love-20230430

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 April 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 May 31, 2023, there were 15,216,988 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 April 30, 2023 and January 29, 2023 (unaudited)	1

	Condensed Statements of Operations for the thirteen weeks ended April 30, 2023 and May 1, 2022 (unaudited)	2

	Condensed Statements of Changes in Stockholders’ Equity for the thirteen weeks ended April 30, 2023 and May 1, 2022 (unaudited)	3

	Condensed Statements of Cash Flows for the thirteen weeks ended April 30, 2023 and May 1, 2022 (unaudited)	4

	Notes to Financial Statements (unaudited)	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	22

Item 4.	Controls and Procedures	23

Part II. OTHER INFORMATION		24

Item 1.	Legal Proceedings	24

Item 1A.	Risk Factors	24

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24

Item 3.	Defaults Upon Senior Securities	24

Item 4.	Mine Safety Disclosures	24

Item 5.	Other Information	24

Item 6.	Exhibits	25


	April 30, 2023		January 29, 2023
(amounts in thousands, except share and per share amounts)	(unaudited)
Assets
Current Assets
Cash and cash equivalents	$	45,125	$	43,533
Trade accounts receivable	18,447		9,469
Merchandise inventories, net	106,819		119,962
Prepaid expenses and other current assets	17,306		21,077
Total Current Assets	187,697		194,041
Property and equipment, net	59,219		52,904
Operating lease right-of-use assets	142,463		138,271
Other Assets
Goodwill	144		144
Intangible assets, net	1,445		1,411
Deferred tax asset	10,750		9,420
Other assets	26,318		21,863
Total Other Assets	38,657		32,838
Total Assets	$	428,036	$	418,054
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable	$	32,165	$	24,576
Accrued expenses	16,765		23,392
Payroll payable	6,582		6,783
Customer deposits	15,372		6,760
Current operating lease liabilities	22,160		21,898
Sales taxes payable	3,878		5,430
Total Current Liabilities	96,922		88,839
Operating Lease Liabilities, long-term	141,868		135,955
Line of Credit	—		—
Total Liabilities	238,790		224,794
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 April 30, 2023 and January 29, 2023.	—		—
Common Stock $.00001 par value, 40,000,000 shares authorized, 15,217,120 shares issued and outstanding as of April 30, 2023 and 15,195,698 shares issued and outstanding as of January 29, 2023.	—		—
Additional paid-in capital	182,770		182,554
Accumulated earnings	6,476		10,706
Stockholders’ Equity	189,246		193,260
Total Liabilities and Stockholders’ Equity	$	428,036	$	418,054


	Thirteen weeks ended
(amounts in thousands, except per share data and share amounts)	April 30, 2023		May 1, 2022
Net sales	$	141,193	$	129,380
Cost of merchandise sold	70,489		63,272
Gross profit	70,704		66,108
Operating expenses
Selling, general and administration expenses	56,838		44,901
Advertising and marketing	16,913		15,901
Depreciation and amortization	2,822		2,661
Total operating expenses	76,573		63,463

Operating (loss) income	(5,869)		2,645
Interest income (expense), net	341		(35)
Net (loss) income before taxes	(5,528)		2,610
Benefit from (provision for) income taxes	1,298		(715)
Net (loss) income	$	(4,230)	$	1,895

Net (loss) income per common share:
Basic	$	(0.28)	$	0.13
Diluted	$	(0.28)	$	0.12

Weighted average number of common shares outstanding:
Basic	15,230,763		15,155,378
Diluted	15,230,763		16,173,339


	Common			Additional Paid-in Capital		Accumulated (Deficit) Income		Total
(amounts in thousands, except share amounts)	Shares	Amount
Balance - January 30, 2022	15,123,338	$	—	$	173,762	$	(17,536)	$	156,226
Net income	—	—		—		1,895		1,895
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	$	(15,641)	$	159,237

