The Lovesac Company (LOVE) Earnings Call Transcript & Summary

Thanks, and welcome, everyone, on this morning's call. Joining me are Shawn Nelson, our Chief Executive Officer; Mary Fox, President and Chief Operating Officer; and Keith Siegner, Chief Financial Officer. Ahead of diving in, please bear in mind that certain matters we'll cover will contain forward-looking statements concerning upcoming events and how our finances will perform going forward. That covers remarks about what we expect ahead, our financial projections, plus our plans and prospects. What actually happens could differ materially from what those statements describe. To understand these risks and uncertainties, please look at the company's SEC filings, among them today's press release. You shouldn't treat our forward-looking statements as forecasts of what will occur. Every forward-looking statement made during this call rests on assumptions and beliefs held as of today, and except where applicable law demands otherwise, we assume no duty to revise them. Today's discussion will also feature non-GAAP financial measures, among them EBITDA and adjusted EBITDA. These non-GAAP measures ought to be viewed alongside our GAAP results — never as a replacement for them or on their own. A reconciliation linking the closest comparable GAAP financial measures to that non-GAAP financial measure appears as supplemental financial information in our press release. At this point, I'd like to hand the call to Shawn Nelson, Chief Executive Officer of the Lovesac Company.

Thanks, Caitlin. Morning, everyone, and I appreciate you being here today. To kick off our discussion, I'll go over highlights from how we performed in the first quarter and share some thoughts on our outlook. After that, Mary Fox, who serves as our President and COO, will bring you up to speed on how our key growth initiatives are progressing, and then she'll hand things over to Keith Siegner, our CFO, who will walk through our financial results and outlook in greater detail. Now, on to the highlights of our fiscal first quarter. Back in April, on our earnings conference call, we talked about how tough the opening month of the first quarter was and why we felt confident that better results were ahead of us. Well, we're happy to report that the changes we made to promotions and the refinements in how we work with our new digital agency paid off. And we posted net sales, adjusted EBITDA, net loss and EPS at or slightly better than the top end of our guidance ranges. To get specific about the first quarter, total net sales came in at $132.6 million, which reflects a 6% decline versus the prior year, since we were up against a strong quarter last year and are still dealing with a challenging category backdrop. Total omnichannel comparable net sales were down 14.8% for the quarter. That said, as Keith will explain later, almost all of that stemmed from the tough first month, before we implemented the adjustments I mentioned earlier. First quarter adjusted EBITDA and net loss dropped significantly compared with the first quarter of last year. The sales decline made the deleverage worse from opening 35 new touch points and from investments in initiatives meant to drive future sales, and on top of that we saw professional fees and marketing go up, some of which was nonrecurring. Even though the full-quarter results came in below our recent trends, they still marked yet another quarter of market share gains in a category that was down double digits. Also, at the midpoint of our newly issued guidance range for net sales in the fiscal second quarter, we'd be back to growth even against our 25th anniversary campaign last year. As we've laid out on the past several calls, the reason behind our long-term, consistent outperformance comes down to our focus on the customer, our advantaged products and our unique omnichannel business model with an omnichannel infinity flywheel unlike any other. Our Designed for Life philosophy is woven into everything we do. We're a platform company, not a product company or a merchant-led retailer. Innovation is in our DNA, but always with reverse compatibility in mind, which reinforces our commitment to sustainability or sustain high sustainability as we like to say, product platforms that can actually sustain. Our platforms are built to last and designed to evolve; that's the perfect segue into our latest product innovation. The Sac that does it all now does even more. Welcome the PillowSac Accent Chair frame. Sacs is the product that Lovesac was founded on 26 years ago and our namesake, the world's most comfortable seat. Sacs have really cemented their place in the family room, the lounge, the playroom, the bedroom, and plenty of other relaxed spots around the house. We remain the top brand in the subcategory that we ourselves created. By introducing the Accent Chair frame, we've elevated the PillowSac both literally and figuratively. Together, the PillowSac Accent Chair becomes a striking, welcoming, refined, and fashionable means of experiencing cloud-like coziness in more formal settings. In fact, Architectural Digest feels we've transformed this Accent into the living room's ultimate statement piece. The response we've gotten from new and existing customers alike has been tremendous — they're all discovering ways to show off their own personal style, sometimes buying multiple covers for different occasions. It's creating buzz, generating appreciation for our Designed for Life approach, and prompting customers to ask what comes next. On that note, our pipeline for product innovation stays very healthy; a few additional launches are coming during this fiscal year, and they sit on the smaller side of platform extensions. After those, we have a bigger launch in early fiscal '26 that we think will widen the aperture of potential customers and help AOV for one of our core platforms. Beyond that, we have lots more in development, including completely new categories, though you'll need to wait for further details. We're also putting the groundwork in place for services that back our dedication to circular operations and bolster the value proposition for customers to deepen their affection for the Lovesac brand. Mary will share more specifics, but resale and trade-in for our timeless and uniquely durable products come first, so stay tuned. I'll wrap up by addressing our outlook for the rest of the year, which we reiterated today. As we've said previously, we are planning prudently. We aren't relying on a macro balance to hit our numbers. In fact, we're still basing our full-year outlook on another down year for the category, down 10% versus last year. We're uniquely constructed as a business, primed to over-participate in a category rebound whenever it happens in near real-time. That will underpin top line growth and expanding profitability. But let me be clear, we aren't simply waiting idly for the tide to lift our boat. We're broadening our physical accessibility through touch points. We're broadening our digital accessibility with new CRM tools and more. We're strengthening tech foundations to guarantee profitable scalability. We're innovating and adding products across existing and new categories. We're building a powerful brand, certainly one unlike any other in our category. The opportunity is massive, and we're in a position of strength. Before I hand the call to Mary, I want to thank the amazing Lovesac team for their role in delivering yet another strong outperformance versus the industry. With that, I'll hand it over to Mary to cover our strategic priorities and progress in more detail.

