Lulu's Fashion Lounge Holdings, Inc.

Previous wording

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission (“SEC”) on March 6, 2024 (the “2023 10-K”). This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in Item I, Part 1A, “Risk Factors” in the 2023 10-K, Part II, Item 1A, “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, and Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q for the quarter ended September 29, 2024. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report on Form 10-Q, whether as a result of any new information, future events or otherwise*.*

Current wording

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes as disclosed in our Annual Report on Form 10-K for the fiscal year ended December 29, 2024, filed with the Securities and Exchange Commission (“SEC”) on March 27, 2025 (the “2024 10-K”). This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in Item I, Part 1A, “Risk Factors” in the 2024 10-K and Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q for the quarter ended March 30, 2025. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report on Form 10-Q, whether as a result of any new information, future events or otherwise*.*

Previous wording

Lulu’s Fashion Lounge Holdings, Inc., a Delaware Corporation (“Lulus”, “we”, “our”, or the “Company”) is a customer-driven, primarily online, digitally-native, attainable luxury fashion brand for women, offering modern, unapologetically feminine designs at attainable prices for all of life’s fashionable moments. Our aim is to make every woman feel beautiful, celebrated and as if she’s the most special version of herself for every occasion – from work desk to dream date or cozied up on the couch to the spotlight of her wedding day. Lulus primarily serves a large, diverse community of Millennial and Gen Z women, who typically meet us in their 20s and stay with us through their 30s and beyond. We focus relentlessly on giving our customers what they want by using direct consumer feedback and insights to refine product offerings and elevate the customer experience. Lulus’ world class personal stylists, bridal concierge, and customer care team share an unwavering commitment to elevating style and quality and bring exceptional customer service and personalized shopping to customers around the world.

Current wording

Lulu’s Fashion Lounge Holdings, Inc., a Delaware Corporation (“Lulus”, “we”, “our”, or the “Company”) is a customer-driven, digitally-native attainable luxury fashion brand for women, offering modern, unapologetically feminine designs at attainable prices for all of life’s fashionable moments. Our goal is to become the most trusted and number one destination for dresses, helping every woman feel confident and celebrated, supporting her for all of life's occasions. Lulus primarily serves a large, diverse community of Millennial and Gen Z women, who typically meet us in their 20s and stay with us through their 30s and beyond. We focus relentlessly on giving our customers what they want by using direct consumer feedback and insights to refine product offerings and elevate the customer experience. Lulus’ world class personal stylists, bridal concierge, and customer care team share an unwavering commitment to elevating style and quality and bring exceptional customer service and personalized shopping to customers around the world.

Previous wording

Changing macroeconomic factors, including inflation, interest rates, student loan repayment resumption, world events, wars and domestic and international conflicts and overall consumer confidence with respect to current and future economic conditions, have directly impacted our sales through the first nine months of 2024 as discretionary consumer spending levels and shopping behavior fluctuate with these factors. We have responded to these factors by taking appropriate pricing, promotional and other actions to stimulate customer demand. These factors are expected to continue to have an impact on our business, results of operations, our growth and financial condition.

Current wording

Changing macroeconomic factors, including inflation, interest rates, student loan repayment resumption, tariffs or bans, world events, wars and domestic and international conflicts, existing and future laws and regulations, directives (including executive orders), and overall consumer confidence with respect to current and future economic conditions have directly impacted our sales as discretionary consumer spending levels and shopping behavior fluctuate with these factors. We have responded to these factors by taking appropriate pricing, promotional and other actions to stimulate customer demand. These factors are expected to continue to have an impact on our business, results of operations, our growth and financial condition.

Previous wording

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. During the thirteen and thirty-nine weeks ended September 29, 2024, we incurred net losses of $6.9 million and $23.4 million, respectively.

