Greetings, and welcome to The Lovesac Fourth Quarter Fiscal 2024 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I will now turn the call over to your host, Caitlin Churchill, Investor Relations for Lovesac. Thank you. You may begin.

Thank you. Good morning, everyone. With me on the call is Shawn Nelson, Chief Executive Officer; Mary Fox, President and Chief Operating Officer; and Keith Siegner, Chief Financial Officer. Before we get started, I would like to remind you that some of the information discussed will include forward-looking statements regarding future events and our future financial performance. These include statements about our future expectations, financial projections and our plans and prospects. Actual results may differ materially from those set forth in such statements. For a discussion of these risks and uncertainties, you should review the company's filings with the SEC, which includes today's press release. You should not rely on our forward-looking statements as predictions of future events. All forward-looking statements that we make on this call are based on assumptions and beliefs as of today, and we undertake no obligation to update them except as required by applicable law. Our discussion today will include non-GAAP financial measures, including EBITDA and adjusted EBITDA. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results. A reconciliation of the most directly comparable GAAP financial measure to such non-GAAP financial measure has been provided as supplemental financial information in our press release. Now, I'd like to turn the call over to Shawn Nelson, Chief Executive Officer of The Lovesac Company.

Thank you, Caitlin. Good morning, everyone, and thank you for joining us today. What a year it has been. In our 25th year in business, in true Lovesac fashion, we made meaningful strides across a number of areas as we strengthen our omnichannel infinity flywheel, reinforce our Designed for Life product platform, and make the strategic investments necessary to profitably scale our brand and business for years and years to come. We crossed $700 million in revenue for the fiscal year, reflecting high-single-digit growth for the year, and tripled revenues of just four years ago. That is against the category that was down mid-teens for the year and approximately flat now over the past four years. Despite industry headwinds, we delivered material gross profit dollar expansion, with gross margins up into the high 50%s. This more than covered the essential investments in product and capabilities to support sustained profitable growth. While net income was down versus last year on a reported basis, excluding the non-recurring expenses related to the restatement that we've discussed previously, we are pleased to deliver net income growth for the year. We ended the year with $87 million in cash and zero borrowings on our credit facility, a very healthy balance sheet. These results include a solid fourth quarter performance in which we delivered year-over-year growth in revenues, gross profits and net income. While a mid-quarter lull meant we fell just shy of our guidance for net sales, we managed costs well, and we're within the ranges for gross margin, adjusted EBITDA, net income and diluted EPS, all of which Keith will review in detail later. The outperformance we have delivered compared to industry over the past four years is underpinned by our focus on the customer, our advantaged products and our unique omnichannel business model…

Thank you, Shawn, and good morning, everyone. As Shawn discussed with sales growth of 7.5% for fiscal 2024, our results reflected industry leading growth driven by our unique omnichannel business model. Importantly, on a four-year basis, our sales were up 200% from pre-pandemic levels compared to the category at flat over the same time period, and our adjusted EBITDA margin has increased 930 basis points. We believe this consistent financial outperformance is ahead of any other brand in our category, underpinned by our customer- and product-centric focus on our unique omnichannel infinity flywheel. We have built the business model and the platform unlike anyone else in the category, resulting in a total addressable market opportunity that is significant, brand health that is strong and growing, best-in-class touchpoint economics, and an advantaged supply chain. A few highlights of our infinity flywheel that Shawn shared earlier. We compete in a large addressable market of over $46 billion. We believe we have the number one selling couch in America, but have massive market share potential remaining as we've barely scratched the surface of this huge and fragmented category. We're confident because our customers are our strongest proponents. Word-of-mouth is our number one awareness driver, and over a third of our customers report that they don't even cross shop with other brands. Our brand health is stronger than ever with innovation fueling these gains. The launches of Angled Side and StealthTech have helped drive a customer lifetime value, customer acquisition cost ratio that is unsurpassed, and continued strength in our marketing ROI enables healthy reinvestment. We have best-in-class touchpoint economics that we estimate are second only to Apple and Tiffany based on incredible cash payback periods of one year and up to 4 times the sales per foot productivity of our competitors. And finally,…

