Form 8-K Lovesac Co For: Dec 12

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UNITED
STATES

SECURITIES
AND EXCHANGE COMMISSION

WASHINGTON,
DC 20549

 

 

FORM
8-K

 

 

CURRENT
REPORT

Pursuant
to Section 13 or 15(d) of the

Securities
Exchange Act of 1934

 

Date
of report (Date of earliest event reported): December 12, 2019

 

 

THE
LOVESAC COMPANY

(Exact
Name of Registrant as Specified in Charter)

 

 

Delaware		001-38555		32-0514958
(State or Other Jurisdiction of Incorporation)		(Commission File Number)		(I.R.S. Employer Identification No.)

 

Two
Landmark Square, Suite 300
Stamford, Connecticut

(Address
of Principal Executive Offices, and Zip Code)

 

(207)
273-9733

Registrant’s
Telephone Number, Including Area Code

 

 

(Former
Name or Former Address, 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, par value $0.00001 per share		LOVE		The NASDAQ Stock Market LLC

 

Check
the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant
under any of the following provisions (see General Instruction A.2. below):

 

☐	Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐	Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐

Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).   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. ☐

 

 

 

Item 2.02

Results of Operations and Financial Condition.

 

December
12, 2019, The Lovesac Company, a Delaware corporation (the “Company”), issued a press release (the “Press Release”)
announcing the Company’s financial results for the third quarter of fiscal 2020. A copy of the Press Release is attached
to this current report on Form 8-K as Exhibit 99.1.

 

The
Company will host a conference call on December 12, 2019 at 8:30 a.m. Eastern Time in connection with the release of the Company’s
financial results for the third quarter of fiscal 2020. Investors and analysts interested in participating in the call are invited
to dial 877-407-3982 (international callers please dial 201-493-6780) approximately 10 minutes prior to the start of the call.
A live audio webcast of the conference call will be available online at investor.lovesac.com. A recorded replay of the conference
call will be available within two hours of the conclusion of the call and can be accessed online at investor.lovesac.com for 90
days.

 

The
information hereunder and Exhibit 99.1 hereto shall be deemed “furnished” and not “filed” for the purposes
of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities
of that section, nor shall it be incorporated by reference into a filing under the Securities Act of 1933, or the Exchange Act,
except as shall be expressly set forth by specific reference in such a filing.

 

Item 9.01

Financial Statements and Exhibits.

 

(d)
Exhibits.

 

 

 

SIGNATURES

 

Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.

 

	THE LOVESAC COMPANY
Date: December 12, 2019	By:	/s/ Donna Dellomo
	Name:	Donna Dellomo
	Title:	Executive Vice President and Chief Financial Officer

 

 

2

 

Exhibit 99.1

 

The
Lovesac Company Announces Third Quarter Fiscal 2020 Financial Results

 

Third
quarter net sales growth of 25%

Third
quarter total comparable sales increase of 32.5%

Comparable
showroom sales up 27.1%,

Comparable
internet sales up 47.7%

 

STAMFORD,
Conn., December 12, 2019 (GLOBE NEWSWIRE) — The Lovesac Company (Nasdaq: LOVE) (the “Company”) today announced its
financial results for the third quarter of fiscal 2020, which ended on November 3, 2019.

 

The
Company announced its third quarter fiscal 2020 performance, including net sales growth of 25% and total comparable sales growth
of 32.5% driven by increases in new customers as well as increases in average order value (AOV). New product introductions including
the Sactionals PowerHub and Storage Seat have exhibited 45% attachment rates and have lifted the blended AOV of all Sactionals
purchases (new and repeat) significantly. The Company stated it has made good progress on all strategic priorities including supply
chain optimization, sourcing, growth of the pop-up shop business, and the successful launch of four permanent shop in shop locations
within Macy’s stores intended as a test toward a larger program.

 

Shawn
Nelson, Chief Executive Officer, stated, “We are very pleased to have delivered better than expected third quarter Adjusted
EBITDA results even with a slight top-line impact from a timing shift of showroom openings. This demonstrates our disciplined
approach to managing the business while still achieving continued high growth.”

 

The
Company experienced a timing shift of showroom openings in the third quarter. These showrooms are expected to open in the fiscal
fourth quarter for an ending showroom count of 91, or a 21% increase over last year. As a result of these third quarter shifts,
the Company is narrowing its expected net sales growth range for the year to 40% – 42% (from 40% – 45% previously) and continues
to expect positive Adjusted EBITDA for the full fiscal year.