Current wording

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. During the thirteen weeks ended March 30, 2025, and March 31, 2024, the Company incurred net losses of $8.0 million and $5.7 million, respectively. As of March 30, 2025, we had total cash and cash equivalents of $8.6 million and $10.1 million in outstanding amounts under the credit agreement with Bank of America for the Company’s revolving facility (“2021 Credit Agreement”), as amended, classified within total current liabilities. During the thirteen weeks ended March 30, 2025, we borrowed no amounts under the 2021 Credit Agreement, as amended, and repaid $3.0 million of the outstanding balance. Subsequent to March 30, 2025 and through the filing date of this Quarterly Report on Form 10-Q, the Company repaid an additional $2.8 million of the revolving line of credit balance and reduced its outstanding letters of credit by $0.3 million. See Note 5,Debt of the accompanying notes to our condensed consolidated financial statements for further information on the 2021 Credit Agreement, as amended.

Previous wording

We are actively seeking alternative debt financing and continue to take certain cash conservation measures, including adjustments to marketing and other fixed and variable costs and capital spend to meet our obligations as needed. As the ability to raise additional debt financing is outside of management’s control, we cannot conclude that management’s plans will be effectively implemented within twelve months from the date the condensed consolidated financial statements are issued. Accordingly, we have concluded that these plans do not alleviate substantial doubt about our ability to continue as a going concern. The condensed consolidated financial statements do not reflect any adjustments relating to the outcome of this uncertainty.

Current wording

We are actively seeking alternative debt financing and will continue to take certain cash conservation measures, including adjustments to marketing and other fixed and variable costs and capital spend to meet our obligations as needed. As the ability to raise additional debt financing is outside of management’s control, we cannot conclude that management’s plans will be effectively implemented within twelve months from the date the condensed consolidated financial statements

Previous wording

We define Active Customers as the number of customers who have made at least one purchase across our platform in the prior 12-month period. Active Customer count is as of the last day of the relevant period. We consider the number of Active Customers to be a key performance metric on the basis that it is directly related to consumer awareness of our brand, our ability to attract visitors to our primarily digital platform, and our ability to convert visitors to paying customers. Active Customers counts are based on de-duplication logic using customer account and guest checkout name, address, and email information.

Current wording

We define Active Customers as the number of customers who have made at least one purchase across our platform in the prior 12-month period. Active Customer count is measured as of the last day of the relevant period. We consider the number of Active Customers to be a key performance metric on the basis that it is directly related to consumer awareness of our brand, our ability to attract visitors to our primarily digital platform, and our ability to convert visitors to paying customers. Active Customers counts are based on deduplication logic using customer account and guest checkout name, address, and email information.

Previous wording

We define Average Order Value (“AOV”) as the sum of the total gross sales before returns across our platform in a given period, plus shipping revenue, less discounts and markdowns, divided by the Total Orders Placed (as defined below) in that period. AOV reflects average basket size of our customers. AOV may fluctuate as we continue investing in the development and introduction of new Lulus merchandise and as a result of our promotional discount activity.

Current wording

We define Average Order Value (“AOV”) as the sum of the total gross sales before returns across our platform in a given period, plus shipping revenue, less discounts and markdowns, divided by the Total Orders Placed (as defined below) in that period. AOV reflects the average basket size of our customers. AOV may fluctuate as we continue investing in the development and introduction of new Lulu’s merchandise and as a result of our promotional discount activity.

Previous wording

Adjusted EBITDA is a non-GAAP financial measure that we calculate as net loss before interest expense, income taxes, depreciation and amortization adjusted to exclude the effects of equity-based compensation expense and other non-routine expenses. Adjusted EBITDA is a key measure used by management to evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital.

Current wording

Adjusted EBITDA is a non-GAAP financial measure that we calculate as net loss before interest expense, income taxes, depreciation and amortization adjusted to exclude the effects of equity-based compensation expense and other non-routine expenses. Adjusted EBITDA is a key measure used by management to evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. We believe that adjusted EBITDA and Adjusted EBITDA margin provide useful information to investors and others in understanding and evaluating our operating results and in comparing operating results across periods. We view Free Cash Flow as an important indicator of our liquidity because it measures the amount of cash we generate.