Thanks, Mary. Fiscal '24 was a momentous year for Lovesac. It marks our 25th anniversary and we delivered several milestone achievements. Revenues exceeded $700 million. Gross profits exceeded $400 million, representing a gross margin over 57%. Net income of $23.9 million as reported, was down from fiscal '23, but adjusting for the just over $5 million in non-recurring expenses related to the successfully resolved restatement, net income would have been up. Inventories declined 18%, and we ended the year with $87 million in cash on the balance sheet. All of that is despite category headwinds and pressure on operating expenses from investments in people, systems, and product innovation to set us up for sustained profitable growth for the long term. Now, let's jump right into a quick review of the fourth quarter of fiscal '24, which as a reminder included a 14th week, representing the 53rd week from our fiscal year. Then, I'll discuss our outlook for fiscal '25. Net sales increased $12 million or 5% to $250.5 million in the fourth quarter with the year-over-year increase driven by showrooms and web. This was slightly below our expectations provided in early December, owing to a mid-quarter lull before a bounce back in late January. Showroom net sales increased $15.4 million or 10.9% to $156.9 million in the fourth quarter as compared to $141.5 million in the prior-year period. The increase in showroom sales was driven by the addition of 35 net new showrooms compared to the prior-year period, partially offset by a decrease of 4.1% in omnichannel comparable net sales. Internet net sales increased $1.7 million or 2.2% to $78.1 million in the fourth quarter, as compared to $76.4 million in the prior-year period. Other net sales, which include pop-up shop, shop-in-shop, and open-box inventory transactions, decreased $5 million or…

Thank you. At this time, we'll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Brian Nagel with Oppenheimer & Company. Please proceed with your question.

Hi, good morning.

Good morning, Brian.

So, my question, maybe I'll just make it like one question with a few parts, but just really with regard to kind of the sales trajectory. So, Keith and I think Shawn mentioned it too, you talked about, if I heard you correctly, some weakness in -- or strength in January, weakness in February, then restrengthening in March. Again, if I heard that correctly. So, the question I have there is, is there anything -- I mean, we've talked about a difficult category for a while, others have mentioned this as well. But is there anything you noticed that would kind of driven that -- anything new, so to say, that's driven that sales volatility? Then, the second question I have, if you look at the guidance you gave, the sales growth guidance you gave for Q1, is that reflective of where sales are tracking now, recognizing we're pretty late into the fiscal first quarter? And then the third question, just as you -- you talked about restrengthening sales over the balance of the current fiscal year. Is there anything in particular that you're pointing to there? Or is that more you did discuss some product launches or just more kind of timing related to the overall industry dynamics? Thanks.

Yeah, thank you, Brian. I'll probably take the first part and then [Keith can take up] (ph) the rest. So, I think as Keith obviously shared with our guidance for the year, we are obviously still assuming the category to remain very tough. And we will, even with the guidance that we've talked about, continue to take very strong market share. Specifically, we talked about January was very strong for us. We had dialed promotions up a little bit more because we've seen, as Keith talked about, a bit of a lull in December as we tried to pull down off the typical Black Friday promotions. We did that again in February, and what we saw is the same dynamic as in December. So, key competitors were up to 50% off during February and had very aggressive deals even in clearance. So, for us, that was the first factor. And then, as we pivoted into March, we moved back to 30% off and all of that is baked into our guidance, because it's clear we need to have a very compelling value in category that's deep in promotion. And we've done that and we feel really good. To your point, March has been very strong, and a big, big step up from where we were in February. I think the second piece, which was a little bit of what happened in February, is we did have a little bit of disruption. We moved to a new media agency. So, there's a little bit around media planning, timing, and some targeting. This is all back on track. So, again, hence giving us the confidence for the rest of this year and the strengthening of the sales. So yes, as your question talks about the guidance for Q1, that is reflective and baked in. And as Keith had shared, March has been much, much stronger. In the early start of April, we are also seeing that as well. I think Keith...

Yeah. Just to add on that, so when we look at the credit card data from Bank of America, which is one of the primary, let's call it, real-time-ish benchmarks that we look at for category performance, it's still around down 14% for both February and March, right? So, when you put the two months together, our performance is still showing market share gains even if not where we would have planned for it for the reasons Mary just discussed that impacted February. I would highlight that because of the 53rd week and because of the five weeks that happened in our P2, we're really just entering P3 right now. So, it's basically from the early part of this week through the end of the quarter, which is May 5. So, we still have basically most of all of P3 to go and that's all incorporated into our guidance. But again, we were encouraged as to the rebound we saw in our trends in March. When we think about the drivers for the year and where that shakes out, obviously, we tried to give you more context around the baseline of category that's underpinning our outlook. And when we think about our ability to take market share, it's a lot of the same things. Mary talked about we have a number of product launches coming this year. We have enhancements to our marketing. We're going to continue to tweak and optimize our promotions. We do have touchpoint expansion, right? We also have what looked like to all of us easier compares, especially on a two-year basis as we progress through the year. So, put all that stuff together, we still have secular levers within our control that we are going to pull and continue to refine that we think will support another year of market share gains.

