Luvu Brands Reports Fiscal 2021 Second Quarter and First Half Results

Rhea-AI Summary

Luvu Brands reported record first-half net sales of $11.1 million, up 25% year-over-year, and net income of $1.8 million for fiscal 2021.

Second-quarter net sales increased by 20% to $5.7 million, with significant growth from Liberator and Jaxx products, offset by a 20% decline in Avana sales. Gross profit fell to 27% from 32% due to rising labor and material costs. Operating expenses remained stable, leading to an increase in income from operations by 10%.

Positive

• Record first half net sales of $11.1 million, up 25% year-over-year.
• Net income increased to $1.8 million, compared to $0.2 million in the prior year.
• Adjusted EBITDA reached a record $2.1 million for the first half.
• Income from operations grew 69% to $893,000.

Negative

• Gross profit margin decreased to 27% from 32% due to rising costs.
• Avana product sales dropped 20% to $0.8 million.

Reports Record First Half Net Sales of $11.1 million; Record Net Income of $1.8 million

ATLANTA, GA / ACCESSWIRE / February 16, 2021 / Luvu Brands, Inc. (OTCQB:LUVU), a designer, manufacturer and marketer of a portfolio of consumer lifestyle brands, today reported fiscal 2021 second quarter and first half results.

Fiscal Second Quarter 2021 Highlights

Three months ended December 31, 2020 as compared to the three months ended December 31, 2019

• Net sales increased 20% to a record $5.7 million from $4.8 million.
• Total gross profit of $1.6 million, up slightly from the prior year.
• Gross profit as a percentage of net sales at 27%; down from 32% in 2019.
• Operating expenses were relatively unchanged at $1,109,000.
• Income from operations was a record $457,000, up 10% from $414,000 in 2019.
• Net income of $1,465,000, or $0.02 per share, compared to a net income of $257,000, or $0.00 per share, in the prior year.

First Half Fiscal 2021 Highlights

Six months ended December 31, 2020 as compared to the six months ended December 31, 2019

• Net sales increased 25% to a record $11.1 million from $8.9 million.
• Total gross profit of $3.1 million, up 15% from $2.7 million in the prior year.
• Gross profit as a percentage of net sales at 28%; down from 30% in 2019.
• Operating expenses were $2.2 million, up 1.5% from the prior year.
• Income from operations was a record $893,000, up 69% from $528,000 in 2019.
• Net income of $1,794,000, or $0.02 per share, compared to a net income of $212,000, or $0.00 per share, in the prior year.
• Adjusted EBITDA was a record $2.1 million for the first half compared to $618,000 in the prior year first half.

Louis Friedman, Chairman and Chief Executive Officer, commented, "Even without the PPP loan forgiveness, we continued to deliver strong financial results for the second quarter and first half of fiscal 2021. Demand for Liberator and Jaxx products continued to be strong during the December quarter; Avana sales were limited by our production capacity. We recently purchased over $700,000 of new production equipment which we expect will increase our production capacity across all product lines."

Fiscal Second Quarter 2021 Results

Net sales increased 20% to $5.7 million, compared to $4.8 million in the same year-ago quarter. Sales of Liberator products increased 25% to $2.5 million from $2.0 million in the prior year. Jaxx product sales totaled $1.7 million, up 45% from $1.2 million in the second quarter of the prior fiscal year. Avana products decreased 20% to $.8 million from $1.0 million in the prior year.

Gross profit for the second quarter totaled $1.6 million, compared to $1.5 million in the prior year second quarter. The Company experienced labor and raw material cost increases during the second quarter; gross profit as a percentage of net sales fell to 27% from 32% in the prior year second quarter.

Operating expenses were approximately 19% of net sales, or approximately $1,109,000, compared to 23% of net sales, or approximately $1,105,000, for the same period in the prior year.

Income from operations was $457,000 compared to $414,000 in the prior year.

Net income for the quarter was $1,465,000, or $0.02 per share, compared to net income of $257,000, or $0.00 per share in the prior year second quarter.

Secured and unsecured debt decreased from $3.5 million on June 30, 2020 to $2.3 million on December 31, 2020 and the working capital deficit improved from $1.4 million to $.6 million.

Conference Call

Management will host a conference call at 12:00 p.m. EDT (11:00 a.m. CDT; 9:00 a.m. PDT) on Tuesday, February 16, 2021 to review the results for the second quarter and six months. To listen and participate in the call, please register on this weblink https://www.webcaster4.com/Webcast/Page/2527/40025. After the formal presentation, there will be a Q&A session. Shareholders and other interested parties may ask questions through either the weblink or by calling 877-407-0778. The replay of the call will remain available on the Company's investor relations website, www.luvubrands.com, until May 14, 2021.

Forward-Looking Statements

Certain matters discussed in this press release may be forward-looking statements. Such forward-looking statements can be identified by the use of words such as ''should,'' ''may,'' ''intends,'' ''anticipates,'' ''believes,'' ''estimates,'' ''projects,'' ''forecasts,'' ''expects,'' ''plans,'' and ''proposes.'' These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. You are urged to carefully review and consider any cautionary statements and other disclosures in our Annual Report on Form 10-K for the fiscal year ended June 30, 2020 as filed with the Securities and Exchange Commission (the "SEC") on October 1, 2020 and our other filings with the SEC. All forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, many of which are generally outside the control of Luvu Brands, Inc. and are difficult to predict. Luvu Brands, Inc. does not undertake any duty to update any forward-looking statements except as may be required by law. The information which appears on our websites and our social media platforms is not part of this press release.