Thanks, Shawn, and hi everybody. As we said earlier, our first-quarter net sales came in above guidance, which reflects a sharp turn in the trends for March and April compared with February; that helps frame the rough beginning of the quarter as, in our view, an anomaly. The key point is that measured across 5 years, our sales are up 224% versus the pre-pandemic level even though the category stayed flat over that same stretch, and our adjusted EBITDA margin has gained 365 basis points; during quarter 1 we beat the category, and the reason is our focus on customers and products along with our distinctive omnichannel infinity flywheel. Our company has developed both an operating model and a technology foundation that set us apart from every other player in this space. The result is a sizable market we can serve, a brand that remains healthy while continuing to strengthen, touch point economics that lead the field, and a supply chain that gives us an edge. We also feel good about our results so far in the early part of Q2, and we anticipate that careful spending on our strategic priorities and the capabilities that widen the market we can reach will drive even more growth. Now I'd like to share the main points of what we intend to do going forward under each strategic priority. Starting with new product development: we were glad to introduce the PillowSac Accent Chair, the first among several major innovations coming this year. With the PillowSac, the range of choices available to you is now quite broad. A pea pod can serve as a spot to lounge, or you can flatten it into a guest bed, or set it inside the new Accent Chair frame to make a stylish seat. Beyond choosing among more than 150 changeable covers that are machine-washable, there are elegant hardware finishes and strap options available to customize your Accent Chair. For existing PillowSac owners, the blonde wood frame can be attached without any hassle, opening up a fresh way to use their Sac, and newcomers are discovering just how sophisticated this product truly is. To launch this exciting new development, we leaned on our valuable collaboration with Architectural Digest and hosted an editor gathering in New York last month. The event drew more than 60 editors, content creators and interior design professionals, all there to honor a flawless union of aesthetics and cloud-like coziness. The early reaction is exactly what we were aiming for, and we can't wait to tell you more next quarter. Angled Side came out last summer too, and it's still one of our standout items. What stands out is that its share keeps climbing — it now makes up the biggest portion of Sides in our Sactional business, and orders that include it come in at a higher average value than those without it. We just brought Angled Side to Costco, where it's already the top star choice. Beyond that, buyers of Angled Side report greater satisfaction with its comfort compared to what we hear from people choosing our standard Side. As for our material innovation, the launch remains on track for early fiscal '26, and we expect it to substantially expand where we can compete in the couch category, which should help us capture market share more quickly. As we get nearer to the launch date, there's plenty more we're eager to tell you about. The second item on the list has to do with how customers move across our channels — by pairing our physical locations with our online business, we keep building on our standing as a genuinely omnichannel retailer. This quarter saw us add 24 touch points, and we grew our partnership with Best Buy by opening 7 additional shop-in-shops. Back in quarter 1, we rolled out My Hub, a better post-purchase experience that removes additional friction from the omnichannel journey; the result has been a significant increase in the number of shoppers setting up online accounts; with those accounts, we gain more opportunity to reach the customer via personalized experiences and product suggestions, including new launches and far more besides. All of it is meant to help us create lasting relationships; and in Phase 2 of the My Hub plan this year, we are rolling out a seamless quote update and conversion capability for our customers