I appreciate all the color. Thank you.

Thank you. Our next question comes from the line of Maria Ripps with Canaccord Genuity. Please proceed with your question.

Great. Good morning, and thanks for taking my questions. So, I appreciate all the color around sort of your guidance. But sort of broadly, it looks like you were able to outperform the category by wide margin for a couple of years now and sort of deliver growth in a declining category. So -- but kind of -- and you just sort of highlighted some of the reasons for softer Q1, but is there anything that maybe has changed in sort of in your ability to outperform the vertical, especially as we look towards Q1 with expected revenue declines?

Marie, hi. Yeah. Sorry, we're just switching around. So thank you for the question. So I think, we still feel incredibly confident in terms of all the factors around why our company has been so successful in the last four years. And if you think about 200% growth in the last four years on a category that is flat and we've just delivered a year where no one else is at the growth rate that we have delivered that we compete against. So, we see a very strong line for the past around innovation that I touched on. We talk a lot about the continued performance around marketing and just the brand stickiness that continues to grow and improve. And our awareness, our unaided awareness is still low, but the aided awareness and then how we're able to pull customers through our purchase funnel continues to be very, very strong. And we talk a lot about the number one indicator for our brand strength is around word-of-mouth. So, we feel very good on that. And even with the guidance that Keith shared, we will still be gaining significant share. The second, we're very clear around our touchpoint openings for this year. The performance is continuing as we see our new showrooms outperforming on their performance. And I think Keith talked a bit about some of the economic benefits that we're getting as we manage our fleet and occupancy charges. And then, I think the third one is we've always planned very conservatively. And I think we've gone through two years of very tough double-digit declines. And this team consistently, every time, outperforms. And the one thing I'm very proud, even as we talked about some of the weakness in February, this team pivots fast, we test, we move, we adjust, and everything that Keith has laid out in the forecast will continue. So, I think there's a lot that we feel very good about for this year and beyond. And everything in terms of the financial performance continues to show that for us.

Yeah. And I'll just tag on. This is Shawn. Maria, appreciate the question. The aspect to Lovesac that is probably overlooked particularly at tough times like this for the category is that for the last decade, we've invested very fastidiously and intensely in building our brand. And what I'm speaking to is, there is obviously a lot of competition, particularly in the digital landscape for couches, modular couches, et cetera, because of the fervor we've created and obviously the growth that we've garnered in this realm. The big difference between Lovesac and all of those competitors in that realm, as well as some of the competitors in the traditional realm, most of the competitors, and this is based on our own internal brand strength studies, is the strength of this brand, and that's taken a decade to build. And it's not just a digital marketing engine that's kicking butt and making hay when the sun is shining, but a real effort to -- through the activations, through the events, through obviously relentless traditional advertising, TV advertising combined with digital, et cetera, that's really built a lot of awareness for our brand, a lot of acceptance, a lot of love, and a lot of demand. And so, Lovesac is a highly sought-after product. We'll continue to launch more products underneath this brand flag, and we expect them to perform well just as we continue to perform well versus the category. And so that brand strength really carries us through a time like this versus many others who are really focused on just converting through digital means or relying on foot traffic in showrooms, et cetera, in stores, et cetera. Lovesac is a real outlier in this way and I don't think it's fully appreciated or valued, and that's okay. We're focused on -- it's taken this long to build the brand to this point. It will take another decade to take it where we want to take it. And that's our point of view at management. And in the meantime, we'll continue to shuck and jive and do all the things necessary to perform against the category, gain market share and emerge with some really exciting new products on the horizon in the nearer and medium term, even if this category will rebound.

That's very helpful. Thank you. And then, secondly, can you maybe give us a little bit more color on your trade-in and resale initiative? What are some of sort of logistic investments that are needed to enable this initiative? And will you be sort of just connecting, buying and selling consumers? Or will you be taking ownership of this inventory?