Use of Non-GAAP Financial Measures

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. As used herein, Adjusted EBITDA represents net income before interest income, interest expense, income taxes, depreciation, amortization, and stock-based compensation expense. Management believes that this non-GAAP measures provide useful information about the Company's operating results. Adjusted EBITDA has not been prepared in accordance with GAAP. This non-GAAP financial measure should not be considered as alternative to, or more meaningful than, net income (loss) as indicators of the Company's operating performance. Further, this non-GAAP financial measure, as presented by the Company, may not be comparable to similarly titled measures reported by other companies. The Company has attached to this press release a reconciliation of this non-GAAP financial measure to its most directly comparable GAAP financial measure.

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^®, inclined bed therapy products, assistive in relieving medical conditions associated with acid reflux, surgery recovery and chronic pain; and Jaxx^®, a diverse range of casual fashion daybeds, sofas and beanbags made from virgin and our re-purposed polyurethane foam trim. Headquartered in Atlanta, Georgia, the Company occupies a 140,000 square foot vertically-integrated manufacturing facility and employs over 200 people. The Company's brand sites include: www.liberator.com, www.jaxxliving.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.
Ronald Scott
Chief Financial Officer
770-246-6426
ron@LuvuBrands.com

Fiscal 2021 Second Quarter and First Half Results

LUVU BRANDS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(unaudited)

		Three Months Ended December 31,								Six Months Ended December 31,
		2020				2019				2020				2019
		(in thousands, except share data)
Net Sales		$	5,714			$	4,779			$	11,081			$	8,874
Cost of goods sold			4,148				3,260				8,027				6,217
Gross profit			1,566				1,519				3,054				2,657
Operating expenses
Advertising and promotion			120				116				189				196
Other selling and marketing			270				317				537				634
General and administrative			668				633				1,332				1,220
Depreciation and amortization			51				39				103				79
Total operating expenses			1,109				1,105				2,161				2,129
Income from operations			457				414				893				528
Other Income (Expense):
Gain on forgiveness of SBA loan			1,096				-				1,096				-
Interest expense and financing costs			(88	)			(157	)			(195	)			(316	)
Total Other Income (Expense)			1,008				(157	)			901				(316	)
Income before income taxes			1,465				257				1,794				212
Provision for income taxes			-				-				-				-
Net income		$	1,465			$	257			$	1,794			$	212
Net income per share:
Basic		$	0.02			$	0.00			$	0.02			$	0.00
Diluted		$	0.02			$	0.00			$	0.02			$	0.00
Shares used in computing net income per share
Basic			73,682,551				73,452,596				73,567,574				73,452,596
Diluted			74,050,847				74,201,194				74,550,249				74,243,627

LUVU BRANDS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets

		December 31,
		2020				June 30,
		(unaudited)				2020
Assets:		(in thousands, except share data)
Current assets:
Cash and cash equivalents		$	1,015			$	1,152
Accounts receivable, net			915				1,135
Inventories, net			2,490				1,985
Prepaid expenses			87				55
Total current assets			4,507				4,327
Equipment, property and leasehold improvements, net			1,276				938
Finance lease assets			33				-
Operating lease assets			2,684				165
Other assets			24				17
Total assets		$	8,524			$	5,447
Liabilities and stockholders' equity (deficit):
Current liabilities:
Accounts payable		$	2,524			$	2,435
Current debt			1,855				2,007
Current portion of PPP loan			-				482
Other accrued liabilities			470				623
Operating lease liability			247				199
Total current liabilities			5,096				5,746
Noncurrent liabilities:
Long-term debt			444				361
PPP loan			-				614
Long-term operating lease liability			2,437				-
Total noncurrent liabilities			2,881				975
Total liabilities			7,977				6,721
Commitments and contingencies (See Note 16)			-				-
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 at December 31, 2020 and June 30, 2020			-				-
Common stock, $0.01 par value, 175,000,000 shares authorized, 75,037,890 and 73,452,596 shares issued and outstanding at December 31, 2020 and June 30, 2020, respectively			750				735
Additional paid-in capital			6,159				6,147
Accumulated deficit			(6,362	)			(8,156	)
Total stockholders' equity (deficit)			547				(1,274	)
Total liabilities and stockholders' equity (deficit)		$	8,524			$	5,447

SUPPLEMENTAL FINANCIAL INFORMATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

Reconciliation of net income to Adjusted EBITDA for the six months ended December 31, 2020 and 2019:

(Dollars in thousands)		Six months ended December 31,
		2020				2019
Net income		$	1,794			$	212
Plus interest expense, net			195				316
Plus depreciation and amortization expense			103				79
Plus stock-based compensation			8				11
Adjusted EBITDA		$	2,100			$	618

SOURCE: Luvu Brands, Inc.

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FAQ

What were the net sales for Luvu Brands in the second quarter of fiscal 2021?

Luvu Brands reported net sales of $5.7 million for the second quarter of fiscal 2021, a 20% increase from the previous year.

What was Luvu Brands' net income for the first half of fiscal 2021?

Luvu Brands reported a net income of $1.8 million for the first half of fiscal 2021.

How did Luvu Brands' operating expenses change in the second quarter of fiscal 2021?

Operating expenses for Luvu Brands were relatively unchanged at approximately $1.11 million, about 19% of net sales.

What impact did increased costs have on Luvu Brands' gross profit margin?

Luvu Brands' gross profit margin fell to 27% in the second quarter of fiscal 2021, down from 32% the previous year due to increased labor and raw materials costs.

When will Luvu Brands host its conference call to discuss the quarterly results?

Luvu Brands will host a conference call on February 16, 2021, at 12:00 p.m. EDT to review the results.