 

Nelson
added, “The all-important fourth quarter is off to a great start with greater than 42% growth over fourth quarter last year
and we are on track to deliver positive Adjusted EBITDA for the full fiscal year.”

 

For
the Thirteen Weeks Ended November 3, 2019

 

●

Net sales increased 25.0% to $52.1 million in the third quarter of fiscal 2020 from $41.7 million in the third quarter of fiscal 2019. This increase was driven by strong showroom, Internet and pop-up shop (which we previously referred to as shop in shops) performance with both transaction and ticket growth resulting from successful digital marketing strategies which drew new customers to the brand while also driving repeat purchase behavior. Comparable sales, which includes showroom and Internet sales, increased 32.5%. Comparable showroom sales increased 27.1% and Internet sales increased 47.7%.

 

●

The Company opened four new showrooms in the third quarter of fiscal 2020 and ended the quarter with 84 showrooms in 32 states. This represents a unit increase of 9.1% over the same quarter in the prior year.

 

●

Gross profit increased $3.4 million, or 14.7%, to $26.3 million in the third quarter of fiscal 2020 from $22.9 million in the third quarter of fiscal 2019. Gross margin decreased to 50.4% of net sales from 54.9% of net sales in the prior year period. The expected decrease in gross margin rate was driven primarily by the impact of the 25% China tariffs, partially offset by reduced costs of Sactionals and Sacs products. The decrease in costs of Sactionals and Sacs products was primarily related to cost savings from improved sourcing of Lovesoft and down blend fills in addition to an ongoing shift of manufacturing from China to Vietnam. Given timing factors, the benefits of the sourcing work and recently negotiated vendor concessions are expected to impact gross margins starting in the first quarter of fiscal 2021.

 

 

●

Selling, general and administrative expenses increased $5.2 million, or 26.7%, to $24.5 million in the third quarter of fiscal 2020 compared to $19.3 million in the prior year period. The increase in selling, general and administrative expenses was primarily related to investments to support growth including: an increase in employment costs of $1.6 million, $0.9 million of increased rent associated with our addition of four showrooms offset by a reduction of $0.1 million of expenses related to sales such as an increase of $0.4 million of credit card fees, offset by a reduction of $0.5 million of pop-up shop sales agent fees. Overhead expenses increased $2.8 million consisting of an increase of $2.3 million in infrastructure improvements, increase in equity-based compensation of $0.1 million, and an increase of $0.4 million related to operating costs of the business such as insurance.

 

●

As a percent of net sales, total SG&A expense increased to 47.0% from 46.4% in the prior year period, driven largely by increases in infrastructure improvements, employment and insurance costs, partially offset by selling related expenses.

 

●

Advertising and marketing expenses increased $2.1 million, or 40.5%, to $7.3 million in the third quarter of fiscal 2020 compared to $5.2 million in the third quarter of fiscal 2019. The increase in advertising and marketing costs relates to increased media and direct to consumer programs, which are expected to drive revenue beyond the period of the expense.

 

●

Depreciation and amortization expenses increased $0.3 million or 27.1% in the third quarter of fiscal 2020 to $1.4 million compared to $1.1 million in the third quarter of fiscal 2019. The increase in depreciation and amortization expense principally relates to capital investments for new and remodeled showrooms.

 

●

Operating loss was $6.9 million in the third quarter of fiscal 2020 compared to an operating loss of $2.7 million in the third quarter of fiscal 2019.

 

●

Net loss and net loss attributable to common shares was $6.7 million in the third quarter of fiscal 2020, compared to a net loss of $2.5 million, or net loss attributable to common shares of $2.9 million including preferred dividends and deemed dividends in the third quarter in fiscal 2019. Adjusted net loss, which excludes the impact of the IPO and certain other non-recurring expenses in both periods, was $6.7 million in the third quarter of fiscal 2020 compared to $2.0 million in the third quarter of fiscal 2019 (see “GAAP and Non-GAAP Measures”).