Previous wording

Due to these limitations, Adjusted EBITDA and Adjusted EBITDA Margin should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using these non-GAAP measures only supplementally. As noted in the table below, Adjusted EBITDA includes adjustments to exclude the impact of depreciation and amortization, interest expense, income taxes, equity-based compensation expense and other non-routine expenses. It is reasonable to expect that some of these items will occur in future periods. However, we believe these adjustments are appropriate because the amounts recognized can vary significantly from period to period, do not directly relate to the ongoing operations of our business and may complicate comparisons of our internal results of operations and results of operations of other companies over time. In addition, Adjusted EBITDA includes adjustments for other items that we do not expect to regularly record. Each of the normal recurring adjustments and other adjustments described in this paragraph and in the following reconciliation table help management with a measure of our core operating performance over time by removing items that are not related to day-to-day operations. Adjusted EBITDA Margin is a non-GAAP financial measure that we calculate as Adjusted EBITDA (as defined above) as a percentage of our net revenue.

Current wording

Due to these limitations, Adjusted EBITDA, Adjusted EBITDA Margin, and Free Cash Flow should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using these non-GAAP measures only supplementally. As noted in the table below, Adjusted EBITDA includes adjustments to exclude the impact of depreciation and amortization, interest expense, income taxes, equity-based compensation and goodwill impairment. It is reasonable to expect that some of these items will occur in future periods. However, we believe these adjustments are appropriate because the amounts recognized can vary significantly from period to period, do not directly relate to the ongoing operations of our business and may complicate comparisons of our internal results of operations and results of operations of other companies over time. In addition, Adjusted EBITDA includes adjustments for other items that we do not expect to regularly record. Each of the normal recurring adjustments and other adjustments described in this paragraph and in the following reconciliation table help management with a measure of our core operating performance over time by removing items that are not related to day-to-day operations. Adjusted EBITDA Margin is a non-GAAP financial measure that we calculate as Adjusted EBITDA (as defined above) as a percentage of our net revenue.

Previous wording

A reconciliation to non-GAAP Free Cash Flow from net cash provided by operating activities for the thirteen and thirty-nine weeks ended September 29, 2024 and October 1, 2023 is as follows:

Current wording

A reconciliation to non-GAAP Free Cash Flow from net cash provided by operating activities for the thirteen weeks ended March 30, 2025 and March 31, 2024 is as follows:

Previous wording

Our financial condition and results of operations have been, and will continue to be, affected by a number of factors that present significant opportunities for us but also pose risks and challenges, including what is discussed below. See Part I, “Item 1A. Risk Factors” in our 2023 10-K and* *Part II, Item 1A of our Quarterly Reports on Form 10-Q for the quarters ended June 30, 2024 and September 29, 2024.

Current wording

Our financial condition and results of operations have been, and will continue to be, affected by a number of factors that present significant opportunities for us but also pose risks and challenges, including what is discussed below. See Part I, Item 1A, “Risk Factors” in our 2024 10-K and Part II, Item 1A,“Risk Factors” of this Quarterly Report on Form 10-Q for the quarter ended March 30, 2025.

Previous wording

Our continued success depends in part on our ability to retain and drive repeat purchases from our existing customers. We monitor retention across our entire customer base. Our goal is to attract and convert visitors into Active Customers and foster relationships that drive repeat purchases. During the trailing 12 months ended September 29, 2024, we served 2.7 million Active Customers compared to 3.0 million for the trailing 12 months ended October 1, 2023.

Current wording

Our continued success depends in part on our ability to retain and drive repeat purchases from our existing customers. We monitor retention across our entire customer base. Our goal is to attract and convert visitors into Active Customers and foster relationships that drive repeat purchases. During the trailing 12 months ended March 30, 2025, we served 2.6 million Active Customers compared to 2.8 million for the trailing 12 months ended March 31, 2024.