Yeah. Great. Thank you, Maria. This is an initiative we're very passionate about because I think as we talk about the infinity flywheel, we've been very active around the left side, around driving amazing brand awareness, touchpoints that [indiscernible] with an incredible Designed for Life platform and an amazing product, that are for life, and the ability to be able to establish the services that we've touched on is so important. So, the work that we started last year around circular operations was just starting to build the foundations for the ability to do trade-in and resale. And I touched a little bit on just the fact that we're even just in this foundational build, launching an internal test for our own team members around open-box item sales and just building the technology to be able to do that. And we have an external partner that is also helping us with that, also working in terms of just the overall S&OP processes that have to happen. All of that is baked in in terms of those investments into our business for this year. And then later in the year, we'll come back and share with you the progress that we're making for the sale and trade-in. And so, yes, as we build that loop out, there will be a dip of inventory, and we will be then managing that through. We see a very high demand for our product on the secondary market today. So, it is happening today. So, the ability for us to have an amazing brand experience and really do something that no one else can do. Because other brands, it's much harder for them to do resell and trade-in. It's super expensive logistically and very complicated and hard to keep the product intact. So, as we talk about innovations to come and then the ability for our customers that bought a product 10 years ago, they're able to trade-in covers, get new covers and be able to build up their lifetime value, we are very excited about this ability. So, we look forward to sharing more news for you, and the progress of this obviously very critical initiative.

Got it. Thank you very much for the color.

Thank you. Our next question comes from the line of Matt Koranda with ROTH MKM. Please proceed with your question.

Hey, guys. Good morning. Just wanted to spin back to the quarter-to-date trends that you shared. Maybe just -- is there any way to unpack them or quantify them, what you saw in February and March? And I know you mentioned March getting a little bit better than February on a relative basis. Just was March actually up on a year-over-year basis or just down less badly than February, maybe just a little bit more there? And then just, Mary, if you could talk about the promotional tactics? I know you sort of touched on it in one of your previous responses, but just wanted to hear you speak a little bit more about the more frequent promotions that we're running and the 30% off promotions, and how those are kind of faring relative to some of the broader promotions you mentioned in the industry?

I'll start off and then pass it over to Mary to talk more about the promotional tactics. Just in terms of specifics, at this point, we're not going to get into the exact specifics in relation to February and March, but Mary kind of gave the details. And look what -- a lot of what it boiled down to in February, given that the category was about the same, according to the credit card data for both February and March, some of this was company specific, right, for the fact that as Mary said, we've tried to dial back on the promotions. However, the competitors were dialing up on the promotions at that time, as well as dislocations in our marketing program relative to the change in agency, which happened on the first day of the fiscal year, right? So, it really impacted the entirety of P1. But we corrected for that. We adjusted for that. We tweaked the promotions as we headed into March and we saw a massive bounce back. It was a dramatic shift in trends. We've taken both February and March holistically into account as we think about our plans for P3, which is April, and that's all compartmentalized within our guidance. Obviously, this is an ongoing constant effort to tweak and refine and tweak and refine, test and learn, all those types of things. So -- but we -- at this point, we think this is the best representation of our placement in this quarter. And then as we get later into the year, for all the things I talked about a little earlier, that's when we really start to see the launches, right, that Mary highlighted before. That's when we see the touchpoint expansion really kicking in and that's when we think we can get even sharper with our marketing and promotions, finance offers, all that kind of stuff to really crystallize and convert the interest we're seeing from our customers. Mary, I don't know if you want to talk more about the promotional tactics.

Yeah. No, thank you, Keith. And I think, Matt, obviously, Black Friday, typically, we see the strongest promotions of the year, and we came out at 30% off and a couple of bundle deals. And as you know, compared to the rest of the category, that's still substantially lower. We had a very strong performance. Then what we normally would do is step down a little bit coming out of that Black Friday. But as I shared, we saw everyone else holding. And it's actually -- in many ways, actually get more aggressive in using the clearance area just making core stock products and actually promoting it even more aggressively. We were seeing promotions up to 50% off. So, when we had dialed back down, as Keith just said, then we saw the velocity just tail back a little bit because people quote growth was really strong, conversion was just a little bit slower. And we know we always have to have compelling value. So, as we tested back into the 30% off, as Keith said, we saw great growth in March. So, like anything, we're going to continue to test and learn. I think one of the really interesting parts about this is from a consumer behavior point of view, we see a very high percentage of customers close a quote in about a week to two weeks. So, for us, we're just really adjusting our promo campaigns and tactics, allowing [indiscernible] where we see when they're coming in, and then able to drive them to conversion. So again, big advantage for us as we manage across all of our channels. And the guidance that Keith has baked in, we have industry-leading gross margin performance. And we talked earlier about the growth year-over-year and just all of that performance. So, we're just always threading the needle between top-line growth, gross margin growth and how that flows through. So, we'll adjust through the year, but feel good now in terms of where we are settled in our programming.

