Luvu Brands, Inc.: Luvu Brands Announces First Quarter Fiscal 2025 Financial Results

Reports First Quarter Fiscal 2025 Net Sales of $5.76 million, Net Loss of $211,000

ATLANTA, GA / ACCESSWIRE / November 14, 2024 / Luvu Brands, Inc. (OTCQB:LUVU), a designer, manufacturer, and marketer of a portfolio of consumer lifestyle brands, announced today its financial and operational results for the first quarter of fiscal 2025 ending September 30, 2024.

For the three months ended September 30, 2024, highlights include:

• Net revenue decreased by 4% to $5.76 million versus the prior year.

• Gross margin remained flat at 26% from a year ago.

• Net loss of $211,000, or $0.00 per basic and diluted share.

• Adjusted EBITDA was a loss of $3,000, down from a profit of $63,000 a year ago.

• Inventory at September 30, 2024, was $3.0 million, an 8% decrease from June 30, 2024.

• As of September 30, 2024, the Company had $1.07 million in cash and cash equivalents, up 4% from June 30, 2024.

Louis Friedman, Chairman and Chief Executive Officer, commented on the results, "Despite the challenging economic environment, we remain committed to strengthening our market position and enhancing operational efficiencies. The first quarter results reflect the external pressures on consumer sentiment and the absence of significant marketing events from the previous year. However, our proactive measures, including increased digital advertising and influencer engagement, have set the foundation for future growth. According to Market Survey Lab, the Adult Store Market is projected to grow at a CAGR of 8.2% from 2024 to 2030. We are well positioned to exceed that growth rate."

Three Month Operating Results:

• Net revenue in Q1 FY2025 decreased 4% to $5.76 million compared to $6.13 million in the prior year. The year-over-year decrease is primarily attributable to lower sales from our adult wholesale customers. Additionally, a large contract order from the prior year was not repeated this year.

• Gross profit in Q1 FY2025 totaled $1.52 million compared to $1.58 million in the prior year, while the gross margin improved to 26.3% in Q1 FY2025 versus 25.8% a year ago. The decrease in gross profit is primarily due to the decline in units sold through our wholesale channels, and the improvement in gross margin is mainly due to lower freight and raw material costs compared to a year ago.

• Operating costs, excluding sales and marketing in Q1 FY2025, were $884,000, or 15% of net revenue, compared to $819,000, or 13% of net revenue in the prior year. The increase was primarily attributable to increases in personnel expenses and professional fees.

• Sales and marketing expenses in Q1 FY2025 totaled $645,000, or 11% of net revenue, compared to $695,000, or 11% of net revenue, in the prior year. This decrease resulted from eliminating unprofitable pay-per-click spending and reduced graphic design needs due to fewer new product launches compared to the prior year.

• Net loss in Q1 FY2025 was $211,000 compared to a net loss of $126,000 in the prior year.

• Adjusted EBITDA was a loss of $3,000, down from a profit of $63,000 a year ago.

Friedman added, "As we focus on reinvigorating our products and brands, we are encouraged by the strong consumer response to our recent influencer success. This makes us confident that our fresh, updated product collections coming to market over the next year will build on that success. We believe the combination of elevated product, good storytelling, and superior customer experience will position the business to return to top-line growth in 2025 and enable us to build long-term shareholder value."

Additional Information:

Please see www.luvubrands.com for updated events, press, and new product releases. If you wish to speak to us directly, please email [e-mail] with your preferred day and time.

Forward-Looking Statements

Certain matters discussed in this press release may be forward-looking statements. Such matters involve risks and uncertainties that may cause actual results to differ materially, including the following: changes in economic conditions; general competitive factors; acceptance of the Company's products in the market; the Company's success in obtaining new customers; the Company's success in product development; the Company's ability to execute its business model and strategic plans; the Company's success in integrating acquired entities and assets, and all the risks and related information described from time to time in the Company's filings with the Securities and Exchange Commission ("SEC"), including the financial statements and related information contained in the Company's Annual Report on Form 10-K and interim Quarterly Reports on Form 10-Q. Examples of forward-looking statements in this release include statements related to new products, anticipated revenue, and profitability. The Company assumes no obligation to update the cautionary information in this release.

*Use of Non-GAAP Measures - Adjusted EBITDA

Luvu Brands management evaluates and makes operating decisions using various financial metrics. In addition to the Company's GAAP results, management also considers the non-GAAP measure of Adjusted EBITDA. While Adjusted EBITDA is not a measure of performance in accordance with GAAP, management believes that this non-GAAP measure provides useful information about the Company's operating results. The table below provides a reconciliation of this non-GAAP financial measure with the most directly comparable GAAP financial measure.

As used herein, Adjusted EBITDA income represents net income (loss) before interest income, interest expense, income taxes, depreciation, amortization, and stock-based compensation expense.

About Luvu Brands

Luvu Brands, Inc. designs, manufactures and markets a portfolio of consumer lifestyle brands through the Company's websites, online mass/drug merchants, and specialty retail stores worldwide. Brands include Liberator®, a brand category of iconic products for enhancing sensuality and intimacy; Avana®, yoga, inclined sleep therapy, and orthopedic pillow products; and Jaxx®, a diverse range of casual fashion daybeds, sofas, and beanbags made from virgin and re-purposed polyurethane foam. Many of our products are offered flat-packed and vacuum-compressed to save on shipping and reduce our carbon footprint. The Company is headquartered in Atlanta, Georgia, in a 140,000-square-foot vertically integrated manufacturing facility that employs over 190 people. Bringing sewn products manufacturing back to the USA and creating innovative consumer brands are core to the Company's operating principles. The Company's brand sites include www.liberator.com, www.jaxxbeanbags.com, www.avanacomfort.com, plus other global e-commerce sites. For more information about Luvu Brands, please visit www.luvubrands.com.

