and answers your question, but it's not something that we really talk about overtly in the way that you're asking the question. I think that as we maybe for Investor Day, it's something that we could think about how we speak to that, because as Keith said, our products are so integrated. Like, the PillowSac Accent Chair Frame is connected to the PillowSac and the Sacs, and the Sacs business in general. The AnyTable is connected to those Sactionals. And ultimately, if we can sell more $5,000 and $10,000 and $15,000 couches because of this clever table, and not just the table.

Let me just put a plug in there for all of the new wood products that we launched. You know, new drink holders, new coasters, new trays. I mean, go into a Lovesac showroom and see these things. We have made a big push into wood products, what for us is a big push, and it's also, by the way, us putting a foot into the water, because wood is a big part of the home, and we need to get better at it. And I think you'll see us doing that in real time right now, right? But the ultimate goal is to sell more seats and sides and stay very focused on that in the near term, as we continue to gain market share and gain strength versus the category.

I'm sorry, we can't give you, like, a better kind of model analyst, a creative answer to the question that you answered. But, it's got us thinking. I appreciate the question.

Alex Fuhrman (Senior Research Analyst)

Excellent. I appreciate all that color, and thanks very much.

Operator (participant)

Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Nelson for any final comments.

Shawn Nelson (CEO)

Just wanna say thank you to all of the investors, shareholders, and the extended Lovesac family that keeps this company going. We appreciate your support.

Operator (participant)

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.