GlobeNewswire Inc | Dec 14, 2021 04:05PM EST

December 14, 2021

CHICO, Calif., Dec. 14, 2021 (GLOBE NEWSWIRE) -- Lulus Fashion Lounge Holdings,Inc. (Lulus) (Nasdaq: LVLU) today reported financial results for the quarter ended October3, 2021.

Third Quarter 2021 Financial Highlights:

-- Net revenue of $106.3 million, an increase of 95% compared to the prioryear period -- Net income of $2.3 million, an increase of 921% compared to the prioryear period -- Adjusted EBITDA of $11.9 million, an increase of 126% compared to the prioryear period and Adjusted EBITDA Margin of 11.2%, a 16% increase compared to the prioryear period -- Earnings per share of $0.13, an increase from $0.01 compared to the prioryear period

Third Quarter 2021 Business Highlights:

-- Average Order Value (AOV)of $125, compared to the prior year period of $103 -- Last TwelveMonths Active Customersof 2.5 million, compared to the prior year period of 2.3 million

David McCreight, CEO of Lulus, said:

We are very pleased with our strong third quarter results for our first quarterly reporting as a public company. We delivered record Q3 2021 sales with a 95% increase in net revenue compared to Q3 2020, and 16% compared to Q3 2019. Despite uncertainty caused by the pandemic and related global supply chain pressures, our third quarter results highlight the effectiveness of our business model and team, and give us confidence in continued growth and momentum. The LuCrews focus on providing a compelling brand experience led to continued growth in new customers acquired with all time high AOVs for both new and repeat customers.

Balance Sheet

-- Our cash and cash equivalents amounted to $40.9 million as of October3, 2021, an increase of 163% compared to January3, 2021. -- Our cash from operating activities amounted to $41.8 million for the ninemonths ended October3, 2021, an increase of 97% compared to the prioryear period. -- We completed our IPO on November15, 2021 and received net proceeds of $85.6 million. We used the proceeds from our IPO, together with $25 million in borrowings under our new revolving credit facility, to repay amounts outstanding under our term loan.

Financial Outlook

-- For the fullyear 2021, we expect net revenue between $370 million and $372 million. -- Adjusted EBITDA for the fullyear 2021 is expected to be between $38 million and $39 million, which represents growth of 101% and 106% over 2020. This equates to an expected Adjusted EBITDA Margin of 10.3% and 10.5%, as compared to 7.6% in 2020. -- As a result of paying down our long-term debt following the IPO, we expect reported interest expense for Q4 2021 to be $4 million, which includes the amortization and write-off of loan fees. However, excluding the impact of the non-recurring amortization and write-off of loan fees, interest expense for Q4 2021 is expected to be approximately $1.4 million versus $3.5 million in Q4 2020. We expect that the impact of non-recurring amortization and write-off of loan fees captured in interest expense for Q4 2021 will be $2.6 million. -- We plan to make capital investments in a third logistics facility starting in Q4 2021. -- We expect capital expenditures of $3.5 million for the fullyear 2021.

Lulus outlook is based on current indications for its business, which are subject to change. The net sales outlook factors in anticipated headwinds resulting from unknown future impacts related to COVID-19.

Webcast& Conference Call Information

The Company will host a conference call and live webcast with the investment community at 5:00p.m. Eastern Time on Tuesday, December14, 2021 to discuss its third quarter 2021 results. The live webcast will be accessible through the Investor Relations section of the Companys website at https://investors.lulus.com/. To access the call through a conference line, dial 1-877-407-0792 (in the U.S.) or 1-201-689-8263 (international callers). A replay of the conference call will be posted shortly after the call and will be available for sevendays following the call. To access the replay, dial 1-844-512-2921 (in the U.S.) or 1-412-317-6671 (international callers). The access code for the replay is 13725267.

About Lulus

Lulus is a customer driven, digitally native fashion brand for women. Based in California and serving millions of customers worldwide, Lulus develops styles with the customer in mind, using direct consumer feedback and insights to refine its products. As a brand built on customer feedback, Lulus puts an extreme focus on providing exceptional customer service and a personalized shopping experience. With fresh inventory hitting the site almost daily, Lulus features on-trend, high-quality, must-have pieces, at affordable prices. The brands world class personal stylists, bridal concierge, and customer care team take pride in offering a personalized shopping experience to every customer. Lulus was founded in 1996. Lulus is a registered trademark of Lulus Fashion Lounge,LLC. All rights reserved.