 

●

Net loss per share, including preferred dividends and deemed dividends, was ($0.46) in the third quarter of fiscal 2020 compared to ($0.22) in the third quarter of fiscal 2019. Adjusted net loss per common share, which is calculated by dividing adjusted net loss by adjusted weighted average common shares outstanding assuming the IPO related issuances occurred at the beginning of each period presented, was ($0.46) in the third quarter of fiscal 2020 compared to ($0.15) in the third quarter of fiscal 2019 (see “GAAP and Non-GAAP Measures”).

 

●

Adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”), was ($3.7) million in the third quarter of fiscal 2020 compared to ($0.4) million in the third quarter of fiscal 2019 (see “GAAP and Non-GAAP Measures”).

 

Please
see “Non-GAAP Financial Measures” and “Reconciliation of GAAP to Non-GAAP Financial Measures” below for
more information.

 

 

For
the Thirty-Nine Weeks Ended November 3, 2019

 

●

Net sales increased 38.8% to $141.2 million in the fiscal 2020 year-to-date period from $101.7 million in the same period of fiscal 2019. This increase was driven by strong showroom, Internet and pop-up shop performance with both transaction as well as ticket growth resulting from successful digital marketing strategies which drew new customers to the brand while also driving repeat purchase behavior. Comparable sales, which includes showroom and Internet sales, increased 37.8%. Comparable showroom sales increased 29.5% and Internet sales increased 64.7%.

 

●

The Company opened 11 new showrooms and closed two showrooms in the fiscal 2020 year-to-date period.

 

●

Gross profit increased $16.2 million, or 29.2%, to $71.5 million in the fiscal 2020 year-to-date period from $55.4 million in the corresponding prior year period. Gross margin decreased to 50.7% of net sales in the fiscal 2020 year-to-date period from 54.4% of net sales in the corresponding prior year period. The decrease in gross margin rate was driven primarily by the impact of 25% China tariffs, partially offset by reduced costs of Sactionals and Sacs products. The decrease in costs of Sactionals and Sacs products was primarily related to cost savings from improved sourcing of Lovesoft and down blend fills in addition to an ongoing shift of manufacturing from China to Vietnam.

 

●

Selling, general and administrative expenses increased $15.3 million, or 27.9%, to $70.3 million in the fiscal 2020 year-to-date period compared to $55.0 million in the prior year period. The increase in selling, general and administrative expenses was primarily related to investments to support growth including: an increase in employment costs of $5.1 million, $2.2 million of rent associated with our net addition of 9 showrooms, and $2.2 million of expenses related to the increase in sales such as $1.1 million of credit card fees and $1.1 million of pop-up shop sales agent fees. Overhead expenses increased $5.8 million consisting of an increase of $6.1 million in infrastructure investments, an increase in insurance expense of $0.8 million related to the growth of the Company and an increase of $1.2 million in stock compensation offset by a decrease in IPO and financing related expense of $2.3 million.

 

●

As a percent of net sales, total SG&A expense decreased to 49.8% from 54.1% in the prior year period, driven largely by decreases in equity-based compensation and IPO related expenses, partially offset by warranty and professional services.

 

●

Advertising and marketing expenses increased $5.6 million, or 42.2%, to $18.7 million in the fiscal 2020 year-to-date period from $13.2 million in the corresponding prior year period. The increase in advertising and marketing costs relates to increased media and direct to consumer programs which are expected to drive revenue beyond the period of the expense.

 

●

Depreciation and amortization expenses increased $1.1 million or 45.2% in the fiscal 2020 year-to-date period to $3.6 million compared to $2.5 million in the corresponding prior year period. The increase in depreciation and amortization expense principally relates to capital investments for new and remodeled showrooms.

 

●

Operating loss was $21.1 million in the fiscal 2020 year-to-date period compared to an operating loss of $15.3 million in the same period of fiscal 2019.

 

●

Net loss and net loss attributable to common shares was $20.6 million in the fiscal 2020 year-to-date period. This compares to a net loss of $15.1 million in the prior year period and a net loss attributable to common shares of $43.0 million including preferred dividends and deemed dividends in the prior year period. Adjusted net loss, which excludes the impact of the IPO and certain other non-recurring expenses, was $20.3 million in the fiscal 2020 year-to-date period compared to $11.1 million in the prior year period (see “GAAP and Non-GAAP Measures”).

