Sign in

You're signed outSign in or to get full access.

LB

Luvu Brands, Inc. (LUVU)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 FY2024 revenue declined 14% year over year to $5.92M amid softer Liberator demand and China knock-off competition; gross margin expanded 210 bps to 27.7% on lower labor and raw materials costs, resulting in a small operating profit but a net loss of $0.09M as interest expense rose .
  • Mix shift was notable: Liberator -23% YoY to $3.44M while Jaxx +16% to $1.42M and Avana +5% to $0.68M; Direct and Wholesale channels both declined double digits, but gross margin improved in Direct and held in Wholesale .
  • Management emphasized actions to restore growth: elevated, more targeted PPC spend; product innovation in “erotic home”; relaunch of “Foam Labs” for hospitality; software to speed drop-ship onboarding; and a forthcoming mainstream intimacy brand for mass retail distribution .
  • No formal guidance was issued; management aims to return to profitable growth and discussed a medium-term revenue goal of ~$30–$35M as marketing, category expansion, and distribution scale, with domestic manufacturing cited as a competitive asset in supply chain execution .
  • Wall Street (S&P Global) consensus for Q3 FY2024 was unavailable; estimate-based beat/miss analysis cannot be provided at this time (see Estimates Context).

What Went Well and What Went Wrong

  • What Went Well

    • Gross margin increased to 27.7% (from 25.6%) on lower labor and raw material costs despite lower sales; management expects continued process improvements to support YoY margin gains: “I expect these actions to result in year-over-year margin improvements during the coming months.” — CEO Louis Friedman .
    • Jaxx and Avana grew YoY in Q3: Jaxx +16% to $1.42M and Avana +5% to $0.68M, supported by product innovation, category expansion, and new channels .
    • Channel margin resilience: Direct gross margin at 46% (vs 48% LY) and Wholesale at 25% (flat YoY), with improved fulfillment costs and vendor sourcing cited in overall margin improvement .

  • What Went Wrong

    • Liberator revenue declined 23% YoY to $3.44M due to overall market weakness and increased China-based knock-offs on mass-market sites and Amazon; mix still ~60% of company, heightening category risk .
    • Operating expenses rose YoY (to $1.60M) on higher sales and marketing, pressuring profitability even as the quarter posted a slight operating profit; net loss was $0.09M due largely to interest expense .
    • Direct and Wholesale sales fell double digits YoY (-15% and -14%), reflecting softer category demand; “Other” channel remains a headwind with negative gross profit (shipping/handling economics) .

Financial Results

Quarterly progression (oldest → newest) and YoY snapshot

MetricQ1 FY2024 (Sep-23)Q2 FY2024 (Dec-23)Q3 FY2024 (Mar-24)
Revenue ($USD Millions)$6.13 $6.79 $5.92
Gross Margin %24.2% 26.8% 27.7%
Operating Income ($USD Millions)$(0.03) $0.15 $0.04
Net Income ($USD Millions)$(0.13) $0.03 $(0.09)
Diluted EPS ($)$0.00 $0.00 $0.00

Q3 FY2024 YoY vs Q3 FY2023

MetricQ3 FY2023 (Mar-23)Q3 FY2024 (Mar-24)YoY Change
Revenue ($USD Millions)$6.90 $5.92 -14%
Gross Margin %25.6% 27.7% +210 bps
Operating Expenses ($USD Millions)$1.39 $1.60 +$0.21
Net Income ($USD Millions)$0.29 $(0.09) -$0.38
Adjusted EBITDA ($USD Millions)$0.51 $0.15 -$0.36

Segment/Product Mix – Q3 FY2024 vs Q3 FY2023

ProductQ3 FY2023 Sales ($M)Mix %Q3 FY2024 Sales ($M)Mix %
Liberator$4.49 65% $3.44 58%
Jaxx$1.22 18% $1.42 24%
Avana$0.65 9% $0.68 12%
Purchased for Resale$0.27 4% $0.26 4%
Other$0.28 4% $0.12 2%
Total$6.90 100%$5.92 100%

Channel KPIs – Q3 FY2024 vs Q3 FY2023

ChannelNet Sales Q3 FY2023 ($M)Net Sales Q3 FY2024 ($M)Gross Profit Q3 FY2023 ($M)GM% Q3 FY2023Gross Profit Q3 FY2024 ($M)GM% Q3 FY2024
Direct$1.91 $1.63 $0.92 48% $0.76 46%
Wholesale$4.82 $4.16 $1.22 25% $1.04 25%
Other$0.17 $0.14 $(0.37) —$(0.16) —
Total$6.90 $5.92 $1.77 26% $1.64 28%

Non-GAAP (for context)

  • Adjusted EBITDA: Q3 FY2024 $0.15M vs $0.51M in Q3 FY2023; nine months FY2024 $0.45M vs $2.04M LY (pressure from sales decline and higher online marketing) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue, EPS, MarginsFY/Q4None providedNone providedMaintained “no formal guidance”; management discussed strategy and intent to return to growth without specific targets