that will bring an improved customer experience, lifting conversion and customer satisfaction. What really matters here is that our omnichannel approach sets us apart, and thanks to it, customer satisfaction numbers continue to climb — they went up from one quarter to the next in Q1. Digital experience and fulfillment scores were especially strong, and both hit their highest marks ever on a year-over-year basis. That improvement was driven largely by deliberate spending on people and tools in our customer service operations, our supply chain, and our digital experience. Item three on the list is our ecosystem, and its focus is on bringing in loyal, devoted customers, keeping them happy, and holding onto those relationships. Also, in February we wrapped up bringing our new agency on board, and that will make this push even stronger. On the call, we described how our marketing approach combines national ads in conventional channels like television and legacy outlets with a range of digital tactics, including social platforms, nonlinear TV and influencer campaigns. A major share of our digital spend goes toward driving conversion via geo-targeted and narrowly focused methods, guiding buyers to a Lovesac location where they can try what we sell firsthand. That bolsters our commitment to an authentically omnichannel operation, serving shoppers through whichever channel they prefer. Looking ahead, we'll continue running active media experiments to fine-tune where we put our dollars for growth, especially with openings in video, search and audience targeting, plus broadening how well-known our brand is. During the first quarter, we ran successful trials of fresh approaches to targeting and promotional messaging aimed at our current customers, which included particular deals encouraging them to buy covers again. Since our customer base keeps expanding, we think that taking a distinct approach to communication with this group is essential to achieving success when it comes to fostering loyalty and lifetime value. Those efforts helped drive substantial expansion in repeat purchases among existing customers during quarter one. Lastly, regarding services inside our ecosystem, our attention is on developing these capabilities and doing more to unlock both the right side of our flywheel and customer lifetime value. We're at the start of building out the infrastructure that will let us provide completely digital resale and trading later in this year, all of which further lengthens how long every Lovesac product stays in use and keeps us delivering on our commitment to make items that are Designed for Life and backed by circular operations. Now, we're making disciplined investments in infrastructure and driving efficiencies. During quarter 1 fiscal '25, we achieved substantial gross margin gains by lowering COGS and inbound freight. We're also continuing to invest in infrastructure for both capabilities and technology, and we're already seeing the advantages. We finished the quarter with a 9% decrease in total inventory, which came from the payoff of recent investments, such as the new order management system. At the start of this year, we upgraded our inbound logistics approach, shifting away from a freight forwarder model toward a direct carrier relationship, which cuts our dependence on spot rates. That helps us through better pricing and availability overall, and it also reduces the emphasis on spot market pricing inflation. And this means meaningful cost avoidance. Our outbound logistics approach is moving forward well too. In one important market, we added regional parcel carriers, and that's driving expenses down compared with what our nationwide partner charges, while also—equally crucial—improving how satisfied customers feel. We plan to carry on growing this program for the rest of this year and beyond. In closing, we're pleased with how much traction our strategic priorities have gained and with the caliber of our outcomes, and that traction carried through into Q2 as we continue to expand the business effectively while making critical foundational investments meant to fuel and maintain the substantial growth still to come. With that, I'll hand the call to Keith.