Forward-Looking Statements

This press release contains forward-looking statements within the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical or current fact included in this press release are forward-looking statements, including but not limited to statements regarding our expectations around the continued impact of the COVID-19 pandemic on our business, our operations, our growth, our investments, including in a third logistics facility, and our financial results for the fourth quarter and fiscalyear ending January 2, 2022. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause Lulus actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including but not limited to the following: risks related to the continued impact of the COVID-19 pandemic on our business, operations and financial results; our ability to successfully maintain our desired merchandise assortment or manage our inventory effectively; demand for our products, including our ability to anticipate, identify, measure, and respond quickly to fashion trends, customer preferences and demands; general economic conditions; our fluctuating operating results; seasonality in our business; our ability to acquire products on reasonable terms; our e-commerce business model; our ability to attract and retain customers in a cost effective manner; the strength of our brand; competition; fraud; system interruptions; system security risks including security breaches; and our ability to fulfill orders. These and other important factors discussed under the caption Risk Factors in Lulus final prospectus filed pursuant to Rule424(b)(4)on November12, 2021 and its other filings with the Securities and Exchange Commission could cause actual results to differ materially from those indicated by the forward-looking statements made in this press release. Any such forward-looking statements represent managements estimates as of the date of this press release. While Lulus may elect to update such forward-looking statements at some point in the future, it disclaims any obligation to do so, even if subsequent events cause its views to change.

Use of Non-GAAP Financial Measures and Other Operating Metrics

To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with Generally Accepted Accounting Principles in the United States of America (GAAP), we reference in this press release and the accompanying tables the following non-GAAP financial measures: Adjusted EBITDA and Adjusted EBITDA Margin. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and our non-GAAP measures may be different from non-GAAP measures used by other companies. We use these non-GAAP financial measures to evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses that may not be indicative of our ongoing core operating performance. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when analyzing historical performance and liquidity and when planning, forecasting, and analyzing future periods. For a reconciliation of these non-GAAP financial measures to GAAP measures, please see the tables captioned Reconciliation of Non-GAAP Financial Measures included at the end of this release. Definitions of our non-GAAP financial measures and other operating metrics are presented below. A reconciliation of Adjusted EBITDA guidance to net loss in a forward-looking basis cannot be provided without unreasonable efforts, as we are unable to provide reconciling information with respect to equity-based compensation expense and income tax, all of which are adjustments to Adjusted EBITDA.

Gross Margin

We define Gross Margin as gross profit as apercentage of our net revenue. Gross profit is equal to our net revenue less cost of revenue. Certain of our competitors and other retailers report cost of revenue differently than we do. As a result, the reporting of our gross profit and Gross Margin may not be comparable to other companies.

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure that we calculate as income before interest expense, income taxes, depreciation and amortization, adjusted to exclude the effects of equity-based compensation expense, management fees, and transaction fees. 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. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA facilitates operating performance comparisons on a period-to-period basis and, in the case of exclusion of the impact of equity-based compensation, excludes an item that we do not consider to be indicative of our core operating performance.

Adjusted EBITDA Margin

Adjusted EBITDA Margin is anon-GAAPfinancial measure that we calculate as Adjusted EBITDA (as defined above) as apercentage of our net revenue.

Active Customers

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. 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 digital platform, and our ability to convert visitors to paying customers.

Average Order Value

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 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 Lulus merchandise and as a result of our promotional discount activity.

Total Orders Placed

We define Total Orders Placed as the number of customer orders placed across our platform during a particular period. An order is counted on the day the customer places the order. We do not adjust the number of Total Orders Placed for any cancellation or return that may have occurred subsequent to a customer placing an order. We consider Total Orders Placed as a key performance metric on the basis that it is directly related to our ability to attract and retain customers as well as drive purchase frequency. Total Orders Placed, together with Average Order Value, is an indicator of the net revenue we expect to generate in a particular period.