Balance - January 29, 2023	15,195,698	$	—	$	182,554	$	10,706	$	193,260
Net loss	—	—		—		(4,230)		(4,230)
Equity based compensation	—	—		686		—		686
Vested restricted stock units	21,422	—		—		—		—
Taxes paid for net share settlement of equity awards	—	—		(470)		—		(470)
Balance - April 30, 2023	15,217,120	$	—	$	182,770	$	6,476	$	189,246


	Thirteen weeks ended
(amounts in thousands)	April 30, 2023		May 1, 2022
Cash Flows from Operating Activities
Net (loss) income	$	(4,230)	$	1,895
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization of property and equipment	2,697		2,575
Amortization of other intangible assets	125		86
Amortization of deferred financing fees	42		29

Equity based compensation	686		1,163
Non-cash operating lease cost	5,308		4,184
Deferred income taxes	(1,330)		523
Changes in operating assets and liabilities:
Trade accounts receivable	(8,978)		2,134
Merchandise inventories	13,143		(14,515)
Prepaid expenses and other current assets	5,971		270
Other assets	(4,455)		—
Accounts payable and accrued expenses	(5,785)		(10,359)
Operating lease liabilities	(5,515)		(4,062)
Customer deposits	8,612		(5,709)
Net Cash Provided by (Used in) Operating Activities	6,291		(21,786)
Cash Flows from Investing Activities
Purchase of property and equipment	(4,177)		(5,893)
Payments for patents and trademarks	—		(125)
Net Cash Used in Investing Activities	(4,177)		(6,018)
Cash Flows from Financing Activities
Payment of deferred financing costs	(52)		(161)
Taxes paid for net share settlement of equity awards	(470)		(47)


Net Cash Used in Financing Activities	(522)		(208)
Net Change in Cash and Cash Equivalents	1,592		(28,012)
Cash and Cash Equivalents - Beginning	43,533		92,392
Cash and Cash Equivalents - Ending	$	45,125	$	64,380
Supplemental Cash Flow Disclosures
Cash paid for taxes	$	—	$	905
Cash paid for interest	$	30	$	33
Non-cash investing activities:
Asset acquisitions not yet paid for at period end	$	4,994	$	—


	Thirteen weeks ended
	April 30, 2023		May 01, 2022
Operating lease expense	$	7,004	$	5,334
Variable lease expense	2,041		2,197
Short term lease expense	240		179
Total lease expense	$	9,285	$	7,710


(amounts in thousands)
2024	$	21,684
2025	28,644
2026	26,237
2027	23,905
2028	21,605
Thereafter	73,411
Total undiscounted future minimum lease payments	195,486
Less: imputed interest	(31,458)
Total present value of lease obligations	164,028
Less: current operating lease liability	(22,160)
Operating lease liability- long term	$	141,868


	Number of shares	Weighted average grant date fair value
Unvested at January 29, 2023	640,256	$	34.50
Granted	693,989	26.97
Forfeited	(12,888)	35.17
Vested	(37,908)	46.22
Unvested at April 30, 2023	1,283,449	$	30.07


	Number of shares	Weighted average grant date fair value
Unvested at January 30, 2022	533,333	$	28.41
Granted	256,329	46.11
Forfeited	(20,159)	22.88
Vested	(2,480)	16.57
Unvested at May 1, 2022	767,023	$	34.31


	Thirteen weeks ended
(dollars in thousands)	April 30, 2023		May 1, 2022

EBITDA (2)(3)	$	(3,047)	$	5,306
Adjusted EBITDA (2)(3)	$	(2,356)	$	6,373


	The Lovesac Company

	By:	/s/ Shawn Nelson
		Shawn Nelson
Date: June 9, 2023		Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ Donna Dellomo
		Donna Dellomo
Date: June 9, 2023		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)


	As of
(amounts in thousands)	April 30, 2023		January 29, 2023

Balance Sheet Data:
Cash and cash equivalents	$	45,125	$	43,533
Working capital	90,775		105,202
Total assets	428,036		418,054
Total liabilities	238,790		224,794
Total stockholders’ equity	189,246		193,260

SEC Form 10-Q filed by The Lovesac Company