Thanks, Mary. I'll move straight into a brief recap of Q1, then share what we expect for the remainder of fiscal '25. In the first quarter of fiscal '25, net sales fell $8.6 million, or 6.1%, down to $132.6 million versus the same period a year earlier. That result came in a bit ahead of what we had anticipated, which speaks to a well-executed shift in our promotional approach and the smoothing out of issues that arose after our agency change — both of which weighed heavily on the opening month of the fiscal first quarter. Even with that rough first month, we were happy to post market share gains once more, despite macroeconomic conditions that remain uncertain. Showroom net sales dropped $2 million, or 2.3%, to $81.6 million in the first quarter of fiscal 2025 versus the prior-year period, owing to a 14.8% decline in omnichannel comparable net sales, partly offset by adding 35 net new showrooms relative to the prior-year period. To give more color on how the quarter trended internally, omnichannel comparable net sales were down just low single digits across the combined second and third periods of the fiscal first quarter. Our new showrooms keep performing well, and operational efficiencies spanning construction through opening let us open some locations sooner than we had planned. Internet net sales declined $3.6 million, or 9%, to $36.6 million in the first quarter of fiscal 2025 versus the prior-year period. Other net sales — covering pop-up shop, shop-in-shop and open-box inventory transactions — fell $3 million, or 17.1%, to $14.4 million in the first quarter of fiscal '25 versus the prior-year period, mainly because our temporary online pop-up shops on costco.com were less productive. As a reminder, going forward we may do limited open-box inventory transactions with ICON to keep our warehouses running as efficiently as possible. We think the fiscal 2024 quarterly run rate represents a reasonable baseline level for use in your models. Turning to product category, in the first quarter our Sactional net sales declined 5%. Sacs net sales declined 17%. And our other net sales, which covers decorative pillows, blankets and accessories, declined 23% versus the prior year. Gross margin rose 430 basis points to 54.3% of net sales in the first quarter of fiscal '25 compared with 50.0% in the prior-year period, mostly driven by a 790 basis point drop in inbound transportation costs, partly offset by a 240 basis point rise in outbound transportation and warehousing costs, along with a 120 basis point decline in product margin caused by heavier promotional discounting. SG&A expense as a percent of net sales came to 51.6% in the first quarter of fiscal '25 versus 40.0% in the prior-year period. That higher percentage stems mainly from reduced net sales, along with spending on payroll, professional fees, rent, infrastructure, selling-related costs, and equity-based compensation. In dollar terms, overhead expenses rose $6.3 million, driven largely by a $4.5 million increase in professional fees and $1.2 million more invested in infrastructure to support both current and future growth, plus $0.5 million in equity-based compensation. Employment costs climbed by $4 million, mainly because of additional new hires during fiscal '25. Rent went up by $1 million, reflecting a $1.4 million rise in rent expense from the net addition of 35 showrooms, partly offset by a $0.4 million decrease in percentage rent. Selling-related expenses grew $0.6 million, chiefly from credit card fees tied to higher credit card rates. We estimate that nonrecurring incremental fees connected to the restatement of prior-period financials came to roughly $2.3 million in the first quarter. Forecasting these is quite difficult, so we'll keep flagging any that apply each quarter. Advertising and marketing expenses rose $1.1 million, or 6.4%, to $18 million for the first quarter of fiscal '25 versus the prior-year period. Advertising and marketing expenses represented 13.6% of net sales in the first quarter, compared with 12.0% of net sales in the prior-year period, with that higher percentage largely caused by lower net sales and partly by some timing of expenditures related to our