 

●

Net loss per share, including preferred dividends and deemed dividends, was ($1.45) in the fiscal 2020 year-to-date period compared to ($4.51) in the prior year period. Adjusted net loss per common share, which is calculated by dividing adjusted net loss by adjusted weighted average common shares outstanding assuming the IPO related issuances occurred at the beginning of each period presented, was ($1.43) in the fiscal 2020 year-to-date period compared to ($1.16) in the prior year period (see “GAAP and Non-GAAP Measures”).

 

●

Adjusted EBITDA was ($11.7) million in the year-to-date period of fiscal 2020 compared to ($6.3) million in the prior year period in fiscal 2019 (see “GAAP and Non-GAAP Measures”).

 

 

Please
see “Non-GAAP Financial Measures” and “Reconciliation of GAAP to Non-GAAP Financial Measures” below for
more information.

 

Conference
Call Details

 

A
conference call to discuss the third quarter fiscal 2020 financial results is scheduled for today, December 12, 2019, at 8:30
a.m. Eastern Time. Investors and analysts interested in participating in the call are invited to dial 877-407-3982 (international
callers please dial 201-493-6780) approximately 10 minutes prior to the start of the call. A live audio webcast of the conference
call will be available online at investor.lovesac.com.

 

A
recorded replay of the conference call will be available within two hours of the conclusion of the call and can be accessed online
at investor.lovesac.com for 90 days.

 

About
The Lovesac Company

 

Based
in Stamford, Connecticut, The Lovesac Company is a direct-to-consumer specialty furniture brand with approximately 90 retail
showrooms supporting its ecommerce delivery model. Lovesac’s name comes from its original Durafoam filled beanbags
called Sacs. The Company derives a majority of its current sales from its proprietary platform called Sactionals, a washable,
changeable, reconfigurable, and FedEx-shippable solution for large upholstered seating. Founder and CEO, Shawn
Nelson’s, “Designed for Life” philosophy emphasizes sustainable products that are built to last a lifetime
and designed to evolve with the customer’s needs, providing long-term utility and ultimately reducing the amount of
furniture discarded into landfills.

 

Non-GAAP
Information

 

This
press release includes the following financial measures defined as non-GAAP financial measures by the Securities and Exchange
Commission (the “SEC”): adjusted net loss, adjusted diluted loss per share and Adjusted EBITDA. Adjusted net loss
excludes the effect of one-time costs related to the Company’s IPO in June 2018 and fees associated with fundraising and
reorganizing activities. Adjusted diluted loss per share is defined as adjusted net loss divided by a pro forma share count which
assumes the IPO took place before the relevant time period. We define Adjusted EBITDA as net income plus interest expense, income
tax expense, depreciation and amortization, sponsor fees, deferred rent, equity-based compensation, write-off of property and
equipment, one-time IPO-related expenses, and fees associated with fundraising and reorganizing activities. The Company has reconciled
these non-GAAP financial measures with the most directly comparable GAAP financial measures under “GAAP and Non-GAAP Measures”
in this release. The Company believes that these non-GAAP financial measures not only provide its management with comparable financial
data for internal financial analysis but also provide meaningful supplemental information to investors. Specifically, these non-GAAP
financial measures allow investors to better understand the performance of the Company’s business and facilitate a more
meaningful comparison of its diluted income per share and actual results on a period-over-period basis. The Company has provided
this information as a means to evaluate the results of its ongoing operations. Other companies in the Company’s industry
may calculate these items differently than the Company does. Each of these measures is not a measure of performance under GAAP
and should not be considered as a substitute for the most directly comparable financial measures prepared in accordance with GAAP.
Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a
substitute for analysis of the Company’s results as reported under GAAP.

 

 

Cautionary
Statement Concerning Forward Looking Statements

 