Okay. Got it. And then, on the gross margin guide for the first quarter, it looks like there's some expansion there. Just wondered maybe, Keith, if you could touch on sort of what's factored in in terms of promotional headwind versus some of the continued sort of unlock that we're seeing from lower inbound freight. Maybe just touch on that. And then, for the full year, if we look at the guidance, I guess we're still seeing some deleverage on SG&A. Just wondered if you could maybe touch on sort of what the planned investments are there and maybe why not -- why we can't see or couldn't see a little bit more leverage on that line this coming year.

Sure thing. I'll start with the gross margin. So, the story for first quarter gross margin is really consistent with kind of what we've been talking about the last six months and with the full year. We got to this high-50%s range. We think this is a comfortable level. Last year's first quarter was still burdened by a little bit of the capitalized inbound freight that hadn't burned off as of then, that's helping us a little bit year-over-year in first quarter. We do expect gross margin expansion for this year. Obviously, the total top-line will impact that range that you saw within our guidance that we provided. But there's a few things Mary was talking about that have the potential to benefit both the inbound and outbound side of freight and logistics for us. Even in first quarter, we were -- we had been getting some questions in relation to whether it's Red Sea, whether it's Baltimore, all that kind of stuff. Just to put some of the stuff into context, as we moved into P12 and P1, we've really changed some of the relationships we have. We moved to direct service providers for ocean freight and container drayage using a beneficial cargo owner direct carrier model. That's definitely impacting things for us. We're also moving on an outbound side into evaluating some alternative options for last-mile carrier projects and tests, all the stuff we think has potential to benefit the gross margin side of things. So, we definitely see potential for gross margins. The magnitude of that expansion really just depending upon the top-line for the year, which again is largely dependent upon where the category ends up. On the SG&A side of things, look, this is really what we're trying to do here is to balance the…

Okay. Very helpful, Keith. If I could sneak one more in. Just -- can we just maybe level set everybody on the cadence of profitability by quarter for the rest of the year? Obviously, not asking for specific guidance. But should we expect -- I would imagine 1Q would be the trough in terms of profitability. Should we expect you to be at least breakeven or positive for the rest of the year, maybe just a little bit more on sort of cadence? I know you provided a little 1H versus 2H, but just anything on profitability and cadence for this year?

Yeah. I mean, that really boils down to where the top-line shakes out. I mean, obviously, this is based upon what we just gave in terms of category backdrop and full year guidance, we expect the most difficult top-line picture of the year to be Q1, and it is historically also our most difficult quarter. Nothing changes on that front. Q4 still remains the bulk of the profits. It's just such a big selling year for us -- or selling quarter for us, sorry. There's a little wiggle around that, but it's -- you can look at seasonal trends historically coupled with a slightly better macro backdrop for the year in the back half versus the first half, and the quarter will likely fall out very similar in your model to what we have planned. So, nothing unusual outside of those two dynamics that should be affecting that cadence.

Okay. Makes sense. I'll take the rest of mine offline. Thanks, guys.

Thank you. Our next question comes from the line of Mike Baker with D.A. Davidson. Please proceed with your question.

Okay, thanks. Maybe following up on some previous questions, but asking in a different way. I mean, the guidance has a massive ramp in sales growth and profitability growth after the first quarter. Yet your advertising as a percent of sales, which seems to be the big driver to helping sales, goes down for the rest of the year, right? I think your 14%-and-change for the first quarter and then 13% for the full year, which implies something lower than that for the rest of the year. So, I guess if you could help us again with a little more color as to why the rest of the year gets so much better? And then beyond that, like -- it seems like when you're advertising more, advertising as a percent of sales, that's driving sales. Why not go above the 13% in the short term, 14%, 15% for 2024, for calendar 2024? Thanks.