agency transition. Operating loss for the quarter was $17.9 million versus an operating loss of $5.7 million in last year's first quarter, driven by the factors we just covered. Before we move on to net loss, net loss per common share and adjusted EBITDA, please see the terminology and the reconciliation between each of our adjusted metrics and the most directly comparable GAAP measurements in our earnings release issued earlier this morning. Net loss for the quarter was $13 million, or negative $0.83 per common share, versus a net loss of $4.1 million, or negative $0.27 per common share, in the prior-year period. In the first quarter of fiscal '25, we recorded an income tax benefit of $4.2 million, compared with $1.3 million in the prior-year period. Adjusted EBITDA for the quarter was a loss of $10.3 million, compared with an adjusted EBITDA loss of $2.1 million in the prior-year period. Now to our balance sheet: we closed the first quarter with a very healthy balance sheet, including $72.4 million in cash and cash equivalents and $34 million of availability on our revolving line of credit, with no borrowings. Our total merchandise inventory levels match our projections. We feel exceptionally good about both the quality and quantity of our inventory, and about our ability to maintain industry-leading in-stock positions and delivery times. Please see our earnings press release for other details on our first quarter financial performance; so now, our outlook. Not a lot has shifted since our April discussion. Our goal near term is expansion no matter what the category does, and we'll keep up our history of taking share. On top of that, we're set up to benefit from a category recovery the moment it arrives, and faster than others in our space. When that happens, those extra revenues ought to translate into greater flow-through from the top line down to the bottom line. To be precise, our baseline assumption of a 10% decline for the full year in the category hasn't moved, and it's what our fiscal '25 outlook rests on. During the whole fiscal first quarter, the category was down about 12%, more or less in line with what we first assumed, which likewise anticipated somewhat stronger category conditions in the back half compared with the front half. Once more, if the category does better, we'd anticipate doing better too, or the reverse. For the entire fiscal '25 year, our guidance is being reaffirmed. Net sales are estimated at $700 million to $770 million. Adjusted EBITDA is expected to land between $46 million and $60 million. That figure includes gross margins of 57% to 59%, advertising and marketing at roughly 13% of net sales, and SG&A at roughly 39% of net sales. Net income is estimated at $18 million to $27 million. Diluted income per common share is estimated in the $1.06 to $1.59 range, alongside roughly 17.0 million estimated diluted weighted average shares outstanding. Keep in mind that fiscal '25 will have 52 weeks, whereas fiscal '24 had an extra 53rd week during the fourth quarter. For the fiscal second quarter, net sales are estimated at $152 million to $160 million, which is slight growth at the midpoint and a big step up from the fiscal first quarter; adjusted EBITDA loss is expected between $2 million and $5 million. That includes gross margins of roughly 58%, advertising and marketing at 14% to 15% of net sales, and SG&A at 45% to 47% of net sales. Net loss is estimated between $6 million and $8 million; basic loss per common share is expected at $0.37 to $0.53, with 15.6 million weighted average shares outstanding. To sum up, the category stabilizing and eventually going back to growth still lie in front of us. Until then, we're weighing caution and cost efficiency against our conviction that keeping our eyes on the big picture matters most. That means the enormous long-term chance to create tremendous value for every Lovesac stakeholder. We're growing the Lovesac brand and putting money into new product innovation spanning style, function and new categories. The PillowSac Accent Chair is just one instance. Give it a try, I believe you'll love it. I'll hand the call back to the operator now so we can begin our Q&A session.