Company Contact:

Luvu Brands, Inc.
Chris Knauf
Chief Financial Officer
770-246-6426
[e-mail]

Q1 FY2025 Results

Consolidated Statements of Operations

		Three Months Ended
		September 30,
		2024				2023
		(in thousands, except share data)
Net Sales		$	5,756			$	6,126
Cost of goods sold (excluding depreciation expense presented below)			4,239				4,544
Gross profit			1,517				1,582
Operating expenses:
Advertising and promotion			231				269
Other selling and marketing			414				427
General and administrative			885				819
Depreciation			109				99
Total operating expenses			1,639				1,614
Operating loss			(122	)			(31	)
Other income (expense):
Interest expense and financing costs			(88	)			(94	)
Total other income (expense)			(88	)			(94	)
Income from operations before income taxes			(210	)			(126	)
Provision for income taxes			-				-
Net loss		$	(210	)		$	(126	)
Net loss per share:
Basic		$	(0.00	)		$	(0.00	)
Diluted		$	(0.00	)		$	(0.00	)
Shares used in calculation of net income per share:
Basic			76,834,057				76,547,672
Diluted			76,834,057				76,547,672

Consolidated Balance Sheets

		September 30,
		2024				June 30,
		(unaudited)				2024
Assets:		(in thousands, except share data)
Current assets:
Cash and cash equivalents		$	1,068			$	1,028
Accounts receivable, net of allowance for doubtful accounts and allowance for discounts and returns of $10 on September 30, 2024 and $11 on June 30, 2024			1,198				1,061
Inventories, net of allowance for inventory reserve of $188 on September 30, 2024 and $188 on June 30, 2024			3,004				3,287
Other current assets			171				141
Total current assets			5,441				5,517
Equipment, property and leasehold improvements, net			1,762				1,870
Finance lease assets			103				103
Operating lease assets			1,410				1,545
Other assets			96				96
Total assets		$	8,812			$	9,131
Liabilities and stockholders' equity:
Current liabilities:
Accounts payable		$	1,434			$	1,502
Current debt			1,871				1,639
Other accrued liabilities			686				508
Operating lease liability			555				528
Total current liabilities			4,546				4,177
Noncurrent liabilities:
Deferred Tax Liability			119				119
Long-term debt			534				854
Long-term operating lease liability			984				1,151
Total noncurrent liabilities			1,637				2,124
Total liabilities			6,183				6,301
Commitments and contingencies			-				-
Stockholders' equity (deficit):
Preferred stock, 5,700,000 shares authorized, $0.0001 par value none issued and outstanding			-				-
Series A Convertible Preferred stock, 4,300,000 shares authorized $0.0001 par value, 4,300,000 shares issued and outstanding with a liquidation preference of $1,000 as of September 30, 2024 and June 30, 2024			-				-
Common stock, $0.01 par value, 175,000,000 shares authorized, 76,834,057 and 76,547,672 shares issued and outstanding as of September 30, 2024 and June 30, 2024, respectively			766				765
Additional paid-in capital			6,261				6,253
Accumulated deficit			(4,398	)			(4,188	)
Total stockholders' equity			2,629				2,830
Total liabilities and stockholders' equity		$	8,812			$	9,131

Consolidated Statement of Cash Flow

		Three Months Ended
		September 30,
		2024				2023
		(in thousands)
OPERATING ACTIVITIES:
Net income		$	(210	)		$	(126	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			109				99
Stock-based compensation expense			9				(6	)
Provision for bad debt			-				2
Change in operating assets and liabilities:
Accounts receivable			(137	)			(119	)
Inventory			283				147
Prepaid expenses and other assets			(31	)			(36	)
Accounts payable			(63	)			63
Accrued expenses and interest			178				148
Operating lease liability			(141	)			(94	)
Amortization of operating lease asset			135				93
Net cash provided by operating activities			132				171
INVESTING ACTIVITIES:
Investment in equipment, software and leasehold improvements			(1	)			(32	)
Net cash used in investing activities			(1	)			(32	)
FINANCING ACTIVITIES:
Borrowing (repayment) under revolving line of credit			10				63
Repayment of unsecured line of credit			(1	)			(3	)
Proceeds from unsecured notes payable			-				200
Repayment of unsecured notes payable			-				(200	)
Payments on equipment notes			(94	)			(99	)
Principal payments on capital leases			(6	)			(4	)
Net cash used in financing activities			(91	)			(43	)
Net increase (decrease) in cash and cash equivalents			39				96
Cash and cash equivalents at beginning of year			1,028				1,041
Cash and cash equivalents at end of year		$	1,068			$	1,137
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest		$	86			$	94

SUPPLEMENTAL FINANCIAL INFORMATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

Reconciliation of Net Loss to Adjusted EBITDA income for the 3 months ended September 30, 2024 and 2023:

		Three Months Ended
		September 30,
		2024				2023
		(in thousands)
Net loss		$	(210	)		$	(126	)
Plus interest expense, financing costs and income tax			89				96
Plus depreciation and amortization expense			109				99
Plus stock-based compensation expense			9				(6	)
Adjusted EBITDA		$	(3	)		$	63

SOURCE: Luvu Brands, Inc.

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