Certain
statements either contained in or incorporated by reference into this communication, other than purely historical information,
including estimates, projections and statements relating to our business plans, objectives and expected operating results, and
the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements
are often, but not always, made through the use of words or phrases such as “may,” “believe,” “anticipate,”
“could,” “should,” “intend,” “plan,” “will,” “aim(s),”
“can,” “would,” “expect(s),” “estimate(s),” “project(s),” “forecast(s)”,
“positioned,” “approximately,” “potential,” “goal,” “pro forma,” “strategy,”
“outlook” and similar expressions. All statements, other than statements of historical facts, included in or incorporated
by reference into this press release regarding strategy, future operations, future financial position, future revenue, projected
expenses, prospects, plans and objectives of management are forward-looking statements. These statements are based on management’s
current expectations and/or beliefs and assumptions that management considers reasonable, which assumptions may or may not prove
correct. We may not actually achieve the plans, carry out the intentions or meet the expectations disclosed in the forward-looking
statements and you should not place undue reliance on these forward-looking statements. Actual results and performance could differ
materially from those projected in the forward-looking statements as a result of many factors. Among the key factors that could
cause actual results to differ materially from those expressed or implied in the forward-looking statements are the risk of disruptions
to current plans and operations, including the timing of openings of new showrooms that further shift expect growth to later periods,
slower than expected growth during the fourth quarter and risks related to tariffs, the countermeasures and mitigation steps that
we adopt in response to tariffs and other similar issues, as well as those risks  and uncertainties disclosed under
the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” in our most recent Form 10-K and Form 10-Q filed with the Securities and Exchange Commission,
and similar disclosures in subsequent reports filed with the SEC, which are available on our investor relations website at investor.lovesac.com
and on the SEC website at www.sec.gov. Any forward-looking statement made by us in this press release speaks only as of the date
on which we make it. We disclaim any intent or obligation to update these forward-looking statements to reflect events or circumstances
that exist after the date on which they were made.

 

Investor
Relations Contact:

Rachel
Schacter, ICR

(203)
682-8200

[email protected]

 

 

THE
LOVESAC COMPANY

CONDENSED
CONSOLIDATED BALANCE SHEETS

 

		As of November 3, 2019				As of February 3, 2019
Assets		(unaudited)
Current Assets
Cash and cash equivalents		$	27,896,406			$	49,070,952
Trade accounts receivable			8,581,102				3,955,124
Merchandise inventories			50,206,326				26,154,314
Prepaid expenses and other current assets			8,715,638				5,933,872
Total Current Assets			95,399,472				85,114,262
Property and Equipment, Net			21,838,589				18,595,079
Other Assets
Goodwill			143,562				143,562
Intangible assets, net			1,200,274				942,331
Deferred financing costs, net			164,303				219,071
Total Other Assets			1,508,139				1,304,964
Total Assets		$	118,746,200			$	105,014,305
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable		$	18,971,289			$	16,836,816
Accrued expenses			5,120,624				3,701,090
Payroll payable			3,385,340				2,269,834
Customer deposits			3,427,184				1,059,957
Sales taxes payable			893,917				750,922
Total Current Liabilities			31,798,354				24,618,619
Deferred Rent			2,498,124				1,594,179
Line of credit			—				31,373
Total Liabilities			34,296,478				26,244,171
Stockholders’ Equity
Preferred Stock $0.00001 par value, 10,000,000 shares authorized, no shares issued and outstanding as of November 3, 2019 and February 3, 2019, respectively.			–				–
Common Stock $0.00001 par value, 40,000,000 shares authorized, 14,538,586 shares issued and outstanding as of November 3, 2019 and 13,588,568 shares issued and outstanding as of February 3, 2019, respectively.			145				136
Additional paid-in capital			168,028,472				141,727,807
Accumulated deficit			(83,578,895	)			(62,957,809	)
Stockholders’ Equity			84,449,722				78,770,134
Total Liabilities and Stockholders’ Equity		$	118,746,200			$	105,014,305

 

 

THE
LOVESAC COMPANY

 CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS

 (unaudited)

  

		Thirteen weeks ended								Thirty-nine weeks ended
		November 3,				November 4,				November 3,				November 4,
		2019				2018				2019				2018
Net sales		$	52,097,232			$	41,685,929			$	141,202,010			$	101,703,739
Cost of merchandise sold			25,843,532				18,799,108				69,670,642				46,331,175
Gross profit			26,253,700				22,886,821				71,531,368				55,372,564
Operating expenses
Selling, general and administrative expenses			24,484,791				19,329,422				70,302,779				54,978,109
Advertising and marketing			7,258,284				5,164,699				18,717,517				13,167,354
Depreciation and amortization			1,377,659				1,084,180				3,649,072				2,513,009
Total operating expenses			33,120,734				25,578,301				92,669,368				70,658,472
Operating loss			(6,867,034	)			(2,691,480	)			(21,138,000	)			(15,285,908	)
Interest income, net			134,416				200,862				538,306				142,442
Net loss before taxes			(6,732,618	)			(2,490,618	)			(20,599,694	)			(15,143,466	)
Provision for income taxes			(15,692	)			–				(21,392	)			–
Net loss		$	(6,748,310	)		$	(2,490,618	)		$	(20,621,086	)		$	(15,143,466	)
Net loss per common share:
Basic and diluted		$	(0.46	)		$	(0.22	)		$	(1.45	)		$	(4.51	)
Weighted average number of common shares outstanding:
Basic and diluted			14,538,586				13,465,882				14,179,995				9,536,164