To start, could you give us a bit more detail about your marketing initiatives and how things are going with the new media agency partnership up to this point? Then, on a wider level, what are some examples of what you're able to do in a different way, or perhaps with greater effectiveness, now that you have a bigger agency on board?

I'd say, first off, we're feeling quite positive since we completed that initial onboarding during February. The teams, I think, have truly established a framework focused on customer segmentation, plus all the learning curves involved in getting to know our business. That transition is something we feel good about — we can see it in our results, in the performance, and in the return on ad spend across March and April. Looking ahead, including around optimization for certain digital marketing efforts, on the whole, I think the entire rationale behind making this switch is simply that they bring us far more resources when it comes to data analytics, the economies of scale — I believe we've mentioned this to you previously — the purchasing power and all that they're able to deliver; so we've already built a very solid relationship with the team; we're witnessing it in the performance that Keith, Shawn and I have talked about as we even move forward into quarter 2; and I think this is only the start; and I think there's simply so much additional backing when it comes to resources and the team, with more still to come.

That's really useful. Now, Mary, you mentioned something about shifting toward direct relationships with carriers. Could you shed a bit more light on that? Has this already been kicked off? Is there — anything you're able to tell us regarding, say, when the launch might happen? And in what way should investors view the added gains to gross margins that come from it?

Yes. No, wonderful. I'll kick that off, and then perhaps Keith will chime in. Yes, we feel a great deal of gratitude. Our teams actually began handling a large portion of this heavy lift, Maria, toward the end of last year. So rather than relying on freight forwarders, we've made the switch to that direct carrier model. And that effort is now paying off. So most of our containers are in fact being booked through this approach and consequently aren't as exposed to some of the spot market float rate inflation you're hearing about. Beyond that, it also means we secure booking availability and make sure we stay in stock. So the team has made great progress, and we keep feeling very good about every one of the supply chain leverage points that we consistently share with you strategically, which truly keep giving us an edge both in availability and also in the P&L. And then perhaps, Keith, you'd like to walk through the P&L benefit?

Sure, that’s a fair question, Maria. We were already aware of this plan because of the earlier rollout, back when we gave the initial full-year gross margin guidance that we repeated again today. So when you look at how the quarters are likely to play out from here, what it really comes down to is this: as we put more of these changes into place—such as the last mile freight items Mary talked about on her call—the payoff from them will build across the year. And when I consider that quarterly pattern, since the year-ago comparisons become much tougher than what showed up in the first quarter, the gross margin view for 2Q points to a modest year-over-year squeeze; even so, we ought to return to gross margin growth in Q3 and Q4, as you work through your models, with somewhat more of that expansion in Q4 as momentum builds from some of these additional initiatives.

To begin with, once more, congratulations on steering through, well, quite a transformed landscape; so my initial question — I believe it follows up somewhat on that earlier inquiry regarding product, yet you mentioned an inflection point in your operations where March and April performed considerably stronger than February. So you made a shift — as you described, you made a shift, I suppose, in advertising partners. But might you elaborate with greater specificity on the actions you undertook that contributed to driving that inflection with more force in your operations starting in March?

Yes, certainly. Brian, I'll begin, and afterward if somebody else wishes to contribute. So I believe, as we've communicated, I believe there were 2 genuinely crucial factors behind the unevenness we encountered during February: I believe the initial one was, as we conveyed, we attempted a reduction in promotional activity. Given what we'd normally observed occurring within the category after the peaks of Black Friday; and when we entered that period in February and what we truly witnessed across President's Day is that everybody else in fact stayed at levels that were even higher. Consequently, as we've communicated, we returned to the 30% off campaign that we've been running. And I believe what's genuinely thrilling for us as we observed the momentum across March, April, extending even into quarter 2, is that no direct straight-line connection exists between what rivals happen to be doing and the position we must occupy. There's simply a headline impact we must provide, which is extremely potent at that 3 figure. Regardless of whether competitors sit at 36% off or 39% off or perhaps many of them are promoting at 60% off, it's performing quite effectively for us. So I believe we feel quite confident regarding that inflection. As Keith mentioned earlier concerning what's incorporated into our guidance and believe that, that will genuinely allow us to bring the traffic through during that period; and afterward I believe, as we discussed with the agency, truly just concentrating their strengths, particularly on targeting the customers who are genuinely quite enthusiastic about our product, young parents, capitals and so forth. So there's simply a great deal of effort. That simply requires some time. And I believe, as we conveyed earlier, February is a calmer month for us. There's never an ideal moment to undertake a transition, yet we made it through. And I believe, as we've discussed, the outcomes in fact show that advantage. So expect more ahead; and the entire purpose truly with this agency is that it will in fact deliver far more advantages to us, in the analytics, the purchasing leverage, but also, honestly, simply the optimization of our flywheel.

