Afternoon, and welcome to Lulu's Fashion Lounge Holdings, Inc. Third Quarter 2025 Earnings Conference Call. Today's call is being recorded. And we have allocated one hour for the prepared remarks and Q&A. At this time, I'd like to turn the conference over to Lulu's Fashion Lounge Holdings, Inc. General Counsel and Corporate Secretary, Naomi Beckman-Straus. Thank you. You may begin.

Good afternoon, everyone, and thank you for joining us to discuss Lulu's Fashion Lounge Holdings, Inc. Fiscal Third Quarter 2025 Results. Before we begin, we would like to remind you that this conference call will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements made on this call that do not relate to matters of fact should be considered forward-looking statements, including but not limited to statements regarding management's expectations, plans, strategies, goals, and objectives, their implementation, opportunities for growth in the coming quarter, the long-term growth trajectory of our business, our expectations around the continued impact of the macroeconomic environment including as a result of the imposition of tariffs, consumer demand and return rates on our business, our future expectations regarding financial results, our ability to realize the intended impact of cost reduction measures, reference to the fiscal year ending 12/28/2025, including our financial outlook for the fourth quarter and fiscal year 2025. Market opportunities, buying strategies, product launches, SKU management, our technology enablement initiative, and personalized shopping and other initiatives. These forward-looking statements are subject to various risks, uncertainties, assumptions, and other important factors, which could cause our actual results, performance, or achievements to differ materially from results, performance, or achievements, expressed or implied by these forward-looking statements. These risks, uncertainties, and assumptions are detailed in this afternoon's press release, as well as our filings with the SEC, including our annual report on Form 10-Ks for the fiscal year ended 12/29/2024, and our quarterly reports on Form 10-Q for the fiscal quarters ended 03/30/2025, and 06/29/2025. All of which can be found on our website at investors.lulu.com. Any such forward-looking statements represent management's estimates as of the date of this call. While we may elect to update such forward-looking statements…

Thank you, Naomi, and good afternoon, everyone. Appreciate you joining us today. Our third quarter results reflect the meaningful progress we are making in strengthening and optimizing key areas of the business through consistent execution of our strategic priorities and an eye towards a more occasion-wear-focused assortment. We believe we are on a solid path with another quarter of material sequential improvement in our quarterly year-over-year net revenue comparisons and another consecutive quarter of positive adjusted EBITDA in line with our expectations. Special occasion and bridesmaids categories continue to outperform, giving us confidence in our event attire strategy, reinforcing the strength of our attainable luxury value proposition. The outperformance in special occasion was offset by continued weaker performance in casual wear and footwear assortments, which we are actively realigning towards a more curated event-focused assortment. Importantly, we entered into a credit agreement with White Oak Commercial Finance in the third quarter, which strengthens our liquidity position and significantly improves our financial flexibility. Combined with another quarter of positive adjusted EBITDA performance, a more efficient cost structure, and a healthier balance sheet with the closing of our new ABL facility, we believe we are well-positioned to continue executing against our strategic priorities which are geared towards strengthening our foundation, driving customer engagement, and setting us up for sustainable long-term growth. I'd like to highlight a number of key positive developments from the quarter which showcase the continued momentum we're seeing across the business as a result of our strong execution against our strategic initiatives. Special occasion continues to lead outperformance, with formal and bridesmaids categories driving ongoing year-over-year net sales growth on top of a double-digit comparison in the prior year period. Our continued strong performance in event dressing gives us increased confidence in our assortment strategy and value proposition and…

Thank you, Crystal. Our brand engagement initiatives continued to resonate. Strengthening visibility and deepening awareness across key markets. Despite a decline in our active customer counts year over year. Our Love Rewards loyalty program membership continues to grow steadily. Contributing to higher reactivation rates amongst lapsed customers. We also saw a meaningful uplift in average order value. During the third quarter, which supported our strong comp performance for the period. With continuous progress across key engagement metrics, we're optimistic about the impact of our strategic initiatives are having an accelerated brand momentum for Lulu's Fashion Lounge Holdings, Inc. To that end, let me share more specifics around the progress we're seeing against our three strategic initiatives. Starting with our product assortment optimization, and related margin expansion efforts. We delivered another quarter of sequential improvement in return rates, and damages related to customer returns. The shift to a flat fee return policy in Q1 introduced to better align with industry standards has proven effective in enhancing the customer experience and preserving margins. We continue to monitor customer behavior and will adapt our policy, to support the customer experience and the financial impact of returns. Across event categories, we observed several positive trends that reinforce our confidence in our refined merchandising and product assortment strategy. In first-time reorder, our positive performance led by event gowns our ongoing reorder strategy of investing more into recently tested new products and retiring older reorder products. In cocktail dresses, we saw progressive sales comp improvements throughout the quarter, supported by very strong top performers in both our new product and reorder product assortments. Demonstrating the impact of our new merchandising strategy and assortment optimization initiatives. While our best-selling new assortments saw early sell-through, we are taking advantage of opportunities to increase depth in styles that are…

Thank you, Mark. I'm excited to join during this transformational time in Lulu's Fashion Lounge Holdings, Inc. journey and contribute to its path to profitable growth. I've been incredibly impressed by the talent, engagement, and hands-on culture here. The team's deep passion for the Lulu's Fashion Lounge Holdings, Inc. brand was palpable from day one. Over the next few months, I'll be focused on getting up to speed, deepening my knowledge of our operations strategy, and culture. I'm looking forward to collaborating across the organization and engaging with the investment community as we continue driving Lulu's Fashion Lounge Holdings, Inc. growth and value over the long term. Now to our results. In the third quarter, net revenue was approximately $73.6 million, a decrease of 9% year over year, driven by a 14% decrease in total orders placed partially offset by an 8% increase in average order value. Gross margin for the quarter was 42.6%, up 450 basis points year over year due to notable improvement in product-related margins driven from a higher mix of full-price sales and higher margin product categories in addition to further progress on direct sourcing initiatives, driving improved margins, specifically in our entry price point product assortment. On the expense side, Q3 selling and marketing expenses totaled $16.9 million, down about $0.7 million year over year, primarily due to lower marketing and merchant processing fees and lower revenues. General and administrative expenses decreased $3.5 million to $16.4 million in Q3 an 18% decline year over year primarily due to a decrease in fixed labor costs driven by reduced headcount lower variable labor costs, and lower sales volume, as well as lower equity-based compensation expense reduced insurance costs, and lower travel, supplies, other discretionary expenses, all the result of our ongoing cost control initiatives. Our net loss…

All in all, I am proud of the clear progress we've made driving positive momentum across key areas of our business. We continue to demonstrate the impact of our strategic and cost-saving initiatives on optimizing our operations driving a return to profitability, and delivering a more aligned and curated occasion wear to our customers at an attractive price point. We remain firmly committed to maintaining positive year-to-date cash flow protecting brand integrity, and investing in our long-term objectives to support our return to growth. To our Lulu's Fashion Lounge Holdings, Inc. team and partners around the world, thank you for your tireless effort, trust, and passion for our brand. And thank you to our shareholders for your ongoing support. With that, I'll open it up for questions.

Thank you. Ladies and gentlemen, we will now be conducting a question and answer session. If you'd like to ask a question, please key in star and then one. On your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may key in star and then two, to leave the question queue. Thank you. Ladies and gentlemen, with no questions in the question queue, it brings us to the end of this event. Thank you for attending. And you may now disconnect your lines.