Previous wording

We utilize a data-driven strategy that leverages our proprietary reorder algorithm to manage inventory as efficiently as possible. Our “test, learn, and reorder” approach consists of limited inventory purchases followed by the analysis of proprietary data including real-time transaction data and customer feedback, which then informs our selection and customization of popular merchandise prior to reordering in larger quantities. While our initial orders are limited in size

Current wording

We utilize a data-driven strategy that leverages our proprietary reorder algorithm to manage inventory as efficiently as possible. Our “test, learn, and reorder” approach consists of limited inventory purchases followed by the analysis of proprietary data including real-time transaction data and customer feedback, which then informs our selection and customization of popular merchandise prior to reordering in larger quantities. While our initial orders are limited in size and financial risk and our supplier partners are highly responsive, we nonetheless purchase inventory in anticipation of future demand and therefore are exposed to potential shifts in customer preferences and price sensitivity over time. As we continue to grow, we will adjust our inventory purchases to align with the current needs of the business.

Previous wording

Cost of revenue consists of the product costs of merchandise sold to customers; shipping and handling costs, including all inbound, outbound, and return shipping expenses; rent, insurance, business property tax, utilities, depreciation and amortization, and repairs and maintenance related to our distribution facilities; and charges related to inventory shrinkage, damages, and our allowance for excess or obsolete inventory. Cost of revenue is primarily driven by growth in orders placed by customers, the mix of the product available for sale on our site, and transportation costs related to inventory receipts from our suppliers. We expect our cost of revenue to fluctuate as a percentage of net revenue primarily due to how we manage our inventory and merchandise mix.

Current wording

amortization, and repairs and maintenance related to our distribution facilities; and charges related to inventory shrinkage, damages, and our allowance for excess or obsolete inventory. Cost of revenue is primarily driven by growth in orders placed by customers, the mix of the product available for sale on our site, and transportation costs related to inventory receipts from our suppliers. We expect our cost of revenue to fluctuate as a percentage of net revenue primarily due to how we manage our inventory and merchandise mix.

Previous wording

Interest expense consists of interest expense related to the 2021 Revolving Facility.

Current wording

Interest expense consists of interest expense related to the revolving facility under the 2021 Credit Agreement, as amended.

Previous wording

The provision for income taxes represents federal, state, and local income taxes. The effective rate differs from the statutory rate primarily due tothe establishment of valuation allowance as the Company could not provide sufficient positive evidence that the deferred taxes will be more-likely-than-not realized in the future. Our effective tax rate will change from quarter to quarter based on recurring and nonrecurring factors including, but not limited to, the geographical mix of earnings, enacted tax legislation, state and local income taxes, the impact of permanent tax adjustments, tax audit settlements, and the interaction of various tax strategies.

Current wording

The benefit for income taxes represents federal, state, and local income taxes. The effective rate differs from the statutory rate primarily due tothe establishment of a deferred tax asset valuation allowance as the Company could not provide sufficient positive evidence that the deferred taxes will be more-likely-than-not realized in the future. Our effective tax rate will change from quarter to quarter based on recurring and nonrecurring factors including, but not limited to, enacted tax legislation, state and local income taxes, and tax audit settlements.

Previous wording

We regularly assess the realizability of deferred tax assets and record a valuation allowance to reduce the deferred tax assets to the amount that is more likely than not to be realized. In assessing the realizability of our deferred tax assets, we weigh all available positive and negative evidence. This evidence includes, but is not limited to, historical earnings, scheduled reversal of taxable temporary differences, tax planning strategies and projected future taxable income. Due to the weight of objectively verifiable negative evidence, we established a valuation allowance of $5.4million during the thirteen weeks ended June 30, 2024 and maintained such valuation allowance for the thirty-nine weeks ended September 29, 2024. This was comprised of a valuation allowance of $5.7 million for the net deferred tax assets as of December 31, 2023 and an adjustment of $0.3 million for the thirty-nine week period through September 29, 2024. The significant piece of objectively verifiable negative evidence evaluated was the recent cumulative losses. Our ability to use our deferred tax assets depends on the amount of taxable income in future periods.

Current wording

The Company regularly assesses the realizability of deferred tax assets and records a valuation allowance to reduce the deferred tax assets to the amount that is more likely than not to be realized. In assessing the realizability of our deferred tax assets, we weigh all available positive and negative evidence. This evidence includes, but is not limited to, historical earnings, scheduled reversal of taxable temporary differences, tax planning strategies and projected future taxable income.