That's extremely useful, Mary. My second question is really about context. I realize all of you keep pointing to how well Lovesac has done and how it has gained share under normal conditions. But my follow-up on the environment is this: do you believe things are deteriorating? What I mean is, we keep encountering additional evidence indicating that consumers with lower incomes, and perhaps those in the middle, are in fact cutting back even more. In merger, are you actually observing a challenging environment?

Shawn, do you — I believe you — would you like to address that?

Sure. Beyond our own sales, we looked at a lot of other data sources to shape our view for the year. Based on what we're seeing from our customer so far, conditions are fairly stable. We stay watchful, and we stay a little paranoid. I think we always have, ever since our early days, when we were a fairly scrappy company. That approach has worked well for us. So when we look, for example, at the guidance we've provided for our performance, we aren't assuming any macro recovery this year as such. We still believe that could happen. As for what customers are showing us, the patterns we've described on earlier calls, perhaps over the past 2 or 3 quarters, haven't changed: customers have been slightly more deliberate about how large their configurations are and whether they add various accessories and similar items — just somewhat more cautious overall — but that's already reflected in our plans as they stand. And the trends we're seeing right now feel roughly the same for this customer. So while I don't disagree, we also read the reporting about the lower-end consumer being squeezed hard by inflation and so on. Our customer isn't really that customer — more affluent, more stable. And so far, the trends are holding. So we'll stay watchful, we'll stay paranoid. And we think there's also a case for upside, if the housing market comes back or other factors that would especially affect our customer come into play.

Shawn, Mary and Keith, congratulations on the quarter. There's one thing I'd like to ask, plus a follow-up. First, could you discuss how often Sacs get product innovation? I honestly can't recall the last instance you released something along these lines; and after that, could you describe how buyers have reacted historically whenever you've rolled out new product innovation for Sacs?

Yes. I appreciate you bringing that up. That's a sharp observation. As a brand, we've likely let our Sac category slide somewhat over the past few years, since Sactionals has simply been such a growth engine for us. We do keep innovating within Sactionals, but — the innovation engine for Sac is now formally switched back on, and we're thrilled to watch how the PillowSac Accent Chair frame performs. From where we sit, it's genuinely been remarkable. Without getting more granular, it truly fires us up. So the response has been quite positive, and we take great pride in the product. We also genuinely perceive substantial upside in Sacs across the coming years; our innovation pipeline keeps building. Items are in development right now that should arrive within just the coming quarters. And the early win of the PillowSac Chair frame prompts us to consider extensions built on it as a platform; given how well it's done, we're starting to view it as a platform, in ways it might grow and fulfill what Designed for Life products are supposed to do; so that genuinely excites us. We also believe Accent chairs, broadly speaking, are clearly a space Lovesac has the right to compete in. At the same time, we have several, as we've discussed, let's term them singles, as we've put it, with smaller innovations arriving this year such as this one that's proven to perhaps be bigger than a single, we'll find out. But we'll keep advancing our platform, Sactional, Sacs, and even while pursuing additional categories too. So we're extremely, extremely enthusiastic about it.