Sure thing. Thanks. So look, just starting with Q1, look, obviously, given the seasonality that we just discussed in Matt's question, this is the most -- it's the lowest spend in Q1 and we had inefficiency in spend given the dislocations related to the transition. That's kind of what drove that dynamic. We have bigger dollars and anticipate more effectiveness and efficiency of the dollars as we get into the later seasons. That also couples with the promotions. That also couples with the product innovation that we'll be bringing. All of these things kind of work together. So, your question is fair. We totally get it. But we've been through all that, and I'm very comfortable at this point with that dynamic of lower percentages, but higher dollars and more effectiveness and impact of all of those things combined to drive what you would see within that range of guidance.

I think, Keith, just to add, I think, Mike, what we also see, I mean, within our marketing and advertising spend, there's a short-term working media that drives growth. And that's in the quarter and beyond because it's never always just that real time. I think the second piece in our spend is all the research and development work around the innovations to come. So, there's that also built in as well as brand equity building. One of the things that we've always talked about is, we continue to test and learn all the time around advertising and marketing. So, for example, the team are running a test right now, really looking at opportunities outside of big promotional windows, temporal moments that you would typically see, to see in terms of the traffic that we can drive and then convert through the funnel. So, the team is very energized around that. Lots of debates and great outlook in terms of testing. And that will continue and is one of the reasons that we have been successful is that agility. And I think as Keith shared, we feel very good in terms of the runway for the rest of the year because obviously touchpoints are a key leader as well for us as we think about the growth and the formula of success that we've had for so many years.

Okay. Fair enough. One quick just housekeeping. As part of the analysis shown in the back half, the variables we need are how much the extra week helped in terms of sales and EBITDA? Excuse me. I have my estimates, but is that something you're willing to share?

Yeah. There was nothing unusual about it that would make it a non-standard week for us. So, it's pretty consistent across most of the metrics with a typical Q4 week. Nothing really unusual on that front. So...

That's both in terms of sales and profitability or EBITDA dollars?

Yeah. There's a number of moving pieces across the things, but it's a relatively representative Q4 week.

Understood. Thank you.

Thank you. Our next question comes from the line of Thomas Forte with Maxim Group. Please proceed with your question.

Great. So, for the sake of time, three quick questions and three quick answers are more than acceptable. The inventory management, was that a one-off or is that a permanent change? And then, on the services revenue, I like that you're talking more about it, but how should we think about the relative profitability? Your gross margin on your goods is quite high. And then lastly, when thinking about your full year outlook, how do you think about the notion that there may be fewer rate cuts, but it seems like there's a greater likelihood of a soft landing? So, I know home category can be highly sensitive to interest rates, but it seems like the good news is that there's a greater chance of a soft landing. And I'd love your high-level thoughts on that. Thanks.

Yeah. Keith, should I take the inventory management one?

Sure. Sounds good.

Yeah. Tom, so, yeah, for us, it was a result of a lot of the investments we've made in the past in supply chain. So, for us, we will continue to drive efficiencies in our inventory and even just kind of the speed to market as we move goods from factory through to our DC. So, continue -- you'll expect to see some benefits continuing. And the team honestly has done an amazing job. So, we're just very grateful. And I think back to the point Keith touched on before, the ability for us to drive up, as the demand will swing back at the point where the category does go back into some momentum, we're also really able to be very agile and be able to build up inventory. So, feel good on that one. I think service revenue is -- we'll share more through the year as we think in terms of the model. It's still very early days as we start to build out those capabilities. So, we'll give you some more color to that later in the year. And I think, Keith, maybe you want to go to the outlook.

Sure thing. So look, it's -- the macro discussion could get really complicated really quickly. Do we not get the rate cuts which result in greater housing turnover which typically results in more desire for the furnishings, but do we also get a soft landing? What happens with the elections? There's a lot of these moving pieces. And I think really what we're trying to say was because we are in this enviable position of not having to make a call on exactly when that balance is going to come, we're going to take a conservative approach and manage our expenses against that, setting us up for the position where should that work out, should we get more housing turnover, should we get more home furnishing demands, rates go lower, elections not a big deal, whatever, we can participate and ride that demand curve in real time, and that's the plan. So that's why we're providing a lot more of the transparency behind it. Yes, we hope it plays out the way you're talking about, but we're not building a plan that requires any of the more positive outcomes to really dominate the rest. And that's what we -- that's why we are so transparent with that macro benchmark underneath our guidance.

Great. Thank you, Keith. Thank you, Mary. Thank you, Shawn.

Thank you. Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Nelson for any final comments.

Yes. We just want to thank all of our investors as well as all the Lovesac-ers out there that keep this company banking. We look forward to an amazing fiscal year.

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.