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Competitive intensity / China knock-offsCited increased competition and tougher comps post-Netflix bump; marketing spend up; margins pressured by inflation Category softness and China-based knock-offs on mass sites/Amazon hurting Liberator; sharpening PPC targeting Worsening for Liberator; response with targeted marketing
Marketing and channel spendAdvertising up; OpEx mix higher to support online sales Increased PPC (Google/Amazon), pruning low-ROI ads, influencer/podcast outreach More disciplined, multi-channel
Product innovation / new brandsLimited disclosure in filingsFocus on “erotic home” innovation; mainstream intimacy brand in development for mass retail (Target/Sephora/Walmart channels) New vectors for growth
Jaxx & Avana trajectoryJaxx and Avana mixed; cost efficiency and drop-ship dynamics discussed Jaxx +16% YoY; expanding into modular sofas/hospitality; Avana +5% with efficiency gains Improving mix
Supply chain / manufacturingInflation in raw materials and transport; inventory management; domestic ops Emphasizes domestic manufacturing capacity as execution edge; vendor sourcing lowered costs Stabilizing costs; internal advantage
International / logisticsNot a focusInternational limited by large box freight costs; priority on U.S. expansion Cautious international
Systems/automationNot highlightedNew software to accelerate drop-ship onboarding and SKU updates across channels Infrastructure investment
Platform dependence (Amazon)Amazon concentration: 37% (Q1), 35–37% (Q2) of sales Amazon 39% of nine-month sales; underscores platform exposure High reliance persists

Management Commentary

  • “The challenge for the last 3 quarters came from a sales decline in the overall retail market for pleasure products, compounded with increased competition from China-based knock-offs….” — CEO Louis Friedman .
  • “For Liberator, we are focusing on… the erotic home category with designs of transformable multipurpose furniture… We are reaching new customers through podcast, cable TV… [and] influencers and sexual wellness educators.” — CEO Louis Friedman .
  • “Our growth strategy for Jaxx consists of 3 parts: product innovation, increased speed to new markets, and category expansion… hospitality has been a huge point of focus for us.” — VP E-commerce Jordan Friedman .
  • “We’re… making [an] investment in new software to improve our speed to market for drop ship and e-commerce… one central source of truth.” — VP E-commerce Jordan Friedman .
  • “We’re trying to… grow our top line back to… at least $30 million or $35 million… with new product development [and] promoting our brands.” — CEO Louis Friedman .
  • “Almost 60% of the company is still Liberator… Jaxx… has significant growth… margins are bigger [and] average order size is bigger.” — CFO Chris Knauf .
  • “Our domestic manufacturing capacity allows us to continue to execute within a challenging supply chain environment.” — CEO Louis Friedman .

Q&A Highlights

  • Mix and growth vectors: Management targets a return to growth by expanding Jaxx (higher AOV, margins) and restoring Liberator via influencers/content and “erotic home” innovation; Liberator remains ~60% of revenue today, underscoring mix risk .
  • International vs U.S.: International expansion constrained by shipping costs on bulky items; focus near-term on U.S. partners and channels where CAC/logistics are more favorable .
  • Retail seasonality: A large retail deal was concentrated in “holiday” categories (calendar Q4); strength moderated post-holiday; team is re-building for next season while adding e-commerce partners and sales staff .
  • New mainstream intimacy brand: Team is building a “mainstream version of Liberator” with different packaging and price points for mass retailers (Target/Sephora/Walmart), separating content from adult-channel expectations .
  • Medium-term ambition: Management cited a top-line goal of ~$30–$35M through multi-pronged product and channel efforts .

Estimates Context

  • S&P Global (Capital IQ) consensus for Q3 FY2024 EPS and revenue was unavailable due to data access limits at the time of this analysis; therefore, beat/miss versus Wall Street cannot be assessed. Values retrieved from S&P Global were unavailable at this time.

Key Takeaways for Investors

  • Margin resilience despite top-line pressure: Gross margin expanded +210 bps YoY on cost controls/vendor sourcing; further gains are expected as process improvements scale .
  • Mix improving beneath headline: Jaxx (+16% YoY) and Avana (+5% YoY) offset part of Liberator declines; Jaxx’s higher AOV/margins could be a structural tailwind as its mix rises .
  • Liberator headwinds remain the swing factor: Category softness and China knock-offs pressure volumes; success of influencer/content strategy and “erotic home” innovation will likely drive the recovery path .
  • Channel strategy broadening: Foam Labs relaunch (hospitality/contract) and drop-ship software could unlock more scalable wholesale/direct growth with lower incremental cost .
  • Platform risk elevated: Amazon accounted for ~39% of nine-month sales; diversification into mass retail via a new mainstream brand is strategically important to reduce platform concentration .
  • Balance sheet and liquidity: Inventory reduced 17% since FY-end; working capital modestly lower; interest expense weighs on net income — a return to volume growth would be the cleanest path back to sustained profitability .
  • Near-term trading setup: Absent formal guidance and with category headwinds, catalysts skew to execution updates — new brand launch milestones, Jaxx/hospitality wins, and evidence of Liberator stabilization could re-rate expectations .