Previous wording

The following tables set forth our consolidated results of operations for the periods presented and as a percentage of net revenue and net loss:

Current wording

The following tables set forth our condensed consolidated results of operations for the periods presented and as a percentage of net revenue and net loss:

Previous wording

Net revenue decreased in the thirteen weeks ended September 29, 2024 by $2.6 million, or 3%, compared to the thirteen weeks ended October 1, 2023 primarily due to a 3% decrease in Total Orders Placed and the impact of slightly lower AOV offset by the impact of lower return rates.

Current wording

Net revenue decreased in the thirteen weeks ended March 30, 2025 by $13.1 million, or 17%, compared to the thirteen weeks ended March 31, 2024 primarily due to a 17% decrease in Total Orders Placed and the impact of lower AOV offset by lower return rates.

Previous wording

Gross profit decreased in the thirteen weeks ended September 29, 2024 by $2.9 million, or 9% compared to the same period of the prior year which was primarily driven by higher markdowns and discounts.

Current wording

Gross profit decreased in the thirteen weeks ended March 30, 2025 by $6.8 million, or 21% compared to the same period of the prior year which was primarily driven by the impact of the lower volume of sales.

Previous wording

General and administrative expenses decreased by $1.7 million in the thirteen weeks ended September 29, 2024, or 8%, compared to the thirteen weeks ended October 1, 2023. The decrease was primarily due to a $2.2 million decrease in stock based compensation expense, a $0.4 million decrease in non-routine items accruals, a $0.3 million decrease in D&O liability insurance and legal and professional fees, a $0.2 million decrease in variable labor and benefits associated with lower sales volume and operational efficiencies, and a $0.1 million decrease in board-related fees due to the reduction of our board size and temporary suspension of director cash compensation. This was partially offset by a $1.5 million increase in software, fixed labor, and depreciation and amortization.

Current wording

General and administrative expenses decreased in the thirteen weeks ended March 30, 2025 by $3.1 million or 15%, compared tothe same period of the prior year. The decrease was primarily due to a $1.4 million decrease in fixed labor driven byreduced fixed headcount resulting from our cost reduction measures, a $0.5 million decrease in variable labor and benefits associated with lower sales volume, partly offset by temporary ramp up costs related to the consolidation of our West Coast distribution facilities, a $0.5 million decrease in equity-based compensation expense, a $0.5 million decrease in D&O liability insurance and legal and professional fees, a $0.1 million decrease in occupancy primarily related to rent and facility expenses and a $0.1 million decrease in software, supplies and travel.

Previous wording

We experience moderate seasonal fluctuations in aggregate sales volume during the year. Seasonality in our business does not follow that of traditional retailers, such as a typical concentration of revenue in the holiday quarter. Our net revenue is typically highest in the second and third quarters due to the highest demand for event dresses in the spring and summer. Net revenue is typically the lowest in the first and fourth quarters when event dresses are less in demand. The seasonality of our business has resulted in variability in our total net revenue quarter-to-quarter. We believe that this seasonality has affected and will continue to affect our results of operations.

Current wording

We experience moderate seasonal fluctuations in aggregate sales volume during the year. Seasonality in our business does not follow that of traditional retailers, such as a typical concentration of revenue in the holiday quarter. Our net revenue is typically highest in the second and third quarters due to the increased demand for event dresses in the spring and summer. Net revenue is typically the lowest in the first and fourth quarters when event dresses are less in demand. The seasonality of our business has resulted in variability in our total net revenue quarter-to-quarter. We believe that this seasonality has affected and will continue to affect our results of operations.

Previous wording

Our quarterly gross profit fluctuates primarily based on how we manage our inventory and merchandise mix and has typically been in line with fluctuations in net revenue. When quarterly gross profit fluctuations have deviated relative to the fluctuations in sales, these situations have been driven by non-recurring, external factors, such as the COVID-19 pandemic.