LULUS FASHION LOUNGE HOLDINGS,INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)(Unaudited)(In thousands, except per share data)

Three Months Ended Nine Months Ended October 3, September October 3, September 2021 27, 2020 2021 27, 2020Net revenue $ 106,320 $ 54,533 $ 278,861 $ 194,129 Cost of 55,553 30,128 145,561 107,208 revenueGross profit 50,767 24,405 133,300 86,921 Selling andmarketing 20,509 9,481 49,008 35,894 expensesGeneral andadministrative 21,196 10,854 57,436 54,179 expensesIncome (loss)from 9,062 4,070 26,856 (3,152 )operationsOther income(expense), net:Interest (3,612 ) (3,959 ) (11,036 ) (11,899 )ExpenseOther Income, 16 20 74 86 netTotal other (3,596 ) (3,939 ) (10,962 ) (11,813 )expense, netIncome (loss)before(provision) 5,466 131 15,894 (14,965 )benefit forincome taxesIncome tax(provision) (1,616 ) 246 (5,075 ) (187 )benefitNet income(loss) and 3,850 377 10,819 (15,152 )comprehensiveincome (loss)Deemeddividend to a ? ? ? (504 )preferredstockholderAllocation ofundistributedearnings to (1,574 ) (143 ) (4,322 ) ? participatingsecuritiesNet income(loss)attributable $ 2,276 $ 234 $ 6,497 $ (15,656 )to commonstockholderNet earnings per share:Basic $ 0.13 $ 0.01 $ 0.37 $ (0.90 )Diluted $ 0.13 $ 0.01 $ 0.37 $ (0.90 )Weightedaverage number of shares:Basic 17,462 17,462 17,462 17,462 Diluted 17,462 17,462 17,462 17,462

LULUS FASHION LOUNGE HOLDINGS,INC.

CONDENSED CONSOLIDATED BALANCE SHEETS(Unaudited)(In thousands, except share and per share data)

October 3, January 3, 2021 2021Assets Current assets: Cash and cash equivalents $ 40,927 $ 15,554 Accounts receivable 6,389 3,832 Inventory, net 23,400 16,895 Asset for recovery 6,230 1,104 Income tax refund receivable ? 2,739 Prepaids and other current assets 4,644 2,675 Total current assets 81,590 42,799 Restricted cash 505 505 Property and equipment, net 2,754 3,090 Goodwill 35,430 35,430 Tradename 18,509 18,509 Intangible assets, net 2,023 2,290 Other noncurrent assets 4,441 2,453 Total assets $ 145,252 $ 105,076 Liabilities, Redeemable Preferred Stock,Convertible Preferred Stock and Stockholder?s DeficitCurrent liabilities: Accounts payable $ 6,732 $ 7,161 Income taxes payable 1,004 ? Accrued expenses and other current 26,864 7,533 liabilitiesReturns reserve 18,344 2,895 Stored-value card liability 6,494 4,973 Revolving line of credit ? 8,580 Long-term debt, current portion 103,393 10,125 Total current liabilities 162,831 41,267 Long-term debt, net of current portion ? 96,856 Other noncurrent liabilities 2,357 2,504 Total liabilities 165,188 140,627 Commitments and Contingencies Redeemable preferred stock: $0.001 parvalue, 10,000,001 and 7,500,001 sharesauthorized as of October 3, 2021 andJanuary 3, 2021, respectively; 8,950,001and 7,500,001 shares issued and outstanding 19,320 16,412 as of October 3, 2021 and January 3, 2021,respectively; aggregate liquidationpreference of $17,900 and $15,000 as ofOctober 3, 2021 and January 3, 2021,respectively.Convertible preferred stock: $0.001 parvalue, 3,129,635 shares authorized as ofOctober 3, 2021 and January 3, 2021;3,129,634 shares issued and outstanding as 117,038 117,038 of October 3, 2021 and January 3, 2021;aggregate liquidation preference of$240,000 as of October 3, 2021 and January3, 2021Stockholder?s deficit: Common stock: $0.001 par value, 24,000,000and 21,196,740 shares authorized as ofOctober 3, 2021 and January 3, 2021, 18 18 respectively; 17,462,283 shares issued andoutstanding as of October 3, 2021 andJanuary 3, 2021Additional paid-in capital 12,510 10,622 Accumulated deficit (168,822 ) (179,641 )Total stockholder?s deficit (156,294 ) (169,001 )Total liabilities, redeemable preferredstock, convertible preferred stock and $ 145,252 $ 105,076 stockholder?s deficit

LULUS FASHION LOUNGE HOLDINGS,INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS(Unaudited)(In thousands)

