Lulus — Third Quarter 2026 Earnings Summary

Financial Performance:

• Net revenue decreased 20% year-over-year to $58.6 million, driven by a 20% decline in Total Orders Placed and higher return rates, partially offset by increased wholesale revenue.
• Gross profit decreased 16% to $26.3 million, while Gross Margin expanded 230 basis points year-over-year to 44.9%.
• Net loss widened to $4.3 million compared to a $2.3 million loss in the same period last year.
• Adjusted EBITDA was a loss of $1.8 million, compared to a profit of $0.4 million in the prior year period.
• Inventory balance decreased 17% year-over-year to $31.9 million from $38.4 million.
• Net cash used in operating activities for the quarter was $2.1 million, compared to $1.8 million used in the prior year period.
• Free Cash Flow for the quarter was a loss of $2.3 million, compared to a loss of $2.4 million in the prior year period.
• Total debt increased by $5.3 million during the quarter.
• Net Debt increased by $2.9 million during the quarter.
• Cash and cash equivalents increased to $6.5 million as of September 27, 2026, from $2.7 million as of December 28, 2025.
• Total liabilities increased to $100.1 million as of September 27, 2026, from $86.4 million as of December 28, 2025.
• Stockholders' equity turned to a deficit of $5.0 million as of September 27, 2026, from positive equity of $3.0 million as of December 28, 2025.

Guidance and Future Outlook:

• Revised fiscal 2026 outlook to reflect greater-than-anticipated revenue pressure from historical assortment decisions; full-year revenue and Adjusted EBITDA are expected to be below previously communicated expectations.
• Expects continued year-over-year revenue pressure in the fourth quarter comparable to the third quarter, with no meaningful improvement expected before year-end.
• Revised capital expenditure guidance for fiscal 2026 to a range of $1.5 million to $2.0 million, inclusive of capitalized software.
• Preliminary outlook for fiscal 2027 anticipates a moderation in the year-over-year revenue decline rate as 2026 product introductions drive reorder activity.
• Expects continued strong growth in the wholesale channel to support fiscal 2027 revenue performance.
• Anticipates meaningful profitability improvement in fiscal 2027 driven by a healthier sales mix, full-year benefits of late 2026 cost reduction initiatives, and improved inventory productivity.
• Outlook factors in risks including tariffs, consumer demand, inflation, supply chain pressures, and macroeconomic uncertainties.

Business Segments and Product Lines:

• Wholesale business demonstrated meaningful growth, providing an avenue for future growth and appealing to a broader customer base.
• Product assortment reset is underway, with encouraging signs from newer 2026 product introductions regarding productivity and reorder eligibility.
• Historical assortment decisions continue to act as a headwind to customer engagement and repeat purchasing behavior.
• Average Order Value remained flat at $141 compared to the prior year period.
• Active Customers decreased 14% year-over-year to 2.0 million and decreased 5% sequentially from the second quarter of 2026.

Market and Competitive Landscape:

• The company is refocusing its assortment on categories and customers where it historically differentiates itself to rebuild customer engagement.
• Management notes the near-term operating environment remains challenging with liquidity constraints.

Risks and Challenges:

• Liquidity remains a constraint.
• Impact of historical assortment decisions continues to weigh on revenue and customer engagement.
• Higher return rates driven by sales mix negatively impacted revenue.
• Forward-looking statements are subject to risks including macroeconomic factors, inflation, higher interest rates, global political changes, tariffs, wars, and conflicts affecting consumer confidence.

Management Commentary and Tone:

• CEO Crystal Landsem expressed confidence that refocusing the assortment is the right path to rebuilding engagement, citing improving productivity of 2026 products.
• CFO Heidi Crane highlighted a disciplined approach to inventory management, expense control, and working capital, noting a 230-basis-point Gross Margin expansion and 17% inventory reduction.
• Management stated priorities remain centered on maintaining disciplined cost and inventory management, improving working capital efficiency, and carefully allocating resources for long-term health.
• Management believes recent operational improvements and structural cost reductions represent a significant step toward establishing a foundation for long-term, sustainable profitability.

Other Key Points:

• The company reported a 1-for-15 reverse stock split that became effective on July 7, 2025.
• Adjusted EBITDA for the quarter included $483,000 in other non-routine expenses, primarily fees related to the strategic alternatives process.
• Equity-based compensation expense for the quarter was $600,000.
• The company maintains an Asset Based Revolving Credit Facility with White Oak Commercial Finance, LLC.
• A conference call and live webcast were hosted on November 12, 2026, to discuss results.