Current wording

Our quarterly gross profit fluctuates primarily based on how we manage our inventory and merchandise mix and has typically been in line with fluctuations in net revenue. When quarterly gross profit fluctuations have deviated relative to the fluctuations in sales, these situations have been driven by non-recurring, external factors, such as global pandemics or trade wars.

Previous wording

Our primary sources of liquidity and capital resources are cash generated from operating activities as we have no further access to borrowings under our 2021 Revolving Facility, as amended by the 2024 Amended Credit Agreement. Our primary requirements for liquidity and capital are inventory purchases, payroll and general operating expenses, capital expenditures associated with our distribution facilities, capitalized software and debt service requirements.

Current wording

Our primary sources of liquidity and capital resources are cash generated from operating activities as we have no further access to borrowings under our 2021 Credit Agreement, as amended. Our primary requirements for liquidity and capital are inventory purchases, payroll and general operating expenses, capital expenditures associated with our distribution facilities, capitalized software and debt service requirements.

Previous wording

On November 15, 2021, we entered into the 2021 Credit Agreement with the lender to provide the 2021 Revolving Facility that provided for borrowings up to $50.0 million with a maturity date of November 15, 2024. All borrowings under the 2021 Credit Agreement accrued interest at a rate equal to, at our option, either (x) the term daily SOFR plus the applicable SOFR adjustment plus a margin of 1.75% per annum or (y) the base rate plus a margin of 0.75% (with the base rate being the highest of the federal funds rate plus 0.50%, the prime rate and term SOFR for a period of one month plus 1.00%).

Current wording

In November 2021, we entered into the 2021 Credit Agreement that provided for borrowings up to $50.0 million with a maturity date of November 15, 2024.

Previous wording

On July 22, 2024, we entered into the 2024 Amended Credit Agreement which extended the maturity date from November 15, 2024 to August 15, 2025 and reduced the 2021 Revolving Facility from $50.0 million to $15.0 million, with a further reduction to $10.0 million on March 31, 2025. Under the 2024 Amended Credit Agreement, we can increase the aggregate amount of the facility by $10.0 million, subject to the satisfaction of certain conditions, including an asset coverage ratio of at least 1.50:1.00, recalculated as of the last day of the most recently ended month for which financial statements are internally available. The 2024 Amended Credit Agreement also reduced the previous letters of credit sublimit from $7.5 million to $5.0 million.

Current wording

On July 22, 2024, we entered into an amendment to the 2021 Credit Agreement (the “First Credit Amendment”)which extended the maturity date to August 15, 2025 and reduced the Revolving Commitment (as defined in the 2021 Credit Agreement) to $15.0 million, with a further reduction to $10.0 million on or about March 31, 2025. The First Credit Amendment also reduced the previous letters of credit sublimit from $7.5 million to $5.0 million.

Previous wording

During the thirty-nine weeks ended September 29, 2024, the Company borrowed $31.5 million under the 2021 Credit Agreement and the 2024 Amended Credit Agreement and repaid $28.0 million of the outstanding balance. As of September 29, 2024, the Company had $0.5 million letters of credit outstanding. We borrowed an additional $1.6 million

Current wording

During the thirteen weeks ended March 30, 2025, the Company borrowed no amounts under the 2021 Credit Agreement, as amended, and repaid $3.0 million of the outstanding balance. As of March 30, 2025, the Company had $0.5 million in letters of credit outstanding. The weighted average interest rate on the $10.1 million outstanding balance as of March 30, 2025, was 10.2%, and during the thirteen weeks ended March 30, 2025, the effective interest

Previous wording

As of September 29, 2024, we had cash and cash equivalents of $6.3 million. During the thirteen weeks ended September 29, 2024, we took certain cost reduction and cash conservation measures, including adjustments to marketing spend, and other fixed, variable, and capital spend. We will continue to take certain cost reduction and cash conservation measures to meet our obligations as needed. As the ability to raise additional debt financing is outside of our control, we cannot conclude that our plans will be effectively implemented within twelve months from the date the condensed consolidated financial statements are issued. Accordingly, we have concluded that these plans do not alleviate substantial doubt about our ability to continue as a going concern. The condensed consolidated financial statements do not reflect any adjustments relating to the outcome of this uncertainty. Actual results of operations will depend on numerous factors, many of which are beyond our control, as further discussed in Part I, Item 1A, “Risk Factors” included in our 2023 10-K and risk factors set forth in Part II, Item 1A of our Quarterly Reports on Form 10-Q for the quarters ended June 30, 2024 and September 29, 2024.