Nine Months Ended October 3, September 2021 27, 2020Cash Flows from Operating Activities Net income (loss) $ 10,819 $ (15,152 )Adjustments to reconcile net income (loss) to net cash provided by operating activities:Depreciation and amortization 2,116 2,449 Amortization of debt discount and debt 2,041 1,809 issuance costsInterest expense capitalized to principal of 2,074 942 long-term debt and revolving line of creditEquity-based compensation expense 1,888 8,635 Equity-based compensation expense related to 1,481 8,571 redeemable preferred stock issuanceEquity-based compensation related to special 2,153 ? compensation liability awardsWrite-off of deferred offering costs ? 1,950 Deferred income taxes (2,144 ) 1,053 Gain on disposal of assets ? (2 )Changes in operating assets and liabilities: Accounts receivable (2,557 ) 782 Inventories (6,505 ) 12,590 Assets for recovery (5,126 ) 995 Income tax (receivable) payable 3,852 164 Prepaid and other current assets (315 ) 394 Accounts payable (1,989 ) (2,447 )Accrued expenses and other current 34,836 (607 )liabilitiesOther noncurrent liabilities (836 ) (942 )Net cash provided by operating activities 41,788 21,184 Cash Flows from Investing Activities Capitalized software development costs (919 ) (962 )Purchases of property and equipment (668 ) (645 )Proceeds from sale of property and equipment ? 2 Net cash used in investing activities (1,587 ) (1,605 )Cash Flows from Financing Activities Proceeds from borrowings on revolving line of ? 5,300 creditRepayments on revolving line of credit (8,580 ) ? Repayment of long-term debt (7,595 ) ? Payment of debt issuance costs (61 ) (132 )Proceeds from the issuance of Series B 1,427 7,337 Preferred Stock, netAdvance from Parent ? 37 Repayment of Advance from Parent ? (2,040 )Other (19 ) (30 )Net cash provided by (used in) financing (14,828 ) 10,472 activitiesNet increase in cash, cash equivalents and 25,373 30,051 restricted cashCash, cash equivalents and restricted cash at 16,059 6,361 beginning of periodCash, cash equivalents and restricted cash at $ 41,432 $ 36,412 end of periodSupplemental Disclosure Cash paid for income taxes, net of income tax $ 3,631 $ (6 )refundsCash paid for interest $ 6,996 $ 7,787 Supplemental Disclosure of Non-Cash Investing and Financing ActivitiesPurchases of property and equipment included $ 20 $ ? in accounts payable and accrued expensesDebt issuance costs included in accrued $ 917 $ 1,222 expensesDeemed dividend to a preferred stockholder $ ? $ 504 Paid-in-kind interest added to principalbalance of long-term debt and revolving line $ 2,074 $ 942 of creditDeferred offering costs in accounts payable $ 1,654 $ ?

LULUS FASHION LOUNGE HOLDINGS,INC.

KEY OPERATING AND FINANCIAL METRICS(Unaudited)

Three Months Ended Nine Months Ended October September October September 3, 2021 27, 2020 3, 2021 27, 2020 (in thousands, except Average Order Value andpercentages) Gross 47.7 % 44.8 % 47.8 % 44.8 %MarginAdjusted $ 11,885 $ 5,249 $ 35,050 $ 19,009 EBITDAAdjustedEBITDA 11.2 % 9.6 % 12.6 % 9.8 %MarginAverageOrder $ 125 $ 103 $ 120 $ 108 ValueActiveCustomers 2,500 2,300 2,500 2,300 (1)

_______________(1) Based on the prior 12-month period ending September27, 2020 and October3, 2021. Thus, the metric is the same for the three- and nine-month periods.

LULUS FASHION LOUNGE HOLDINGS,INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES(Unaudited)

A reconciliation of non-GAAP Adjusted EBITDA to net income for the three and ninemonths ended October3, 2021 and September27, 2020, respectively, as follows:

Three Months Ended Nine Months Ended October 3, September October 3, September 2021 27, 2020 2021 27, 2020 (in thousands)Net income (loss) 3,850 377 10,819 (15,152 )Excluding: Depreciation and 695 795 2,116 2,449 amortizationInterest expense 3,612 3,959 11,036 11,899 Income taxes 1,616 (246 ) 5,075 187 Management fees 165 157 482 470 Write-off ofpreviously ? ? ? 1,950 capitalizedtransaction feesEquity-based 1,947 207 4,040 8,635 compensationSeries B / B?1equity-based ? ? 1,482 8,571 compensationAdjusted EBITDA $ 11,885 $ 5,249 $ 35,050 $ 19,009 Adjusted EBITDA 11.2 % 9.6 % 12.6 % 9.8 %Margin

Contacts

MediaNoelle SadlerChief Marketing Officernoelle@lulus.com

InvestorsCrystal LandsemCo-President and Chief Financial Officerinvestors@lulus.com