 

 

THE
LOVESAC COMPANY

CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOW

(unaudited)

 

		Thirty-nine weeks ended
		November 3,				November 4,
		2019				2018
Cash Flows from Operating Activities
Net loss		$	(20,621,086	)		$	(15,143,466	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of property and equipment			3,457,737				2,374,743
Amortization of other intangible assets			191,335				138,266
Amortization of deferred financing fees			54,768				102,917
Net (gain)loss on disposal of property and equipment			(166,865	)			6,139
Equity based compensation			4,020,978				2,849,842
Deferred rent			903,945				382,353
Changes in operating assets and liabilities:
Accounts receivable			(4,625,978	)			(108,136	)
Merchandise inventories			(24,052,012	)			(12,977,256	)
Prepaid expenses and other current assets			(2,781,766	)			(190,920	)
Accounts payable and accrued expenses			4,812,508				6,726,184
Customer deposits			2,367,227				1,615,798
Net Cash Used in Operating Activities			(36,439,209	)			(14,223,536	)
Cash Flows from Investing Activities
Purchase of property and equipment			(6,834,382	)			(8,436,529	)
Payments for patents and trademarks			(449,278	)			(440,185	)
Proceeds from the disposal of property and equipment			300,000				–
Net Cash Used in Investing Activities			(6,983,660	)			(8,876,714	)
Cash Flows from Financing Activities
Proceeds from issuance of common shares, net			25,610,000				59,168,596
Payments of initial public offering issuance costs			–				(260,044	)
Taxes paid for net share settlement of equity awards			(3,342,304	)			(7,902	)
Proceeds from the sale of preferred stock and warrants, net of issuance costs			12,000				–
Paydowns of borrowings on the line of credit, net			(31,373	)			(405	)
Payments of deferred financing costs			–				(292,095	)
Net Cash Provided by Financing Activities			22,248,323				58,608,150
Net Change in Cash and Cash Equivalents			(21,174,546	)			35,507,900
Cash and Cash Equivalents – Beginning			49,070,952				9,175,951
Cash and Cash Equivalents – End		$	27,896,406			$	44,683,851
Supplemental Cash Flow Disclosures
Cash paid for interest		$	38,632			$	48,256

 

 

THE
LOVESAC COMPANY

RECONCILIATION
OF NON-GAAP FINANCIAL MEASURES

 

		Thirteen weeks ended								Thirty-nine weeks ended
		November 3,				November 4,				November 3,				November 4,
(dollars in thousands)		2019				2018				2019				2018
Net loss		$	(6,748	)		$	(2,490	)		$	(20,621	)		$	(15,143	)
Interest income, net			(134	)			(201	)			(538	)			142
Taxes			16				-				21				-
Depreciation and amortization			1,378				1,084				3,649				2,513
EBITDA			(5,488	)			(1,607	)			(17,489	)			(12,488	)
Management fees (a)(b)			141				125				438				992
Deferred Rent (c)			816				131				904				382
Equity-based compensation (d)			628				516				4,021				2,850
(Gain) loss on disposal of of property and equipment (e)			–				-				(167	)			6
Other non-recurring expenses (f)(g)			174				444				598				1,982
Adjusted EBITDA		$	(3,729	)		$	(391	)		$	(11,695	)		$	(6,276	)

 