Current wording

As of March 30, 2025, we had cash and cash equivalents of $8.7 million. During the thirteen weeks ended March 30, 2025, we took certain cost reduction and cash conservation measures, adjustments to marketing spend, and other fixed, variable, and capital spend. We will continue to take certain cost reduction and cash conservation measures to meet our obligations as needed. As the ability to raise additional debt financing is outside of our control, we cannot conclude that our plans will be effectively implemented within twelve months from the date the condensed consolidated financial statements are issued. Accordingly, we have concluded that these plans do not alleviate substantial doubt about our ability to continue as a going concern. The condensed consolidated financial statements do not reflect any adjustments relating to the outcome of this uncertainty. Actual results of operations will depend on numerous factors, many of which are beyond our control, as further discussed in Part I, Item 1A, “Risk Factors” included in our 2024 10-K and Part II, Item 1A,“Risk Factors” in this Quarterly Report on Form 10-Q for the quarter ended March 30, 2025.

Previous wording

On May 3, 2024, our Board of Directors authorized a stock repurchase program to repurchase up to $2.5 million of our common stock (the “2024 Repurchase Program”). The actual timing, number, and value of shares repurchased in the future will be determined at our discretion and will depend on a number of factors, including market conditions, applicable legal requirements, our capital needs, and whether there is a better alternative use of capital. Repurchases will be funded from our existing cash and cash equivalents, or future cash flow. The 2024 Repurchase Program may be modified, suspended, or terminated at any time. During the thirteen and thirty-nine weeks ended September 29, 2024, we repurchased 130,293 shares and 178,143 shares of common stock, respectively, in open market transactions pursuant to a 10b5-1 purchase plan. As of September 29, 2024, there was $2.2 million available under the 2024 Repurchase Program authorization. For further information on the 2024 Repurchase Program, see Note 2, Significant Accounting Policies.

Current wording

The actual timing, number, and value of shares repurchased in the future will be determined at our discretion and will depend on a number of factors, including market conditions, applicable legal requirements, our capital needs, and whether there is a better alternative use of capital. Repurchases will be funded from our existing cash and cash equivalents, or future cash flow. The 2024 Repurchase Program may be modified, suspended, or terminated at any time. For further information on the 2024 Repurchase Program, see Note 2,Significant Accounting Policies, of the accompanying notes to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Previous wording

During the thirty-nine weeks ended September 29, 2024, net cash provided by operating activities decreased by $16.0 million, as compared to the same period in 2023. The decrease was largely due to an increase of $11.5 million in our net loss after adjusting for non-cash items, a $4.7 million increase in inventory purchases, a $3.8 million increase in prepaids and other current assets mainly due to an insurance receivable of $4.7 million partially offset by the write-off of our debt issuance costs pertaining to the 2021 Revolving Facility, prepaid marketing and prepaid software subscriptions, an increase of $2.3 million in income tax refund receivable, an increase of $1.4 million in accounts receivable pertaining to credit card and wholesale receivables, a decrease of $1.2 million in accounts payable primarily related to the timing of payments related to our credit card payables and a $0.4 million decrease related to operating lease liabilities. This was partially offset by a $7.5 million increase related to accrued expenses and other current liabilities mainly due to an increase in our non-routine legal reserve accrual of $4.6 million, an increase in stored value liabilities of $3.3 million due to lower redemption rates, a timing related increase in accrued inventory of $1.3 million, and an increase in miscellaneous accruals of $0.3 million offset by a decrease in accrued compensation and benefits of $0.7 million, a decrease in accrued freight of $0.4 million, a decrease in the return reserve of $0.4 million as a result of lower sales and a slight decrease in return rates, as well as a decrease in accrued marketing of $0.2 million. In addition, there was a $1.6 million increase related to other noncurrent liabilities and a $0.2 million increase related to assets for recovery.

Current wording

During the thirteen weeks ended March 30, 2025, net cash provided by operating activities increased by $1.4 million, as compared to the same period in 2024. The increase was primarily due to receipt of a $3.4 million income tax refund which consisted of $0.4 million of interest accrued during the thirteen weeks ended March 30, 2025 and the related $3.0 million of prior year state income tax overpayments that were included in our income tax receivable at the end of fiscal year 2024, a $1.0 million increase in accrued expenses and other current liabilities primarily driven by an increase in return reserve, a $0.5 million increase related to other noncurrent liabilities driven by increased non-current deferred tax liabilities and a $0.2 million timing related increase in accrued inventory. This was partially offset by an increase of $2.4 million in our net loss after adjusting for non-cash items, a $0.6 million increase related to assets for recovery, a $0.3 million increase in accounts receivable pertaining to higher credit card receivables, a decrease of $0.2 million in accounts payable related to the timing of payments related to our credit card payables, anda $0.2 million decrease related to operating lease liabilities.

Previous wording

Our primary investing activities have consisted of purchases of equipment to support our overall business growth and internally developed software for the continued development of our proprietary technology infrastructure. Purchases of property and equipment may vary from period-to-period due to timing of the expansion of our operations. We have no material commitments for capital expenditures.

Current wording

Our primary investing activities have consisted of purchases of equipment to support our overall business growth and internally developed software for the continued development of our proprietary technology infrastructure. Purchases of property and equipment may vary from period to period due to the timing of the expansion of our operations. We have no material commitments for capital expenditures.

Previous wording

During the thirty-nine weeks ended September 29, 2024, as compared to the same period in 2023, net cash used in investing activities decreased by $0.6 million. This was attributable to $0.5 million less invested in capitalized software development costs and $0.1 million lower capital expenditures for furniture, leasehold improvements, equipment, and construction in progress for our general operations.

Current wording

During the thirteen weeks ended March 30, 2025, as compared to the same period in 2024, net cash used in investing activities increased by $0.4 million. This was attributable to $0.5 million lower capital expenditures for furniture, leasehold improvements, equipment, and construction in progress for our general operations, which was partially offset by $0.1 million invested in capitalized software development costs.

Previous wording

Financing activities consist primarily of borrowings and repayments related to our revolving line of credit.

Current wording

Financing activities consist primarily of borrowings and repayments related to our revolving facility under our 2021 Credit Agreement, as amended.

Previous wording

on ourrevolving line of credit anda $0.2 million decrease in withheld tax payments related to vesting of RSUs, partially offset by $4.0 million of higher repayments on our revolving line of credit, $0.7 million increase in finance lease payments, $0.3 million decrease in proceeds received from issuance of common stock under our ESPP and $0.2 million increase related to the 2024 Repurchase Program.

Current wording

During the thirteen weeks ended March 30, 2025, net cash used by financing activities increased by $0.6 million compared to the same period in 2024. The increase was primarily due to lower net borrowings of $10.0 million on our 2021 Credit Agreement, as amended, a $0.2 million increase related to the 2024 Repurchase Program and a $0.1 million decrease in proceeds received from issuance of common stock under our ESPP, partially offset by a $9.0 million decrease in repayments on our revolving facility, a $0.4 million increase in finance lease payments and a $0.3 million decrease in withholding tax payments related to vesting of RSUs.

Previous wording

Other than the November 2024 Amended Credit Agreement discussed in Note 5,Debt and Note 13,Subsequent Events, there have been no other material changes to our contractual obligations and commitments as disclosed in our 2023 10-K.

Current wording

There have been no other material changes to our contractual obligations and commitments as disclosed in our 2024 10-K.

Previous wording

Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates” in our 2023 10-K and the notes to the audited consolidated financial statements appearing elsewhere in our 2023 10-K. There have been no significant changes to our critical accounting policies and estimates as disclosed in our 2023 10-K.

Current wording

Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates” in our 2024 10-K and the notes to the