(a)	Management fees in the thirteen weeks ended November 3, 2019 are made up of $141 monitoring fees. Management fees in the thirteen weeks ended November 4, 2018 are made up of monitoring fess of $125.
(b)	Management fees in the thirty-nine weeks ended November 4, 2019 are made up of $438 monitoring fees. Management fees in the thirty-nine weeks ended November 4, 2018 are made up of monitoring fees of $367 and one time payments of $625 relating to the IPO.
(c)	Represents the difference between rent expense recorded and the amount paid by the Company. In accordance with GAAP, the Company records monthly rent expense equal to the total of the payments due over the lease term, divided by the number of months of the lease terms.
(d)	Represents expenses associated stock options and restricted stock units granted to our management and equity sponsors.
(e)	Represents the net (gain) loss on the disposal of property and equipment.
(f)	Other expenses in the thirteen weeks ended November 3, 2019 are made up of: (1) $76 in financing fees associated with our primary and secondary offering and (2) $98 in executive recruitment fees. Other expense in the thirteen weeks ended November 4, 2018 are made up of: (1) $110 in fees and costs associated with our fundraising and reorganizing activities including the legal and professional services incurred in connections with such activities; (2) $261 in legal fees related to the secondary offering (3) $29 in fees paid for investor relations and public relations relating to the IPO and (4) $44 in executive recruitment fees to build executive management team.
(g)	Other expenses in the thirty-nine weeks ended November 3, 2019 are made up of: (1) $247 in recruitment fees to build executive management team and Board of Directors; (2) $268 in fees associated with our primary and secondary shares offerings and (3) $83 in financing fees associated with our secondary offering. Other expenses in the thirty-nine weeks ended November 4, 2018 are made up of: (1) $341 in fees and costs associated with our fundraising and reorganizing activities including the legal and professional services incurred in connection with such activities; (2) $84 in travel and logistical costs associated with the offering; (3) $198 in accounting fees related to the offering; (4) $450 in IPO bonuses paid to executives; (5) $508 in fees paid for investor relations and public relations relating to the IPO (6) $140 in executive recruitment fees to build executive management team and (7) $261 in legal fees relating to the secondary offering.

  

  

THE
LOVESAC COMPANY

RECONCILIATION
OF NON-GAAP FINANCIAL MEASURES

(unaudited)

 
               

		Thirteen weeks ended								Thirty-nine weeks ended
(dollars in thousands)		November 3, 2019				November 4, 2018				November 3, 2019				November 4, 2018
Net loss as reported		$	(6,748	)		$	(2,490	)		$	(20,621	)		$	(15,143	)
Adjustments:
Adjustments to selling, general and administrative expense:
Management fees relating to the IPO (a)			–				–				–				625
Equity based compensation related to the IPO (b)			–				–				–				1,442
Other expenses (c)(d)			76				444				350				1,982
Adjusted net loss		$	(6,672	)		$	(2,046	)		$	(20,271	)		$	(11,094	)
Adjusted basic and diluted weighted average shares outstanding- adjusted for IPO related issuance			14,538,586				13,465,882				14,179,995				9,536,164
Adjusted net loss per common share		$	(0.46	)		$	(0.15	)		$	(1.43	)		$	(1.16	)

 

(a)	$625 paid in management fees to equity sponsors related to the IPO
(b)	$700 in executive Restricted Stock awards vested as a result of the IPO and $742 IPO bonus paid to equity sponsor in common stock.
(c)	Other expenses in the thirteen weeks ended November 3, 2019 are made up of $76 in financing fees associated with our primary and secondary offering. Other expenses in the thirteen weeks ended November 4, 2018 are made up of: (1) $110 in fees and costs associated with our fundraising and reorganizing activities including the legal and professional services incurred in connections with such activities; (2) $261 in legal fees related to the secondary offering (3) $29 in fees paid for investor relations and public relations relating to the IPO and (4) $44 in executive recruitment fees to build executive management team.
(d)	Other expenses in the thirty-nine weeks ended November 3, 2019 are made up of: (1) $268 in fees associated with our primary and secondary shares offerings and (2) $83 in financing fees associated with our secondary offering. Other expenses in the thirty-nine weeks ended November 4, 2018 are made up of: (1) $341 in fees and costs associated with our fundraising and reorganizing activities includingthe legal and professional services incurred in connection with such activities; (2) $84 in travel and logistical costs associated with the offering; (3) $198 in accounting fees related to the offering; (4) $450 in IPO bonuses paid to executives; (5) $508 in fees paid for investor relations and public relations relating to the IPO (6) $140 in executive recruitment fees to build executive management team and (7) $261 in legal fees relating to the secondary offering.

 

 

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